Cooperation South, 2002. INSTITUTION United Nations Development Programme, New York, NY

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AUTHOR Gitta, Cosmas, Ed. TITLE Cooperation South, 2002. INSTITUTION United Nations Development Programme, New York, NY. ISSN ISSN-0259-3882 PUB DATE 2002-00-00 NOTE 141p.; Prepared by the Special Unit for Technical Cooperation among Developing Countries (TCDC). Published biannually. Only one issue was published in 2002. AVAILABLE FROM United Nations Development Programme, Special Unit for TCDC, One United Nations Plaza, FF-121, New York, NY 10017. Tel: 212-906-5737; Fax: 212-906-6352; Web site: http://www.undp.org/. For full text: http://tcdc.undp.org/tcdcweb/ coop_south_journa1/2002_dec/index.html. PUB TYPE Collected Works - Serials (022) -- Reports Descriptive (141) JOURNAL CIT Cooperation South; 2002 EDRS PRICE EDRS Price MF01/PC06 Plus Postage. DESCRIPTORS Developing Nations; Foreign Countries; *Health Needs; *Intellectual Property; Public Housing; Research Utilization IDENTIFIERS Africa; Arab States; Costa Rica; Multinational Corporations; Regional Development; Singapore

ABSTRACT The current international debate over patient rights to essential drugs versus intellectual property rights is inescapable. Across fields such as pharmaceuticals, electronics, and biotechnology, southern hemisphere countries appear to be finding it increasingly difficult to afford and benefit from technologies and ideas produced by big multinational companies. This 2002 issue of "Cooperation South" articulates broad suggestions on how to reform existing rules about the intellectual property system. The theme of this issue is: Creativity, Innovation and Intellectual Property Rights. There are 12 articles in the issue:(1) "'Road Map' for Intellectual Property Rights";(2) "Balancing Health Needs and Drug Research Incentives" (Hannah E. Kettler; Chris Collins); (3) "Pricing Medicines to Benefit Poor Countries" (Jagdish Bhagwati);(4) "Capacity Building for Management of IPR" (Mart Leesti; Tom Pengelly); (5) "In the News: Current Issues in IPR"; (6) "From North-South to South-South: The True Face of Global Competition" (Robert J. S. Ross; Anita Chan);(7) "Costa Rica's Technology Strategy: Roots and Outcomes" (Andres Rodriguez-Clare); (8) "Paths for Arab Cooperation: Well Mapped, Little Traveled";(9) "Lessons on Public Housing from Singapore for Sao Paulo" (W.E. Hewitt);(10) "Africa: From the OAU to the African Union" (Abdalla Bujra);(11) "Windows on the South: Current Trends, Perspectives, and Events"; and (12) "Sharing Ideas: A 21st Century Vision." (BT)

Reproductions supplied by EDRS are the best that can be made from the original document. Cooperation South 2002: Creativity, Innovation and Intellectual Property Rights.

Cosmas Gitta, Editor

United Nations Development Programmee, New York, NY

U S. DEPARTMENT OF EDUCATION PERMISSION TO REPRODUCE AND Ottice of Educational Research and Improvement DISSEMINATE THIS MATERIAL HAS EDUCATIONAL RESOURCES INFORMATION BEEN GRANTED BY CENTER (ERIC) 0 This document has been reproduced as received from the person or organization originating it. C 6 17-7-A o Minor changes have been made lo improve reproduction quality.

TO THE EDUCATIONAL RESOURCES Points of view or opinions stated in this INFORMATION CENTER (ERIC) document do not necessarily represent 1 official OERI position or policy.

BEST COPY AVAILABLE COOPERATION 2002

UNITED NATIONS DEVELOPMENT PROGRAMME

Creativity, Innovation and Intellectual Property Ights 3 The creativity of 4.7 billion people

The cover designs used on issues of this journal present artifacts or COOPERATION artworks that demonstrate the creativity and connectivity of people across the south. EDITOR-IN-CHIEF Safiatou Ba-N'Daw

EDITOR Ancient tradition, modern product Cosmas Gitta PRODUCTION MANAGER Our cover reproduces a design from Maureen Lynch

the 5,000-year-old textile tradition in DESIGN southern Peru which was begun by Kayley LeFaiver Mary Vengrofski Zehngut ancestors of the Incas. Garments TRANSLATIONS were designed with "tocapu" squares Multi-Language Servkes Inc.

or rectangles containing various geo- EDITORIAL ASSISTANT metric forms and color combinations Rogel Nuguid in clearly indicated sequences. Hundreds of tocapu designs CIRCULATION ASSISTANT have been identified, and some may represent emblems of geo- Lourdes Hermosura-Chang graphic places or social rank. For example, the symbol for the EDITORIAL ADVISORY BOARD Salah Bourjini Quechua word kapak, which means "noble sovereign': is in the Paul Boyd square reproduced above from our cover. Sharon Capeling-Alakija, Babashola Chinsman Another distinctive element of these textiles is that they Djibril Diallo were woven from cotton fibers that are naturally red, ecru, Carlos Di Cerisano Walter Franco mauve and various shades of brown. Spanish conquerors in Kerstin Leitner Peru in the early 1500s marveled at extensive fields of cotton in Carlos Lopes Ramadhar a range of colors and at Indian weaving more technically Michael Sakbani sophisticated than was produced on European looms. Belying Odile Sorgho-Ntoulinier the widespread belief that all cotton is white, colored cotton FOR FURTHER INFORMATION, PLEASE CONTACT: plants have been closely guarded down through centuries by Cosmas Gitta the Mochica Indians in the Andes mountains, and also by [email protected] some small, traditional communities in Mexico and Guatemala. Plants which still survive today are organically grown and pes- ticide-free and are the basis for newly popular cotton products sold internationally. Growers include 15,000 peasants and The.eniblem of Technical Cooperation among Developing Indians in Peru's"Native Cotton Project,"and many others in the Countries (TCDC) displays a hills of Santander in Colombia, the highlands of Guatemala, : symbolic:bridge joining die countries and people of the and eastern Bolivia. Southern hemisphere. L The centre of the emblem where the Southern, Northern, Eastern and Western parts of the 074 world join symbolizes a further and ultimate objective of TCDC: UNDP is the UN's global development network, advocating for the promotion of a truly global glelchangeand connecting countries to knowledge, experience partnership for development. and resources to help people build a better life. BEST COPY AVAILABLE CON TEN TS Cooperation South, 2002*

2 Message from the Administrator

PROTECTING CREATIVITY AND SPREADING ITS BENEFITS: The Two Sides of Intellectual Property Rights (IPR)

4 "ROAD MAP" FOR INTELLECTUAL PROPERTy RIGHTS

10 BALANCING HEALTH NEEDS AND DRUGRESEARCH INCENTIVES Hannah E.Xettler and Chris Collins

37 PRICING MEDICINES TO BENEFIT POOR COUNTRIES Jagdish Bhagwati

40 CAPACITY BUILDING FOR MANAGEMENT OF IPR Mart Leesti and Tom Pengelly 66 IN THE NEWS:CURRENT ISSUES IN IPR

70 FROM NORTH-SOUTH TO SOUTH-SOUTH:THE TRUE FACE OF GLOBAL COMPETITION III Robert J. S. Ross and Anita Chan

78 COSTA RICA'S TECHNOLOGY STRATEGY: ROOTS AND OUTCOMES Andrés Rodriguez-aare

90 PATHS FOR ARAB COOPERATION:WELL MAPPED, LITTLE TRAVELED

93 LESSONS ON PUBLIC HOUSING FROM SINGAPORE FOR SAO PAOLO W. E. Hewitt 108 AFRICA: FROM THE OAU TO THE AFRICAN UNION Abdalla Bujra

125 WINDOWS ON THE SOUTH: Current Trends, Perspectives, and Events

ACCESS TO ESSENTIAL DRUGS MAY BE UNDERMINED BY GLOBAL PATENT AGREEMENT AIDS AND DISCRIMINATION ASEAN FARMERS GOING ON THE INTERNET FOREIGN INVESTMENT DOWN IN LATIN AMERICA AND THE CARIBBEAN UNCTAD CALLS FOR NEW POLICIES FOR AFRICAN DEVELOPMENT ANCIENT SOUTH-SOUTH TRADE BETWEEN EGYPT, INDIA AND JAVA

134 SHARING IDEAS A 21st Century Vision

* This is the only edition of Cooperation South for 2002.

COOPERATION SOUTH is published twice a year by the Special Unit for TCDC, United Nations Development Programme, One United Nations Plaza, NewYork, NY 10017, USA (212)906-5737, FAX (212)906-6352, email: [email protected].

The views expressed in this publication do not necessarily reflect those of the United Nations, the United Nations Development Programme, or governments.The designations employed and material presented on maps do not imply the expression ofany opinion whatsoever concerning the legal status of any country, territory, or area, or its frontiers or boundaries. BEST COPYAVAILABLE FROM THE ADMINISTRATOR

Add llng Connectivity to Creathity

At the heart of the concept of "South-South" knowledge-sharing is the search to unlock, in the words of the pioneering world conference on Technical Cooperation among

Developing Countries (TCDC) which UNDP organized almost 25 years ago "the cre-

ativity" of the developing world. The South has an immense reservoir of traditional wis-

dom, problem-solving skills and new technologies that are worth sharing globally. The

challenge is how to add connectivity to that creativity to encourage such trade and

cooperation, and reduce or eliminate the obstacles to such knowledge-sharing. In this context, the current international debate over patients' rights to essential

drugs versus intellectual property rights is inescapable. The very concept of intellec-

tual property is a recognition of the need to provide protections and rewards for

creativity. As such, it is a principle just as important to developing countries as devel-

oped ones. In practice, however, across fields such as pharmaceuticals, electronics and biotechnology, Southern countries appear to be finding it increasingly difficult to

afford and benefit from technologies and ideas produced by big multinational companies. The World Bank estimates that, when broader intellectual property rules nego-

tiated as part of the Uruguay Trade Round come fully into effect in the next few years, $40 billion more per year will be transferred from poor countries to Northern corpo-

rations a sum approaching total aid flows in the other direction. There are no easy answers. On the one hand, opponents argue that such restric-

tions and imbalanced income flows are clearly discriminatory to developing countries, locking them out of ideas and technologies that are critical to accelerating

2 COOPERATION SOUTHg, v growth and poverty reduction. On the other, defenders of the global standards say that rn in Ln 30 a strong patent system in the long run fuels innovation and provides anexcellent way CI rn for developing nations to attract investment and encourage rapid technology transfers while protecting their own products. A third view, which is gaining increasing weight, is that free trade, open financial markets and intellectual property protection are wor- thy goals which should not, however, be pursued as part of a one-size-fits-all approach or on a rigid timetable. All three approaches and a number of broader suggestions on how to reform existing rules are articulated in this issue of Cooperation South, which seeks to help stimulate debate on how to build an intellectual property system that maximizes benefits for developing countries while giving due recognition to the importance of protecting creativity, wherever it may be found.

ilite, ilkauti4i4givs,

Mark Malloch Brown, Administrator United Nations Developthent Programme

2002 3 llgRoad pgil for Inte,ectua -3ropert ghts*

INTELLECTUAL PROPERTY (IP) broadly means the legal rights which result from intellectual activity in the industrial, scientific, literary and artistic fields. Countries have policies and laws regarding intellectual property for three mainreasons: to protect the moral and economic rights of creators in their creations and the rights of the public to have access to those creations; to promote creativity and the dissemination and application of its results, to encourage fair trading, and thus to contribute to economic and social development; to facilitate transfer of technology in the form of foreign direct investment, joint ventures and licensing. Creators and producers of intellectual goods and servicesare granted the right to control their use for a defined period. That exclusive right is generally subjectto limits and exceptions aimed at balancing the legitimate interests of rights holders andusers. Intellectual property is traditionally divided intotwo branches: Industrial property consists of inventions, industrial designs and tradesecrets which can be protected by patents in order to stimulate innovation, design and the creation of technology; trademarks and other signs which distinguish the goodsor ser-

vices of one undertaking from others; and geographical indications which identifya good as originating in a place that gives it special characteristics. Trademarkprotec- tion aims to stimulate and ensure fair competition, and to enableconsumers to make informed choices between various goods and services. Patent protection is typically given for a period of 20 years, industrial design is protected fora minimum of 10 years, and trademark protection may last indefinitely. Copyright covers literary and artistic works suchas novels, poems and plays, films, musical works, artistic works such as drawings, paintings, photographs and sculptures, and architectutal designs. Rights related to copyright include those of performing artists in their performances, producers of phonograms in their recordings, and those

* Adapted from documents and websites of WIPO, WTO and CIPR. To read furtheron this and related topics, visit www.iprcommission.org, www.panos.org.uk.

4 BEST COPY AVAILABLE COOPERATION SOUTH e of broadcasters in their radio and television programs. The mainpurpose is to encourage and reward creative work. Copyright extends for a minimum period of 50 years after the death of the author.

THE TRIPS FRAMEWORK Wide variations in the protection and enforcement of these rights around the world became a source of tension in international economic relations as the importance of intellectual property in trade increased. To introduce more order and predictability and to settle disputes more systematically, new international trade rules for intellectual property rights were sought during the trade negotiations, known as the Uruguay Round, between 1986 and 1994. The result was an international agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) under the World Trade Organization (WTO). TRIPS tries to narrow the gaps in the way these rights are protected around the world, to bring them under common international rules, and to link with and build on obligations entered into under earlier agreements, especially the Paris and Berne Conventions on Trademarks and Copyright, respectively. When there are trade disputes over intellectual property rights, WTO's dispute settlement system is now available. When the WTO agreements took effect on 1 January 1995, developed countries had one year to ensure that their laws and practices conformed with the TRIPS agreement. Within a transition period ending 1 January 2000, developing country WTO members completed much of the legislative reforms required for implementing the TRIPS agreement. However, there is less information on such reforms by least developed countries, which have leeway for implementing the TRIPS agreement during a transition period ending 1 January 2005. For pharmaceuticals, the TRIPS agreement is structured so that product patent protection will be mandatory for developing countries as of 1 January 2005, except that the least developed countries have been granted an extension until 1 January 2016. This delay came about at the World Trade Organization conference in Doha, Qatar, in November 2001, which issued a declaration that public health needs must be weighed equally with intellectual property rights. The road that led to the TRIPS agreement began with the Paris Convention for the Protection of Industrial Property, created in 1883. Since then, many additional international conventions and agreements have been drawn up, and in the past forty years, two global and five regional organizations have been created by cooperating governments (see box). The creation of three of the organizations (EPO, EAPO and GCCPO) is linked to wider projects of economic integration within the regions concerned. While the same is also true of OAPI and ARIPO, the common legacies of the colonial past (existence

2002 5 TABLE 1: KEY AGREEMENTS AND CONVENTIONS

Short nameFull name Year Signers

Berne Berne Convention for the Protection of Literary 1886 144 and Artistic Works (copyright)

CBD Convention on Biological Diversity 1993 186

Hague Hague Agreement Concerning the International 1999 29 Registration of Industrial Designs

Madrid Madrid Agreement (and Protocol) Concerning 1891 70 International Registration of Marks (trademarks)

Paris Paris Convention for the Protection of 1883 164 Industrial Property

Pa Patent Cooperation Treaty 1970 115

TRIPS Agreement on Trade Related Aspects of 1995 144 Intellectual Property

UPOV International Convention for Protection of 1961 51 New Varieties of Plants

of a common official language, legal standards, etc.) also seem to have played a pre- dominant role in their creation. There are no regional IPR organizations in south, southeast and east Asia, the Pacific, and the Americas. However, in southeast Asia, a framework agreement on IPR was signed some years ago at ministerial level, which established working groups to meet at regular intervals, and has led to the implementation of a common filing system for trademarks. Efforts in the Andean region led to the establishment of a common law on IPR for the six countries of the Andean Pact.

INTERREGIONAL ROLE OF THE EUROPEAN PATENT OFFICE (EPO) When a foreign application arrives in a developing country, there is a 98 per cent chance that it is also being processed by EPO. Its 4,000 technical scientists and other experts probably constitute one of the largest pools of scientists and experts in the world, not only in the IPR field. Its patents know-how covers administrative and examination procedures, human resources development, documentation techniques, patent information strategies, and information technology solutions for patent offices. The EPO is probably the world's most important provider of IPR technical cooperation: With multilateral financing from the European Union, EPO has assisted projects in China, ASEAN countries, India, Vietnam, most eastern European

6 COOPERATION SOUTH e TABLE 2: INSTITUTIONS WITH GLOBAL AND REGIONALROLES

Short name Full name Year Members

Global

WIPO World Intellectual Property Organization (Geneva) 1893 179

WTO World Trade Organization (Geneva) 1995 144

Regional

ARIPO African Regional Industrial Property 1976 15 Organization (Harare)

EPO European Patent Office (Munich) 1977 30

EAPO Eurasian Patent Office 1993 9

GCCPO Gulf Cooperation Council Patent Office ( Riyadh) 1996 6

OAPI Organisation Africaine de la Propriété 1962 16 Intellectuelle (Yaounde)

countries, and some countries of the former Soviet Union. Total project costs are almost 30.5 million euros from 1990 to 2005. With its own resources, EPO has carried out bilateral projects in developing countries almost since its inception. Current projects are in Africa, Arab countries, China, ASEAN countries, India, eastern European countries, countries of the former Soviet Union, and Latin America. These projects cost an estimated 18.8 million euros for the period 1996-2001 (excluding expert salary costs). The EPO International Academy organizes training seminars for about 500 persons per year, holds international topical conferences, and develops tutorial material. EPO's information technology unit develops systems, tools, and on- line data bases for patent searches and administration.

REGIONAL ORGANIZATIONS 1. Organisation Africaine de la Proprieté Intellectuelle (OAPI). OAPI (in English, the African Organization for Intellectual Property) has 16 member states, of which 14 are French-speaking. It serves as a registering office and can also carry out novelty examination for trademarks upon demand. In 1999, OAPI received 341 patent applications (over 90 per cent from abroad) and 1,751 trademark applications (97 per cent from abroad). Its fees generated the equivalent of about 3.46 million euros in revenue for OAPI, apparently making the organization financially self-sustainable. It was even able to provide technical assistance worth about 286,000 euros to its member states. 2002 ii 7 OAPI's 76 staff include 25 scientists, lawyers and experts. After investing in information technology with assistance by WIPO and the French patent office, OAPI is now linked to WIPOnet, and is developing its own IT system for administering patents, trademarks, etc. It now seeks to enable full retrieval and evaluation of technological information in the region's patent documentation, and plans to create a regional training centre with support by international donors. Of the original countries in OAPI, only Madagascar is left. Two non-French-speaking countries have joined (Equatorial Guinea and Guinea-Bissau). French-speaking countries around the Great Lakes in East Africa have not yet chosen between ARIPO and OAPI. 2. African Regional Industrial Property Organization (ARIPO). ARIPO has 15 member states in English-speaking Africa. Ten additional states have observer status, including Egypt, Nigeria and South Africa. Its revenues in 2001were equivalent to US$ 1,348,600. Of this, 96 per cent came from application, examination and renewal fees for patents and the rest from trademarks and industrial designs. The number of patent appli- catiOns varies between 250-350 per year. In 2001, there were 26 staff, of which 8are at scientific/expert level. Examiners at ARIPO assess patent applications in substance for novelty, inventive steps and industrial applicability, and determine if patentability criteria and requirements in the Harare Protocol on patents are met. They may also study reviews done by other offices, such as EPO and the US and Japanese patent offices. EPO is helpingput into place a system for administering patents and trademark procedures, creating a data base with patent documentation from the ARIPO states, and working toward establishing a regional training center. 3. Eurasian Patent Office (EAPO) has a membership of six countries formerly within the Soviet Union Armenia, Belarus, Georgia, Kazakhstan, Kyrgyzstan and Moldova. All six have intellectual property legislation which is compliant with the TRIPS agreement. According to a recent EPO assessment, two of these countries have a high capacity for substantive examination of patent applications and have achieved full office automation (Belarus and Georgia), and three have high capacity for local preparation of laws and policymaking (Belarus, Kyryzstan and Moldova); the capacity ranking is lower for the other countries. The volume of applications processed varied from a low of 94 patents per year in Kyrgyzstan to 1,198 in Belarus, and from 1,571 trademarks a year in Armenia to 4,960 in Kyrgyzstan. 4. Patent Office of the Gulf Cooperation Council. The idea of establishingan "Arab regional IP organization" has been mainly promoted by Egypt. In the meantime, a regional organization for the Arab States of the Gulf (except for Yemen) was created in 1996, with United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar, and Kuwait

8 COOPERATION SOUTH PE, 12 as members. This young organization seems to follow a pragmatic approach in examining foreign applications, recognizing de facto foreign results whenever possible. It has been recommended that GCCPO establish a service to provide background technological information and documentation searches for their national industries to help them decide whether to apply at international level.

FUTURE STRATEGIES A recent EPO study recommended future strategies for national, regional and international development of intellectual property regimes, including the following:. 1. Develop realistic concepts for the capacities, functions and methods needed at national levels by small or medium-scale IP offices. (Many small countries try to set up fully fledged patent offices, with search and substantive examination, though they have difficulties with such simple tasks as registering titles.) 2. Promote cooperation within and between subregions, even by conditioning technical assistance on the subsequent regional sharing of nationally acquired know-how and facilities. 3. Use a south-to-south approach in training, study visits and conferences, and support the establishment of training centres in the region, particularly in the field of patent information retrieval and evaluation. 4. Make patent information readily available to other countries, other offices and the public. The following two articles are based on studies commissioned by the UK Govern- ment's Commission on Intellectual Property Rights (CIPR), which was established in April 2001 to "examine how intellectual property rights can work better for poor people." See the CIPR website at www.iprcommission.org for more information about CIPR's mandate and activities. e,

2002 9 D3 N LJ HEALTH NEEDS A N D DRUG RESEARCH INCENTIVES

BY HANNAH E. KETTLER AND CHRIS COLLINS

Are there ways to improve access to essential drugs for people in developing countries while simultaneously retaining or creating the incentives for pharmaceutical companies to research and develop needed new drugs, especially for neglected infectious diseases? How will broader patent protection for drugs, as foreseen under the trade-related intellectual protection agreement (TRIPS) of the World Trade Organization (WTO), affect incentives to

conduct research and development (R&D),drug access and pricing and domestic production of generic drugs in developing countries? Some possible new approaches to these issues are offered in this article, which is based on a report commissioned by the UK Commission on Intellectual Property Rights .It was written by Dr. Hannah E. Kettler, a Project Director at the Institute of Global Health, University of California, San Francisco, with assistance from Chris Collins, an independent consultant.

INTRODUCTION AND OVERVIEW R&D resources towards neglected dis- A key global health challenge is how to eases. To the extent that it affects the simultaneously encourage more innova- price of patented drugs, IPR has a nega- tion and R&D into new, more effective tive effect on poor patients' ability to products and ensure that people needing afford and therefore access new drugs and these products can afford and have access vaccines. Other barriers to access, as to them. Intellectual property rights shown by experience with HIV drug (IPR) sit at the center of this debate. IPR access in India, Brazil, and SOuth Africa, is a necessary but insufficient incentive include inadequate health care systems to encourage companies in the devel- infrastructure and staff, poor government oped or the developing world to commit commitment to fighting the disease, and

10 COOPERATION SOUTH e 14 the lack of sufficient financing to ensure measles, polio, syphilis, diphtheria, lep- access to HIV treatments. rosy and diarrhoeal diseases. For tubercu- To develop solutions within the cur- losis and HIV, the figures are 91 and rent IPR system, new global norms for 65 per cent, respectively (Lanjouw and technology licensing agreements and Cockburn, 2001). pricing must be adopted. Considerable This group of "neglected diseases" is a political discussion has been given to low priority for both private and public the establishment of differential pricing investorsinpharmaceutical R&D. where the flow back of the cheaper priced Despite a large number of patients and products to the industrial countries is significant need for products, the actual controlled. Second, in technology and demand is small because of the targeted research agreements, companies are mak- populations' inability to pay for new ing commitments, in exchange for their medicines. So companies see small mar- retaining the ownership of the IP, to help kets and expect low returns from sales. ensure that any approved product result- The R&D process is long, risky and ing from global health initiatives (and expensive, regardless of the indication or advanced with these initiatives' funds) disease. At the same time, the marginal will reach the patients who need them. cost of producing pharmaceuticals, once At the same time, for substantive progress tested, is low, which permits generics to be made, governments in developed firms to manufacture and sell products at countries must make substantive finan- prices a fraction of that offered by inno- cial commitments to fund the develop- vator. Patent protection for the innova- ment and purchase of new products. Gov- tor, therefore, is considered an essential ernments in developing countries must mechanism for securing economic returns also participate in global initiatives and on the innovation. For neglected dis- help invest in the development of better eases, however, that protection,and the health care infrastructure. market secured for the innovator, is insufficient to warrant the R&D investment. The R&D Problem Recent events in Canada point indi- For at least 12 diseases, 99 to 100 per cent cate the importance of patents as an of all cases globally are located in devel- incentive for investments in pharmaceu- oping countries. The 100 per cent cate- tical innovation. Here, R&D invest- gory includes malaria with over 24 mil- ments rose significantly following the lion sufferers (1996), chagas disease, abolition of compulsory licensing (see dengue, encephalitis, lymphatic filariasis, terminology box), the strengthening of onchocerciasis, schistosomiasis, tetanus, IPR, and adoption of tax incentives. trachoma, and trypanosomiasis. In the World Bank-commissioned surveys of 99+ per cent category are leishmaniasis, transnational corporations reveal that

2002 11 Box 1: SOME TERMINOLOGY

BOLAR PROVISION, sometimes called regulatory exception, allowsmanufacturers of generic drugs to use a patented invention, while still underpatent, to develop the generic products that they can market as soon as the patent expires.TheWorld Trade Organization (WTO) ruled that theprovision is in accordance withTRIPS.

COMPULSORY LICENSING. Under TRIPSand the law ofmany individual countries, governments can, in the case of a national emergency, issue a license for productionor purchase of a drug without approval of the patent holder. Patent holdersare generally guaranteed some remuneration.Compulsory licensing has emergedas a primary issue of debate.

DIFFERENTIAL OR 11ERED PRICING.means pricing products differently indifferent markets where the segments ideally correspond with consumers'ability to pay. Some argue that the use of such policies has the potentialto significantly lower the prices.irr developing countries of essential drugs that are-still on: patent, thereby.expandingT. drug access without undermining thepatent system.

DONATION PROGRAMS. A number of largepharmaceutical companies haveinitiat- ed or participated in drug donation programs for HIV and other neglected diseases.In the case of HIV, companies tend to negotiate with countrieson a case by case, or region by region basis.

LOCAL WORKING PROVISIONS require that a product be manufactureddomestical- ly within a certain time following its introduction in acountry. For example, if a company does not manufacture and/or distribute a product in Brazil, within threeyears of its registration there, a Brazilian company is permitted to takea compulsory license and manufacture the product themselves. An opposing voicestates that because of significant economies of scale in pharmaceutical manufacturing,local working requirements may-actually make products morerexpensive:Another is that suchpro- visions actually seek to protect localmanufacturing capacity,not to benefit patients,. and are therefore a violation of TRIPS.

PARALLEL IMPORTING involves theimport of products froma third party rather than the patent-owning manufacturer to a second country. Parallel tradecan undermine price differentials; if parallel trade makes a significantly lower price availableinterna- tionally, it is difficult maintain higher prices in industrialized countriesthat are necessary for companies to recoup investment and seekprofits. PRICE CONTROLS are another option available to countries seekingto extend drug access. One view is that price controls may be effectiveat reducing prices while leav- ing patent owners only negligibly worse off (Scherer and Watal, 2001). Theopposing view is that price controls are contrary to the free market andthreaten innovation by undermining the ability to make profits.

12 COOPERATION SOUTH ee pharmaceutical companies rank patent Explicit, targeted policies and initia- policies high in their decision criteria for tives are needed above and beyond IPR to foreign direct investment. channel some of the resources and capa- It is still too early to judge the impact bilities of the pharmaceutical industry on developing countries' infant pharma- towards neglected diseases. ceutical industries of introducing IPR To this end, some of the available pol- laws that comply with TRIPS of the icy options are: WTO. Some predict, for example, that Product development public private the introduction of product patent pro- partnerships (PPPs) have been set up to tection in India will put hundreds of small develop drugs or vaccines for specific dis- local generics companies out of business. eases. In exchange for funds and other At the same time, it will provide new support, the companies agree to contracts opportunities for those companies able to that include some mechanism for secur- invest in R&D capabilities and for larger ing the development and delivery of any generics companies which will be able to successful final product at affordable enter and compete for contracts in global prices to developing world markets. In markets as products go off patent. In the some cases, such as leishmaniasis, the absence of significant injections of funds PPP may be responsible for the market. In for basic research, training, and technol- others, such as malaria, there is a paying ogy transfer, it seems unlikely that in and travelers' market to which the industry of itself IPR will create new innovative partner may have first rights. companies. Still,it will improve the Incentives to invest in neglected prospects for cross-national joint ventures diseases. Attempts to legislate effective and for scientists trained in the US and national policies in the US and the UK Europe to return home and build their for that purpose have been less success- own companies. ful. The goal is to combine cost-saving There is less evidence that the intro- policies (push), such as grants and tax duction of TRIPS will encourage com- credits, and revenue-enhancing policies panies and scientists in endemic coun- (pull), such as the creation of a purchase triestoinvestintreatmentsfor fund. Another "pull" proposal is to offer neglected diseases. One global study of companies a patent extension on a prod- new research activity" in tropical dis- uct of their choice in exchange for their eases post-1980 found only slight devel- successfully developing and marketing, opments in malaria patent and invest- at affordable prices, a product for a ment behavior, while all others were neglected disease. While attractive to stagnant despite many new entrants to research-oriented companies, such a pol- the R&D pharmaceuticalindustry icy is unlikely to find favor with policy- (Cockburn and Lanjouw, 2000). makers in developed countries who are

2002 13 1 actively working to find ways to reduce patent protections will undermine incen- the size of the publicly funded domestic tives for product development. Since drug bill. Generics companies whose Africa represents only 1.1 per cent of the strategies depend on predictable dates global pharmaceutical market (Attaran, when product patents expire in large, 2001), it may seem difficult to see how profitable markets will also protest. An lower prices in this market significantly interesting but unexplored question is impact MNCs' profits. But the real prob- how companies in the developing world lem is that it is difficult to isolate policies such as India, China, or Brazil would to specific regions. Companies fear that respond to the creation of a global fund the establishment of lower prices in the or nationally based tax incentives to developing countries will undercut accep- address diseases of concern to their own tance of higher prices elsewhere. A related populations. concern is that the comparatively cheap products will not be made available to the The Access Problem domestic populations, but will instead be Patents help determine access to new "reimported" back to rich markets. medicines in developing countries. Case studies of HIV drug access in India, South Seeking a Coherent Policy Africa, and Brazil show that the presence Examples from the way HIV drug access or absence of patent protection can affect has been addressed (or not) in Brazil, India drug prices and access, as well as the and South Africa provide useful lessons for development of domestic industry. How- those looking for a coherent policy that ever, they also demonstrate that other, addresses the needs of developing coun- non-patent, factors cannot be ignored, tries. Each country demonstrates the criti- factors such as the availability of interna- cal importance of a combination of factors, tional and domestic financial resources for including health funding, political com- health care, inadequate infrastructure and mitment, and flexibility in implementa- staffing needs, and political leadership. tion of IPR law. Of the three countries, Even when companies offer to give away Brazil has had the most success in extend- their products, the majority of the drugs ing drug access to its population. Its devel- can fail to reach the patients in need. opment of domestic public manufacturing The move towards stronger IPR pro- capacity and its willingness to use options tections through the TRIPS agreement in trade law has turned the government presents complex issues. There is evidence into a powerful negotiator with patent- that strong patents can have a negative owning transnationals. effect on affordable prices by delaying the The Brazil model is less applicable to entry of generic options. Industry contin- lower income countries that lacka ually raises concerns that the erosion of domestic industry. In these countries, sig- 14 fs COOPERATION SOUTHe nificant injection of resources is abso- sory licensees must havethe capability to lutely necessary, combined with supplies "reverse-engineer" or import the product of greatly reduced prices for pharmaceuti- without the cooperation of the patent cals. Political and economic incentives owner. Transfer of technology,often rec- for differential pricing (particularly for ommended as a solution, requires the essential medicines) must play an impor- active cooperation of the patent owner tant role. For example, expanded efforts or, in the context of South-South coop- by industrialized and developing country eration, of the owner's competitors. governments will be needed to prevent Increasingly, larger domestic companies re-importation of cheaper drugsto in developing countries are raising their wealthier markets. R&D investments and are collaborating A crucial element in achieving reduced with multinational companies to achieve drug prices in developing countries has advanced capabilities and reach more been generic competition or its threat. It markets. Sustainable cooperation will would be irresponsible to constrain the not allow for these companies to under- ability of developing countries to use com- cut their "partners" in other product pulsory licensing for in-country produc- areas with generic copies. tion or importation of generic products Second, exportsof compulsorily necessary to address health priorities. licensed products from large markets The question of compulsory licensing for destined for small developing countries product imports was left unresolved at the can only work where the disease patterns WTO consultation in Doha, in Novem- are common to both markets. ber 2001. Developing countries without Third, compulsory licensees will only production capacity clearly need to use be attracted to large and profitable drug compulsory licensing for drug importation markets. Thus, essential medicines with if they are to meet the health care needs small potential volumes or mostly poor of their populations. It also makes little patients will not attract many applicants, sense to expect each developing country however important they are from the per- in the world to have its own production spective of public health. Thus, existing facility for every essential on-patent drug, and future drugs for most neglected dis- particularly given the economies of scale eases are not likely to be the focusof pri- in pharmaceutical production. vate generics producers either. However, compulsory licenses should The AIDS pandemic demonstrates not be seen as a "magic wand" for the desperate need for policies that foster obtaining affordable access to patented early and broad access to life saving drugs, medicinesin developingcountries. as well as the promotion of research on Scherer and Watal (2001) have high- future technologies needed in developing lighted three limitations. First, compul- countries. This is the difficult and urgent

2002 1 9 15 challenge to policymakers. As developing product development and research. Most countries increasingly demand funding of the answers to bioterrorism are "in the and policy options to increase health care hands of the biotech and pharmaceutical access, and policymakers begin to appre- world" (Contra Costa Times, 10/24). Dur- ciate the role of health status in creating ing October 2001, US national headlines a more stable world, this challenge of bal- portrayed the pharmaceutical industry anced and equitable IPR policy becomes and the patent system as the key barriers ever more important. to "national security," while also identify- ing them as the best opportunity for Anthrax and CIPRO quick, innovative solutions to scientific IPR Debates in a New problems that until then had no priority Global Context and little research. Public funds, infras- One could argue that, with the anthrax tructure and support are essential, but not attack in October 2001, the US obtained enough to meet the existing and future first-hand experience with the complexi- demands. Private company participation ties of the policy debates surrounding IP is essential. for global health. The US sawan imme- What steps are needed to encourage diate need for supplies of a product still private companies to participate? How on-patent that its owner, Bayer, was can R&D be made affordable, especially unable or unwilling to meet. The USgov- for small biotech companies not able to ernment's first instinct was to consider pursue projects just out of patriotic duty? compulsory licensing. Manufacturers, How, at the same time, can affordablesup- Cipla in India in particular, claimed they plies of products, new and existing,some could meet the demand in less time and on-patent, some not, some in stock, some at a lower price. The US government, in not, be ensured? The US possesses the the end, managed a deal with Bayer. By political and financial means to mobilize contrast, Canada's government immedi- the resources needed in this national ately granted a compulsory license toa "emergency" though, of course, results Canadian generics company (New York are not guaranteed given the uncertainties Times, October 19, 2001). This move did inherent in drug and vaccine develop- not follow legal requirements, however, ment. At a global level, the exact same and was withdrawn. Canada also eventu- types of questions arise in the IPR debates ally reached an agreement with Bayer. over how to improve health in the devel- In the light of the new (or newlyper- oping world. Those countries in greatest ceived) bioterrorist threats, the USgov- need cannot mobilize theresources to ernment also finds itself lacking effective solve their regional problems and depend tools to address specific threats and seeks on global solutions. To date, only incom- to take steps to encourage rapid new plete answers have been found.

16 COOPERATION SOUTH e USING IPR TO SOLVE THE the disease burden, measured in terms of R&D PROBLEM disease-adjusted life years (DALYs). Of those DALYs lost, 68 per cent were Defining the Problem linked to communicable diseases (World Developing new drugs, vaccines and diag- Bank 1999, WHO, 1999). nostics is a critical part of a package of Private companies are not the only steps needed to treat and ultimately erad- actors neglecting thesediseases.In icate the infectious diseases prevalent pre- $41,887 million of research by the US dominantly among the poorest segments National Institutes of Health in 2001, of the peoples of the developing world. only 0.21 per cent went to TB and 1.13 The primary actors in pharmaceutical per cent to AIDS vaccines, compared and vaccine R&D are public research with 10 per cent to cancer, the disease institutions and private pharmaceutical with the largest budget. A joint study by companies in developed countries. The WHO and the International Federation public researchers contribute primarily to of Pharmaceutical Manufacturer Associa- the early discovery stages. Privatecompa- tions (IFPMA) shows that seven diseases nies invest in all stages, but dominate the do not have effective drugs on the market

Africa has 10 per cent of the world's population but suffers 25per cent of the disease burden.

development, production and commer- and have limited numbers of products, if cialization processes. The division of any, in development: malaria, TB, lym- labor has changed somewhat over the phatic filariasis, onchocerciasis, leishma- past 20 years though the relative compar- niasis, schistosomiasis and African try- ative advantages have stayed the same. panosomiasis (WHO/IFPMA, 2001). Much evidence shows that diseases A key factor that discourages private such as malaria, TB, leishmaniasis and investment for R&D on these diseases is others are a low priority. Only 5 to 10per the poor expected return (Kettler, 2000, cent of health R&D goes to diseases Kremer, 2001, PIU, 2001, Europe Eco- prevalent in developing countries, and nomics, 2001). Despite high need a only 1 per cent of new products between large number of patients these patients 1975-1997 were developed specifically are unable to pay for medicines, and thus fortropicaldiseases(Troullier and expected demand is very low. 011iaro, 1999). In 1998 the peoples of Regardingmalaria,estimatesby Africa made up 10 per cent of the world's Medicines for Malaria Venture (MMV) population, but suffered 25per cent of are that "at most $50 million in annual

2002 17 21 returns" would be achieved by "a new drug requires a package of cost-reducing that sold well in endemic countries, with ("push") and market-enhancing a low margin, and achieved an aggressive ("pull") policies that provide 30 per cent market share in the travelers' incentives for more R&D into market, at a 50 per cent margin". This is these diseases and improve its ltnot enough for pharmaceutical compa- expected profitability; nies seeking annual sales potential of $250 m In the second model, public-pri- to $300 million for a new drug." The mar- vate partnerships (PPPs) are set ket for new TB drugs would be $700 mil- up to address R&D gaps for spe- lion by the year 2010, according to a cific diseases. recent estimate by the Global Alliance for Both models assume that private TB Drug Development (New York Tmes, industry plays a critical role in the R&D November 15, 2001). process, and that strong IPR, especially The public policy challenge is to con- patent protection, is required to give struct incentives for public and private companies incentives to participate. This researchers to invest more aggressively in occurs within the current IPR environ- R&D for new products in the neglected ment where countries with pharmaceuti- diseases of the poor. In addition to new cal industries have, or are in the process products, "local development work" is of introducing, IPR legislation to comply needed to make existing compounds with TRIPS. In both models, creative

The challenge is to construct incentives for more aggressive R&D on new drugs for the neglected diseases of the poor.

more suitable for the specific circum- patent and licensing anangements should stances of the country of focus, adjust be employed above and beyond the base dosages to local needs, and find combina- protection rules to ensure success. Spe- tions more appropriate for local medicine cific details of this are discussed below. practices (Europe Economics, 2001, 8). Policy discussions have focused primarily Innovation through Patenting on two alternative solutions. The message from research-based phar- m The first model the commercial maceutical and biotechnology companies approach strives to make is clear: without patent protection, there neglected diseases as attractive as will be no R&D. Two features of pharma- non-neglected diseases to private ceuticalresearchand development companies looking to make explain why. First, the sunk costs of R&D investment decisions. This are high, averaging hundreds of millions

18 COOPERATION SOUTHes 22 of dollars per new product. The estimate innovative performance and competitive includes the cost of failures and the success in the US and Europe during the opportunity cost of funds during the industry's historical development since R&D process(Kett ler,1999). This before World War II. Their account amounts to more than 30 percent of the makes a number of key contributions to total cost of developing, producing, and our IPR discussion: marketing the typical product. Second, IPR, especially patents rules, are although the R&D process is lengthy and key factors in each stage. The struc- risky, most pharmaceutical products once ture of IPR and its influence as an tested and approved for patient use, are incentive have varied and evolved relatively cheap to produce. This feature as science, technological competen- is what permits generic firms to launch cies and business strategies have products at prices well below the cost of a evolved. For example, German

Although the R&D process is lengthy and risky, most pharmaceutical products once they exist are relatively cheap to produce. branded product, immediately following companies tended to lead the expiration of the patents. Without patent industry in the first epoch, sup- protection and the secured period of mar- ported only by process patents that ket exclusivity, generic products would covered limited scientific and tech- enter the market immediately following nological improvements rather than product launch, and bid down prices to advanced innovations. In clear con- marginal cost. Since prices set at the trast, strong, targeted product marginal costs of manufacturing do not patent protection in the modem cover the fixed costs on R&D, the result era is one of the central contribu- would be a decrease in R&D, and hence tors to the US' success in launching a decrease in new products brought to a vibrant biotech industry, and its market. absence is a factor for the Germans' The organization of R&D and the role problems in doing the same (Kett ler of IPR in innovation have evolved over and Casper, 2000). time in the pharmaceutical industry. The There is no one "best practice" in interplay between "policy regimes", of any one time period and no linear which IPR is a part, and "technological relationship between one type of regimes" has been studied by Lacetera regulation and competitive suc- and Orsenigo (2001). They explore how cess. It is the composition of regu- these interactions have contributed to lation and competencies that are

2002 19 2 3 important. Other important com- tion, process imitation, inventing ponents of the supportive system around, and the production and above and beyond IPR include marketing of drugs under license price, market size, safety and or after patent expiration. approval regulations, and scientific These findings raise important ques- resources. This suggests that strong tions for the developing countries con- patent laws give an advantage to sidering changes to their IPR system. innovators, but are not enough to Can we predict how companies in coun- promote innovations where inno- trieswith emerging butrelatively vation capabilities and supporting underdeveloped industries will respond institutions are low or absent. to the introduction of the IPR standard Similarly, achieving high eco- of the globe's leading companies? In the

Will globalization of patent protection affect the global level of pharmaceutical innovation, especially for neglected diseases?

nomic returns on innovation is absence of necessary competencies and likely to be particularly important institutional support, will IPR regula- for sustaining innovation in highly tion in and of itself have any effect on innovative and competitive envi- developing countries' abilities to con- ronments. There are countries duct R&D and innovation to a global where companies have managed standard? The extent to which coun- to innovate despite relatively tries can pursue "national company weak patent systems at home strategies" will vary with their depen- (Germany and Switzerland) and dence on global markets, resources, and others where companies have competencies to survive. In addition, failed despite strong patent sys- we know that the relative strength of tems (Italy and Japan). patent protection influences foreign m There is not necessarily only one direct investment (FDI) decisions by sustainable business model. US, German and Japanese firms in rela- Though not industry leaders in tively high-technology industries like terms of R&D innovation or prof- chemicals, pharmaceuticals, machinery, its, companies in countries like and electrical equipment (Mansfield, France, for example, have, at least 1095). For drug and chemical compa- until recently, survived pursuing nies, patent protection was important in less innovative strategies based on both the manufacturing as well as the domestic markets, me-too produc- R&D stages.

20 COOPERATION SOUTH fie 24 IPR and R&D Capacity in the innovative research of new drugs Developing World and developing-country versions of Until recently, a limited number of coun- existing drugs; tries and companies had a pharmaceutical improve the transfer of, and access industry, while the rest of the world was to, technology and information consumers. The situation is changing. from established companies to Even before TRIPS, the production side of developing country researchers; the industry had started to become more create jobs for skilled labor global. According to a 1991 UNESCO and perhaps limit the "brain study, only Argentina, India, China, Mex- drain" from developing to ico, and Republic of Korea among the developed countries; developing countries had industries with improve international credibility innovativecapabilities;eightothers, for, and prospects for joint ven- including Brazil, Cuba, Indonesia and tures and direct foreign investment Egypt, could produce therapeutic ingredi- in, developing country research. ents and finished products that were com- Pharmaceutical companies refuse to petitive in regional export markets; and 59 bring products to market in countries countries had no industry at all and were where patents are not protected and totally reliant on imports to meet their domestic capacity exists for copying prod- pharmaceutical requirements. ucts. In a 1996 study, only 45 of the 434 Many proponents of TRIPS argue that pharmaceuticals on patent in the UK were a key benefit for developing countries is made available in India by Pfizer (Moss- that it will improve the conditions neces- inghoff, 1996). Case studies of Canada, sary to attract foreign direct investment Mexico, and Republic of Korea suggest and technology transfer, inputs necessary that pharmaceutical industry investors to help develop local R&D capacity. consistently located R&D and manufac- Expected long-term benefits are that turing in developing countries that respect stronger IPR will: IPR, according to Mossinghoff. potentially globalize the effort to find cures for disease, bringing in Local R&D into core scientific skills from emerging Neglected Diseases economies that currently lack It has been argued that developing coun- incentives to use them. In countries stand to contribute extensively to tries with emerging pharmaceutical the global R&D effort in general, and the industries such as India, Republic effort to eradicate neglected diseases in of Korea, Brazil, and China, it particular. To test the incentive role of should encourage researchers to patent protection, a study was done on switch from molecule copying to whether the trend in global research into

200 2 21 neglected diseases has changed signifi- required to discover, develop, and mar- cantly (and positively), as endemic coun- ket a new product. Moreover, even if tries implement strong IPR (Cockburn companies were capable of achieving and Lanjouw, 2000). Given identifiable such low costs, moneymaking opportu- differences in drug demands in these nities would still be much greater for countries, the authors surmised that rapidly growing global diseases than for changes in the pattern of research expen- neglected diseases, despite significant ditures might be expected as a result of differences in cost structure between strengthening the patent system, and that these categories. those changes would be easier to detect In interviews, executives of India's and ascribe to policy reform than changes leading companies revealed a global in overall levels of investment. focus (Lanjouw and Cockburn, 2000). They find some evidence of new They seek to exploit their traditional "research activity" in malaria in the experience and cost advantages in the 1980s/ear1y 1990s, but none in other generic drugs market, in improving tropical diseases. Rather than test the the drug profile by modifying existing incentive role of patent protection to drugs, or in discovering new classes of conduct R&D in general, they may molecules for well-understood diseases. instead have presented excellent evi- Those looking to increase their in-house dence that patent protection on its own is R&D facilities emphasize the impor- not enough to provide incentives for new tance of major diseases in industrialized investment in these neglected diseases. countries, e.g. cancer and diabetes. In the USA, for example, marketing The Case of India approval by the Food and Drug Admin- It seems unlikely that the potential cost istration is quick, and even a moderately advantage of doing R&D in the devel- important discovery is likely to be signif- oping world would encourage emerging icantly profitable (Lanjouw, 2000). As of companies with R&D capabilities to 1999, only 16 per cent of R&D expendi- focus on diseases neglected by the global ture in India was targeted on tropical players, as shown by the Indian example. diseases or developing-country markets; There are several reasons for this (Ket- about half was focused on developing tler and Modi, 2001). In addition to the suitable products for diseases of global required fixed investments, companies incidence (Scherer and Watal, 2001). need to move along a steep and rapidly In India, the Government has given evolving learning curve in order to priority to investment in new drug achieve the predicted low cost levels. development for diseases of relevance to Most Indian companies have done little its population, including tuberculosis, or no extensive R&D of the type malaria, and leishmaniasis. But without BEST COPY AVAILABLE

22 COOPERATION SOUTH fie explicit targeted incentives, such invest- that can exploit traditional strengths in ment is unlikely to take place. A pro- generic drug production and innovative posal to establish a support fund through process development, and find markets a tax on formulations sold in India in industrialized countries. Driven by would help to fund research in areas of the need to earn profits, companies combined high cost and low return, e.g. wishing to succeed in drug discovery are neglected diseases (Lanjouw, 2000). It is likely to target growing and potentially unclear whether the estimated US$ 22 profitable global diseases. million generated annually by such a Local solutions to local disease prob- scheme would serve as an adequate lems seem a long-term prospect at best, incentive, and who would decide how to and will require more than just the intro- allocate funds. duction of stronger IPR or even general Potentially large socioeconomic bene- incentives to conduct R&D. Once capa- fits could be gained by enabling private ble of managing intellectual property and companies and research institutions in conducting R&D, companies from devel- endemic regions to contribute to R&D oping countries can be expected to focus on new treatments. Research facilities in on diseases where they too can earn

Large benefits could be gained by enabling private companies and research institutions in endemic regions to contribute to R&D work on new treatments. these regions may be comparatively wellprofit. To increase the R&D investments placed to achieve quick solutions, relying committed towards neglected diseases, on close contact with other parts of the additional incentives and explicit policies health sector, on the local epidemiologi- and projects focused on specific diseases cal environment, and on clinical, behav- are needed. ioral, and social sciences tied to both Policy thinking has focused on two national and global frameworks. different R&D models: the commercial However, creating conditions for model, which provides incentives for innovative and cost-effective drug dis- "traditional actors" to replicate the covery and development and for a criti- R&D process applied to global diseases cal mass of companies focused on R&D to neglected ones; and the public private requires significant investment in facili- partnership model, which involves a ties, institutions, and skill building. The new organization of R&D. Creative IPR Indian companies most likely to survive policy can serve as an important incen- the changes in patent lawsare those tive tool in both models.

200 2 23 2 7 Policies to Support the applications for special orphan designa- Commercial Model tion. Individual countries would provide In the commercial model, the goal is to the research grants, tax credits to support give private companies incentives to the cost of the research and special exclu- engage in neglected diseases, as they do in sivity rights as a reward for any effective, other ones, by increasing the expected affordable product approved for market. A return on these investments. As in all cap could be set on the additional funds R&D projects, public and private actors companies could earn from the granted will contribute, but the private profit patent extension for their other product. motive will drive the process. Two types The main problem is that the burden of of policies are sought push incentives financing the roaming exclusivity measure to reduce the real cost of doing R&D falls predominately on the users of the in these diseases, and pull incentives to existing drug. Developed country govern- increase the expected rate of return (see ments would likely face opposition from detailed discussion in Kett ler, 2000). strong domestic patient groups, as well as With our focus here on IPR, we focus the generics industry. A second problem is only on roaming patent exclusivity as that this proposal will only be valuable to part of a modified orphan drug act. An companies that already have approved attractive feature of typical orphan drug products and would exclude small biotech- acts is that they combine push incentives nology companies, for example, that have (tax credits, grants, fast-track approval) no products to receive exclusivity rights. and pull incentives (guaranteed market Under any incentive policy, devel- exclusivity for 7-10 years) to encourage oped countries would subsidize the R&D companies to invest in rare diseases for costs for developing countries to benefit. which there are limited numbers of Two key issues are, first, whether the work patients in the respective market. A is done by public or private organizations, roaming patent exclusivity clause would and, second, whether the subsidy will be allow companies to extend the patent life "hidden" as extra costs to payers and of a product of their choice for a limited, patients using the products with the extra prespecified period of time in exchange months of exclusivity, or "open" with a for bringing a neglected diseases product grant paid out of general taxation to, say, to market and making it affordable to a purchase fund set up in WHO. patients in need (Kett ler, 2000, WHO- Another question is whether the types IFPMA, 2001). of push and pull incentives created in rich In a hypothetical scenario, an interna- countries for transnational corporations tional team of experts, perhaps housed at would also work in India or other coun- WHO, would prepare and update a list of tries with emerging industries. To be most qualifying disease categories and approve effective, incentives should probably take

24 COOPERATION SOUTH explicit account of the distinct cost struc- retaining reversion rights, should tures, skills, and strategic capabilities of commercial partners not deliver companies in the developing countries. on their commitments. Also, different policies are needed to IP is a key tool for pharmaceutical encourage the participation of small, companies in the pursuit of products and often loss-making biotechnology compa- profits. PPPs must be as assertive in the nies, as opposed to transnational corpora- way they use IP as any commercial unit, tions. How global incentive packages but for a different purpose the social should be designed and executed are top- objective of getting quality, affordable ics for important research in the future. products to developing country patients. This involves the negotiation of creative Policies on Public Private IP arrangements that do not scare off Partnerships (PPPs) companies, but also allow the PPP enough IPR plays a critical role in these new dis- control to ensure their ultimate objective, ease-specific initiatives (see Kett ler and a difficult challenge. Towse, 2001). Many PPPs choose to pur- PPPs are breaking into completely sue an IP strategy designed to maximize new territory with their IP negotiations. the social value of product and process The conditions PPPs place on IP negoti- patents. Arguably one of the most impor- ations price guarantees, volume guar- tant strategic tools is the partnership antees, and market specifications are research contract, and in particular the IP new and risky, and the challenge is how ownership conditions. Evidence suggests to make it attractive for major companies that the PPPs are pursuing some combi- to do deals. (For details, see Kett ler and nation of the following strategies: Towse, 2001.) acquiring rights over all IP arising from projects directly funded by THE IMPACT OF IPR ON ACCESS the PPPs; Studies, most notably the Commission trading rights to rich country mar- on Macroeconomics and Health and kets and use in other indications Attaran (2001), suggest that drug patents for low-price access for target are not a significant barrier to access to markets in developing countries; essential therapeutic drugs in the least ensuring there are incentives to developed countries. Of the 300 products deliver to these markets on the WHO designated Essential Drug e.g. requiring simultaneous launch List, 95 per cent are off-patent worldwide. in rich and poor countries; Furthermore, cases such as India and HIV providing incentives to supply drugs demonstrate that even in situations sufficient volume to developing where product patents are not recognized country markets; and and a flourishing generics industry exists,

2002 25 2 patients are not able to access the thera- tors. For example, if there are extremely peutics that they need. Health care advo- limited financial and health infrastruc- cates point to events in Brazil and South ture resources, and minimal political will Africa, where governments are trying to to make drugs available, the existence or address the HIV crisis with a package of not of patents will have little effect on policies including taking or threaten- access to existing drugs. If a country has ing to take a compulsory license to some, albeit limited financial resources show that patent policies can have an and infrastructure and a political or pri- observable impact on product prices and vate sector commitment to deliver essen- thus, presumably, patient access. tial drugs, the patent status of those drugs IP is far from the only factor involved becomes more critical. in access to medications. The lack of The relative importance of patents financial resources, health care infrastruc- varies in significance across diseases ture, and political will are also pivotal. as well. The treatment of a disease for Price is, of course, linked to how many which effective, off-patent medications resources are available to buy all health are already on the market is not likely to care products, including drugs. To the be affected by a country's patent policy. extent that the presence of generic com- But if some or all of the appropriate drugs petition brings down the prices set for on- for a disease are on-patent, as is the case patented products, the introduction of of AIDS at the moment, the link between that competition (or its threat) arguably patents, price, and access becomes central would affect that piece of the equation. to the treatment debates. Where newer, on-patent treatments are significant therapeutic advances over The Relationship of IP, older off-patent drugs, early access to Price and Access patentable products affects the health of Several researchers have documented millions, and thus the seeming conflict the effect of IP laws on prices for thera- between encouraging the development of peutic drugs. Borrell and Watal looked those new products and ensuring their at private sector sales prices for AIDS affordability must be addressed. antiretroviral medications (ARVs) in 34 When and how does IP affect access to developing countries between 1995 and the most appropriate therapeutic drugs 2000. They found that patents promote needed to treat disease? And what poli- local availability of new drugs on the for- cies are needed to help ensure afforda- profit market, but also result in higher bility in view of the harmonization of prices. Their study found that "firms stronger IP laws of the next few years? doubled mean prices when marketing The significance of IP to drug access exclusivity rights are available" and depends on several country-specific fac- average prices increased by 32 per cent,

26 COOPERATION SOUTH Ee raising "a difficult trade-off in poor the TRIPS agreement. Scherer and countries." One response to these find- Watal (2001) refer to three studies that ings is that government policy should predict price increases of 200 per cent or focus on control of drug prices rather more with the introduction of product than on actions that undermine the patents. The authors conclude that strength of patents. But the fact that IP TRIPS will lead to "economic shock" in is closely linked to price means that gov- some developing countries because it ernments with limited resources may will effectively outlaw generic copies of have to include consideration of IP law on-patent drugs. The authors argue that as they work to secure drug access for generics will have a crucial role to play their populations. in ensuring drug access in the future and The presence or absence of generic that "vigorously competitive global mar- substitutes can also have a profound kets for generics" are needed to ensure impact on the cost of drugs. In a study for access to therapeutics. Médecins sans Frontieres (MSF) of ten The ultimate personal and social essential AIDS drugs in eight countries, impact of stronger patent regimes will Perez-Casas (2000) found that their largely be determined by the degree to prices were 82 per cent less than the US which new patented drugs represent sig- price in developing countries with access nificant therapeutic advances over off- to generic copies of on-patent drugs. "The patent products already available as presence or absence of generic competi- generics at lower prices. In this specific tion in the market is a key determinant of case, prices may be significantly above pricing levels," he wrote. For the combi- competitive levels. In the absence of nation AIDS therapy d4T+3TC+nev other pro-access policy actions, millions rapine, his 2001 study showed steep price of people in developing countries will reductions following introduction of low- have very limited access to therapeutic priced generic versions on the world advances in biotechnology. It is impor- market. Health groups have argued that tant to keep in perspective, however, the it is generic competition, not voluntary fact that the majority of these people do drug company price reductions, that have not now have access to off-patented, led to steep and sustained price reduc- generic products either. tions on AIDS therapies in Africa. Potential effect of full TRIPS What will stronger IP implementation in India laws mean? Within the literature on the impact of Several researchers have attempted to stronger patent laws on pharmaceutical estimate the effects of stronger IP laws access, many authors focus on the case of resulting from full implementation of India. New patent laws would arguably

2002 27 31 influence domestic access to cheap patented products represented only 10.9 generic copies of new drugs, and will also per cent of pharmaceutical sales in1993. affect India's ability to serve as an important exporter of generic drugs to other AIDS as a Case Study developing countries. But for the 70 per AIDS is the most deadly infectious dis- cent of Indians without access to drugs ease in the world, claiming 8,000 lives now, expansion of IP protections is irrel- each day, over 95 per cent of them in the evant (Lanjouw, 1998). Delays in avail- developing world (UNAIDS, 2000). An ability of patented medicines produced analysis of the availability of AIDS med- by transnational corporations in India ications in developing countries well are not caused by the absence of product illustrates the complex issues of IP and patents, but by the transnationals' con- access. A variety of drugs, typically com- cerns regarding administrative issues in bined in a "cocktail," have been shown to the country, including potential impedi- improve and prolong the lives of people meats in winning marketing approval. living with HIV disease. Some of the Industry reluctance to market drugs in drugs commonly used in AIDS treatment India may also result from concern that were developed years ago and are not lowering drug prices here to make them widely subject to patent protection. Oth- accessible to a sizable market could ers, including most protease inhibitors undermine higher prices in wealthier that have revolutionized treatment, were countries (ibid. ). Patent-owning compa- launched recently and remain on-patent nies may "set prices to maximize global in most industrialized countries. Unlike profits, not profits in India." malaria and TB treatments, there is a Watal (2000) has estimated that fol- large market for AIDS drugs in industri- lowing the introduction of product IP, alized countries, so discussions concern- prices on patentable pharmaceuticals ing price-tiering or weakening of IP for could increase from 26 to 242 per cent, these drugs raise deep concerns with with a loss in consumer surplus of between patent holders of AIDS drugs. $11 million and $67 million, and total A mix of lessons can be learned from a "welfare losses" of from $50 million to look at three case studies: India, South $140 million. Watal notes that a large Africa, and Brazil. In general, these cases proportion of these losses will go to pre- show that IP, financial resources, infras- tax foreign profits, and that the existence tructure and political will all play key roles of substitute medications for on-patent in determining access to AIDS drugs. products is a critical factor in price effects. Fink also predicts significant effects, not- India ing that large losses to consumers are India'sPatent Act of 1970 made possible, but pointing out that in India pharmaceutical products unpatentable,

28 COOPERATION SOUTH f!N! 32 engendering a large generic drug indus- South Africa try focused on copying on- and off- In the midst of a horrific AIDS epidemic, patent medications. An estimated 200 South Africa provides a dramatically dif- pharmaceutical companies now operate ferent example. As of 2000, UNAIDS on the national level, and approximately estimated that 4.2 million people (or 20 23,000 compete at the regional level, per cent of the adult population) in the according to de Souza. India has taken country were infected with HIV. The vast the option to delay full implementation majority of people living with HIV do not of TRIPS until January 1, 2005, so have access to AIDS medications, and the domestic drug companies can produce government has been widely criticized for generic versions of drugs that are on- its failure to act more aggressively to make patent elsewhere until that date. AIDS drugs available, including drugs to The Joint United Nations Programme prevent mother-to-child transmission. on HIV/AIDS (UNAIDS) estimated that The South Africa case demonstrates in 2000 there were 3.7 million people liv- the importance of adequate financial and ing with HIV or AIDS in India, or 0.7 per infrastructure resources in meeting the cent of the adult population. Indian com- needs of people living with HIV. Yet in panies making generic drugs used in AIDS the extremely resource-constrained envi- therapy have offered to sell them to ronment of South Africa, the interaction patients in other developing countries at of IP policy and drug prices clearly impacts prices far below those charged by patent- drug access. South Africa has traditionally holding transnational companies. Yet had a strong IP regime relative to other these lower-priced products have not developing countries, and patented ver- resulted in widespread drug access to ther- sions of many drugs produced by transna- apeutic drugs for AIDS and other diseases tionals are available for sale there. South among India's poor. Africa is also known for its high prices for The international pharmaceutical patented drugs long thought to be industry points to this evidence to sup- among the highest in the world as com- port their position that the mere presence pared with other developing countries of a strong generics industryensures (Gray, 2000). A survey of AIDS drug access to drugs. The International Feder- prices by MSF found that a one-gram vial ation of Pharmaceutical Manufacturers of Ceftriaxone is US$10.90 in South Associations (IFPMA) has noted that "If Africa, and US$1.80 in India as a generic. patents were indeed the problem, large Fluconazole is 14 times more expensive in populations within India and similar South Africa than in Thailand, where it is countriesshouldhaveeasyaccess sold as a generic (Perez-Casas, 2000). to...copied, generic versions of AZT and High consumer drug prices are blamed other medications." on strong IP laws, but also high distribu-

2 002 29 3 3 tion chain costs, including mark-ups that patents do not appear to be the pri- between initial sale and retail price. mary factor restricting access to ARV South Africa has considered the intro- treatments in most African nations. They duction of controls on drug mark-ups, found that patents in most countries did of taking steps to encourage sale of not cover these drugs and that patent cov- generic substitutes where available, and erage is not correlated geographically with of allowing parallel importing under some ARV treatment access. Attaran and col- circumstances. Compulsory licensing is leagues conclude that "a variety of de facto technically already permitted within the barriers are more responsible for impeding existing Patents Law. access to antiretroviral treatment." Their Debates continue about the relative list includes but is not limited to "the importance of patents on South African poverty of African countries, the high cost drug access. Infrastructure and financial of antiretroviral treatment, national regu- resources are the most pressing issues latory requirements for medicines, tariffs with regard to AIDS drug access in South and sales taxes, and, above all, a lack of suf- Africa, according to an International ficient international financial aid to fund Intellectual Property Institute (IIPI) antiretroviral treatment." paper. IIPI argue that in South Africa Five health advocacy groups( the TRIPS compliance already permits Consumer Project on Technology, Essen- expanded access by means of compulsory tial Action, Oxfam, Treatment Access licensingandparallelimports.In Campaign, and Health Gap) responded response, South African's Treatment to the Attaran article with a joint state- Action Campaign (TAC) has argued that ment (2001) claiming that several com- ARVs are not available in the public sec- binations of AIDS treatments were not tor medical system largely because of cost, adequately included in the published sur- which they claim is closely related to the vey. Their statement also emphasizes the strong patent system in their country. special circumstance of patents in South TAC has also claimed that "the scope of Africa, and the role of that country in TRIPS is sufficiently complex to allow the region: pharmaceutical companies to pursue In South Africa every three-drug ARV

time-consuming, costly legal action", cocktail is blocked by patents...The with the goal of delaying implementation South Africa market is important for of alternatives (Geffen, 2001). several reasons. First, there are 4 to 5 In an attempt to introduce more evi- million HIV+ persons in South Africa. dence into this debate, Attaran and col- Second, the South Africa economy has leagues at Harvard University conducted a more than 40 percent of the GDP far controversial study of the patent status of sub-Saharan Africa, a per capita 15 ARVs in 53 countries. They concluded income of more than $3 ,000 and a rel-

30 COOPERATION SOUTH ta5 3 4 atively good health care infrastructure, national agreements, Brazil passed strong making ARV treatment feasible if drug patent laws, steps highly praised by indus- prices are low enough. Third, entry try observers. But the Brazilian patent law into the South Africa market is neces- stipulated that patents for drugs commer- sary for generic suppliers to reach the cialized before May 14, 1997 would economies of scale (volume) needed remain off-patent in the country. for the most efficient production. In 2000, UNAIDS estimated that This is particularly true for those prod- 530,000 Brazilians, or 0.57 per cent of the ucts with post-1996 patents, such as adult population, were living with HIV. efavirenz or nelfinavir, that currently Since 1996, the government has been lack a significant generic market out- officially committed to provide AIDS side of Africa. treatment to all citizens and has imple- In 2000 and 2001, transnational cor- mented a broad-based AIDS treatment porations reduced the price on a number program. To make pharmaceuticals afford- of Aids drugs sold in Africa. Many able, the government uses its public man-

Local manufacture of generic AIDS drugs in Brazil reduced their prices by 72.5 per cent from 7996-2000.Their use avoided 146,000 hospitalizations and saved $422 million from 1997-1999.

health advocates argued these price cuts ufacturing plant, Far-Manguinhos, to pro- were motivated by earlier offers from duce drugs that are off-patent in the generic companies, including Cipla and country. Brazilian public health officials Aurobindo. Oxfam (2001) noted that have also shown willingness to threaten even with the new drug company price compulsory licensing and domestic pro- cuts, AIDS triple combination therapy duction of on-patent drugs in their nego- would cost African governments $1,000 tiations with pharmaceutical companies. per person annually, still more than The Brazilian Ministry of Health three times higher than the cheapest (2001)estimatesthat,becauseof offer from the Indian generic company expanded availability of ARVs, 146,000 Aurobindo. hospitalizations were avoided from 1997- 1999, saving $422 million. It claims that Brazil price reductions in AIDS drugs are due to Brazil is often held up as an example of the establishment of national manufac- how developing countries can both turing labs and effective negotiation of respect patent law and expand access to prices with companies. AIDS drugs made new drugs. In 1996, to comply with inter- in Brazil fell 72.5 per cent in price from

2002 3 ti 31 1996 to 2000. Imported drugs fell 9.6 per threat of generic competition is enough cent during the same period. to get manufacturers to lower their prices" Brazil's AIDS drugs budget shows the (New York Tmes, January 28, 2001). price differentials between off-patent domestically manufactured therapies and Toward balanced policies imported on-patent drugs. AIDS thera- Current literature and lessons from India, pies produced in the country represent 47 South Africa and Brazil demonstrate that per cent of ARVs used, but consume only the presence or absence of patent protec- 19 per cent of total AIDS drug spending. tion is one of several important factors AIDS drugs purchased from transnational that have affected drug prices and access, corporations represent 53 per cent of as well as development of domestic indus- ARVs used, and consume 81 per cent of try. Though patents are important, it is expenditures (Ministry of Health, 2001). possible to overemphasize their effect on In its analysis of drug prices, MSF (2000) drug access and ignore other important foupd that locally produced ARVs in factors such as the availability of interna- Brazil are sold at fraction of the global tional and domestic financial resources price. Combination ARV therapy is pro- for health care, infrastructure needs, and duced locally in Brazil, but in Thailand political leadership. the same ARVs are not available as The move towards stronger IP protec- genetics. As a result, according to MSF, it tions through the TRIPS agreement pre- costs the same in Brazil to treat 1,000 sents complex issues. There is evidence people with HIV/AIDS as it does for the that strong patents have had a negative Thai government to treat 552 people. effect on affordable prices. Industry con- Brazil has effectively used price con- tinually raises concerns that the erosion trols and threats of compulsory licensing of patent protections will undermine as bargaining chips to negotiate with incentives for product development. transnationals for lower AIDS drug Since Africa represents only 1.1 per cent prices. A presidential decree on compul- of the global pharmaceutical market, it is sory licensing enables the government to difficult to see how lower prices in this override market exclusivity of patents market significantly impact transnation- and authorize third-party production on als' profits. The real fear is that lower the grounds of public interest or national prices will undercut acceptance of higher emergency. A recent successful negotia- prices elsewhere, and could lead to a flow- tion was the agreement with the pharma- back of cheap drugs to richer markets. ceutical company Roche on a 40 per cent Political and legal actions are needed to price cut for the ARV nelfinavir after address both concerns. Brazil threatened to break the patent and Developing countries have a clear produce the drug itself. "Just the credible stake in product development for diseases

32 COOPERATION SOUTH fie 3 6 affecting their populations. By them- try distributor is often a fraction of the selves, stronger patents in developing final price charged to the patient. countries are unlikely to provide ade- The Brazil model is less applicable to quate incentives for the private sector to lower-income countries without domestic significantly expand research on treat- industry. In these countries, significant ment and vaccines for tropical diseases. injection of resources is absolutely neces- Yet patents may well be an important part sary, combined with greatly reduced phar- of a comprehensive package of incentives maceutical prices. Political and economic necessary to increase industry work on incentives for tiered pricing can play an diseases of the poor. important role here, particularly for In looking for a balanced policy that essential medicines, and there is evidence addresses the needs of developing coun- that interventions will be needed to tries, the examples from the three coun- encourage greater use of tiered pricing. tries above demonstrate the critical The AIDS pandemic demonstrates importance of a combination of factors, the desperate need for policies that fos- including healih funding, political com- ter early and broad access to life-saving mitment, and flexibility in implementa- drugs, as well as the promotion of tion of IP law. Of the three countries, research on future technologies. This is Brazil has shown the most impressive suc- the difficult and urgent challenge to pol- cesses at extending drug access to its pop- icymakers. Yet there is little justice in ulation. In this case, the development of demanding that populations in develop- domestic public manufacturing capacity ing countries forgo access to today's and willingness to use options in trade AIDS drugs in order to promote future law have allowed the government to be a R&D on products that would also be powerful negotiator with patent-owning inaccessible to many in these countries. transnationals. One goal of a balanced IP TRIPS and other international trade policy might be to encourage flexible agreements will remain a priority for

There is little justice in demanding that developing countries forgo access to today's drugs so as to promote future R&D on products that would also be inaccessible to many in these countries. policies that acknowledge patent rights, industrialized countries, yet theyare not but also provide options that strengthen ultimately sustainable unless greater the negotiating hand of developing coun- equity in the delivery of health care tech- tries with transnationals. However, the nology is achieved. As developingcoun- price that the company charges to a countries increasingly demand funding and

200 2 33 3 policy options to increase health care For diseases which predominate in access, and policymakers begin to appre- developing countries, and for which no ciate the role of health status in creating effective treatments currently exist, a more stable world, this challenge of bal- affordability and access are legitimate anced and equitable IP policy becomes concerns, but for now the primary issue ever more important. is how to realize new products through R&D. Creative ways to attain the CONCLUSIONS "dynamic innovative" opportunities of The R&D and access issues discussed IPR are needed. Regardless of the incen- above are among the broad set of factors tive package, it must include explicit affecting health in the developing world. conditions to help ensure that any A critical challenge, well recognized by approved product of the research be all involved, is to find a balance between affordable to the patients in need.

TRIPS and other international trade agreements are not ultimately sustainable unless greater equity in the delivery of health

care technology is achieved.

IPR rules that allow for affordable access Governments in both the north and to new, on-patent technologies, while the south working to design effective IPR continuing to protect companies and policies for global health must consider other institutions that have invested in a the short and longer-term impacts of IPR risky and lengthy research effort and policies. IPR policies are critical in shap- demand a return on that investment. ing the path of domestic industry devel- Steps to cut prices for existing products opment. Ironically, governments of devel- now may jeopardize incentives for com- oping countries may feel pressured to panies to develop new products for the choose between an IPR policy that could future. And patients suffering from one of help promote domestic-based research the neglected diseases can only hope for industries and investment (and arguably new products, as effective treatments cur- long-term economic development) and rently do not exist. one that some argue will help improve Only a few of the priority "diseases of immediate access to products now, and the poor" fall into the category of diseases thus the health of their population. Look- with truly global markets and where dif- ing closely at the role IPR plays in the ferential pricing (or the threat of compul- global health debates, policymakers need sory licenses) are part of the access debate. clearly identified goals, an understanding The most important example is HIV. of what motivates the necessary partici-

34 COOPERATION SOUTH ee pants, and a willingness to acceptthat IPR World Bank. is only one of a necessary package of Geffen, N. (2001). "Pharmaceutical Patents, instruments they need to consider. er, Human Rights and the HIV/AIDS Epidemic." Presentation to the World Business Council for Sustainable Development Project on REF ER ENCES Innovation and Technology. O Gray, A. and T. Matesebula (2000). "Drug n Attaran, A. and L. Gillespie-White(2001). Pricing," in South African Health Review. "Do Patents for Antiretroviral Drugs Con- Health Systems Trust, South Africa. strain Access to AIDS Treatment in Africa?" http://www.hst.org.za/sahr/2000. Journal of the American Medical Association, a International Federation of Pharmaceutical vol. 286, No. 15 Manufacturer Associations (2000). "TRIPS, a Borrell, J. and J. Watal. "Access to HIV/AIDS Pharmaceuticals, and Developing Countries: Drugs in Developing Countries: Assessing the Implications for Health Care Access, Drug Impact of Patents" (preliminary version). Quality, and Drug Development." a Chaudhry, PE and M.G Walsh (1995)"Intellec- a Kettler, H. (2000). Narrowing the gapbetween tual Property Rights: Changing Levels of Protec- provision and need for medicines in developing tion under GATT, NAFTA, and EU", Columbia countries, Office of Health Economics, London. Journal of World Business, 30 (2): 80-92. a Kettler, H. and S. Casper (2000).The Road O Consumer Project on Technology, Essential to Sustainability in the UK and German Biotech- Action, Oxfam, Treatment Access Campaign, nology Industries,pffice of Health Economics, Health Gap (2001). "Comment on the London. Attaran/Gillespie-White and PhRMA Surveys a Kettler, H. and R. Modi (2001)."Building of Patents on Antiretroviral Drugs in Africa." local research and development capacity for www.cptech.org/ip/health/africa/dopatents- the prevention and cure of neglected diseases: matterinafrica.html the case of India", Bulletin of the World Health oDeSouza, N.J. "Overview of the Indian Organization, Vol. 79, No. 8, 742-747. Pharmaceutical Industry: Imperatives for the Kettler, H. and A. Towse (2001). "Public Pri- Next Millennium." www.gbhap-us.com/maga- vate Partnerships A Report for Working zines/pharmanews/5-6-article.htm Group 2 of the WHO Commission for Macroe- O Europe Economics (2001). "Medicines Access conomics and Health", unpublished draft. and Innovation in Low Income Countries", a Lacetera N. and Orsenigo L.(2001). "Political draft report to IFPMA, London. www.europe- regimes, technological regimes and innova- economics.com tion in the evolution of the pharmaceutical a Fink, C. "How Stronger Patent Protection in industry in the USA and in Europe", paper India Might Affect the Behavior of Transna- presented at Conference on Evolutionary Eco- tional Pharmaceutical Industries." Washing- nomics, Johns Hopkins University; Baltimore, ton, D.C.: Development Research Group, The MD, USA, 30-31 March 2001.

2002 35 3 9 a Lanjouw, J. (1998). "The Introduction of under the WTO TRIPS Agreement. Oxford: Pharmaceutical Product Patents in India: Blackwell Publishers. Heartless Exploitation of the Poor and Suffer- WHO-IFPMA (2001). "Priority infectious dis- ing?", NBER Working Paper No. 6366. eases requiring additional R&D", April draft. Lanjouw, J. and I. Cockburn (2000). "Do Patents Matter?: Empirical Evidence After Galt", NBER Working Paper 7495. a Mansfield E. (1995). Intellectual property protection, direct investment and technology transfer Germany, Japan, and the United States. Washington, DC, World Bank, (International Finance Corporation Discussion Paper No. 27). a Ministry of Health of Brazil (2001). "AIDS Drugs Policy." www.aids.gov.br/assistencia/ aidsdrugspolicy.htm Mossinghoff, G. J. and T Bombe Iles (1996). "The Importance of IP Protection to the American Research-intensive Pharmaceutical Industry", Columbia Journal of World Business, 31 (1): 38-49. a Oxfam (2001). "WTO Patent Rules and Access to Medecines: the Pressure Mounts. www.oxfam.org.uk/policy/papers/wtorules.htm. a Perez-Casas, C., et al. (2000). "Setting Objec- tives: Is There a Political Will?" HIV/AIDS Medicines Pricing Report. Médecins sans Frontieres. Perez-Casas, C., et al. (2001). "Accessing ARVs: Untangling the Web of Price Reduc- tions for Developing Countries." Campaign for Access to Essential Medicines, Medecins Sans Frontiers. a UNAIDS (Joint United Nations Program on HIV/AIDS). "AIDS Epidemic Update," December 2000.

Watal, J. (2000). Pharmaceutical Patents, Prices and Welfare Losses: Policy Options for India

36 40 COOPERATION SOUTH e 0

Poor 0

BY JAGDISH BHAGWATI

What are appropriate ways of pricing drugs for diseases, such as malaria, which mainly exist in the poor countries, and for those diseases, such as AIDS, which afflict rich

and poor countries alike? In the latter case, it is in the interestsofpoor countries to

segment the market so as to assure themoflower prices. This is the argument made by Jagdish Bhagwati, a University Professor at Columbia University, whose latest book is Free Trade Today (Princeton).

THE DEBATEon intellectual property once secured is desirable, we have here protection and medicines for the poor the economist's trade-off: more IPP countries is part of a general debate on means more knowledge, but it also how much intellectual protection there reduces diffusion. The social optimum should be and whether it should have lies somewhere in the middle, as often. been built into the World Trade Organi- Few economists believe that the 20-year zation. But, of course, it also raises some patent length agreed upon at the con- issues specific to medicines. clusion of the Uruguay Round at Mar- The argument for intellectual prop- rakesh in 1995 is anything but excessive erty protection (IPP) is that, since it from this viewpoint. Yet the pro-IPP lob- costs money to invent knowledge and bies, among whom the drug companies the widespread diffusion of knowledge were vociferous, used their political

* A shorter version of this article appeared in the Financial Times of 10 September 2002, entitled "Patents and the Poor".

2002 37 BESTCOPYAVAILABLE 4 1 muscle to have this agreement. the WTO as increasingly the target of Most poor countries were not enthu- Western lobbies that would capture the siastic about IPP, just as the United WTO to their own advantage, using the States had been historically when it was specious arguments that their causes a user rather than a producer of know- have to do with trade in some intrinsic how. Poor countries objected to intellec- way all courtesy of the IPP lobbies, tual property protection being provided drug companies included. as part of a trade package the Trade- But one must say that the very related Intellectual Property (TRIPs) premise that drug companies are seri- agreement in the WTO. IPP is not a ously handicapped in their R&D by the trade issue; and the WTO ought to be lack of IPP in the poor countries is about lowering trade barriers and tack- flawed. Poor countries have need, but no ling market access problems that will effective demand. There is little money often go beyond border measures to to be made to recover normal profits on internal regulations: a thorny issue. your invented drugs, if you think of poor Trade-relatedInvestmentMeasures country markets. To see why the drug (TRIMs) is by contrast only about roy- companies nonetheless see IPP in the alty collection. It was put into the WTO poor countries as a money-spinner, it is

The argument that drug companies are seriously handicapped in their R&D by the lack of intellectual property protection in the poor countries is flawed.

by considerable lobbying pressure, in the necessary to distinguish between two United States in particular, so as to types of diseases: those, such as malaria, provide for the use of trade sanctions which are primarily in the poor coun- against user countries who used knowl- tries, and those, such as AIDS, which edge without paying royalty. It turned afflict rich and poor countries alike. the WTO, therefore, into a royalty-col- For the former, evidently IPP cannot lection agency! To the chagrin of the assure any decent return because the poor poor countries today, the result has been countries cannot pay. So, we have several the proliferation of yet other lobbies, ways of getting drugs invented for them such as labour unions, which would like by using public and quasi-public moneys to have their own agendas built into the to mobilize scientists (and firms) to WTO, to follow in the path of the IPP address the task. In the old days, you had lobbies. The poor countries therefore see institutions like the Institute for Tropical

38 42 COOPERATION SOUTH Medicine in England. The Nobel laureate IPP in the poor countries comes into Norman Borlaug was financed by Foun- play when they want to shut off the more dation moneys to help invent the new advanced of the poor countries, such as seeds that made the Green Revolution. India and Brazil, from coming into Michael Kramer of Harvard University Botswana and Gabon and providing, with has proposed the setting up of guaranteed their generic copies, the same drugs at remunerative prices for invented vac- low prices that effectively put a cap on cines. All of these are variations on the how far the drug companies can raise use of public moneys; IPP has no useful their prices. So, they would like to stop role to play in the provision of drugs spe- Indias and Brazils through IPP applied cific to poor countries. there; and they prefer also restrictions on But everything changes when drugs to whether the Indias and Brazils can export fight diseases that cut across the rich and to the poor countries. poor nations are at stake. Here, the drug What about parallel imports? Should companies make money in the rich coun- the drug companies be allowed to seg- try markets; IPP there is clearly some- ment rich and poor country markets for thing they value. But then they see pif- such drugs, preventing the importation fling effective demand for those drugs in into rich countries of drugs they sell at the poor countries. So, their strategy is to lower prices in the poor countries? The sell there, producing at very low marginal answer has to be a resounding yes. If there costs and then charging the little that were no such segmentation, the poor and these poor markets will bear. the rich countries would be a single mar- But they would like to raise that return ket, and the prices charged to the poor as much as they can. The way is to countries would rise. The segmentation increase effective demand by using aid enables poor countries instead to secure moneys addressed to health programs, so low prices from the drug companies. This that the excess of what they will charge is something that the rich-country non- over their marginal cost is increased, rais- governmental organizations concerned ing profitability in the poor country mar- about poor countries must understand. kets. Medical economists have known for There are often paradoxical ways to effec- years that medical groups, for instance, tively help the poor; this is one of them. favour insurance schemes that improve e?! the patients' ability to pay (such as Blue Cross and Blue Shield insurance programs in the US), but oppose insurance schemes like the National Health Service of England, which instead reduce the returns to doctors.

2002 39 4 3 Capacity Building IFO vLANAGEMENT OF Intellectual Property Rights

BY MART LEESTI AND Tom PENGELLY

There is a broad range of experience to share among developing countries concerning

' strategies and structures for the management of intellectual property rights (IPR). Based on a background paper for the Commission on Intellectual Property Rights (CIPR), this article captures the state of the art and offers guidelines for future improvements. It draws on several case studies in developing countries, available literature , and interviews with representatives from relevant international organizations, as well as developing country IPR managers. The authors are Mart Leesti, a consultant on intellectual property administration, who was the first Chief Executive Officer of the Canadian Intellectual Property Office; and Tom Pengelly, who was a Policy Analyst with CIPR, and has worked in four developing regions for the UK Department for International Development and other agencies.

DESIGNING IPR REGIMES and commercialization of new technolo- IN POOR COUNTRIES: gies, products, artistic and literary works, POINTS OF DEPARTURE and to promote the use of those items. There are five fundamentals to consider Empirical evidence, while inconclusive, in the design of intellectual property suggests that stronger IPR regimes can regimes in developing countries. generate both benefits and costs for poor countries. On the benefits side, stronger 1. Balancing incentives for IPR IPR regimes can lead to greater trade and holders with access for users inflows of foreign direct investment IPRs exist to strike a balance between the (FDI), as well as more transfers of tech- needs of society to encourage innovation nology, which in turn increases produc-

40 COOPERATION SOUTHes tivity performance. On the costs side, decide whether his country should, say, IPRs can reduce social welfare by restrict- develop a new system for protecting its ing access to protected technologies and traditional knowledge or extend copy- knowledge, and by raising prices for items right laws to protect electronic databases. essential to poor people's livelihoods like medicines, agricultural inputs and educa- 2. Low levels of domestic tional materials. intellectual property creation The implication of this for designing A second point of departure is that poor IPR policies, legislation and institutions countries can devote few resources to isthat poor couhtries require quite innovation and that they generate very sophisticated technical expertise and low levels of (industrial) intellectual decision-making processes in order to for- property that could be protected by the mulate policies and laws that carefully formal system of patents, trademarks etc. balance public policy objectives and (Poor countries may generate other kinds stakeholder interests in the context of of knowledge, but these are outside the economic and technological develop- formal IPR system and harder to mea- ment. As a recent article put it: sure.) While there are of course huge dif- "Normally, society opposes monopo- ferences between the innovation capabil- lies because they create artificial ities and the volume of IPR applications scarcity and raise prices for con- in countries like Taiwan, South Africa sumers. Intellectual property, on the and Eritrea, table 1 shows that almost 90 other hand, creates monopolies to per cent of patents granted in 2000 in the encourage new products . The trick is US (the world's biggest single market) to get the best possible bargain by originated from the USA, Europe and restricting new rights to products that Japan. Poor countries are essentially are valuable and cannot be obtained users, not producers, of innovation. As by other means. Careful legislators table 2 shows, their IPR regimes will do this by imposing threshold require- essentially protect knowledge assets pro- ments (such as novelty and creativ- duced in the industrialized countries for ity) that dole out rights as sparingly as some time to come. possible." (Maurer et al, 2001) Moreover, the level of sophistication 3.Capturing benefits from IPRs required is increasing as the realms of through holistic institutional intellectual property protection expand frameworks followingtechnologicalorpolitical Developing countries need more than change. For example, it is not a simple just the minimum institutional capacities task for a government minister responsi- required to provide a reasonably smooth ble for intellectual property in an LDC to system for administration and enforce-

200 2 41 4 5 TABLE 1: GRANTS OF US PATENTS BY COUNTRY OF ORIGIN, 2000

Country Total US Patents grants Total US Patents grants (Number) (%) USA 96,920 55.07% Japan 32,922 18.71%

European Union 27,190 15.45%

Other Developed Countries' 6,695 3.80%

Taiwan 5,806 3.30%

South Korea 3,472 1.97%

Israel 836 0.48%

China 711 0.40%

Eastern Europeb 355 0.20%

Singapore 242 0.14%

India 131 0.07% South Africa 124 0.07%

Brazil 113 0.06% Mexico 100 0.06% Other Developing Countries` 365 0.21%

Least Developed Countries° 1 0.0006% Total All Countries 175,983 100.00%

Source: USPTO Information Products Division. a Australia (859), Canada (3923), Gibraltar (1), Iceland (18), Liechtenstein (19), Monaco (15), New Zealand (136), Norway (266), Switzerland (1458).

bBelarus (3), Bulgaria (1), Croatia (6), Cyprus (1), Czech Republic (41), Czechoslovakia (10), Estonia (4), Hungary (38), Latvia (1), Lithuania (2), Malta (2), Poland (13), Romania (4), Russian Federation (185), Slovakia (4); Slovenia (18), U.S.S.R. (1), Ukraine (17), Yugoslavia (4). ' Arab Emirates (2), Argentina (63), Aruba (2), Azerbaijan (1), Bahamas (14), Bahrain (1), Bermuda (2), Bolivia (2), Cayman Islands (8), Chile (16), Colombia (11), Costa Rica (8), Cuba (3), Dominica (1), Dominican Republic (5), Egypt (8), Guatemala (2), Hondurai (1), Indonesia (14), Jamaica (2), Kazakhstan (4), Kenya (3), Kuwait (8), Kyrgyz Republic (1), Lebanon (4), Malaysia (47), Morocco (2), Namibia (1), Netherlands Antilles (2), Nigeria (2), Pakistan (5), Palau (1), Panama (2), Peru (3), Philippines (12), Qatar (1), Saint Kitts and Nevis (1), Saudi Arabia (19), Sri Lanka (5), Syria (4), Thailand (30), Turkey (6), Turks and Caicos (1), Uruguay (1), Uzbekistan (2), Venezuela (32). ° Guinea (1). However, information from the UK Patent Office suggests this is an error and the patent application (for a seed-separating device) originated from Papua New Guinea, a developing country. If correct, this would mean that none of the 175,983 US patents granted in 2000 originated from an LDC.

ment of IPRs. Rather, they require a wider m (a) to regulate IPRs and ensure institutional framework which provides open, contestable markets for three capacities: goods and services essential to

42 COOPERATION SOUTH 4 6 TABLE 2: PATENT APPLICATIONS AND GRANTS IN SELECTED LEAST DEVELOPED COUNTRIES, 1998

Country Applications Grants Residents Non-Residents Total ResidentsNon-Residents Total

Bangladesh 32 184 216 14 126 140

Gambia* 5 60267 60272 1 17 18

Lesotho* 6 67485 67491 0 36 36

Malawi* 7 67753 67760 0 80 80

Sudan* 6 67713 67719 0 64 64

Uganda* 7 67603 67610 0 66 66

Zambia* 7 86 93 1 19 20

Source: WIPO website (note:data only available for a small minority of WIPO LOC member states, hence the small sample). - *Member of the PCT (Zambia only acceded to the PCT in 2001, and this.explainsthe low level of applications in 1998). Although the total numbers of applications in the Pa- member countries shown appear very large, only a very much smaller number of these enter into the "national phase" where action is required by national officesinvolving the grant of a substantive patent in the country concerned.

poor people's livelihoods (through national IPR administration agencies, instruments such as competition establishment of five university chairs policy and compulsory licensing, on intellectual property in various for example); regions of the country, and creating a (b) to support development of National Innovation Foundation aimed national innovation capabilities by at encouraging innovations to solve maximizing access to technologies local problems and building a national and knowledge assets protected by register of innovations and outstanding IPRs (through subsidized patent traditional knowledge. information services and support to upgrade technology transfer 4.IPRs as private rights capabilities in universities, for A fourth point of departure is that example); intellectual property rights are private (c) to strengthen research and rights, as articulated in the preamble to education institutions and conduct the Agreement on Trade-related Intel- public awareness campaigns. lectual Property (TRIPS) under the India illustrates efforts to develop a World Trade Organization. Thus, IPR holistic approach which includes invest- regimes should lean heavily towards ing substantial sums in modernizing the resolving disputes over intellectual

2002 43 4 7 TABLE 3: THE 49 LDCS AND THEIR MEMBERSHIP OF SELECTED INTERNA- TIONAL IPR TREATIES

Country WIPO Regional Paris Beme Madrid Hague UPOV agreements

WTO members (TRIPS by 1 January 2006)

Angola Yes No No No No No No No

Bangladesh Yes No Yes Yes No No No No

Benin Yes OAPI Yes Yes No Yes No Yes

Burkina Faso Yes OAPI Yes Yes No No No Yes Burundi Yes No Yes No No No No No Central African Rep Yes OAPI Yes Yes No No No Yes Chad Yes OAPI Yes Yes No No No Yes Congo (DR) Yes OAPI Yes Yes No No No No Djibouti No No No No No No No No- Gambia Yes ARIPO Yes Yes No No No Yes Guinea Yes OAPI Yes Yes No No No Yes Guinea-Bissau Yes OAPh Yes Yes No No No Yes: Haiti Yes No Yes Yes No No No No Lesotho Yes ARIPO Yes Yes Yes No No Yes Madagascar Yes No Yes Yes No No No Yes Malawi Yes ARIPO Yes Yes No No No Yes Maldives No No No No No No No No

Mali Yes OAPI Yes Yes No No No Yes

Mauritania Yes OAPI Yes Yes No No No Yes Mozambique Yes ARIPO Yes No Yes No No Yes Myanmar Yes No No No No No No No Niger Yes OAPI Yes Yes No No No Yes

Rwdnda Yes No Yes No No No No No

Senegal Yes OAPI Yes Yes No Yes No Yes

Sierra Leone Yes ARIPO Yes No Yes No No Yes

Solomon Islands No No No No No No No No - Tanzania Yes ARIPO Yes Yes No No No Yes

Togo Yes OAPI Yes Yes No No No Yes Uganda Yes ARIPO Yes No No No No Yes Zambia Yes ARIPO Yes No Yes No No Yes Non-WTO members Afghanistan No No No No No No No No

Bhutan* Yes No Yes No Yes No No No Cambodia* Yes No Yes No No No No No Cape Verde* Yes No No Yes No No No No Comoros No No No No No No No No Equatorial Guinea Yes No No Yes No No No Yes

Eritrea Yes No No No No No No No Ethiopia Yes No No No No No No No Kiribati No No No No No No No No Laos* Yes No Yes No No No No No

44 COOPERATION SOUTHee TABLE 3: continued

Country WIPO Regional Paris BerneMadridHagueUPOV PCT agreements

Liberia Yes No Yes Yes Yes No No Yes

Nepal* Yes No Yes No No No No No Samoa* Yes No No No No No No No Sao Tome & Principe Yes No Yes No No No No No Somalia Yes ARIPO No No No No No No

Sudan* Yes ARIPO Yes Yes Yes No No Yes Tuvalu No No No No No No No No Vanuatu* No No No No No No No No Yemen* Yes No No No No No No No Total memberships 41/49 22/49 32/49 23/49 7/49 2/49 0/49 23/49- (all LDC5) (84%) (45%) (65%) (47%) (14%) (4%) (0%) (47%)

Source: WTO website, WIPO website * In process of accession to WTO. property assets between parties under 5. Compliance with civil law, and so reduce the enforce- international obligations ment burden on the state to the mini- In common with other areas of public pol- mum. In practical terms, this means icy such as the environment or trade, the an intellectual property infrastructure design of national intellectual property which has the capacity to grant IPRs regimes is in part determined by interna- with a high presumption of validity, tional rules and standards to which the keep accurate and readily accessible country has committed itself. There are registries and records, and correct international treaties and they are con- defects in IPR titles through adminis- stantly being added to for almost every trativerather than judicial means form of intellectual property rights, such where possible. It also highlights the as the Paris Convention (industrial prop- need for rights holders (particularly erty), the Berne Convention (copyright), large corporations) and their collective the Patent Cooperation Treaty (patents), management organizations to coop- and so on. Over time, and partly as a erate proactively with enforcement consequence of their colonial history, a agencies in poor countries, which typi- majority of developing countries, includ- cally may be under-resourced for their ing even theleast developed, have total duties under the criminal system. become members of one or more of these Equally, rights holders will need access treaties a gradual process, as the Paris to effective legal professional services and Berne Conventions originate from to assist them in managing their IPRs. the end of the 19th century. Table 3 shows

2 002 45 4 9 the membership of the 49 LDCs in some Policy and legislation of the main international treaties on intel- development lectual property rights. At the time of Policy/lawmakers in most developing writing, about 100 developing countries countries have a formidable forward and 30 LDCs are party to the WTO agenda in intellectual property reform. TRIPS Agreement, while more are mov- Implementation of the TRIPS Agree- ing to join WTO and thus also TRIPS in ment has required and will require due course (WTO website). changes in industrial property and copyright legislation, including wholesale new INSTITUTIONAL CHALLENGES IN legislation in some instances. In addition DEVELOPING COUNTRIES to TRIPS, countries not already members Two issues of particular importance have of international treaties like Paris, Berne, systemic impacts across the operation of Madrid, PCT, Hague, UPOV, etc., may all aspects of the national institutional choose to join, and this will require fur- infrastructure. ther legislative change. First, developing countries typically do Beyond compliance with international not have sufficient intellectual property obligations, almost all developing coun- expertise in their national academic or tries are facing choices about adopting educational institutions. Perhaps partly as other intellectual property reforms, such a result, they have few, if any, local legal as protection of traditional knowledge; professionals specialized in intellectual regulation of access to national biological property disciplines. For example, in resources and benefits sharing under the Jamaica, not a single trained Patent Agent Convention on Biological Diversity; and is practicing in the legal community. Pro- legislation to modernize IPR administra- fessional education and training in intel- tion (e.g. creating a semi-autonomous lectual property subjects is not available agency). Policy/lawmakers may also have anywhere in the entire Caribbean region. to consider wider reforms to related Second, although the situation is domestic regulations, such as science and improving, there still tends to be low technology policy and antitrust legisla- awareness in poor countries about the tion. According to the WTO website, intellectual property regime (its opera- only about 50 developing countries and tion, costs, and benefits) among key transition economies have so far adopted stakeholder groups, such as the business specific competition laws (although cer- sector, the scientific community and tain countries may deal with IPR-related public officials, and about intellectual restrictive business practices within exist- property rights per se among the general ing intellectual property legislation). population (e.g. that buying counterfeit To address these challenges effectively, music cassettes is illegal). developing countries require sophisti-

46 COOPERATION SOUTI-I 50 cated technical and analytical capabili- developed countries, which have leeway ties; a coordinated approach to policy- for implementing the TRIPS agreement making across government; and a process during a transition period ending 1 Jan- that facilitates participation by different uary 2006. Most countries' progress in stakeholder groups in the private sector, making reforms and preparing new legis- academia and civil society. To what lation relied considerably on technical 6.7 extent do developing countries, espe- assistance from bilateral donors like cially the poorest, have the institutional USAID and international organizations; capacity to meet these requirements? a main source was WIPO, which helped Responsibility for intellectual prop- at least 134 developing countries between erty policy in most developing countries, 1996 and 2000 (WIPO, 2001a). particularly LDCs, falls to ministries Looking to the wider reform agenda, with lead responsibility for international few developing countries have so far trade and/or foreign affairs. Perhaps as a drafted legislation to regulate access to result, such countries typically do not biological resources and benefits sharing

Awareness in poor countries about the intellectual property regime

still tends to be low among key stakeholders suchas the business sector, the scientific community and public officials.

have substantive policy documents deal- under the Convention on Biological ing with intellectual property issues. Diversity (CBD), and even fewer have Instead, government policy is a com- done so for protecting traditional knowl- pound of existing legislation, member- edge (Peru, Guatemala and Panama, for ship of international treaties, and state- example). While many developing coun- ments by government officials. tries are preparing CBD-related laws, only Development of legislation and regu- 13 have substantially completed legisla- lations is generally delegated to depart- tion to date: Bolivia, Brazil, Cameroon, mentsoragenciesresponsiblefor Columbia, Costa Rica, Ecuador, Malaysia, IPR administration. Developing country Mexico, Nicaragua, Peru, the Philippines, WTO members have completed much of the Republic of Korea and Venezuela (per- the legislative reforms required for imple- sonal communication, Kerry ten Kate, UK menting the TRIPS Agreement and did Royal Botanic Gardens, Feb. 2002). this within the transition period ending Some developing countries have set 1 January 2000. However, there is less up interministerial committees to co- information on such reforms by least ordinate policy advice. Key participants

200 2 47 5- 1 are the ministries of industry, commerce, tice through judicial interpretation. science, environment (bio-diversity- The evidence suggests, however, that related issues) and education or culture this may be one of the weakest areas of the (for copyright and related rights). A good intellectual property system. At one end example of joined-up policymaking on of the spectrum, India had an extensive intellectual property and public health system of broad public consultation, is Kenya's Industrial Property Act 2001, which included public workshops on con- with provisions on parallel importing troversial topics, such as protection of bio-

Few developing countries have legislated to regulate access to biological

resources and benefits sharing under the Convention on Biological Diversity

(CBD), and even fewer have done so for protecting traditional knowledge.

and compulsory licensing designed to diversity and traditional knowledge and allow import of generic anti-HIV drugs. use of compulsory licensing), and drew on Such committees have been formed only high level expertise in the academic, busi- relatively recently (e.g. for implementa- ness and legal communities. Even some tion of the TRIPS Agreement) and may civil society groups have intellectual prop- not yet be fully effective. erty policy research and advocacy pro- An ideal participatory process for grammes, such as the CUTS Centre for intellectual property policymaking might International Trade, Economics & Envi- involve preparation of a discussion paper ronment in Jaipur. At the other end of the on a particular subject (e.g. protection spectrum, one sub-Saharan African devel- of traditional knowledge) by local aca- oping country reportedly passed new demics, perhaps in collaboration with copyright legislation after a mainly tech- international experts; its circulation to nical drafting process and minimal public interested parties; public meetings or consultation or debate, even relative to workshops of various stakeholders; prepa- other law reforms in the past. All avail- ration of draft legislation or a policy paper able evidence is that countries devised by the lead government department; and very few mechanisms for participation of public consultation and review in legal poorest groups in policymaking for intel- journals or newspapers. Eventually legis- lectual property reform. lation would be given to Ministers for Finally, recent experience from devel- approval and to nationally elected repre- oping countries that have initiated pro- sentatives for enactment. The new legis- grammes to modernize intellectual prop- lation might then evolve further in prac- erty laws and institutions suggests a lack of

48 COOPERATION SOUTHe continuity from the development of pol- WIPO Secretariats. A recent study icy and legislation to its implementation (Weekes et al, 2001) found that 36 devel- through regulations and organizational oping countries, members or becoming procedures in the relevant agencies. members of WTO, have no permanent representation in Geneva, essentially Participation in international rule because of financial constraints. Twenty making and standard setting LDCs are currently without permanent International rule making and standard representation in Geneva. setting on a very broad range of intellec- In their permanent Geneva missions, tual property subjects takes place pre- WTO developing country members have dominantly in WIPO and WTO. A large an average of 3.6 staff, compared to 6.7 majority of developing countries are persons for developed country members, members or becoming members of both and the estimated minimum requirement organisations. Of the 49 LDCs shown in is 4 to 5 staff (Michalopoulos, 2001). But table 3, 30 are members of WTO, with this conceals the fact that the average 9 more in the process of accession; staff per mission is 8+ for ASEAN coun- 41 are members of WIPO. Five LDCs tries and 5.5 staff for Latin American (Afghanistan, Comoros, Kiribati, Tuvalu countries, India and Egypt. Thus the and Vanuatu) are not currently members average size of the small poorer country of either WTO or WIPO. For any coun- missions is significantly below the overall try, effective participation requires per- developing country average of 3.6 staff. manent representation in Geneva, appro- In some developing countries, intel- priately staffed expert delegations able to lectual property officials may help to attend WTO/WIPO meetings, adequate develop national positions on various technical support for policy analysis issues and then serve on the national del- within the lead government departments, egation to WIPO, WTO, or regional and functional mechanisms for policy co- meetings such as ARIPO. In many poor ordination and discussion in the capital. countries, financial resources are lacking Effective permanent representation in for such travel, notwithstanding the assis- Geneva is important for ensuring good tance available from WIPO. For example, information flows back to the capital; Jamaica has only been able to send repre- participation in informal consultations sentatives from the capital to three (like the WTO Green Room meetings) WIPO Governing Body meetings since as part of the negotiating process; alliance 1995 due to financial constraints. One building with like-minded countries; eli- sub-Saharan African government was gibility for Chairmanship of WTO meet- reportedly largely unaware of the draft ings; and better access to services and TRIPS Agreement until a national semi- assistance available from WTO and nar organized by the WTO Secretariat in

200 2 53 49 1993. Even when poor countries are rep- period of time. Beyond this general resented by officials from the capital in framework, administration of IPRs calls WIPO meetings, this is limited to per- for institutional capacity in terms of sonnel with mainly technical knowledge organization and management, staffing of IPR administration, as opposed to a and human resources, operating proce- knowledge of intellectual property as a dures, and automation models. tool of regulatory and economic policy, The administration of IPRs involves and they may lack experience in repre- receiving applications for patents, trade- senting national interests in international marks, industrial designs, utility models, fora. Even India, with considerable depth integrated circuits and plant varieties, of intellectual property expertise and their formal examination, granting or reg- institutional capacity, had difficulty co- istration of the IPRs, publication, and pro- ordinating national policymaking with cessing of possible oppositions. As IPRs international rule making in the TRIPS expire after specified periods of time, fur- negotiations of the WTO Uruguay Round ther steps are required to renew them and (Sen., 2001). document the decision. While all the pro- In summary, some developing coun- cedures require properly trained staff and tries, including many of the poorest, are modern automated information systems, currently little more than spectators in by far the most challenging aspect is the WTO and WIPO, if they are present at examination of patent applications. Some all. Other developing. countries, perhaps patent applications run to thousands of 30-35 in total, including Brazil, Egypt, pages of technical data, in a wide array of India and some LDCs like Bangladesh, technology fields, and substantive exami- are reasonably competent participants at nation involves both professional/techni- WTO and WIPO and, for various rea- cal competence and access to sophisti- sons, are able to influence their rule- cated international patent information making processes. computer databases. Such institutional capacity requirements are way beyond the Administration reach of most IPR administration agencies Part II of the TRIPS Agreement sets out in the developing world (though China, minimum standards for the acquisition for example, has world class patent exam- and maintenance of patents, trademarks, ination capabilities). Developing coun- copyright and other forms of IPRs in tries can and often do instead opt for a WTO member countries (numbering patent registration regime or join a system 144 as of November 2002). Article 62 of of regional or international cooperation. the Agreement requires that national The level of public administration procedures permit the granting or regis- required for copyright and related rights is tration of the right within a reasonable minimal (Sherwood, 1996). Copyright

50 COOPERATION SOUTH eh can be set when a work is created or different national laws and regulations are expressed, without such formalities as more or less attractive for IPR applicants. examining for prior art or assessing for Developing countries have a number inventive step. Some developing coun- of common institutional formats for IPR tries(e.g.India and Vietnam) have administration. A 1996 WIPO study adopted voluntary copyright registration (Institute for Economic Research, 1996) systems, and a larger number of develop- surveyed 96 developing countries and ing countries (e.g. India, Jamaica, Zim- found that over two-thirds performed babwe, Kenya, Tanzania, Trinidad and administration of industrial property by a Tobago) have created collective manage- department within a ministry of industry ment societies, which represent the rights and trade, or a ministry of justice. In 10 of artists, authors and performers, and col- countries an independent government lect royalties from licensing copyrighted agency was responsible. Regarding copy- works held in their inventories. right, a third of the countries performed While views differ on the merits of this by a department in a ministry of edu- establishing collective management soci- cation or culture, and by an independent eties in developing countries, it would copyright agency in 15 cases. Interest- seem imperative that the full costs of ingly, in another third of the developing establishment and operation of such countries sampled, there was no special agencies be borne by copyright holders, unit within the government with respon- the direct beneficiaries, and not become a sibility for copyright administration. burden on the scarce public finances A number of developing countries available in most poor countries. (e.g. Jamaica and Tanzania) have recently The volume of IPR registrations in established (or are establishing) a single, developing countries vary very widely. semi-autonomous intellectual property For example, in 1998 China handled institution to administer industrial prop- over 82,000 patent applications and erty and copyright. Also notable is the granted 4,700+, while Jamaica received establishment of units for administration 60 applications and granted 16. These of plant variety protection or plant breed- big differences between countries, and ers' rights for example, the Plant even between years, arise because very Breeders Registration unit in the paras- few applications made under interna- tatal Kenya Plant Health Inspectorate tional cooperation treaties enter the Service established in 1997. national phase where substantive regis- There are good arguments for estab- tration takes place; because the country lishing a single, semi-autonomous intel- is a member of a regional organization lectual property administration office, which handles IPR administration, such under a suitable government ministry. as ARIPO, OAPI or GCCPO; or because Advantages include separation of regu-

2002 51 latory and administrative functions; service salaries are invariably well behind improved customer-orientation and ser- those in the private sector. vices; a more business-oriented approach Automated information systems are a to cost-recovery and expenditure control; key requirement for efficient administra- and better policy coordination across dif- tion of IPRs and an important indicator ferent areas of intellectual property. of institutional capacity. IPR administra- Country evidence shows that lack of tion requires some specialized software, financial autonomy contributes to diffi- and common software packages have culties in staff recruitment and automa- been specifically designed for developing tion investment, and that combining countries by agencies such as the EPO. As IPR administration with other functions for computer hardware, stand-alone per- (such as companies registration and small sonal computers, with CD-ROM and enterprise development services) in a sin- printer units, are adequate for small, poor gle agency can lead to considerable cross- developing countries and LDCs. Even in subsidization of the other functions from a lot of larger developing countries, stan- IPR user fees and to financial handicap- dard local-area networks linked to a cen- ping of the IPR functions. tral database will be able to satisfy the The number of staff involved in IPR needs. Availability of information tech- administration in developing countries nology and the Internet also enables easy varies enormously from one untrained access to a wealth of information on person in the Ministry of Trade and intellectual property policy subjects, as Industry in Eritrea, to over 800 staff across well as the on-line databases and libraries three different government agencies in of organisations like WIPO, WTO and India. To meet minimum administrative UNCTAD. Yet, 154 intellectual property standards required by the TRIPS Agree- offices around the world currently lack ment, a skeleton office handling very low Internet connectivity (WIPO, 2001b). volumes of IPR applications, such as an LDC like Eritrea, would need perhaps Enforcement and regulation 10-15 professionals and a similar number of IPRs of administrative/support staff. Agencies IPRs are valuable only if they are well in Jamaica, Kenya, Tanzania, and Trinidad enforced, which implies that the legal and Tobago have 51, 97, 20 and 23 posts system is integrally related to the intel- respectively, while Vietnam has 236 lectual property system in a holistic industrial property staff and 22 copyright institutional framework. A rating of staff. Almost all the countries reviewed intellectual property regimes and their reported shortages of trained professional attractiveness to investors in 18 devel- staff. An important constraint for recruit- oping countries assigned 25 points out of ment/retention of staff is that public a possible 100 (the largest single points

52 COOPERATION SOUTH 5 6 category) to factors such as judicial inde- approach for other developing countries is pendence, prompt injunctions, compe- to establish or strengthen a commercial tence of judges, delays experienced in court, as Jamaica did in 2001, to hear IPR- legal proceedings, and the capacity of related cases. police and customs to act in IPR cases The "private" nature of IPRs suggests (Sherwood, 1997). the importance of resolving disputes The International Chamber of Com- between parties out of court or under civil merce (ICC) reports very high levels of law. Indeed, as state enforcement is IPRs infringement in developing coun- resource-intensive, there is a strong case tries. For example, the ICC website for poor countries' legislation to empha- describes Thailand as the biggest source of size enforcement through a civil rather pirated compact discs in Asia, capable of than a criminal justice system, reducing producing up to 60 million such products the enforcement burden on the govern- per year. The largest area of the IPR ment. Particularly in Asian countries like infringement in most poor countries is in Vietnam, out-of-court settlement of IPR copyright (e.g. counterfeiting of computer disagreements has a long tradition and

There are very high levels of 1PRs infringement in developing countries, mostly in trademarks and copyright violation by counterfeiting computer software and recorded music.

software and recorded music) and trade- may be the preferred route. Of course, in marks. For many developing countries, the case of wilful piracy and counterfeit- particularly the poorest, the detailed mining on a large scale, state enforcement imum requirements to enforce IPRs which agencies would still be required to inter- are set out in the TRIPS Agreement (Arti- vene. To the extent that they exist in cles 41- 61) present considerable chal- developing countries, collective manage- lenges for policing and judicial systems, ment organizations may play an impor- civil and criminal procedures and customs tant role in enforcement of IPRs, particu- authorities. Some developing countries, larly for copyright infringements. such as Thailand and Panama, have estab- There are also institutional issues for lished specialized courts to hear IPR- developing countries in effective regula- related cases as a means of improving their tion of IPRs, particularly regarding mat- national enforcement capacities, though ters of special public interest, such as such a measure is not formally required by compulsory licensing of pharmaceutical the TRIPS Agreement. A more attractive IPRs and preventing and controlling

2002 53 5 7 anti-competitive practice by IPR holders developing countries that develop patent (e.g. by restrictive contractual licensing). information systems for use by local com- These complex matters present a signifi- panies and universities; conduct public cant challenge for policymakers, admin- education campaigns; establish voluntary istrators and enforcement agencies: copyright registration schemes; and "In most developing countries, mech- strengthen their permanent representa- anisms aiming at controlling restric- tion in Geneva to cover the intellectual tive business practices or the misuse of property dossiers in WIPO, WTO and intellectual property rights are weak UNCTAD. There are very good reasons or nonexistent. Similarly, developing for supporting such activities in develop- countries are generally unprepared or ing countries, but they are not of course unable to neutralize the impact that required under the TRIPS Agreement. price increases resulting from the UNCTAD (1996) reported some esti- establishment or reinforcement of mates of the institutional costs of compli- intellectual property rights may have ance with the TRIPS Agreement in on access to protected products , par- developing countries. In Chile, additional ticularly by the low-income popula- fixed costs to upgrade the intellectual tion." (Correa, 1999) property infrastructure were estimated at US$718,000, with annual recurrent costs Costs and revenues increasing to US$837,000. In Egypt, the The establishment and operation of the fixed costs were estimated at US$800,000, intellectual property infrastructure in with additional annual training costs of developing countries involves a range of around US$1 million. Bangladesh antici- one-time and recurrent costs. Some may pates one-time costs of only US$250,000 be incurred only by the IPR administra- (drafting legislation) and US$1.1 million tion agency, while others or some por- in annual costs for judicial work, equip- tion of them may also be incurred by ment and enforcement costs, exclusive of enforcement agencies (police, judiciary training. In 2001, the World Bank esti- and customs). A good example is the mated that a comprehensive upgrade of costs of running dedicated anti-counter- the IPR regime in poor countries, includ- feiting police units (e.g. Malaysia) or spe- ing training, could require capital expen- cialised IPR courts (e.g. Thailand). diture of US$1.5 to 2 million per country, The costs will be far higher in devel- although evidence from a 1999 survey of oping countries that operate a national relevant World Bank projects suggested IPR administration agency performing these costs could be far higher. India, for substantive patent examination com- example, has committed around US$19 pared to those countries using a registra- million just to modernize its Patent Office tion system. Costs will also be higher for over a five-year period.

54 COOPERATION SOUTHe 58 In most developing countries, IPR applications and grants for which fees administration agencies charge various can be charged. A second part of the service fees. In some larger developing answer is technical and financial assis- countries, such fee revenues are signifi- tance from donors, which is mainly cant and far exceed the operating expen- available only for one-time investment ditures of national IPR administration costs, rather than recurrent costs. agencies. In Chile, for example, fee rev- The remaining option for developing enues from industrial property rights countries is to stage their capital invest- administration amounted to $6 million ment programmes (to the extent possi- in 1995, compared to recurrent expendi- ble) and ensure that IPR service fees are ture of $1 million in the same period set at a level where the full costs are (UNCTAD, 1996). recovered. This points to the need for The key question for the poorer devel- rigorous financial management and oping countries is to what extent are they accounting systems in IPR administra- able to recover from rights holders the full tion agencies. A number of developed costs of a modern intellectual property and developing countries have adopted infrastructure? It seems hardly desirable atiered system of charges, where that developing countries should have to reduced fees could be charged to, for - take resources from overstretched health example, nonprofit organisations, indi- and education budgets to subsidize the viduals and small commercial organiza- administration of IPRs, where the over- tions, such as those where the number of whelming majority of rights owners will employees or level of turnover falls be from industrialized countries. Instead, below specified thresholds. This seems a as the World Bank (2002) notes, "in very sensible cost-recovery policy for many poor countries, devoting more poor countries to adopt, as it should pro- resources to the protection of tangible vide a means of developing the national property rights, such as land, could bene- intellectual property infrastructure and fit poor people more directly than the delivering improved services for users, protection of intellectual property." without placing additional burdenson Some poorer countries risk processing the public finances. very low volumes of IPRs for some time to come. Part of the answer for them Regional and international obviously lies in rationalizing expendi- cooperation ture on IPR administration through Given the exponential growth in the automation and regional or interna- volume and complexity of industrial tional cooperation. Over time, insome property rights applications worldwide, countries such an approach may also regional and/or international coopera- help to generate higher volumes of IPR tion in IPR administration, even for

2002 55 developed countries, is now essential. Madrid systems. Under PCT, technical This would help to ensure high validity search and examination are performed of rights, reduce costs and increase effi- by ten authorities (the EPO and the ciency in national IPR administration. national patent offices of the United For patents in particular, most countries States, Japan, Australia, Austria, Spain, rely to a greater or lesser extent on the Sweden, Republic of Korea, China and work of the EPO and the patent offices the Russian Federation). This not only of the United States and Japan, which allows national patent offices to minimize together probably do substantive exami- search, examination and publication nation for around 95 per cent of all tasks; it also allows domestic companies applications worldwide. The EPO has and inventors to obtain high-quality,

-0-

In light of the growing volume and complexity of industrial property rights applications worldwide, regional and/or international cooperation in 1PR administration, even for developed countries, is now essential.

over 5,000 professional patent exam- international patent protection in all iners specializing in different fields PCT member countries at relatively low and technologies significantly more cost; residents of developing countries get resources for patent administration than a 75 per cent reduction in all PCT fees. national offices around the world At the time of writing, 115 countries It is therefore vitally important that were members of the PCT, with develop- developing countries, particularly the ing countries in the majority, including poorest,designtheir national IPR 23 of the 49 LDCs (WIPO website). regimes and institutions to take full Membership of the Madrid system pro- advantage of the regional and interna- duces similar advantages in trademark tional cooperation systems available, administration. At the time of writing, particularly for determining that patent membership of the Madrid system is 70, and trademark applications meet estab- including only 7 LDCs. lished standards and criteria for pro- The second option is to delegate or tection. A number of alternatives for contract out some tasks of IPR administra- regional and international cooperation tion (essentially patent administration) to are on offer and are being used by devel- another national patent office or to EPO oping countries. or WIPO. EPO offers an extension system The first option is membership in the for patents to a number of smaller coun- Patent Cooperation Treaty (PCT) and tries in Eastern Europe and a similar vali-

56 COOPERATION SOUTH Et, 6 0 dation system for patents to developing Azerbaijan and Armenia. countries, although currently no country is In the Arab region, the Gulf Co- using it. Under the EPO's validation sys- operation Council Patent Office tem, patent applicants can designate the (GCCPO) includes 6 member developing countries that opt to join as countries (but not Yemen, the well as the EPO member countries; the ini- only LDC in the region). tial fee for this additional designation In Africa, there are two regional would be retained by the EPO for its industrial property organizations: expenses, but subsequent annual renewal Organisation Africaine de la Pro- fees (up to 20 years) would be transmitted priété Intellectuelle (OAPI), with to the developing country concerned. 16 member states, and African Developing countries can also impose Regional Industrial Property conditions on the granting of rights under Organisation (ARIPO), with 15. the validation system, in line with their Both play a significant role in the own national Jegislation (e.g. they could intellectual property administra- exclude patents for pharmaceuticals). tion of a large number of the poor- WIPO's Patent Information Services est countries in the world, and (WPIS) assist developing countries in both also provide activities related search and examination of patent appli- to training, harmonization and cations. From the start of the program patent information dissemination. in 1975 until July 2001, almost 15,000 There are currently no regional indus- search requests were processed free of trial property administration organiza- charge from over 90 developing countries tions in Latin America, the Caribbean, and 14 intergovernmental organizations Pacific, South Asia, or South East Asia. and countries in transition. The searches However, the six countries of the Andean are free to those requesting them. For Pact have developed common intellec- search requests from ARIPO, examina- tual property legislation, though this is tion is also carried out. still administered individually by national The third option is membership of a governments. And there are also ongoing regional industrial property system, where efforts to deepen regional cooperation in these exist. There are currently four such the Caribbean for collective management regional industrial property organizations of copyright, and in southeast Asia for a in the developing world: common filing system for trademarks. A In Eastern Europe and Central majority of the LDCs (27 of 49) are cur- Asia, the Eurasian Patent Office rently not members of regional intellec- has 9 member states, including tual property organisations, although 12 low-income countries like the of these are within the African region, Kyrgyz Republic, Tajikistan, and so could potentially join OAPI or

200 2 57 ARIPO, and Yemen could potentially Largely as a result of these differences, join the GCCPO. OAPI handles more IPR applications than Looking at OAPI and ARIPO in ARIPO (especially trademarks) because more detail, there are some important there is no national filing route for its differences: member states. Consequently, OAPI is m OAPI is a regional industrial able to return a portion of revenues to its property system of mainly French- members (7.5 per cent of its total revenues speaking countries. It issues patent of 3.8 million euros in 1999), whilst rights on behalf of, and in the ARIPO is still partly dependent on finan- name of, all of its member states cial contributions from member states. (there is no system of country Both ARIPO and OAPI, however, con- designations). OAPI member tinue to be long-term recipients of sub- countries do not have national stantial technical assistance from donor industrial property administration agencies, including WIPO, EPO and systems and their industrial prop- France's Institut National de la Propriété erty law is the OAPI system. OAPI Industrie Ile (INPI). OAPI received tech- is essentially a registering office for nical assistance to a total value of 830,000 IPRs, with around 76 staff (25 of euros in 1999 alone. Each organization has whom are professionals). undertaken significant investment and m ARIPO is a regional industrial training programmes in recent years. property system of mainly English- Given the institutional challenges and speaking countries. It allows the constraints facing many poor countries, filing of one application for trade- the advantages of regional and interna- marks, patents or designs with tional cooperation are apparent. The role effect in all designated Member of regional organizations is principally in States. ARIPO member states, IPR administration, which still leaves to however, still have their own national institutions the functions of poli- national industrial property legis- cymaking, participation in international lation and administration systems. rule-making, and enforcement of IPRs. Membership of the protocols cov- Regional organizations, therefore, comple- ering the different IPRs is optional ment rather than wholly replace national (e.g. only 5 countries are currently intellectual property infrastructures. members of the Banjul protocol on trademarks). ARIPO has 26 TECHNICAL COOPERATION staff, 8 of whom are professionals, PROGRAMMES 1996-2001 but has a small examination Under Article 67 of the TRIPS Agree- capacity with 3-4 highly profes- ment, developed country WTO Members sional examiners. are formally obligated to provide techni-

58 62 COOPERATION SOUTH cal and financial assistance to developing stantially reduced, that fee income would countries and to facilitate implementa- have been about 60 per cent higher for tion of the TRIPS Agreement. Given the 2002-2003 (WIPO, 2001b). very low levels of IPR creation in poor countries, this assistance is unusual in Major donors and types that a significant share of the resultant of activities direct benefits can be expected to go to IPR-related technical assistance to devel- foreign IPR holders who are mainly from oping countries is provided directly or by the developed countries. multilateral agency contributions by most In very poor countries, especially developed countries, including the Euro- LDCs, priority is rightly given to increas- pean Union and its member states, the ing ODA expenditures on basic health United States, Japan, Australia, Canada, and education services for the poorest in New Zealand, Norway, and Switzerland. order to meet the international develop- The principal international organizations ment target of halving world poverty by involved are WIPO, EPO, the World 2015. Therefore, it is appropriate that the Bank, UNDP and UNCTAD. In staffing, financing required for technical assis- the most significant donor organization tance aimed at modernizing IPR infras- are WIPO, with around 60 full-time pro- tructure in these countries should nor- fessional staff working in its Development mally be raised from service user fees paid Cooperation division( including the by IPR holders. In fact, organizations like WIPO Worldwide Academy), and EPO,

Given the institutional challenges and constraints facing many poor countries, the advantages.of regional and international cooperation are apparent.

WIPO, EPO and the patent offices of with about 40 staff in its Directorate for some developed countries already adopt International Technical Cooperation. this approach to a large extent. For exam- UNDP and the World Bank, in contrast, ple, out of WIPO total income of 530 have provided mainly financial resources, million Swiss francs, about 85 per cent is either directly to developing countries or from fee revenues. Additional financing via contributions to WIPO trust funds. for assistance to LDCs could be relatively UNCTAD advises some developing easily and equitably generated from fees; countries in accession to WTO on imple- if PCT fees alone had remained at the mentation of the TRIPS Agreement and 1976-1977 level, instead of being sub- undertakes research on intellectual prop-

2002 59 erty and development issues. For example, offices around the world (WIPO, 2001b). UNCTAD, in collaboration with the World Bank assistance (e.g. in Brazil, International Centre for Trade and Sus- Indonesia,Mexico)hassometimes tainable Development, is currently provid- approached upgrading of national IPR ing developing countries with policy guid- systems as one component of broader ance on implementation and upcoming policy reform and capacity building reviews of the TRIPS Agreement, through aimed at stimulating R&D spending and a project financed by the UK Department improving industrial productivity and for International Development. A number competitiveness. Such programmes are of other smaller organisations also provide potential models for better integrating technical assistance to developing coun- intellectual property reforms and related- tries or support research on IPR and devel- capacity building within the broader opment related issues. national development plans and assis- Donor assistance falls into five broad tance strategies of poor countries. categories: (a) general and specialized training, e.g. from the WIPO Worldwide Scale and coverage of technical Academy; (b) advice and assistance in assistance programmes preparing draft laws; (c) support for Despite scarce data on technical assis- modernizing IPR administration offices tance expenditures across the developing ( including automation) and collective world, some broad indications can be management systems; (d) access to patent given of the scale and coverage of such information services, including search programmes undertaken by some of the and examination; (e) exchange of infor- principal international organizations in mation among lawmakers and judges; and recent years. For example, between 1996- (f) promoting local innovation and cre- 2001, WIPO's budgeted expenditure on ativity (Lehman, 2000b). development cooperation is estimated at More recently, assistance for automa- 174 million Swiss francs, rising from 45 tion of IPR administration in developing million in 1996-1997 to 71 million in countries and regional intellectual prop- 2000-2001 (whether including trust funds erty organisations has become signifi- or not). For the 2002-2003 biennium, that cant. The WIPO Net programme, with budget is approximately 100 million Swiss projected costs of over 97 million Swiss francs (including about 20 million from francs between 2000 and 2005, will pro- trust funds, but excluding expenditure on vide on-line services such as secure elec- WIPO Net). Around 40 per cent of these tronic mail, secure exchange of intellec- expenditures are for staff. tual property data, hosting of national For 1990 to 2005, the European Com- IPR agency websites, and Internet con- mission has committed over 30 million nectivity to 154 intellectual property euros to programmes implemented by the

60 COOPERATION SOUTH fa, 6 4 EPO across the developing world. About have perhaps achieved thebiggest 4.5 million euros of this was for pro- impact, but institutional capacities have grammes in China, and 9.5 million euros significantly developed in countries like was allocated to Eastern European coun- China, Morocco, Vietnam, Trinidad, and tries. In addition, from its own resources, India, as well as in the regional organiza- EPO committed almost 19 million euros tions. At the same time, many low- between 1996 and 2001, excluding the income countries, and particularly LDCs, cost of EPO staff. stillface considerable challenges in Finally, the IPR components of three developing their intellectual property World Bank-funded programmes under- infrastructure. Also, important issues for taken in the 1990s involved US$4 mil- the financing, design and delivery of lion in Brazil out of a US$160 million technical cooperation to these countries loan for a science and technology pro- need be addressed. gramme; US$14.7 million in Indonesia First, more finance needs to be brought within an Infrastructure Development on stream, raised primarily from IPR hold- Project; and US$32.1 million in Mexico ers, for necessary institutional reforms and forimproving IPRadministration, capacity building in poor countries, as automation and enforcement. many struggle to implement the TRIPS Agreement over the next few years. This Effectiveness and impact will take time, and some LDCs may well Clearly there have been considerable need the extended transition period avail- achievements in the last 5-10 years able to them under the TRIPS Agreement in modernizing intellectual property to modernize their IPR systems in a finan- infrastructure and developing associated cially sustainable manner. As the World human resources in the developing world. Bank recently said: Large numbers of people, from a variety of "While some assistance is on offer professional backgrounds, have received now, it is insufficient for the major general and specialized training in intel- job of reforming IPR administration. lectual property subjects. Equally, many The current approach, whereby developing countries have overhauled grants are made to such organiza- their intellectual property legislation, tions as WIPO and UNCTAD for taken advantage of international cooper- undertaking specific projects,is inad- ation mechanisms like the PCT and equate given various bureaucratic Madrid systems, and increasingly auto- constraints ." (World Bank, 2002) mated IPR administration to improve Second, design, delivery and coordi- efficiency and service levels and process nation of intellectual property-related more applications for all forms of IPR. technical assistance to developing coun- Latin America and Eastern Europe tries can also be improved. In Vietnam,

2002 61 for example, 8 different donor agencies ministry. The institution should also provided IPR-related assistance between provide policy and legal advice to 1996 and 2001). Countries receiving the government on all IP matters, in such assistance need better internal conjunction withother concerned coordination to avoid duplication of ministries and agencies; liaison with efforts or, at worst, conflicting advice. enforcement agencies and competition; More positively, there is much ad hoc expert representation in international cooperation between donors and some organizations and rule-making; and co- good instances of more formalized col- ordination of IPR public awareness and laboration (e.g. the WIPO-WTO coop- consultation programmes. eration agreement). Donors should build 2. Developing countries should ensure on these successes. that their legislation and procedures Finally, to address these new chal- emphasize, to the maximum possible lenges, donors and developing countries extent, enforcement of IPRs through need to work together better. They administrative action and through the should make better use of existing in- civil rather than criminal justice system. stitutional mechanisms at national, Rights-holder organizations should be regional and international levels for responsible for enforcement of copyright understanding the IP capacity-building infringement, increase cooperation with needs of poor countries, sharing project the enforcement agencies, and agree information, and collaborating on sector with national governments on appropri- reviews as a part of continuous elabora- ate cost-recovery mechanisms for any tion of best practice. The donor com- large-scale anti-counterfeiting opera- munity as a whole needs to place more tions and public awareness campaigns by emphasis on monitoring and evaluating government agencies. the impact and results of IPR-related 3. Developing countries should aim technical cooperation. to recover the full costs of upgrading and maintaining the national intellectual RECOMMENDATIONS property infrastructure through national The following 14 recommendations IPR registration and administration address the issues and problems identi- charges. A tiered system of fees should fied above: be employed. IPR administration agen- 1. Developing countries should estab- cies should generally only offset one- lish a single institution for IPR adminis- time and recurrent expenditures with tration, either as a semi-autonomous revenues from such charges, but a fixed agency or government department oper- percentage of revenue income should be ating on a trading account basis, under returned to the government's consoli- the supervision of a suitable government dated fund each year as a contribution

62 COOPERATION SOUTH fie 6 6 towards IPR enforcement costs. 7. Technical and financial assistance to 4. Developing countries should seek IPR institutions in low-income countries maximum possible benefitsin cost should be through multi-year, broad-based reduction and administrative efficiency programmes. It should support one-time from existing regional and international expenditure, setting financial sustainabil- cooperation mechanisms such as the ity of the institution as a key objective PCT and Madrid systems. LDCs and from the outset. small developing countries in particular 8. To meet the special needs of LDCs, should adoptapatent registration WIPO, EPO and developed countries regime and make use of verification sys- should plan to commit US$100 million in tems offered by international search and technical and financial assistance specifi- examination authorities such as the cally to LDCs over the next 5 years, raised EPO. Countries in the African region, though income from IPR service user-fees particularly the LDCs, should seriously and fully incorporated within the Inte- consider becoming full member states of grated Framework for Trade-related Tech- ARIPO or OAPI. nical Assistance to LDCs. 5. Like-minded countries and donors 9. WIPO and EPO should be invited should redouble their support for high- to join the Integrated Framework along- level dialogue on new regional and side the World Bank, UNDP, UNCTAD, international cooperation initiatives in WTO, and ITC. Developed countries IPR administration, training and statisti- should consider increasing the contribu- cal data collection involving developing tion of their national IPR offices. EPO, countries. WIPO and developed country IPR offices 6. Developing countries should encour- should each contribute US$1.5 million age policy research and analysis on IP to the Integrated Framework Trust Fund subjects in the national interest (e.g. pro- to enable consideration of IPR-related tection of plant varieties;traditional capacity building needs in those pilot knowledge and folklore; technology trans- country diagnostic studies. fer, etc.) within academic organizations, 10. To streamline donor coordina- policy think-tanks and other stakeholder tion, UNDP, the World Bank and UNC- organizations in civil society. To assist these TAD should cooperate with EPO, efforts, a Preparatory Group of donors and WIPO and developed country agencies developing countries should be formed to in implementing intellectual-property examine the feasibility of establishing a related programmes under the Inte- Foundation for Intellectual Property and grated Framework. To facilitate effective Development Research, either as a new management between the agencies and entity or under an existing nongovern- national governments on the ground in mental organization based in Geneva. LDCs, a portion of the WIPO and EPO

2002 63 6 7 contributions to the Integrated Frame- REF EIRENCES work Trust Fund should be used to fund the provision of up to 6 Field Managers, a Correa, C.M. (1999) "Intellectual Property based in selected UNDP or World Bank Rights and the Use of Compulsory Licenses: offices in Africa (4), Asia (1) and the Options for the Developing Countries", South Pacific (1). Centre: Geneva. 11. WIPO should make funds avail- a Correa, C.M. (2000) "Intellectual Property able to cover the travel, accommodation Rights, the WTO and Developing Countries: the and subsistence expenses of two repre- TRIPS Agreement and Policy Options", Zed sentatives from all LDCs to participate Books: New York and Third World Network: in WTO TRIPS Council meetings and Malaysia. WIPO meetings. WIPO should con- Drahos, P. (2001) "Developing Countries and tribute technical and financial aid to ini- International Intellectual Property Standard- tiatives for developing countries without Setting", Study Paper 8, CIPR www.iprcom- permanent representation in Geneva mission.org/meetings.asp?primary=25 (e.g. AITEC). a Institute for Economic Research (1996) 12. To improve monitoring of techni- "Study on the Financial and Other Implications cal cooperation under Article 67 of the of the Implementation of the TRIPS Agreement TRIPS Agreement, developed countries for Developing Countries", WIPO: Geneva. and the relevant international organisa- a Lehman, B.A. (2000a) "Modernizing Jamaica's tions should include summary financial Intellectual Property System", International information and evaluation results in Intellectual Property Institute: Washington. their annual submissions to the WTO a Lehman, B.A. (2000b) "World Intellectual TRIPS council. Property Organisation: Dawn of a New 13. WIPO should strengthen the mon- Century", International Intellectual Property itoring and evaluation of its development Institute: Washington. cooperation programmes, including a a Maurer, S.M. et al (2001) "Europe's Database rolling programme of external impact- Experiment", Science, vol 294.

evaluations, and consider ways of improv- oMichalopoulos, C. (2001) "Developing ing the strategic oversight exercised by countries in the WTO", Palgrave: London.

WIPO's Permanent Committee on Devel- El Oman, R. (2001) "Copyright: engine of develop- opment Cooperation. ment", UNESCO: Paris. 14. The OECD Development Assis- a Sen, J. (2001) "Negotiating the TRIPS Agree- tance Committee should develop Guide- ment: India's experience", CUTS: Jaipur. lines for Modernizing Intellectual Prop- a Sherwood, R.M. (1996) "Study on the Financial erty Systems for Development, based on and Other Implications of the Implementation of case studies on developing countries and the TRIPS Agreement for Developing Countries", regions. e WIPO: Geneva.

64 COOPERATION SOUTH g, 6 8 a Sherwood, R.M. (1997) "Intellectual Property Systems and Investment Stimulation: The Rating of Systems in Eighteen Developing Countries", IDEA, vol 37, No.2. Story, A. (2002) "Copyright, Software and the Internet", Study Paper 5, CIPR, www.iprcommission.org/meetings.asp?primary=27 a UNCTAD (1996) "The TRIPS Agreement and the Developing Countries", UNCTAD: Geneva. a Weekes, JM et al (2001) "A Study on Assis- tance and Representation of the Developing Coun- tries without WTO Permanent Representation in Geneva", Commonwealth Secretariat: London. a WIPO (2001a) "WIPO's Legal and Technical

Assistance to Developing Countries for the Imple- mentation of the TRIPS Agreement from January 1, 1996 to December 31, 2000", WIPO: Geneva. a WIPO (2001b) "Revised Draft Program and Budget 2002-2003", WIPO: Geneva. a World Bank (2002) "Intellectual Property: Balancing Incentives with Competitive Access", in Global Economic Prospects and the Developing Countries 2002, World Bank: Washington.

200 2 65 Current Issues in

Property Rights

News and controversy continue to be generated by the issues surrounding intellectual property. Pressure groups are active on both sides of the equation: seeking more protection for the rights of inventors and producers, and pushing for improved access to the benefits of innovations in such fields as pharmaceuticals , software, and biotechnology. This is evident in the sampling of news reports from the second half of 2002 given below.

DIVERSION OF DISCOUNTED $6 a pill in Europe, but for only 80 cents AIDS DRUGS in sub-Saharan Africa. A German businessman and a French A British pharmaceutical company pro- drug trader were arrested in October for duced a low-cost AIDS drug destined for their roles in the diversion. Police and poor and dying patients in fiveAfrican investigators in Belgium, France, Ger- countries. However, one-fifth of these many and the Netherlands, as well as in products were obtained by profiteers at Europol, the European police agency, the marked-down price and shipped believe there is a wide network of traffic back to Europe for sale at market prices in gray-market AIDS drugs. Suggested with huge profits. The company, Glaxo- ways to track and stop South-North SmithKline, says it lost almost $16 mil- diversions include use of different colors, lion in sales last year because of such labels or pill forms (capsules and tablets) reselling. One of its drugs sells for $4 to in the two markets.

66 COOPERATION SOUTH faP Pressured by AIDS activities and ufacturers, as has already happened with health authorities in developing coun- some drugs for treating HIV-AIDS. In tries, some drug companies including addition, the Fund's money will go fur- Merck, Bristol-Myers Squibb, Roche, and ther now that it can buy less expensive GlaxoSmithKline have discounted generic drugs and expand treatment to their AIDS drugs by as much as 90 per additional patients. Perhaps the clearest cent for developing world markets. Oth- example of unmet needs is that only ers resist such discounting on the grounds 30,000 of the estimated 30 million peo- that two-price tiers open the door to fraud ple with the AIDS virus in Africa are and undermine the profit margins that getting anti-retroviral drugs that are reg- make it possible to reinvest in additional ularly applied in Europe and the U.S. R&D for essential new drugs. (See also The Fund's policy is that countries it articles on "Balancing Health Needs" and assists are required to buy the lowest-price "Pricing Medicines" in this issue.) drugs, use only drugs with guaranteed quality, and follow international and national laws.

UN GLOBAL DISEASE FUND ENCOURAGES USE OF GENERIC DRUGS FASTER MARKETING OF GENERIC DRUGS IN THE US Buying cheaper generic drugs rather than costly brand-name ones is now the policy The US government has taken steps to of the UN disease fund created in 2001. allow cheaper generic drugs to reach the The Global Fund for Fighting AIDS, market sooner and to end delaying tac- Tuberculosis and Malaria has a target of tics by pharmaceutical companies that $7 billion to 10 billion per year for its try to extend their monopolies for simi- work, has so far been given pledges for lar patented drugs. The US Food and $2.1 billion, and has received requests Drug Administration estimated that its from developing countries for $8 billion new rules would save consumers $35 bil- worth of assistance. lion over 10 years, out of $4.7 trillion in The Fund's recent decision will expenditures for prescription drugs. encourage manufacturers of generic This will be of most help to older Amer- drugs in Brazil, India and other countries icans who tend to have fixed or lower to sell more in developing countries, in incomes and need more medications place of medications from patent-hold- than younger people analogous to the ers in the North. It may also prompt less-advantaged populations in develop- more price reductions by Northern man- ing countries who can benefit from

200 2 67 internationally marketed generic drugs. while net payments would go up by $5.1 A 1984 U.S. law gave brand-name drug billion a year in China, $2.6 billion in manufacturers patent protection and Mexico, and $900 million in India. research incentives while also encouraging Issued by the Commission on Intellec- generic companies to sell low-cost copies tual Property Rights (CIPR) sponsored by of those medicines as soon as the patents the United Kingdom, the report suggests expired. Under the new rules, brand-name other changes in TRIPS rules, such as drug makers would no longer be able to get allowing developing countries to: long extensions of their 20-year patent make greater use of compulsory monopolies by entering multiple lawsuits, licensing of drugs; obtaining patents on secondary elements copy software by making educated like packaging, and raising other obstacles. assumptions about the underlying A patent-holding company would be lim- codes, a process called "reverse ited to only one 30-month stay against a engineering"; generic competitor while a court resolves a ((crack" software usedto protect claim of patent infringement. copyrighted digital media when a country determines that the pro- tective technology limits the fair use of digital materials. MORE FLEXIBLE INTERNA- Part of the rationale for these recom- TIONAL RULES FOR mendations was provided by Professor INTELLECTUAL PROTECTION John H. Barton from Stanford Univer- sity Law School, who led CIPR: "If we A recent report has recommended a cut off imitation strategies for develop- more flexible timetable for developing ing countries, we are drastically narrow- countries to adopt the rules of the Trade- ing the options they have to reach an relatedIntellectual Property Rights economic takeoff," he said (New York (TRIPS) agreement more at their own Times, October 14, 2002). pace. Keeping to the present schedule, The situation of developing countries the TRIPS agreement in full effect is similar to that of the United States would greatly increase the annual patent in the 19th century, when American and royalty income of developed coun- law offered no copyright protection to tries, but increase the costs to be paid by authors from other countries. Books from many developing countries. For exam- England,for example, were widely ple, according to World Bank estimates, copied in America and sold at cut rates annual gains would be $19 billion for in the U.S. Finally in 1891, when a U.S. American companies, $6.8 billion for book industry had grown up and wanted Germany, and $5.7 billion for Japan, protection abroad, the U.S. gave copy-

68 COOPERATION SOUTH e right protection for foreign authors in the U.S. when American authors received similar treatment overseas. Likewise in the 20th century, the economies of Japan, Taiwan and South Korea took off under weak systems of intellectual property protection, achieving easy and inex- pensive technology transfer, until local industry developed and needed recipro- cal international protection. According to the CIPR report, the opportunities for a jump-start in developing countries using imitative tactics is endangered by the scope, speed and strength of the global TRIPS agreement.ee

2002 60 From -South Sounth°-

BY ROBERT J. S. Ross AND ANITA CHAN

"The globalization of capital has made the world smaller and saferfor investors;now the question before theworldcommunity is whether it can do the same for workers ." The challenge is for leaders in the South to agree on a social clause in World Trade Organization agreements that will stop "a race to the bottom" in wages and labor conditions among developing countriesworkingto attract foreign investment.

Documentingthatrace and its impact are authors RobertJ.S.Ross, Professor of Sociology and Director ofthe InternationalStudiesStream at ClarkUniversity, in Worcester, Massachusetts; andAnita Chan,Senior Research Fellow theat China andKorea Centre of Australian National University. .

AS PROTESTERS BATTLED the police in mental and labor standards through a the streets of Seattle in 1999, calling on new "social clause" in WTO agreements. the World Trade Organization (WTO) The clause, its opponents argued, was a to include environmental and labor protectionist ploy that rich nations issues in its trade negotiations, govern- would use to shelter their own workers' ment representativesin conference jobs from the competition in developing rooms were carrying on a battle of r-loth- countries. This stance reflected a corn- er sort. Many developing nations, partic- monly held perception that the main ularly the Asian countries, were strongly competition in the production of goods is resisting a U.S.-led proposal by devel- between the North and the South. But in oped countries to link trade to environ- truth, this competition particularly in

* This article is reprinted, with permission, from Foreign Affairs magazine for SeptemberOctober 2002, vol. 18, No. 5.

70 COOPERATION SOUTH fiS labor-intensive commodities is not so others, such as Zimbabwe and Zambia, much North versus South, but South are opposed. versus South. The absence of a mecha- In Latin America, unions are more nism establishing international labor amenable to linking trade and labor standards is propelling the economies of rights, thanks in part to their strong the South in a race to the bottom in relationships with their North Ameri- wages and labor conditions. can counterparts. Struggling unions in The social clause, in brief, refers to the Guatemala, Honduras, El Salvador, and proposed insertion of five core labor stan- Nicaragua have strategically used the dards into trade agreements: freedom of U.S. threat of trade sanctions (specifi- association, freedom to organize and to cally, in response to violations of labor bargain collectively, and freedom from rights) to secure their own rights to orga- forced labor, child labor, and job discrimi- nize. For example, Guatemalan workers nation. Many poorer countries either lack formed an unrecognized union at a fac- the laws to protect these rights, which are tory owned by the U.S. clothing giant enshrined in the conventions of the Inter- Phillips-Van Heusen in the early 1990s. national Labor Organization (ILO), or In a long and bitter campaign, their they simply do not bother to enforce those North American allies including laws in their export industries. UNITE, the U.S. apparel-workers union filed a lawsuit in the United States at TRADE UNIONS DIVIDED their behest, alleging that Guatemala Governments do not necessarily reflect was ineligible for trade concessions the interests of their country's workers, because it denied workers the right to but labor unions are supposed to. So organize. This pressure finally led the how do unions line up on the social- firm and the Guatemalan government to clause question? Although the issue at recognize the union. Seattle had united the government Other Latin American confedera- leaders of the South in opposition, the tions of unions for example, those in international trade-union movement Argentina and Chile support a social holds diverse views. The International clause, too. The trade unions of several Confederation of Free Trade Unions, middle-income countries in Asia also composed of 221 affiliated unions that approve. The Korean Confederation of represent 150 million workers in 148 Trade Unions believes the "social clause countries, supports the social clause. can be a significant and effective instru- But African backing for the clause has ment to protect and achieve social rights not always been uniform: trade unions and the basic trade union rights." in some countries, such as South Likewise, the Malaysian Trade Union Africa, are in favor, whereas those in Congress supports a linkage between

2002 75 71 labor standards and trade and exports wanese, and Hong Kong firms that sub- out of fear that its members' rights could contract from brand-name corporations be undermined by competition from the to do labor-intensive manufacturing in large number of Asian migrant workers poor countries. The apparel industry working without labor protection in aptly illustrates this type of globalized Malaysia's export zones. production. The work is highly labor- But India's trade unions and China's intensive, and the industry continues to quasi-governmental trade union federa- use a vast amount of unskilled labor sup- tion take a different approach. The gov- plied by the South, despite technological ernments and trade unions of the two upgrading. This sector is also among the most populous countries in the world are most footloose: production facilities can determinedly against a social clause. And be moved easily from city to city or coun-

The debate over a WTO social clause has reached an impasse. Accordingly, there is no internationally binding enforcement mechanism to protect workers' rights in the South.

because of their dominant weight in the try to country. Apparel manufacturing world's cheap-labor market, their posi- employs a large number of workers in the tions have enormous repercussions on the South, mostly young women; in turn, wages of unskilled laborers throughout this high volume of jobs affects the over- the underdeveloped world. This domi- all wage levels and labor standards of nance may also explain the perception these countries. that the South is staunchly opposed to Over the past four decades, the U.S. the social clause even though the apparel industry has been overwhelmed truth is more variegated. by this global low-wage competition. Apparel imports rose from about 2 per- NECK AND NECK cent of U.S. domestic consumption in the In rejecting a regulated international early 1960s to more than 60 percent in labor regime, countries of the South the 1990S. In the largest categories of lower their own labor standards to clothing imports men's and women's remain competitive and provide a "good" tops the $26 billion of imports fur- investment climate. This imperative nishes more than 70 percent of the mar- gives businesses an excellent opportunity ket by value and about 90 percent by to exploit their work forces to the fullest; quantity. Since 1980, imports have cut examples include the South Korean, Tai- U.S. apparel-industry employment by

72 0"7 COOPERATION SOUTHe half, a loss of more than 600,000 jobs. factories employ migrant workers from Many of the workers who remain in the poor, rural areas. In China, the growth U.S. garment industry, toiling as sweat- first began in the mid-1980s, in Guang- shop workers or as underpaid home work- dong province (which neighbors Hong ers, suffer declining wages that tod4 are Kong), and picked up speed in the early often below the legal minimum. Even so, 1990s. The entire Pearl River Delta in the North-South competition is basically Guangdong, which 20 years ago was large- over in this industry. The enormous ly agricultural, is now a manufacturing difference in North-South wage levels powerhouse that churns out labor-inten- ensures that those jobs lost will not return sive goods for the world market. Today, to the United States. some 12 million migrant workers from poor parts of China's countryside staff A TALE OF TWO COUNTRIES these factories' production lines. A similar In recent years, China and Mexico have phenomenon emerged in Mexico in the become the lions of the U.S. clothing 1990s. Along the U.S.-Mexican border, market, obtaining an equal market new investment created boomtowns share since the 1993 signing of the where maquiladoras (assembly plants) North American Free Trade Agreement have mushroomed. By 2000, these facto- (NAFTA). By 2000, Mexico and China ries employed about one million workers each supplied around 15 percent of all an increase of 150 percent since 1990 apparel imports to the United States. and production was spreading to other (The Chinese totalincludes Hong parts of the country. Kong's apparel manufacturing, which Contrary to general wisdom, however, has relocated almost entirely to the more jobs have not meant higher wages mainland.) But Mexico enjoys two sub- or rising labor standards for migrant stantial advantages over China: close workers, whether in Mexico or in China. geography (hence a faster filling of On the contrary, wages have fallen as a orders) and the absence of quota restric- resultof intensified competition to tions, thanks to NAFTA. As a result, attract factories that sell to the North's Asian investors particularly South markets. This drop is reflected in both the Koreans and Taiwanese became low legal minimum wages set by the two increasingly active there in the 1990s, countries and the real purchasing power even moving apparel production out of of workers. Asia into Mexico. In China, the setting of a minimum The dramatic growth of apparel wage is extremely decentralized. Any city, exports from Mexico and China to North or even a city district, can set its own America has created a surge of new jobs. minimum wage based on a formula pro- In both countries, the export-oriented vided by Beijing. This formula takes into

200 2 73 7 7 account such factors as the local cost of wages. Such abuse has become normal in living, the prevailing wage, and the rate southern China. of inflation, and it is adjusted each year. Official minimum wages also obscure In 2001, for example, the city of Shen- other critical facts. They do not show the zhen (just north of Hong Kong) had two violence and physical abuses that have standards. Inner Shenzhen, the city's become pervasive in the factories in commercialized sector, had the highest China owned by Taiwanese, Korean, and minimum wage in China at the equiva- Hong Kong intermediaries; nor do they lent of $72 per month, but the outer take into account the acute and chronic industrialized sector's minimum wage was occupational health and safety hazards. only $55 per month. Elsewhere in China, These factories record a startlingly high legal minimum wages have been set even incidence of severed limbs and fingers;

By rejecting a regulated international labor regime and seeking to provide 11good" investment climate, countries of the South lower their own labor standards to remain competitive, which gives businesses an excellent opportunity to exploit their work forces to the fullest.

lower. Although these local governments Shenzhen alone certified more than comply on paper with Beijing's decrees on 10,000 such accidents in 1999 among a minimum wages, they attempt to attract migrant population of 4 million. In short, investors by allowing them to pay work- despite China's dramatic export growth, ers below those rates. The legal minimum the benefits have not trickled down to wage is set by the month and does not the assembly-line workers who make the take into account that many migrant exported goods. Indeed, their situation workers labor illegally for longer hours. has gotten even worse since the Asian (For example, our survey of China's financial crisis of 1997-98; the downturn footwear industry shows that the average intensified competition with Southeast number of hours worked each day is 11, Asian labor, which had become much and laborers often have no days off.) Fur- cheaper in the wake of local currency thermore, official statistics do not take devaluations. (Provincial surveys in China into consideration the staggering amount show that a downturn in migrant workers' of unpaid back wages. Some 40 percent pay started at that time.) of the 20,000 workers' complaints lodged China's main challenge in apparel with the Shenzhen authorities over nine and other sectors, however, comes from months in 2001 were related to owed Mexico. There, workers' conditions in the

74 COOPERATION SOUTHes BOX 1: FACTORY JOBS MOVING FROM MEXICO TO CHINA

In 2001, plants that assemble duty-free components for export from Mexico, called "maquiladoras; sold $77 billion worth of goods abroad, mostly to the next-door US market.This represented half of Mexico's total exports. However, since then, the industry is beginning to lose out to exporters in other developing countries, particularly China. Over only 18 months between October 2000 and March 2002, these Mexican plants lost 287,000 jobs a 21 per cent drop. The electronics industry suffered the most, with production shrinking 8.8 per cent in 2001. For example, the Dutch firm Royal Philips Electronics moved production of personal computer monitors from Ciu- dad Juarez, Mexico, to an existing factory in Suzhou, China. Why is the Mexico-to-China shift happening? Among the contrasts are that China reportedly fares better in terms of lower employee turnover, lower labor costs, well trained engineers and managers, rising productivity, local suppliers, tax breaks, port and transport infrastructure. Mexican: business .leaders partly blame China's investment subsidies which they say violate rules of the World Trade Organization, but China's President told the Asia Pacific Economic Conference (APEC) in October, hosted by Mexico, that such obstacles are being removed. For the US market, Mexico retains a cross-border advantage in heavy and bulky products that would incur major shipping costs if coming from Asian sources, such as automobiles, whose export accounts for nearly 15 per cent of Mexico's gross domestic product. In the light of South-South competition which is emerging, experts suggest Mexico should work to provide more just-in-time delivery to US factories and retailers, promote research and development to create tailor-made products, and invest much more in higher education of engineers and managers.

rnaqudadorasare also grim. But unlike in downward pressure on average real wages China, wage levels in Mexico are more in Mexico. In the manufacturing sector, regulated. Only three minimum-wage lev- wages dropped in real purchasing power els exist for the entire country, including terms by 20 percent over the same period. one for the U.S.-Mexico border region And in the booming apparel sector, ILO (equivalent to $93 to $108 per month). data show that their wages shed 14 per- These minimum wages, although low, are cent of their purchasing power from 1990 almost double those of Shenzhen, which to 2000. Since 2000, wages have gained are the highest in China. But Mexico's slightly, but that increase is threatened by legal minimum wages fell by almost half the prospect of capital flight to regions during the 1990s, due in part to the peso's with even lower labor costs. collapse in1996.In addition, competition In short, export workers in China and with countries such as China created a Mexico have not benefited from the eco-

200 2 75 nomic boom. More workers are being 120 in the 1970s to 3,700 in 2000, but has employed, but over the course of the dropped by 500 since then. Pressures are 1990s working conditions and wages increasing on other Mexican factories to deteriorated. These assembly workers are compete with China's long working hours caught in an internationally competitive and bargain-basement wages. These pres- race to the bottom. sures may also threaten the incremental growth of an autonomous Mexican trade- INTENSIFYING COMPETITION union movement a result of years of In 2005, trade barriers on apparel are due painstaking political and social change, to end under the 1975 Multi-Fiber Agree- supported by a solidarity movement in the ment (and its 1994 successor). Assuming United States and Canada. Employers that its wages remain low, China will who resist relocating to China or to other

Without regulations to protect labor, akin to rules that protect investors, poor-country workers will not share in the benefits of a growth in world trade. For that reason, labor standards ought to be as much a South-South issue as a North-South one.

then be poised to make more inroads intolow-wage countries will be tempted to rich-country apparel markets, offsetting lower standards in Mexico by resisting the Mexico's advantage of proximity to the fledgling union movement. U.S. market. In other industries, the Mexican President Vicente Fox has WTO's lowering of trade barriers will proposed the "Puebla to Panama Plan," also tip the scales away from Mexico which would build an investment corri- and toward China. Fearing this, Mexico dor for more maquiladoras from southern sought tO delay China's entry into the Mexico through Central America at WTO; in fact, it was the last WTO mem- wages even lower than those at the ber to sign last year the necessary bilater- U.S.Mexican border. In China, mean- al agreement with China that paved the while, the government is encouraging way for WTO accession. foreign investors to go north and inland Mexico is already feeling the increased in pursuit of lower costs than can be competitive heat. Knowing that trade bar- found in southern China. riers will soon fall, intermediate firms The examples of China and Mexico have begun shifting their Mexican assem- show just how much the international bly lines back to Asia, particularly China. competition among nations of the South The number of maquiladoras swelled from influences their workers' well-being. And

76 COOPERATION SOUTH Ws 8 0 this race to the bottom affects people crisis in back wages (and wages simply elsewhere in the developing world who never paid) owed to Chinese migrant hold jobs in those sectors. Without regu- workers shows that the bottom is contin- lations to protect labor, akin to rules that uing to fall. China is a key player in the protect investors, poor-country workers South-South competition, and unless will not share in the benefits of a growth other countries can convince China to in world trade. For that reason, labor form or join a Southern consensus to put standards ought to be as much a South- an international floor beneath wages, the South issue as a North-South one. scenario will only worsen. Only through enforceable minimum-wage standards MAKING STANDARDS STICK can these countries prevent Northern The debate over a WTO social clause has corporations and intermediate suppliers reached an impasse. Accordingly, there is from playing them off against each other. no internationally binding enforcement The possibility of WTO trade sanctions mechanism to protect workers' rights in would deter abuses and give incentives to the South. Even the ILO, charged with national labor-law enforcement. It would this responsibility, has no means to give all nations the right to complain enforce compliance with its conventions. about violations in an international It is doubtful that the Global Compact forum. Picking up where President Bill initiated in 1999 by UN Secretary-Gen- Clinton and other developed-country eral Kofi Annan, which draws up guide- leaders left off in Seattle, the WTO lines for good corporate practices in the should devise a regulatory regime in line areas of human rights, labor rights, and with a labor "social clause," so that the environment, will be useful, because violators, both governments and corpo- it too lacks an enforcement mechanism. rations, can be sanctioned if they con- No competent global forum can enforce a travene it. This scheme or something verdict when a nation or its enterprises similar to it will be necessary before labor contravene fundamental labor rights. standards can be expected to improve or Governments and trade unions of the even just stabilize. The globalization of South must confront this challenge. capital has made the world smaller and Their campaign against the North's pro- safer for investors; now the question tectionism has done little to improve the before the world community is whether lot of their own work forces in export it can do the same for workers. industries. They have to face the fact that they are competing among themselves and that they themselves are partially responsible for the decline in wages and labor standards. The growing

200 2 77 Costa Rica's dmnofl 22m ROOTS AND OUTCOMES

BY ANDRES RODRIGUEZ-CLARE

Electronics and medical services are growing sectors in Costa Rica, which now has the mo'st software exports per capita in Latin America. The country's transformation into a knowledge-driven economy is led by high-tech transnational and domestic companies and by well-crafted government policies, but also has deep roots in national educational and political systems. In this article* Andrés Rodriguez-Clare discusses how these developments came about and what other countries can learn from the experience. He is Visiting Lecturer in Public Policy at Harvard University's John F. Kennedy School of Govern- ment, and headed the Council of Presidential Advisors in Costa Rica, 1998-2002.

ARRIVING AT A STRATEGY sortronics, Colorplast), but also several Over the last decade Costa Rica has madecompanies in the medical devices sector, a tremendous leap forward in the devel- such as Abbott and Baxter. The country opment of a technology and knowledge- also appears to be benefiting from the driven economy. Perhaps the better information-technology-led restructuring known part of the story is that an impor- of large corporations, with the establish- tant group of high-tech transnationals ment of Procter and Gamble's Global decided to establish manufacturing plants Business Center in the country (the in the country. This group includes not largest GBC in the world), as well as other only Intel and several other companies service centers such as Western Union in the electronics sector (e.g., Remec, and IT technical support provider Sykes. Sawtek, Conair, Reliability, Protek, Sen- The growing importance of knowl-

* This is an edited version of a paper written for UNDP's 2001 Human Development Report.

78 82 COOPERATION SOUTH edge and technology in the economy does leader who convinced thecountry to not end with high-tech transnationals. It move in a particular direction. No reaches deeper into the economy, as evi- specific legislation or "grand national denced by several domestic companies vision" is responsible. Moreover, there that are successfully competing world- are important disagreements within the wide in knowledge-intensive sectors. country about the measures, reforms and The clearest example is the phenomenal adjustments that have to be made for growth of the domestic software sector,so Costa Rica to be successful in thisnew

16=0.2711111=3.3111151164b ALIMMIE=1=1=27 Costa Rica has made a tremendous leap forward in the development

of a technology and knowledge-driveneconomy. that today Costa Rica has the highest stage of development. There are pro- level of software exports per capita in found divergences about, for instance, Latin America. Two very significant sig- the role of the state and the privatesec- nals of the country's potential in software tor in the delivery of public services, and design come from recent decisions by most notably telecommunications. And Intel. First, it decided to go beyond the this should be no surprise. Onecannot assembly and testing plant it established expect an open and pluralistic democ- in 1998, and establish in Costa Rica a racy like Costa Rica to achieve the kind center to develop software for the com- of long-term and unified national vision pany and contribute to its semiconductor that was found in countries like Japan, design processes. Second, through its Taiwan and Singapore. venture capital fund, it invested in one of Costa Rica's recent string of achieve- the most promising software companies ments in the technological area are the in the country. All this goes together result of a series of mutually reinforcing and is reinforced by the existence in the policies and events (some of them dating country of internationally recognized back to the 19th century) that have centers of high quality training, educa-. converged in the last years. What is tion and research, such as Harvard-asso- important, however, is that there is no ciated INCAE, Earth, CATIE, and INBio. significant opposition toa development At the outset it should be emphasized strategy based on technology and human that the positive technological develop- capital, with high-tech transnationals ments experienced by Costa Rica in the playing a key role. This is perhaps because last years are not the result ofany col- there is no clear alternative to this strat- lective and explicit decision. They are egy; or perhaps because the momentum not the product of some charismatic accumulated in recent years behind these developments seems unstoppable. This model, and also for the state-owned com- momentum becomes evident when one panies and institutions in telecommuni- sees several different institutions from cations, electricity, agriculture, industry, the national agency in charge of attract- water supply, and infrastructure. ing foreign investment to the public uni- In terms of education, the 1980s were versities, from the ministry of education worse than a "lost decade" for Costa Rica. to the national institution in charge of High-school enrollment rates fell signifi- telecommunications all moving ahead candy, only to recover to 1980 levels by with programs and projects that in com- the end of the 1990s. One 1980s initia- plementary ways support the transition of tive the installation of computer labs the economy towards the new knowl- in schools later contributed signifi- edge-intensive stage. cantly to the country's prospects for developing a technology- and knowl- THE ROLE OF HISTORY edge-driven economy. Later recognized The, process for arriving at Costa Rica's around the world for two revolutionary current "national strategy"even goes back characteristics, the program concentrated to the first half of the 19th century, with on elementary schools, so that itcould the strong emphasis on the importance of make a deeper impact on students; and it education for democracy and develop- did not focus on teaching computer skills, ment. At the beginning of the 20th cen- but rather used the computer as a tool to tury Costa Rica's literacy rate was among aid in the general learning process. Two the highest in the Americas. This com- other developments during the 1970s and mitment to education was later rein- 1980s that would also prove important forced with the creation of the first pub- for the new economy were the growth lic university of the 20th century in 1940, of private universities and the creation followed by the creation of three more of technical or vocational high schools

The momentum of recent years seems unstoppable, with complementary programs of several institutions supporting the economy'stransition towards a new knowledge-intensive stage.

public universities in the 1970s. The pub- and public junior colleges. Without the lic universities generated the supply of investment in education that took place scientists and engineers needed for the for almost two centuries, the current industrial sectors that grew in the 1960s prospects for growth based on human and 1970s under the import substitution capital would of course be impossible.

80 COOPERATION SOUTHee 8 4 After the crisis of the early 1980s, Costa change their orientation from the domes- Rica had to abandon the import substitu- tic and Central American Common tion model, and moved to an export pro- Market towards competing in open and Motion model. This was based primarily on competitive world markets. A parallel trade liberalization (and access to the US objective was to diversify the country's market through the Caribbean Basin Ini- agricultural exports from heavy depen- tiative) and two systems of fiscal incen- dence on coffee and bananas. The subsidy tives: the Export Processing Zone regime was also justified as a way to compensate and the Export Contract. exporters for inefficiencies in public ser- The Export Processing Zone regime vices such as electricity, telecommunica- allowed companies to import all their tions, and ports, as well as the high costs inputs and equipment tax free and avoid of financial services like insurance and paying income tax for eight years, paying banking caused by the quasi-monopolistic only 50 per cent of taxes due for the next structures that remained in those sectors. four years. This system was designed to The strategy of trade liberalization,

Costa Rica's free trade zone legislation has resulted in one of the better export processing zone systems in the developing world. attract foreign direct investment (FDI) export promotion and attraction of FDI and eventually became a key element in paid off, and the country attained moder- attracting high-tech transnationals. A ate rates of growth in the second half study by FIAS (Foreign Investment of the 1980s and early 1990s. It soon Advisory Service, a joint service of the became evident, however, that the system International Finance Corporation and placed a heavy burden on the fiscal sys- the World Bank) concluded that Costa tem. Public debate during the 1990s Rica's "free trade zone legislation has revolved around incentives, trade liberal- resulted in one of the better export-pro- ization, and structural reform. The pri- cessing zone systems in the developing vate sector argued that incentives and world" (FIAS, 1996: vi). some degree of protection to local indus- Through the Export Contract, compa- try were necessary to compensate for inef- nies not only enjoyed an, income-tax hol- ficiencies and distortions that existed iday and tax-free imports of equipment mainly in the financial sector and public and inputs, but also received a generous services. Economists and some policy subsidy equivalent to 10 per cent of the makers argued that both incentives and value of their exports. This system was distortions had to be eliminated simulta- designed to help domestic companies neously through structural reform. This

200 2 81 process was very difficult and frustratingly and attracting FDI, mainly for agriculture slow because of strong opposition from and manufacturing sectors that are public sector unions and the difficulty of unskilled-labor-intensive, especially cloth- passing reform bills through congress ing assembly plants (maquiladoras). Its (where the governing party lacked a success was in large part due to its institu- strong majority and congressional proce- tional nature (nonpolitical, nongovern- dures encouraged filibuster practices). mental), which alloweditto have During these years of debates about continuous programs and a long-term structural reform, political candidates and strategy without being affected by periodic governments talked about policies and changes in government. programs to support science and technol- In the early 1990s CINDE realized ogy, but there was little substance and lit- that the country was losing competitive- tle funding, leading to small programs ness in unskilled-labor-intensive indus- that generally had little impact on the tries to other members of the CBI and economy. So neither the big debate in the also due to the North American Free political arena nor the public policies Trade Agreement (NAFTA), which related to science and technology did would give Mexico better access to the much to determine the new vision. What US market than CBI members. At the really made the difference was happening same time, it was losing the US-AID elsewhere, behind the doors of CINDE. funding it had enjoyed from its creation. It therefore decided to focus FDI attrac- THE CINDE STORY tion efforts on skilled-labor-intensive The transition to the new export promo- industries, in a few sectors that better tion model was accompanied and sup- matched Costa Rica's relatively high ported from the beginning by the Costa education levels. Rican Investment Board (CINDE). A For its 1993 strategic plan, CINDE private nonprofit organization, CINDE focused on electrical,electronic and was founded in 1983 by prominent busi- telecommunication industries. These not ness people, supported by the Costa only required higher skilled labor, but were Rican government and financed by also experiencing fast growth in the US, grants from the US-AID. Its broad objec- and strong competitive pressures were tive was to help in the development of forcing companies to search for low-cost the economy, but the attraction of FDI locations around the world. These sectors was always one of its top priorities. It seemed a particularly good match for assists foreign investors in establishing Costa Rica because of its good supply of operations in Costa Rica. technicians and engineers at relatively low Through time, it gained very relevant cost, the widespread knowledge of English, expertise in promoting the country abroad and the country's well known political sta-

82 COOPERATION SOUTH tali) bility, democracy, developed legal system FDI attraction started a campaign to get it (i.e., rule of law), and low levels of corrup- on the list. They put together an effective tion. Moreover, there was a high quality of presentation for Costa Rica, which was life, with good access to health services, entered on Intel's list in November 1995. nightlife and cultural amenities, natural After Intel's visit to Costa Rica in resources and ecotourism (for which the April 1996, Costa Rica became a top con- country was increasingly better known). In tender in the list, which at that stage fact, several companies in the electronics included Argentina, Brazil, Chile, China, sector were already established in the India, Indonesia, Korea, Mexico, Puerto country, among them Motorola, Trimpot, Rico, Singapore, Taiwan, and Thailand. Sylvania, and Espion. The best source of information about The year 1995 confirmed that this Intel's site-selection process is a study by strategy was right. DSC Communica- Deborah Spar (1998), which I have com- tions Corporation decided to establish a plemented with personal interviews with manufacturing plant in Costa Rica Intel and CINDE representatives. the largest ihdustrial investment in the With three plants already in Malaysia, country up to then and the first Printed China and the Philippines, Intel decided Circuits Board (PCB) assembly plant to diversify and dropped Asian countries in the country. Sawtek Inc., Merrimac from the list. Many additional research Industries, and Remec also chose to visits by Intel to different locations invest in the country. Thanks to these narrowed the list to four countries: successes, CINDE acquired a deeper Brazil, Costa Rica, Chile and Mexico. By understanding of the industry. It realized November 1996 the other three countries for the first time that, though Costa Rica were dropped for various reasons, and Intel had a unique competitive advantage for announced its choice of Costa Rica. Four these sectors over other CBI members factors led Intel to choose Costa Rica: (Mexico, El Salvador, the Dominican The general characteristics of the Republic), it was now competing against country provided a favorable basis countries in other regions (such as Ire- to attract skill-intensive FDI. In land, Chile, Israel, and Thailand). addition to the same characteristics Thanks to this increased understand- which CINDE had identified in ing of the electronics industry, CINDE 1993 (see above), favorable factors learned that Intel was starting the site included a nonunion work envi- selection process for an assembly and test- ronment; a "pro-business" environ- ing plant for one of their newest chips, but ment with a favorable attitude Costa Rica was not on the "long list." towards FDI; a good package of Despite some skepticism from their high- incentives that had clearly defined est authorities, CINDE's specialists on procedures and conditions and was

2002 83 not subject to arbitrary negotiation He also motivated and coordi- (the EPZ system); and good loca- nated the rest of the Government tion and transportation logistics. to help Intel as much as possible The country's growing emphasis within the existing laws and regu- and success in attracting high-tech lations. The Government was very FDI gave credibility to Costa diligent in responding to Intel's Rica's case that it had the profes- concerns in areas like education, sional human resources required electricity and taxes. for an operation like Intel's. When The Government's responses were not Intel talked to several high tech- special concessions made to Intel, but were transnationals in the country dur- generally applicable to other companies as ing its site-selection process, the long as they met the required conditions. glowing reports and optimism of In this sense, it could be argued that these these executives were decisive in were not concessions, but rather Intel- moving Costa Rica to a top posi- inspired reforms to improve the country's tion on Intel's list of countries for competitiveness. For example, education possible investment. reforms included the addition of a one- The existence of an aggressive, year "certificate" program focused on tech- effective and knowledgeable for- nical skills and physics/chemistry compe- eign investment promotion agency tency and a one-year "Associate Degree" like CINDE was very helpful. program focused on semiconductor manu- CINDE was important in convinc- facturing. Regarding electricity, rates were ing Intel to consider locating in very high, so the Government asked the Costa Rica and helping Intel's regulator to establish a new lower rate people conduct research and for energy-intensive industrial facilities. obtain the credible and consistent These incentives were valid generally, not information they demanded. It just for Intel, and this is perhaps the main had links and credibility with the reason why there was almost no opposition government and played a key role to Intel's investment nor to the incentives in arranging successful meetings it received. between Intel executives and gov- With Intel's decision to establish its ernment authorities. assembly and testing plant in the country, The Government quickly under- it became clear that attracting high-tech stood the importance of an Intel transnationals to the country was feasible investment in the country. The and potentially effective as part of the president personally met Intel development strategy of the country. executives and conveyed a very What was until then a CINDE strategy strong interest in its investment. became a national strategy.

84 COOPERATION SOUTH or 88 THE FIAS STUDY AND education advantage covers a wide SUBSEQUENT STRATEGIES range, from operatives to technicians CINDE was aware that other weaknesses and engineers. There is also a wide- in Costa Rica's economy needed to be spread knowledge of English." addressed if the country was to be suc- The FIAS study also suggested pro- cessful in attracting FDI in electronics. moting sectors that support the electron- Moreover, it needed a deeper under- ics industry, such as plastics, metal work- standing of the electronics industry so as ing, mold making and equipment service to better design its FDI attraction efforts. and repair. This would help develop "clus- With this in mind, CINDE hired FIAS ters" and increase competitiveness in in 1996 to develop "A Strategy for For- these areas. It was recommended to do eign Investment in Costa Rica's Elec- this through attracting FDI in these areas, tronics Industry." The study's main find- as well as through backward linkages to ing was that: develop such industries domestically. "There is a basis for substantial Finally, FIAS noted several obstacles to expansion of foreign direct investment developing the electronics sector in the in the electronics industry in Costa country and recommended improvements

Rica... The niches for Costa Rica in intellectual property rights legislation, would not involve mass market prod- telecommunications and transportation ucts ,but rather those with smaller infrastructure, the public system to sup- production runs that require relatively port training, -and the low quantity of large inputs of skilled labor for set-ups graduating technicians and engineers and testing. The most attractive with English proficiency. niches can be grouped into four basic CINDE used the FIAS study to define technology areas, as follows: power its strategic plan for the following years,

technologies,PC cards and surface starting with its 1997 plan objective to mount technologies, system integra- position Costa Rica as "the emerging tion technologies, call centers... Such electronics manufacturing center in the

The main advantage Costa Rica has to offer the world electronics industry is a labor force that is relatively well educated in relation to its cost.

products draw heavily on the main Americas." The idea of developing clus- advantage that Costa Rica has to offer ters in certain skill-intensive sectors was the world electronics industry: this is later reinforced by "Competitiveness the labor force that is relatively well Agenda for Central America towards educated in relation to iB cost. The the 21st Century", carried out jointly

2002 85 8 9 by INCAE and the Harvard Institute rights protection in compliance with for International Development (led by the Uruguay Round, and develop better Michael Porter and Jeffrey Sachs). access to foreign markets through free- In following years, additional CINDE trade agreements with countries such as research led to including the medical Mexico, Chile and Canada. devices sector among its targeted sectors. Success came early in a 1998 decision by THE IMPACT OF INTEL Abbott Laboratories to establish a sophis- ON COSTA RICA ticated $60 million manufacturing plant When Intel announced its decision to in the country, and Baxter's decision to invest in Costa Rica, it projected an

Objective: position Costa Rica as "the emerging electronics manufacturing center in the Americas."

expand its presence with a $30 million investment of between $300 and $500 investment. New opportunities opened million. By December 1999,it had up later in the business services sector already invested $390 million and was with Procter and Gamble's decision to employing more than 2,200 people, establish a Global Business Center for the including over 500 professional employ- Americas, with the expectation of hiring ees, most of them engineers. Average up to 1,500 professionals. wages for Intel employees were 50 per Today, Costa Rica is following a strat- cent higher than the average in the egy that appears to enjoy strong support manufacturing sector. For an economy from many different groups. That includes with a GDP less than $12.5 billion in not only CINDE's continuing efforts to 1997 and a labor force just over one attract high-tech transnationals, but also a million people, this was an extraordinar- program sponsored by Inter-American ily large investment. In fact, in 1999 Development Bank to help small and Intel accounted for more than 60 per medium enterprises become their suppli- cent of the total growth experienced and ers, and initiatives to increase the human almost 40 per cent of total exports. In resources needed for the new develop- 1999 Costa Rica ran a trade surplus for ment model. This is complemented by the first time in decades. more general policies to improve telecom- Of even greater interest and relevance munications (especially for the Internet is the impact Intel had on Costa Rica's and data transmission), improve infras- ability to attract high-tech FDI and the tructure through private sector partic- economy's general competitiveness in ipation, improve intellectual property skill-intensive industries. Intel's invest-

86 COOPERATION SOUTH e S 0 ment decision became news worldwide gle buyer. A few Intel satellites did set up and tremendously improved the country's in the country, mostly small operations image as a viable economy and attractive with very few employees, which con- investment location for high-tech com- tributed little to forming the desired elec- panies. In a 1999 survey among possible tronics cluster. investors, 72 percent of respondents Intel did generate a positive impact claimed they had heard, seen, and read through backward linkages, forcing a sig- more about Costa Rica as an investment nificant improvement in the logistics area prospect after Intel's decision. Given in less than three years. For example, Intel's reputation for rigorous site-selec- Fed Ex and UPS initiated operations in tion research, other companies can in a the country, and now there are daily cargo sense "free ride" on Intel's research and be flights to several destinations in the much more confident about investing in United States. Air Express International, the country. an international logistics and transporta- Using as its main selling point Intel's tion company with a close business rela- "stamp of approval" for Costa Rica as an tion with Intel, invested through a joint investment location, CINDE launched a venture with a local company. strong campaign to attract other large Backward linkages also developed electronic manufacturers as well as Intel's through domestic companies that supply worldwide suppliers to invest in Costa Intel with specialized goods and services, Rica. On the day that Intel announced its as shown by two surveys (Larrain et al, investment, the Minister of Foreign Trade 2001). One survey showed that a signifi- predicted that the country could attract cant percentage of Intel suppliers received around 40 Intel satellite companies. The training from Intel and changed their objective was not only to increase overall organizational practices or their product FDI, but also to form the electronics clus- variety due to Intel. The other survey ter that was envisioned in the 1996 FIAS indicated that Intel competitors believed study and in the INCAE/HIID Competi- that Intel generated changes in inputs tiveness Agenda. markets from which they have also bene- Unfortunately, the Asian crisis of 1997 fited, and had a positive effect on their together with an industry downturn at own operations and the overall economy. global level significantly reduced the flows Perhaps the most important way Intel of FDI in the electronics sector. For exam- has benefited the economy is its col- ple, Seagate a large-scale manufacturer laboration with public universities to of hard-disk units and Lucent aban- improve curricula and teacher training doned their Costa Rican plan. Also, many in technical fields, particularly with the of Intel's suppliers refused to invest in the Instituto Tecnologico de Costa Rica country due to the risk of selling to a sin- (ITCR). Generally, the presence of Intel

2002 87 in the country has increased awareness business" environment with a about career opportunities in technical favorable attitude towards FDI. fields and engineering, leading to a very The Export Processing Zone system significant increase in enrollment in appears to have been important in technical fields at public universities. attracting FDI to Costa Rica. How- ever, other countries will have to LESSONS FOR OTHER do without this kind of incentive, COUNTRIES owing to the Uruguay Round Though Costa Rica's success comes from agreement to eliminate export sub- the convergence of different policies and sidies by the year 2003 in all devel- events going back many years, rather oping countries. One obvious alter- than from a grand national vision, some native, but not without its costs, is general observations may still be of value to establish aggressively low corpo- to other countries: rate income tax rates. Costa Rica's long-term commit- CINDE played an essential role in ment to investing in education attracting FDI and in determining has been the most important fac- a strategy geared towards the elec- tor behind the recent develop- tronics sector that would later ments. The country's main com- prove successful for the country. petitive advantage lies in a labor CINDE has the required character- force that is well educated relative istics to play such a profound role to its cost. Countries should not a nonprofit organization with only focus on increasing coverage strong ties to both private and of primary and secondary educa- public sectors, apolitical and with tion, but should also put in place no special relation to any interest technical high schools and univer- group, with strong financial sities that guarantee a steady support. By its nature, this organi- stream of technicians and profes- zation was able to establish long- sionals in areas where the country term goals, do the required has a competitive advantage. detailed and careful research, Many of the now dominant rec- get the appropiate expertise and ommendations for economic human resources, be selective in its development are validated: politi- approach towards FDI, and make cal and economic stability; rule of sure that its efforts matched the law, transparency and low levels of country's competitive strengths. corruption; economic liberaliza- Based on the Costa Rica case, tion regarding international flows countries should carefully identify of goods and capital; and a "pro- the sectors where they have a

88 COOPERATION SOUTH ee 92 strong competitive advantage and Finally, rather than give special thus high-growth potential, and concessions to lure particular com- make sure that economic policy is panies to invest in the country, it consistent with the needs of these is advisable to adopt policies and sectors. This, for instance, is what reforms that are generally applica- lies behind Costa Rica's strength- ble as well as particularly impor- ening of technical schools in tant for the companies whose informatics, electronics and metal investment is being promoted. OP working and mold making. This is also the rationale for its supporting the development of local sup- REF ERENCES pliers to high-tech transnationals. One factor suggesting that the ARC (Applied Research and Consulting) Costa Rican strategy will be main- (1999). "Foreign Investment in Costa Rica tained at least in the medium term and Other Development Countries" is that responsibility is spread (mimeographed). San José: CINDE. among many different actors in m FIAS (Foreign Investment Advisory Service) society. It is not only the Govern- (1996). "A Strategy for Foreign Investment ment that is running programs to in Costa Rica's Electronics Industry" strengthen the technical capacity (mimeographed). Washington D.C.: of the country, but several other World Bank. organizations are also helping, Larrain, E, López-Calva, F. and A. Rodriguez- among them public universities, Clare (2001). "Intel: A Case Study of Foreign industry chambers, technical Direct Investment in Central America," schools, and CINDE. ch. 6 in Felipe Larrain, ed., Economic Develop- The case of Intel's decision to ment in Central America, vol. I: Growth and invest in Costa Rica shows clearly Internationalization. Boston: Harvard Univer- the importance of transportation sity Press.

logistics for high-tech companies, raSpar, D. (1998). "Attracting High Technology whose products exhibit high rates Investment: Intel's Costa Rican Plant," FIAS. of innovation (and thus require Occasional Paper 11. Washington D.C.: fast shipment of goods from fac- World Bank. tory to consumers) and a high value relative to size and weight. High-quality airport systems and friendly and open policies towards air travel and cargo companies seem advisable.

2002 89 9 3 PATHS FOR

COOPERATION rveUd

What is the balance sheet on cooperation among Arab countries to date, and what are the potential areas of future cooperation? These are among the key questions covered by the Arab Human Development Report 2002, as summarized below. The Report was compiled by an independent team of Arab experts and published by the UNDP Regional Bureau for Arab States, with the Arab Fund for Economic and Social Development as co-sponsor.

ARAB COUNTRIEShave what it takes to leverage that a united front can give in attain adequate living standards for all trade relations with other trade blocs their people, but they need to achieve such as the European Union. The Report economic integration and deepen inter- concludes that the Arab Free Trade Area Arab trade to overcome dependency and is a step in the right direction, but adds vulnerability and make globalization the significant proviso "provided it lives work for Arab interests. According to the up to its promise". Arab Human Development Report 2002, On paper, the Arab region is one of the region needs greater regional cooper- the most cooperative and integrated in ation because of the small size of most of the world in every sphere defense, cul- its individual markets and the increased ture, economy, freedom of movement for

90 COOPERATION SOUTH a 9 4 capital goods and people. But not many of the phosphate industry in the agreements have been implemented Morocco and Tunisia, or petro- or even ratified by the Arab countries. chemicals in Saudi Arabia. The League of Arab States is one of Higher education is an area where the world's oldest regional bodies, and cooperation brings many advantages. has many committees, conventions and Here, as in other fields of education, agreements. So the areas for possible the common language permits col- Arab cooperation are very well mapped, laborative work on, for example, cur- although not much travelled. riculum development, textbook pro- Despite all the agreements, inter-Arab duction, and teacher training. trade accounts for no more than 7 to 10 Shared language can become a per cent of total Arab foreign trade, a fig- means for Arab countries to catch ure that has not changed since the 1950s. up with the information train. Arab investment capital flows more to Currently, the Arab world trans- the industrial countries, rather than lates only about 330 books annu- inter-Arab deStinations. ally one-fifth the number that Based on an analysis of the obstacles Greece translates. Each year, and the potential, the Report points to Spain translates as many books as whole new areas for integration. For have been translated into Arabic example: in the last thousand years. Although Arab countries share a The Report also stresses the need common written language, coun- for cooperation on the environment, to tries apply different standards for settle potential disputes among Arab computer software, for Internet countries over the shared use of these connectivity, and for mobile tele- resources, and to strengthen the Arab phones. If the countries of the voice in global discussions. region are to benefit from Some success stories show that coop- economies of scale necessary to eration is possible. Among them are the counter competition from other initiatives supported by the Arab Fund regions, then they need to coordi- for Economic and Social Development, nate to ensure interconnectivity. the Arab Monetary Fund, the Arab Foun- The region could also maximize its dation for the Insurance of Investments, R&D investments by enabling dif- and several joint Arab production, finan- ferent centres to specialize in areas cial and banking companies. of comparative advantage. Exam- The Arab Fund for Economic and ples include water desalination in Social Development has funded electric- the Gulf States, computer pro- ity, road and communication networks. gramming in Egypt and Jordan, Connecting the electricity networks

2002 95 91 Orders from North America, Latin America, the Caribbean andAsia and the Pacific should be sent to: United Nations Publications Room DC2-853, 2 UN Plaza New York, NY 10017, USA Telephone: (212) 963-8302, Toll Free 1-800-253-9646 (North America only) Fax: (212) 963-3489 E-mail: [email protected]

Orders from Europe, Africa and the Middle East should be sent to: Section des Ventes et Commercialisation Bureau E-4, CH-1211 Geneva 10, Switzerland Telephone: 41 (22) 91 7-261 3/2614 Fax: 41 (22) 917-0027 E-mail: [email protected]

Copies can also be obtained through: UNDP Country Offices in Arab countries www.adabwafan.com

alone has reduced electricity sector they are at the heart of human develop- investment requirements and increased ment and human development is at usage and cut costs. Extending the net- the heart of securing a freer, more secure work toallArab States could create an and more fulfilled future for every citizen Arab electricity market similar to those of all the Arab States. of Europe and North and South Amer- The region covered by Arab Human ica. Similarly, connecting the roads and Development Report 2002 consists of 22 railways would increase the flow of goods Arab countries with a combined popula- among Arab countries. tion of 280 million. The topics covered Above all, concludes the Report, the include health, habitat, education, the dignity and freedom of the Arab people economy, employment, freedom, women's demand that countries join together to pro- empowerment and governance. e vide human services: health, education and training, particularly for girls and women and people living in rural areas, along with strong efforts to abolish illiteracy, especially in the less developed Arab countries. Cooperation in financing and implementing such initiatives should be given priority in joint Arab action because

92 COOPERATION SOUTH e Lessons on Public Housing from

for

BY W. E. HEWITT

In the mid-1990s Sao Paulo began a public housing program based on urban renewal strategies developed three decades earlier in Singapore, half a world away. Despite some modest success, the program was abandoned by Sao Paulo's government in early 2001. This raises questions about how south-south transfer processes can be made to work in practice, as discussed here by W. E. Hewitt, Ph.D, Associate Vice-President (Research) and Sociology Professor at the University of Western Ontario in Canada.

INTRODUCTION Though generally recognized as a pri- In an era of instant communications, ority by developing world planners and globalized commerce, and continuing politicians alike, there are precious few advances in food production and disease examples of national, regional, or local prevention, housing remains one of the housing policies which have worked most basic human needs still unmet or effectively to resolve this issue. This is largely compromised on a massive scale in true even in some of the more affluent many areas throughout the world. Hous- developing regions, such as Latin Ameri- ing deficits are especially acute in the ca. Here, urban planning per se has major urban agglomerations of the devel- evolved only recently, with policies oping world. Millions are forced to live directed specifically towards housing still cheek by jowl in downtown slums or rare. Those in place remain so seriously in sprawling "suburbs" of precarious underfunded as to offer very little relief to dwellings with few services and a mini- the millions of families in need. mum of infrastructure. As Latin American municipal govern-

2 00 2 93 9 7 ments increasingly look outward in their respect to the potential and especially the attempts to seek solutions to the prob- limitations of south-south technology lems which affect them, change may, and information transfer. The study clear- however, be on the horizon. With a now ly reveals that effective models for emula- global trend towards south-south cooper- tion in the housing area, while critical to ation and information exchange,' many the process, cannot in and of themselves Latin American cities have begun to look ensure the success of the transfer process. seriously at innovative housing policies Without political will, resources, and and practices from other regions of the effective management and follow-up, developing world as possible models for even the best of innovations will have emulation in the domestic context. difficulty in adapting to foreign climes. One such borrowed "innovation" in the housing area was adapted by the city SAO PAULO'S URBAN of Sao Paulo Brazil's largest urban cen- HOUSING PROBLEM tre, in the mid-1990s, drawing on Sin- Rapid urban growth since the 1960s gapore's decades-long experience with (UNCHS, 1996) has created a crisis of urban renewal. Dubbed Projeto Cingapu- major proportion in the provision of suit- ra (Singapore Project) or PC for short, able housing in most, if not all urban areas this program of public housing vertical- in the developing world (see Brandt, 1980; ization aimed at the city's growing hous- Rodwin, 1987; Struyk, 1988; Werna, ing deficit, estimated at over one million 1996). This situation has increased public units. Given existing urban densities and awareness of housing problems, along with the high cost of urban land, the program strident calls for action on the part of aid seemed especially well suited to meeting agencies and nongovernmental organiza- Sao Paulo's public housing needs. Despite tions to address the issue through national its initial promise and successes, however, and local housing strategies. Some action the PC provided for only a modest plans have focused on the provision increase in available housing stock and of basic housing in single or multiple was formally abandoned by the city gov- dwelling format, with concomitant invest- ernment early in 2001. ments in local services and infrastructure Using data obtained from archival usually targeted to the poorest popula- sources and field interviews conducted tions. Another common strategy is slum during the main phase of project con- upgrading by either contracted or self- struction, this study explores both the labour to improve the quality of existing promise and the challenges which faced housing stock. Government sponsored the PC during its short history. It seeks to housing finance schemes are also increas- develop a broader understanding than is ingly common, as are incentive schemes currently evident in the literature with encouraging private sector developers to

94 COOPERATION SOUTH e _ 98 provide low-cost housing to those who dents of converted older homes and fac- may not otherwise be able to afford it tories in Sao Paulo's inner core known (Brennan, 1993). as corticos are now estimated to num- However, the overall impact globally of ber over 500,000 (PMSP, 1996: 146-148; government action on the housing front `Corticos e favelas', 2001). For this seg- is remarkably limited. In Thailand, for ment of the population, living conditions example, the National Housing Authority are extremely precarious. Frequently produces fewer than 8,000 units per year, a whole families share one room, some- paltry fraction of the total 250,000 units times without proper ventilation, electri- required. In Madras, India, less than one cal wiring, or plumbing. Rat and cock- public housing unit is completed for every roach infestations are common. five needed (Brennan, 1993). Over the years, disparate attempts to Sao Paulo's recent experience in pub- deal with the housing crisis in Sao Paulo lic housing reflects these dismal statistics. have been spearheaded by an alphabet Between 1960 and 1991, Sao Paulo's pop- soup of agencies established at the feder- ulation skyrOcketed from 3.6 to over 9.6 al, state, and local levels. These includ- million (PMSP, 1996: 49), owing mainly ed a federal bank (BNH) which funded to large-scale in-migration from the urban housing projects and low-interest impoverished northeastern regions of loans to lower and middle-income home Brazil. By the 1970s, growth rates in many buyers; a state-level cooperatives insti- parts of the city had reached 10 percent tute (INCOOP) which helped build per year, with most migrants experiencing housing for state workers in a range of severe difficulties in locating adequate occupations ( teachers, transit workers, housing (Kowarick and Bonduki, 1994). etc.); a state-level development compa- By 2000, the housing deficit in Sao Paulo ny (CODESPAULO) for housing for was estimated at approximately 1 million low-income families and financing of units ('Marta pretende regulizar', 2000). slum upgrading projects; a collaborative Substandard housing in some form or private sector/state company scheme other occupied about 70 percent of São (COHAB) to develop housing for limit- Paulo's area approximately 1,500 ed-income families; and a municipally square kilometers, or three times the size managed COHAB for public housing of Paris (Greenfield, 1994: 103). For construction, which also funded self- example, the number of slum dwellings or help projects ("mutiroes") to upgrade favelas grew astronomically from a hand- substantdard housing. ful in 1973 to well over 350,000 in 1993. Between 1965 and 1982, about These residences are now home to some 154,000 housing units were constructed 2 million individuals, around 20 percent or upgraded, mostly through Sao Paulo's of the total municipal population. Resi- COHAB (Shidlo, 1990: 76, 81). Since

2002 95 the early 1980s, due to cutbacks at fed- São Paulo's search for solutions from eral and state levels, the municipality's other parts of the developing world in burden of public housing construction this case, Asia is part of an emerging has increased still further (Shidlo, 1990: global trend towards south-south tech- 77, 82). Yet the number of units con- nology and information transfer. Con- structed by the municipality each year trasted with more standard forms of since the mid-1980s has been pitifully north-south transfer (typical of most small, averaging less than 6,000 per bilateral or multilateral aid strategies), year (PMSP, 1996: 2, 6; Wema, 1995) south-south transfer is widely seen as hardly sufficient to even begin to meet offering opportunities for partner organi- the extant need. zations and governments to interact as More recently, some attempts were equals, and to directly share experiences made to speed up public housing construc- leading to workable solutions of direct tion. During the 1989-1992 administra- relevance and benefit to populations at tion of leftist mayor Luiza Erundina, the risk. Increasingly studies have focused on municipal government invested in more information sharing and transfer in a cost-efficient self-help housing initiatives, variety of contexts, from environment known as mutiröes. The city provided (Clusener-Godt and Sachs, 2001) and funding directly to community groups, food security (Nwanze, 2001), to trade which in turn engaged local families to (Brown, 1998) and science and technol- build new or renovate existing houses. ogy (Hassan, 2000). Still, less than 8,000 units were built or In urban development, Brazil's Institu- improved during each year of the Erundi- to de Administracao Municipal (IBAM- na administration (Kowarick and Singer, Institute of Municipal Administration) 1994; PMSP, 1996: 2, 6; Werna, 1995). has actively supported transfer of know- how and resources to urban governments GLOBAL SEARCH in a range of developing countries. Since FOR SOLUTIONS 1993, for example, IBAM has served as With the election of right-wing mayor consultant to the Peruvian government Paulo Maluf in 1992, São Paulo's munic- regarding municipal affairs in the formu- ipal government began to seek more lation of the country's new constitution; "radical" solutions to the city's housing provided information to Cuba on the crisis. Eschewing past practice, Maluf construction of low-cost housing; worked initiated an ambitious urban renewal in a project to strengthen local govern- plan borrowed from Singapore, a city- ment in Mozambique; and finally, helped state with one of the world's most set up a regional planning institute in remarkable successes in urban renewal Indonesia (IBAM Newsletters, 1993-95). and housing construction. On a broader scale, another example

96 COOPERATION SOUTH of south-south transfer is the Mega-Cities development in 1997, anda review of Project, which links 18 of the world archival material and media reports. largest metropolitan areas in an effortto promote exchange of ideas and techno- THE SINGAPORE MODEL logical innovation (see Badshah and Singapore's successes in slum removal Lazar, 1995). In one case, methods used and "verticalization"are now legendary. in a Cairo project offering thepoor Its strategy mainly responded to critical opportunities to reclaim and recycle urban overcrowding resulting from waste products to sell for profit (to unprecedented levels of in-migration. finance local neighbourhood improve- Work on the strategy began in 1960 with ments) were transferred to both Bombay the establishment of the Singapore Hous- and Manila. In anothercase, an anti-lit- ing and Development Board (HDB). tering strategy aimed at children (using With generous government funding, cartoon characters), which was devel- the HDB has overseen construction of oped in Bangkok, was later implemented approximately 700,000 flats, housing in Rio de Janeiro. over 85 percent of Singapore's total pop- Despite such examples, whatwe know ulation (SHDB, 2002). Much of this about the process and criticaloutcomes of construction was completed by the late south-south cooperation remains limited, 1970s and early 1980s. Since the 1990s, with much of the literatureto date the HDB has concentrated primarilyon focused on its more genericaspects and upgrading, applying new designconcepts broad successes. This makes Sao Paulo's to deal with an increasingly sophisticated experiment with housing strategies devel- and upwardly mobile population andto oped in Singapore both intriguing and position Singapore firmly as a global city illustrative, because it revealsnot only (see Goh, 2001). the promise, but also the complexities In its initial thrust into the housing and the challenges associated with south- market, the HDB actively planned and south exchanges. built housing blocks in "new towns", with The course of Sao Paulo's experience a full range of urban services and infras- with the Singapore model, itssuccesses, tructure. During earlier phases of the pro- attendant frustrations, and failures,were ject, one, two, and three room apartments studied over five years, from the inception were constructed, ranging in size from 23 of the project in 1995 to its end-point to 53 square metres. During later phases, early in 2001. Research datawere drawn larger flats were introduced, largelyto from site visits to PC projects in 1997 and meet demand among middle-class resi- 2000, interviews with municipal adminis- dents. Initially offered only forrent, since trators, PC project coordinators and resi- the late 1960s, a home-purchase plan has dents during the main phase ofproject also been in effect, offering ownershipto

200 2 97 101 resident families at rates below real estate FROM SINGAPORE market prices (Wan, 1975). TO SAO PAULO Singapore's housing program has also During the Maluf administration (1992- traditionally included a strong social 1996),plannersandadministrators component. During the clearing and con- thought the Singapore model was espe- struction phases, residents of existing cially applicable to São Paulo, owing to housing settlements were offered alterna- both the limited availability and high tive accommodation. In addition, they cost of urban land. Giventhe generally were compensated forland which they limited successes of previous public hous- had left behind. In 1964, the NHB paid ing schemes, and the well publicized suc- out such compensation at a rateof $26.90 cess of the Singapore strategy, adecision per square metre, an amountwhich has was taken to devotesignificant resources increased over the years. Residents also to a home-grown versionof the project received a relocation allowance, and a Projeto Cingapura (PC). In 1994, re, ntal subsidy of$15 per month for the some R$7.5 million(then about US$ 7.5 initial three-year period of their tenancy million) was targeted for the PC, increas- (Wan, 1975: 13-14). In addition, at least ing dramatically to R$67.5 in 1995, and 10 percent of space has typically been set R$206.5 million in 1996. In 1997, the aside for small, labour- intensive busi- administration of Maluf's political pro- nesses so residents can retainand expand tegé, Celso Pitta (1996-2000), planned to commercial activities at home. Attrac- increase this by about half to about tive landscaping and leisure space are also R$300 million with supplementary incorporated in every complex, helping funding from the Caixa Economica Fed- provide a sense of "neighbourhood" (Yeh, eral (a government lending agency) and 1975: v-vii; Wan, 1975: 10). the Interamerican Development Bank By the time HDB's main construction (SEHAB, 1997). If maintained at this initiatives were well underway and many level for the subsequent four years of the were complete, residentsatisfaction with Pitta administration, such funding would Board efforts was already high. In a 1973 have provided for approximately 90,000 survey, As Yeh and Lee(1975) report, well apartment units, or approximately 87 per- in excess of three-quarters of residents rated cent of the total 103,000 housing units factors such as general living conditions, promised by Maluf and Pitta, respective- the social environment, access to shopping ly, at the beginning of their terms (`Proje- and services, and work as either satisfacto- to Cingapura vai deixar', 2000). ry or acceptable, with just a minorityof res- In terms of operations,SaoPaulo's PC idents, a third or less, expressing dissatisfac- mirrored its better known Asian counter- tion with children's playground facilities, part to a remarkable degree. Responsible noise, parking, and access to police. to the municipal Housing Secretariat,

98 COOPERATION SOUTH 6E5 102 day-to-day administration of the PC pro- routinely incorporated in the layout of ject was overseen by an appointed board the development. of directors which did site selection and At the same time, in a major departure oversaw the tendering process for choos- from the PC's progenitor, no provision ing construction (interview with PC was made for accommodation of small- Director, 1997). scale businesses within the projects Most apartment blocks were con- (interview with PC architect, 1997). This structed in areas immediately adjacent to in turn has limited the ability of residents slum housing ( typically favelas) whose to earn income on site, as well as creating residents were to receive priority ten- other difficulties. antship. Early buildings were typically low-rise, with larger buildings preferredas OPPORTUNITIES the project advanced. Apartment size has AND CHALLENGES typically been about 40 to 50square In principle and structure, Projeto Cin- metres, slightly less than Singapore resi- gapura has a good deal in common with dents got during early phases of the its Singapore counterpart. It appeared project. Once constructed, ownership poised to deliver in Sao Paulo what so of buildings passed to the municipal many proposals in the past had failed to COHAB, which is responsible for col- do: affordable, quality housing for some lecting rents of R$57.00 per month (plus of the poorest citizens. Residents of for- a small condominium fee), guaranteed to mer slum areas would be provided qual- tenants for a 25-year period. Although ity housing near their former homes the Municipal Council passeda law and at reasonable cost. Remaining in allowing ownership of the units,to date effect "on-site", they would stay close none have actually been sold (interview to their places of work in the city, in with PO Director, 1997). areas which most could scarcely afford As in Singapore, a strong socialcom- through other means, given the high ponent was been built into the project. cost of urban land. Every new project had been assigneda Many residents of Sao Paulo's less social worker, whose initial taskwas to affluent neighbourhoods appeared to wel- map the slum area and develop a list of come the initiative, even lobbying for residents. The social worker then assist- subsequent phases of the project to be ed with the transfer of familiesto tem- developed in their own areas. According porary settlements as the new buildings to one respondent and former leader of a were constructed. Families also received favela in a neighbourhood known as information about the "dos" and "don'ts" jardim do Arpoador, support for the PC of apartmentliving.'Landscaping, was overwhelming. In an April 1995 sports fields, and leisure areas were also plebiscite, 847 or 95 percent of residents

2002 99 voted to accept a proposal from the city Funding issues to locate a PC apartment complex in Program funding has remained perhaps their neighbourhood, with just 44 or 5 the most serious challenge. Despite fore- percent disapproving (interview with PC casts of significant financing (see above), resident, 1997). the Maluf and Pitta administrations Those who benefited directly from largely failed to apply the promised the PC initiative have lauded the resources. Maluf, in particular, was stri- relatively short turn-around period dently criticized in the public press for between favela elimination, transfer to diverting some R$1.7 billion destined for temporary housing, and construction of PC social services and housing to other new buildings. For the Jardim Arpoador purposes. Press reports claimed that this site, it was a mere 9 months from first amount could have built over 100,000 announcement of project construction public housing units, providing shelter for until the first families moved into their up to a quarter of the city's population in new units (interview with PCresident, favelas (`Maluf tira', 1997). 1997). Adding to this problem was the esca- The "community" atmosphere envi- lation of unit costs. Under previous sioned by the project appeared also to regimes, the cost of housing units in São be slowly taking shape, with residents Paulo had been in the R$15,000 range. increasingly organized to represent their During the Maluf and Pitta administra- needs, and leisure/sports areas developed tions, however, the cost of the PC units on site for neighbourhood children. skyrocketed to nearly R$25,000, further More than a few innovations designed to limiting the municipality's ability to pro- reduce costs for residents have also been duce the required number of units. implemented across the system. In 1996, As a result of both factors, the num- the city announced that all buildings bers of PC units produced during the constructed from that point would Maluf and Pitta administrations totalled include equipment for electricity from only about 14,000. This is far from the solar power, saving residents an estimat- nearly 100,000 projected, and only a frac- ed 45 percent on electric costs (`Cinga- tion of that required to begin to deal seri- pura ganha', 1996). ously with Sao Paulo's housing deficit. At the same time, Projeto Cingapura has been beset by some serious challenges Program issues related to funding and unit cost, program These issues, widely reported in the local management, resident quality of life and press, seriously affected the credibility of eligibility, costs of ownership, and local the program and its ability to attract administration. Such problems are sum- funding from public and other sources. To marized below. begin with, there is evidence that the

100 COOPERATION SOUTHe 104 Maluf and Pitta administrations effec- profits by using substandardconstruc- tively used the PC to "play politics"as tion materials and practices. In several opposed to dealing directly with the cases, it was revealed that in place of housing needs of the poor. According to solid concrete posts required by munici- press reports, during early phases, the vast pal building standards,some construc- majority of PC apartment complexes tion companies used hollow blocks filled were constructed in areas with high pub- with concrete. Construction companies lic visibility, thus serving politicalpropa- argued that this should notpose undue ganda purposes. For example, itwas risks, but the safety of residentswas revealed that of the first 41 complexes clearly put at risk by such illegalprac- constructed, 16 were locatednear or on tices (`Prefeitura nab ve riscos',1996). major roadways and clearly visible to passing motorists by definition, mid- Quality of life issues dle-class voters. By contrast, in thearea of As mentioned previously, levels of resi- the city with the most favelas, the Fregue- dent satisfaction in Singapore's various , sia do 0, not one unit had been built housing complexes were uniformly high (`Freguesia do 0%1996). during the mid-term phase of the urban The tendering process usedto select renewal process in the mid-1970s. In Sao construction companies for individual Paulo, however, oncemany buildings housing complexes was also shown were occupied, residents began to identify to contain serious flaws, resulting in serious quality of life issues. Livingspace favoritism and potential corruption. In was widely seen as inadequate, with one one widely reported case, a construction respondent lamenting that the unitsare company which lost a bid publicly com- "just the size of a matchbox" (interview plained that the Housing Secretariat had with PC resident, 1997).3 At just 40to 50 illegally required that the successfulcom- square metres, there is little room in the pany must be conversant with the objec- average PC apartment for a family of four. tives and requirements of one of the pro- Some have even stated publicly that the ject's major and more recent funders PC units, with generally crampedquar- the Interamerican Development Bank. ters, "are worse than in the favela; one is The company said this requirement piled on top of the other; it'sa huge verti- favored larger developmentconcerns with cal favela" (`Euforia na favela', 2001). which the municipal governmentwas Living in such high-density settle- already working ('Financiador diz', 1997). ments was a novelty for many residents Claims also arose that, during the used to more informal livingarrange- early years of the PC, the Maluf admin- ments. As social worker Eliete Barbosa istration turned a blind eye to developer explained, almost everyone had "to be attempts to save money and increase taught the basics of apartment living;

2002 105 101 what to do with garbage, how to operate then had to seek accommodation else- equipment, the responsibilities and where in the city, typically in another duties of apartment dwellers" (interview favela (interview with PC resident, 1997). with PC social worker, 1997). While In some cases, friends or relatives the learning curve may accelerate as moved in with tenants, who in turn then former favela residents quickly occupy left the complex. This broke the rule that their new dwellings, conflicts inevitably only the original favelados may occupy have resulted, causing strained relations units, but little has been done to rectify between neighbours. the situation. In some cases, residents For example, many residents were not reportedly "sold" their apartments, though aware of restrictions onkeeping animals no such arrangement has beenmandated, in the apartment complexes. Small ani- leading to a "black market" in public mals such as dogs or cats are allowed. But housing. In the end this may have hurt many residents attempted tobring in some poverty-strickenindividuals most in goats or other large animalswhich they need of subsidized housing (interview had raised in their former dwellings, with PC social worker, 1997). sometimes to earn income (interview Another more generic issue related to with PC social worker, 1997). This cre- eligibility, according to one respondent, ates problems for other residentswho is that resentment against those favela- must share their limited space withlive- dos lucky enough to obtain PC housing stock, while removing animals raises the has grown within the surrounding com- ire of owners who may be deprived of a munities. Many believe the favelados principal source of livelihood. have been given "free" housing, which is not the case. Even those who knowthe Eligibility costs of residency in the projectshave Tensions within the PC apartment com- felt that many favelados were "jumping plexes have also arisen as a result of eligi- the queue." The sense of "injustice" has bility rules. Prospective residents have to been particularly acute for the so-called produce evidence of a minimum monthly working poor who own their land and income of approximately R$200 and reg- have managed to build rudimentary ister each family member (including chil- dwellings on their own over a period of dren) prior to assuming occupancy. Single years. Why bother trying to getahead, men have not beenallowed to occupy many have felt, when one is morelikely units, nor individuals with criminal to get a brand new apartment by doing records. In the early stages, however, such little or nothing. Such sentiment has rules were not always communicated obviously not created a positive climate clearly to prospective residents, thus lead- between PC residents and their neigh- ing to disqualification of individuals who bours still struggling to make a life for

102 COOPERATION SOUTH SD 10 6 themselves (interview with PC resi- nesses were not only allowed but encour- dent,1997). aged, and spaces for these were incorporated in the infrastructure of apartment Financial issues and ownership blocs. In Sao Paulo, this was not done, in Up-front costs of apartment rental have some cases eliminating possibilities for been modest at R$57 per month, but residents to continue earning income other costs have arisen for residents on from self-employment (interview with tight budgets. For example, residents PC architect, 1997). have to pay a "condominium" fee of up The inability of residents to purchase to R$15 per month, as well as all elec- their units may also be a factor. Although tricity charges. For low-income resi- allowed by municipal law for some time dents, such charges have left little for now (Interview with PC Social Worker, food, transportation, clothing, and other 1997), no units have to date been offered necessities of life. for sale. Selling their units may be the While the rent charge is guaranteed only option the poorest families have to for 25 years, no such predictability exists pay back rent owed and to attempt to cre- for the condominium fees or utility costs, ate a new life elsewhere. But the city is making residents worry about new caught on the horns of a dilemma. Any charges to come. As one explained, "they sales scheme could easily set up a specula- don't charge for water yet, but they like- tive market situation that prices most ly will. Also, we don't pay any municipal poor families out of the running. Control- taxes, but we may have to soon" (inter- ling prices is an option, but could be easi- view with PC resident, 1997). ly skirted through extra-legal "turn-key" In some complexes, resident con- arrangements between sellers and buyers. cerns over rising costs have been translated into action. In April 2000, PCres- Management issues idents blocked a nearby arterial road to As previously mentioned, once construc- protest city plans to evict residents who tion was completed, ownership of PC were in arrears on rent (Prefeitura buildings was transferred to a COHAB. ameaca', 2000). By August, nearly 58 Under the original plan, management per cent of all PC residents had failed to was to fall to local resident associations, pay rent on time, some accumulating which would function much like condo- substantial back payments (Devedores minium boards. Such boards would be do Cingapura', 2000). responsible for day-to-day operations of Such financial problems have been the facility (e.g. maintenance and repair, exacerbated by restrictions on commer- common utilities, etc.) and for resolving cial activities in the complexes. In the tenant disputes (interview with PC Singapore model, labour-intensive busi- social worker,1997).

2002 103 107 This democratic model of governance ing on the lack of policing in the area. In would appear to be the exception rather both cases, vehicular traffic was severely than the rule. One building resident impeded, and the protests drew strong reported that the building committees and at times violent reaction from local were hardly democratic and, where exis- police ('Moradores de Cingapura', 1998; tent, were largely appointed by the social 'Protesto antiviolencia', 1998). worker assigned to the project (interview In August of 2000, similar protests with PC resident, 1997). Social workers were mounted across the city by residents also reportedly were authoritarian about who were in arrears on their monthly maintaining order, threatening to evict payments. They were reacting to a letter tenants who did not obey building regula- from the Secretariat of Housing requiring tions or engaged in disruptive behaviour. them to pay the rent owed or face evic- "It is the social worker who rules," claimed tion. Rather than deal with these issues the respondent, with some decisions not through local building committees, resi- made in the best interests of the tenants. dents in at least four apartment complex- According to the respondent, the social es took to the streets "to burn tires, throw worker has been known to make excep- stones, and interrupt traffic." The protests tions with respect to tenancy. "The rules only abated once the Secretariat agreed state that new people [i.e. people not liv- to review policy and procedures and ing in the local favela] are not supposed to undertake closer study of residents in dif- be allowed in, but sometimes the social ficult financial conditions (Prefeitura worker would allow them" (interview ameaca', 2000; 'Para moradores', 2000; with PC resident, 1997). 'Para governo', 2000). Whatever management structure has been in place has been inadequate to CONCLUSION deal with resident concerns. In several While massive public housing construc- cases, residents have felt it necessary to tion by the Singapore government during resort to demonstrations and acts of civil the past four decades has almost uniform- disobedience to press their claims. In ly been judged a success, the same can April of 1998, for example, approximate- only be partially said of São Paulo's Pro- ly 500 residents of a PC apartment block jeto Cingapura. In theory, the project in a northern neighbourhood of São held out a great deal of promise, with Paulo blocked an arterial road to protest strong potential to answer a critical need the lack of security, infrastructure (e.g. in a city with a large housing deficit and street lighting), and regular bus service in where the cost of urban land has skyrock- their complex. In another neighbour- eted in recent years. In reality, however, hood in the western region of the city, a the funding applied to the project by the similar protest was mounted, again focus- Maluf and Pitta administrations has fall-

104 108 COOPERATION SOUTH e en well short of projections at one Cingapura unit in excess of $R20,000 point in the hundreds of millions of dol- (Projeto Cingapura vai deixar', 2001). lars as has the number of units con- Whether or not the Suplicy govern- structed. Of the tens of thousands pro- ment is able to produce the 50,000 units jected, in fact, less than 14,000 were it is now promising remains to be seen. delivered, and at a cost per unit far high- What is more certain is that any preten- er than other, more traditional housing tions which São Paulo city hall may strategies. Added to this are some very have had in the past to transform South real problems in the project, from the America's largest metropolis into the tendering process and the quality of con- mirror image of Singapore have largely struction, to resident quality of life, ten- been laid to rest. ancy and ownership, and management of Do the problems faced by the PC in the complexes. São Paulo imply that the potential bene- It perhaps should come as no surprise fits of south-south or lateral information that with the election of socialist mayor and technology transfer in the housing Marta Suplicy in 2000, São Paulo's area are limited? Not necessarily. But for housing strategy has taken a new turn. such large-scale experiments suchas this While vowing to complete approximate- to work, a number of supports must be in ly 1,000 unfinished Cingapura units, the place, not least of all sufficient public municipal administration has formally financing always scarce in the devel- announced that the "Projeto Cingapura oping world. Moreover, municipalities will no longer be a municipal priority" seeking to adapt innovations locally (Projeto Cingapura vai deixar', 2000). must ensure that management supports Promising to apply over $R3 billion to are clearly in place, and that attention is housing during its term in office, the paid to critical factors including project Suplicy administration will focus instead integrity (especially transparency and on a housing strategy designed to obtain accountability), resident quality of life, maximum impact for minimum cost, and eligibility, and ability to pay, and local to involve project beneficiaries directly management capacity. ex, in the process. As in the case of the previous administration of PT mayor Luisa Erundina, the mutirão has become the NOTES cornerstone of Sao Paulo's housing strategy, with financial assistance to families See for example, studies undertaken by in self-construction or upgrading of their Kamibeppu (1994) or Herrera (1995). The own homes. Such assistance is estimated key journal in this area is Cooperation South, at between $R11,000 and 15,000 per which for a number of years has served as the unit, as opposed to the per unit cost of a principal source of information and debate

200 2 105 regarding south-south interchange for prefeitura", 4 February 1997, p. 3-3. development. "Freguesia do 6, corn maior proporcão 2 In addition,to support local income genera- de favelas, não tern predios prontos", tion, developers attempted as a matter of policy 6 September 1996, p. 1-6. to employ local people in the construction pro- "Moradores de Cingapura param rodovias," cess if not as skilled or casual labour, then 27 April 1998. perhaps as security guards or in other roles. "Maluf tira R$1.7 bi de Areas sociais para 3 Thenames of all PC residents cited are tocar obras", 13 September 1996, pp. 1-8. pseudonyms. "Prefeitura näo ve riscos", 29 October 1996 "Protesto antiviolencia fecha marginal Trete," 28 April 1998. REFERE H CES Other references Newspaper references aBadshah, Akhtar and Reena Lazar, 1995. a 1) 0 Estado de Sao Paulo. Also see articles by "Sharing Approaches that Work: Transfer date at: http://www.estado.com.br/editorias and Adaptation of Urban Innovations," "Corticos e favelas: os tares de 5 milhOes," Cooperation South (May): 29-33. 1 January 2001 aBrandt, W. et al., 1980 North-South: "Devedores do Cingapura querem negociar," A Program for Survival. London: PAN. 9 August 2000 Brennan, E. M., 1993. "Urban Land and "Euforia na favela: 'casas para todos'," Housing Issues Facing the Third World," in 7 September 2001 J. D. Kasarda and A. M. Parnell (eds.), Third "Marta pretende regularizar lotes e melhorar World Cities: Problems, Policies and Prospects. unidades habitacionais," 7 October 2000 Newbury Park, CA: Sage.

"Para governo, calote subiu por falta de aBrown, Stephen, 1998. "Expanding Lateral acdo enérgica," 4 August 2000 Partnerships," Cooperation South 2: 80-95. "Para moradores, carta e tentativa de intim- aClusener-Godt, Miguel, and Ignacy Sachs, idacao," 4 August 2000 2001. "Ecosystems of the Humid Tropics: "Prefeitura ameaca com despejo no Cinga- South-South Cooperation on Agenda 21," pura," 4 August 2000 Cooperation South 2: 108-113. "Projeto Cingapura vai deixar de ser priori- aGoh, R., 2001. "Ideologies of 'Upgrading' in dade de governo," 24 November 2000 Singapore Public Housing: Post-Modern

ti2) Folha de Silo Paulo . Also see articles by date Style, Globalisation and Class Construction at: http://www.uol.com/fsp/brasil/fc. in the Built Environment," Urban Studies "Cingapura ganha aquecimento solar," 38(9): 1589-1604. 6 June 1996 aGreenfield, G., 1994. "Brazil," in G. Green- "Financiador diz não sido consultado sobre field (ed.), Latin American Urbanization. licitacab de obras em SP, como alega a Westport, CN: Greenwood.

COOPERATION SOUTH 106 110 a Hassan, Mohammed, 2000. "Challenges, and Policy Alternatives in Developing Countries. Opportunities and Strategies: South-South Washington: Urban Institute Press. Cooperation in Science and Technology in UNCHS (United Nations Centre for Human the 21st Century," Cooperation South 1: 29-42. Settlements), 1996. An Urbanizing World. a Herrera, Claudio, 1995. "Changes in New York: Oxford University Press. International Cooperation," Cooperation a Wan, The Cheang, 1975. "Public Housing South, (May): 46-49. in Singapore: An Overview," pp. 1-21 in a Kamibeppu, Takao, 1994. "South-South Stephen H. K. Yeh (ed.), Housing in Singapore: Cooperation in the 21st Century," Cooperation A Multi-Disciplinary Study. Singapore: South (September):15-17. Housing and Development Board. a L. Kowarick and N. Bonduki, 1994. "Urban a Werna, E., 1995. "Urban Management and Space and Political Space: From Populism to Intra-urban Differentials in São Paulo", Redemocratization", in L. Kowarick (ed.), Habitat International 19(1): 123-138. Social Struggles and the City: Sao Paulo. New Werna, R., 1996. Business as Usual. Avebury, York: Monthly Review. Aldershot. o L. Kowarick and A. Singer,1994. "The Yeh, Stephen H. K. (ed.), 1975. Housing Workers' Party in Sao Paulo," in L. Kowarick, in,Singapore: A Multi-Disciplinary Study. Social Struggles and the City: Selo Paulo. New Singapore: Housing and Development Board. York: Monthly Review. Yeh, Stephen H. K. and Tan Soo Lee, 1975. a Nwanze, Kanayo, P. Justin Kouka and Monty "Satisfaction with Living Conditions," pp. P. Jones, 2001. "South-South Cooperation on 214-239 in Stephen H. K. Yeh (ed.), Housing Food Security: Rice in West Africa," Coopera- in Singapore: A Multi-Disciplinary Study. tion South 2: 114-131. Singapore: Housing and Development Board. PMSP (Prefeitura Municipal de São Paulo- Secretaria Municipal de Planejamento), 1996. Dossie Silo Paulo. São Paulo: SEMPLA. a Rodwin, L. (ed.) 1987. Shelter, Settlement, and Development. Boston: Allen and Unwin. a SEHAB (Secretaria Municipal de Habitacao),1997. "Cingapura-Previsão," mimeo. a Shidlo, G. 1990. Social Policy in a Non- Democratic Regime: The Case of Public Housing in Brazil. Boulder: Westview. a SHDB (Singapore Housing and Development Board), 2002. "Brief Background on HDB," http: www.hdb.gov.sg. a Struyk, R., 1988. Assessing Housing Needs

200 2 107 A

BY ABDALLA BUJRA

The pan-African movement and the search for continental unity has roots in the 1800s, and now has a new start with the inauguration of the African Union in July 2002. The struggles against racism and colonialism and then to protect the fragile sovereignty of new states were succeeded by the search for national development, regional cooperationand an African economic community. Can the new African Union, now working to get into operation, improve on this record despite the impacts of globalization and structural adjustment? The background and the prospects are assessed by Dr. Abdalla Bujra, who is the Executive Director of the Development Policy Management Forum in Addis Ababa.

INTRODUCTION era, including Nkrumah, Nasser, A perceptive observer who iswell Nyerere, Sekou Toure and others, informed about the Organization of had acquired the status of giants and African Unity (OAU) and who attended visionaries. By contrast, the launch of the inaugural meeting of the African the AU was sober and muted, with lit- Union (AU) in Durban in July 2002 tle incendiary rhetoric or passion. compared the launching of the two orga- Critics can point to the weakness of nizations as follows: the AU institutions and their inherited "The OAU was founded in an era of arrears. But much of the Summit was militancy and confident optimism: businesslike and realistic. Africa has Africans believed that having achieved learned much"(Mohammed, 2002). sovereign independence, the world What accounted for the difference was at their feet. The leaders of that between the two events? The brief

* This article is based on a lecture delivered by Dr. Abdalla Bujra at the African Centre for Research and Training in Social Development, Tripoli, Libya, on 23 September 2002.

108 112 COOPERATION SOUTH a) answer is that African countries are Du Bois (African-American) and Pad- worse off economically today than when more (Caribbean). OAU began in 1963 and are mired in The first Pan-African conference internal conflicts of various intensity. was held in London in 1900, followed Most African leaders can hardly claim to by others in Paris and New York. The have control of their economic and most significant meeting and the pinna- political policies and therefore of the cle of the movement was the fifth Pan- destinies of their countries. Africans African Congress in 1945 in Manch- now understand that the main source of ester, England. It was different from their problem is Africa's position in the previous meetings in three fundamental asymmetrical and powerful global sys- ways. A large number of activists tem. However, many believe that if the attended over 200 persons from the AU succeeds, it may ameliorate the US, Europe and Africa. For the first enormous difficulties Africa is facing. time, leading African nationalists took Hence the .;businesslike approach and active and prominent parts such as the anxious but muted optimism. Kenyatta, and Nkrumah, who was Secretary of the Congress (W.E.B. Du FROM THE PAN-AFRICAN Bois was its Chairman). The Congress MOVEMENT TO THE OAU stressed "for the first time the necessity The founding of the OAU was the cul- for a well-organized, firmly-knit move- mination of a long struggle by the Pan- ment as a primary condition for the suc- African movement, which goes back to cess of the national liberation struggle the 19th century. The movement was in Africa" (Nkrumah). "Pan-Africanism essentially born outside the continent, was no longer simply a protest move-

Pan-Africanism became a weapon with which African nationalists could fighi colonial rule. driven by black intellectuals of African ment by people of African descent in descent in the diaspora in the US, the the Caribbean and the United States; it Caribbean and Europe. At first the was becoming a weapon with which movement was essentially a protest of African nationalists could fight colonial black people against their exploitation, rule" (Lamelle). against racism, and for the dignity and The pan-African movement was uplifting of the black people. The lead- strengthened when Ghana became the ers were middle-class intellectuals in the first black African country to gain inde- US and the Caribbean, such as W.E.B. pendence and organized the All-Africa

2002 109 Conference in Accra in 1959. At that EVALUATING THE OAU: time most African countries were still FROM ADDIS ABABA struggling against colonial rule. For the 1963 TO SIRTE 2001 first time, the Accra meeting brought What progress, or otherwise, has Africa together on African soil nationalists made since the formation of the OAU in from all over Africa, with the central 1963 up to the formation of the AU at theme of solidarity and unity in the Sirte, Libya, in 1999 and its inauguration struggle against colonialism. According in Durban, South Africa in 2002? to the late Abdul Rahman Babu, the Prior to the 1963 Addis Ababa found- Accra meeting provided an important ing summit of the OAU, there were pas- psychological, political and practical sionate debates throughout Africa on two boost to nationalist movements within main questions: the framework of pan-African unity Should full continental political which Nkrumah strongly advocated. It unity be established immediately also, became apparent to all the nation- at OAU's founding, or be achieved alist leaders who came to Accra that an gradually through a building-block African state (as exemplified by the approach by first strengthening Ghana government's role in organizing the new states and then establish- the Conference) was key to the struggle ing sub-regional economic blocs? against colonialism and towards eco- Should development be carried nomic development and political unity out through social and economic after independence. planning driven by the state, or be In 1963, four years after Accra, the based on and driven by free and Organization of African Unity (OAU) open markets with foreign invest- was formed in Addis Ababa by African ment playing a major role? countries (except Southern Africa) Around these questions there emerged which had achievedindependence two ideologically opposed groups of coun- through nationalist struggles driven by tries the Casablanca bloc, which stood Pan-Africanism. The struggle against for development based on social plan- the remaining colonialism in southern ning, and the Monrovia bloc, favoring Africa and for continental unity, which market-driven development. The two until then was a mass movement of peo- blocs also had a different approach ple, was taken over by independent to external relations delinking and states under the auspices of the OAU. relinking, as opposed to strengthening Pan-Africanism thus ceased to be a mass inherited colonial links. movement and was transformed into an After its formation, the OAU went ideology driving a state-based continen- through three main phases of evolution, tal organization. as follows.

110 COOPERATION SOUTH EB Phase 1:1963 1980 few interstate conflicts that took place at The founding OAU Summit adopted the the time, and with the struggle to eradi- gradual approach of strengthening the cate racist and colonial rule in southern new states, but retaining aspirations for Africa. While the first concern involved continental unity as a driving ideology. mediation and some practical action by By resolving the first issue this way, the the OAU, the second concern was mainly OAU denied itself any powers over the conducted through the OAU Liberation sovereignty of the new states and there- Committee, which provided political, fore could not impose on its member diplomatic and some financial support. states which development approach they Another important principle for OAU should adopt. The Casablanca and Mon- during this period was the equality of all rovia blocs soon dissipated, but several member states. This meant that the OAU countries adopted the social planning and all continental African institutions development model e.g. Egypt, Ghana, were "driven by the lowest common Tanzania, and Guinea. These countries denominator's approach, to cater for the soon faced great difficulties from the for- wishes of the weakest and most undemo-

The OAU was essentially "a talking club of Heads of State" in the1970s, but pursued a new agenda after the 1980s and made important contributions to Africa's development. mer Western colonial powers and the craticstates.Sovereignty has been Americans, who worked hard by per- fetishized" (Mohammed, 2002). In the suasion or covert support of military famous words of the late President takeover to dissuade them from follow- Nyerere of Tanzania, the OAU became ing the "socialist" model of development. essentially "a talking club of Heads of The two most important Charter State." By organizing the 6th Pan-African objectives that drove the OAU from its Congress in Dar es Salaam in 1976, with inception to 1975 were "to protect the its theme being the liberation of southern fragile sovereignty recently achieved by Africa, Nyerere tried to revive the Pan- African states, and to help those still African mass movement and perhaps to under colonial or racist rule to achieve strengthen its link with the liberation sovereign independence" (Mohammed, movements of southern Africa. 2002). During this period, economic There are two main reasons for the development was not on the OAU OAU's lackluster behavior and being agenda. It was mainly concerned with the labeled a "talking Club". First, during

2002 111 1_15 the 1970s the fierce Cold War seriously this century than it was in 1960". Three affected African countries. Many were years later (1981), the WorldBank forced to take sides ideologically. Their Development Report was making similar visions of development became deeply predictions, that Africa was facing a divided among socialist (influenced by "dim economic prospect" in the 1980s the Scandinavian countries), Marxist virtually no growth in per capita (influenced by the Soviets), and capital- income if you are an optimist, and a neg- ist (influenced by the American-led ative rate of growth (-1.0 per cent per West) visions. The Cold War thus year) if you are not. Under these cir- affected both their internal model of cumstances OAU began taking the eco- development and their external relations. nomic crisis seriously and generating an In the face of this powerful external force, agenda on economic development. the OAU became powerless and inactive. Second, from 1960 to 1975, Africa on Phase 2: OAU, 1980 1990 the, whole was doing well economically. The 1980s have been described as the African growth rates were 4.5 per cent in "lost decade." Africa went through seri- GDP, 2.8 per cent in exports, 1.6 per cent ous economic and political crises neg- in agriculture, and 6 per cent in manufac- ative growth, collapsing economies, civil turing. "In retrospect, the period 1960-75 wars, collapsing states and state struc- has, tragically, turned out to be Africa's tures etc. The international community golden era!"(Adedeji 2002:.6). became very concerned with the "unend- But by the end of the 1970s, Africa ing crises," leading to what came to be was facing serious economic crises. "The called "Afro-pessimism". Implicit in this strong optimism of 1960s concerning was the core idea that the Africanpeople economic development slowly gave way, their societies, cultures, mindset and first to hesitation, then to pessimism, and structures are incapable of running by the end of the 1970s to a consensus of their states and their economies and will gloom" (Bujra, 1982: II). therefore remain in a permanent state of Late in the 70s, Adedeji (1978:25) crisis, stagnation and negative growth. began making gloomy predictions about Afro-pessimism was born outside Africa's economic prospects predic- Africa and the idea was propagated both tions which have proved to be accurate. outside and inside Africa by those who "Africa, more than the other third world had a vested interest in Africa remaining regions, is thus faced with a develop- weak and disorganized for a long time. ment crisis of great portent If past Most Africans, however, generally had trends were to persist the African a different view of these crises, their region as a whole will be worse off rela- causes and continuation, and the way tive to the rest of the world at the end of out of them.

112 116 COOPERATION SOUTH elel Many Africans acknowledge that inter- 2. The international commodity nal factors had contributed to the contin- market and financial system and uation of the crises, and such factors have the dominant role of the Western been well articulated by Prime Minister transnational corporations were, Me les Zinawi of Ethiopia. He says: and still are, extremely formidable "The underlying fact is that African barriers which weak African gov- states are systems of patronage... Their ernments individually or col- external relationshipis designed to lectively were and are unable generate funds that oil this network to overcome. of patronage...Much of the productive 3. Given these conditions, in activity is mired in a system of irrational which the international system licenses and protection that is designed continuously reinforced African to augment the possibilities of rent col- countries' economic dependence lection. Much of the private sector in to maintain their distorted struc- the continent is an active and central tures and encourage the chaotic element of this network of patronage.... political systems inherited from A large part of the NGO community the colonial states, African coun- and civil society organizations constitutes tries found it very difficult to eco- a parallel network of patronage that coin- nomically develop, create nation cides and diverges from the state network states, and develop their human depending on circumstances It is this and natural resources. structure which inhibits the establish- on 4. The Bretton Woods institutions ment of developmental states in Africa and donor countries intervened that are able to adapt the rational ele- directly in African economies ments of the neoliberal paradigm to their through structural adjustment pro- specific circumstances and design others grams, ostensibly to help Africans to supplement it." overcome their crises, but such On the other hand, most Africans interventions simply perpetuated identify and place more emphasis on exter- the unequal and exploitative rela- nal causes of their crises and the difficulty tionship between Africa and the of overcoming them as follows: global system. 1. Colonialism created the basic According to the UN Economic conditions of the crises depen- Commission for Africa (ECA), African dent economies, distorted struc- governments had three options for facing tures, artificial boundaries/coun- "the anticipated crises." First, increase tries, divided people, undeveloped "self-reliance and self-sustainment" and human resources and weak, take more effective steps for intra-African undemocratic state structures. cooperation and mutual help steps

2002 113 7 requiring "vision and statesmanship quite 1. Self reliance should be the basis out of the ordinary". Second, make a "sur- of development at national, reptitious surrender of the economy in sub-regional and regional levels return for substantial foreign aid, a temp- 2. Equity in the distribution of tation which might be impossible to wealth at the national level is a fun- resist". Third, "wait and see and hope damental objective of development whilst continuing with conventional 3. The public sector is essential for measures which avoid creating antago- development and should be nism" (ECA, 1979-1980:6). expanded The OAU, in collaboration with 4. Outside capital is an unavoid- ECA, mobilized African intellectual and able necessity and should be political discussions of the crises and the directed to areas where African above options, and came up with a vision capital is lacking or inadequate and plan of action for getting Africa out such as mining, energy and large- of the crises and towards a better future. scale projects This serious effort led to the adoption of 5. Inter-African economic cooper- three now famous documents, and from ation and integration is essential 1980 until 1990, all African initiatives and should be effected as soon from the OAU and ECA accepted the as possible vision, framework, strategies and princi- 6. Change in the international ples enshrined in these documents: economic order to favor Africa The Monrovia Declaration (1979) and third-world countries is essen- provided a clearly articulated vision and tial, and Africa should continue to scenario for Africa's future. It saw that the fight for a New International Eco- Africa of 2000/2020 would havea high nomic Order. degree of self-sufficiency and a democratic On the basis of these principles, the national development, distribute wealth LPA gave primacy to the development of more equitably, have strong African soli- agriculture, first for food and then for darity, and carry more weight in world export; industrialization, to satisfy basic affairs (OAU, 1979:30). needs; mining industries, to recover total The Lagos Plan of Action (1980) and permanent sovereignty over national provided the practical framework and resources; human resources; and science strategies for implementing development and technology. programs. Its strategies are based on some The Final Act of Lagos (1980),con- important principles, which it considered taining political decisions to support the will lead to an alternative form of devel- vision and the plan of action, including opment and will take Africa out of its the aim of achieving an African Com- crises. These principles are: mon Market by the year 2000. Ten years

114 COOPERATION SOUTH 118 later it was transformed into the Abuja form of what became known as structural Treaty (1991) establishing the African adjustment programs (SAPs), ostensibly Economic Community. The Treaty in order to take African economies out of affirmed the principles enshrined in the crises and lead them to accelerated devel- LPA and laid down a detailed process for opment. There are several contradictions achieving the Community in successive and shortcomings in the Berg Report stages over 34 years. compared to the Lagos Plan of Action In addition, during the 1980s, three (Bujra, 1982). The report does not address other important African development most of the crucial development issues programs were adopted: 1) Africa's Priority which the LPA spelled out in detail. It Programme for Economic Recovery, 1986- gives scant and peripheral attention to 1990, adopted at Addis Ababa in1985; 2) industrialization and control and use of the African Alternative Framework to mineral resources, and never mentions Structural Adjustment Programme for economic cooperation and integration Socio-Economic Transformation (AAF- all issues of central concern in the LPA. SAP), adopted at Addis Ababa in 1989; While the report advocates increased and 3) The African Charter for Popular investment (foreign and local) and a Participation in Development and Trans- reduction in the public sector, the LPA formation, adopted at Arusha, 1990. The advocatesexpansionof the public sector. AAF-SAP was strongly opposed and often Despite these shortcomings of the roundly condemned by experts of the Berg Report, the World Bank/IMF began World Bank and International Monetary in earnest to implement their Structural Fund as well as in the donor community. Adjustment Programs (SAPs) in African Despite efforts to popularize AAF-SAP countries immediately after the Berg and strong support by African govern- Report. Both government officials and ments and intellectuals, the AAF-SAP African researchers have informed the was marginalized and eventually followed World Bank and IMF in no uncertain the fate of previous African initiatives. terms of the inappropriate assumptions The 1980s saw vigorous formal inter- behind the SAPs and of the negative ventions by Western powers in the eco- impact of SAPs on African countries. In nomic strategies and policies of African 1987 and 1988, the Economic Develop- countries. These interventions took place ment Institute of the World Bank orga- through the World Bank and IMF, with nized five senior policy seminars on struc- donors using aid and debt as instruments tural adjustment in Africa, which drew of leverage. The keynote for these efforts participants from 27 countries. Partici- was the World Bank's Berg Report pants were ministers, governors, perma- (1981). It aimed to give an intellectual nent secretaries, senior advisors and a sig- basis for World Bank intervention in the nificant number of senior technical staff

2002 115 of central banks and the core ministries of for policy reforms. This had a num- finance and planning, as well as spending ber of unfortunate consequences. ministries such as agriculture and indus- 9. A long-term strategy based on try. The strong and critical voice of the export-led growth and the liberal- participants was expressed in very polite ization of foreign trade has few and diplomatic World Bank language in adherents. one of its reports (World Bank, 1989): 10. The current African crises, to 1. Most participants perceived a considerable degree, have their adjustment programs as imposed origins in the international eco- from outside. nomic environment. 2. Adjustment must be seen in a m 11. Negotiations can be better broader context as involving handled to reduce the tension medium and longer -term policies between conditionality and in addition to immediate (stabi- national sovereignty. lization) measures. 12. Multilateral institutions should 3. Basic social services must accept greater responsibility for be protected. failed programs. 4. Current adjustment programs Despite the above critique, SAPs have have yet to successfully reconcile continued to be implemented, with slight demand management with supply- technical modifications here and there. enhancing measures. The serious and negative impacts of o 5. Promotion of sub-regional or the SAPs are now well known. The regional trade and coordination of most important formal response to the development plans a main SAPs was the ECA.s African Alternative objective of the LPA have not Framework to Structural Adjustment Pro- received the attention they deserve. gramme (AAF-SAP) in 1989. Among the 6. Significant social costs are many sharp and serious critiques of SAPs associated with adjustment. from African intellectuals is the book 7. To be sustainable, an adjust- "Our Continent, Our Future", edited by ment program must be nationally Thandika Mkandawire (1999). designed and /or designed to fit In 1989, a World Bank report, "Long- local conditions. term Perspective Studies (LTPS)", pro- 8. For many reasons including posed a global coalition of donors and the weak bargaining positions of Africans to effectively direct the intellec- African governments and their lack tual framework and strategies of long-, of indigenous capacity for policy term development in Africa. The Global formulation international orga- Coalition for Africa was thus established nizations currently set the agenda as an organization and is still operating

116 COOPERATION SOUTH e today. In the 1990s, the international gotiated every several years, which guided 31 community began to intensify its coordi- the unequal trade relations between nation at many levels but without the African and EU countries. More recently 11 0 participation of Africans. Its strategies the Americans came with their own and policieswith regardtoloans, programme the Africa Growth and debt, aid, trade, technical assistance, etc. Opportunity Act (AGOA). And the 0 became increasingly standardized. Its British and French (the two largest and 0 members individually all put forward the most powerful former colonial powers) same conditionalities which they insisted recently decided to synchronize and coor-

In the 1990s, the international community intensified its coordination 5 at many levels but without the participation of Africans. 2

African governments should accept dinate their African policies through conditionaliiies which turned out to be annual/biannual joint meetings of their those of SAPs (revised and elaborated), ambassadors in Africa. as well as the political conditionality of In 2000, the World Bank, in associa- good governance. The latter conditional- tion with its partners, came up with yet ity was also adopted by the UN System as another document, titled Can Africa a whole, particularly by the UNDP. Reclaim the 21st Century? This book artic- By the end of the 1980s and through- ulates long-term African development out the 1990s, perspectives and strategies strategies from the perspective of the coming fromexternalsourceshad Bank and the rest of the donor commu- become the dominant, if not the only, nity, aiming to provide intellectual inspi- director of development policies and pro- ration to African policy-makers. The grams in almost all African countries. book also provided intellectual inspira- Indeed, the practical power of the World tion and development strategies for the Bank/IMF and the donor community latest African development initiative (collectively often referred to as the inter- called the New Partnership for Africa's national community) to intervene and Development (NEPAD), according to direct detailed plans, programs and actual CODESRIA (2002). decision-making of African governments had become established and accepted in Phase 3: OAU, 1990 to 2002 government circles. Fundamentally different internal and At the more formal level of treaties, external visions for African development the EU continued with its Lome ( now have existed since the early years of inde- Cotonou) Conventions, renewed/rene- pendence. The present dominance of the

2002 117 121 external vision simply reflects the reali- problems internally and in their ties of the weakness of Africa and the relations with the OAU, and now strength of the externals the Western with the African Union. powers who drive the asymmetrical global 2. The creation within OAU of system. Despite this Western dominance, the Mechanism for the Prevention, OAU continued to enact important plans Management and Resolution of and programs in the 1980s and 1990s, but Conflicts (1990) was an important these had no effect on improving the eco- move, though it may not have the nomic situation of Africa. capacity to resolve, let alone pre-

The present dominance of the external vision for African development simply reflects the weakness of Africa and the strength of the Western powers which drive the asymmetrical global system.

Indeed, according to Dr. Salim A. vent, conflicts in the continent. Salim, the former OAU Secretary Gen- The most horrendous event of the eral (1989-2001), OAU had to change 1990s in Africa was the Rwanda direction after the Lost Decade of the genocide of 1994, which OAU 1980s, and because of "the imperative courageously tried but failed to necessity to cope with the fundamental deal with through the Arusha pro- changes taking place in the world and cess of negotiations. After the the end of the Cold War, as well as the genocide, OAU did not even dis- emergence of the process of globalization cuss its own report on how to stop withitsvarious opportunities and such events in future. threats" (Salim, 2001:6). By pursuinga 3. Inculcation of a culture of new agenda, OAU is said to have made democracy, by withholding recog- important contributionstoAfrica's nition of undemocratic changes of development. There are six areas where government and by monitoring OAU is said to have succeeded: elections. Both are important steps, 1. The Abuja Treaty (1990) but Western powers value the judg- is a road map for achieving the ment of their own monitors more African Economic Community than OAU's (for example, in Zim- (AEC) through the Regional Eco- babwe). In the Madagascar case, nomic Communities (RECs). the US and the European Union Some progress has been made by recognized a government which RECs, but they still face serious OAU considered illegitimate and

118 COOPERATION SOUTH @IS refused to recognize. programme (2000); 2) the New Partner- 4. Enhancing the status of OAU ship for Africa's Development (NEPAD) continentally and internationally, was also taken up as a special programme compared to the 1970s and 1980s, of the OAU/AU in Lusaka, 2001; and 3) But it is not clear what practical methods for OAU to cooperate and work benefits this enhanced status can with civil society organizations were bring to African countries and peo- developed by two major conferences in ple. As a result, can OAU marshal 2000 and 2001. resources to resolve conflicts, or ask In a sense OAU left a full plate for the World Bank to change its the African Union significant issues intervention in African countries? which, if positively and creatively han- 5. Breaking the silence on dled, could propel the African Union HIV/AIDS and making govern- into a powerful continental organization. ments develop programs to cope Why is Africa worse off now than with this pandemic. In this impor- when the OAU was founded? The simple tant and very positive initiative, answer is that the resolutions and pro- as with the situation of African grams adopted by the OAU were not refugees, most of the work is done implemented at the country level. But by external agencies independent this begs the question: Why did heads of of the OAU. state sign up to radical development 6. Initiating the African Union approaches at the OAU level, but fail process, from Sirte in 1999 to to implement these approaches at the Durban in 2002. national level? Some brief explanations: These are important achievements 1. During the first 15 years of inde- made by an organization which had pendence, former colonial powers descended to the level of being called a had a strong presence and direct "a talking club." Despite systemic con- influence in African countries straints in the OAU, it can be said to technical personnel, aid, and have made a reasonable contribution to strong political links between the Africa's development. former colonial governments and At the closing of the 1990s and Dr. the African political leadership. Salim's third term as Secretary General, 2. In the 1960s, African economies three major African initiatives occupied were doing well and generally had the OAU, in addition to the process of healthy foreign currency reserves. establishing the AU: 1) The Conference The emerging African business on Security, Stability, Development and class was accumulating wealth by Cooperation in Africa (CSSDCA) was using state institutions and favored incorporated into the OAU as a special continuity of policies recom-

2002 119 mended by colonial advisors and OAU's very existence. no radical change in the economic 4. Political leaders found it easier to structure. When some governments accept such alternative approaches (e.g. Tanzania) tried to change to development because they saw the existing economic structure on the ground in their countries the through nationalization and diver- drawback of the approach inherited sifying external economic links, from the colonial powers. there was immediate strong media 5. Yet at country levels, most polit- attack, diplomatic isolation, and ical leaders found it extremely diffi- economic pressure to stop such a cult to debunk or reject existing itmove to the left" moves which economic policies. This is because disrupted the economy. This (a) the cost of disruption would be happened in Tanzania, Guinea- too great; (b) the emerging indige- Conakry, Ghana (under nous economic elite within the Nkrumah), Congo-Kinshasa political and administrative struc- (under Lumumba), Benin, Soma- ture was very strong and favored lia, Uganda (under Obote I) etc. continuity of existing policies, 3. The second half of the 1970s including shortages and other eco- saw economic crises intensifying nomic difficulties from which some all over the continent. There were groups among the elite gained eco- serious rumblings among the pop- nomically; and (c) the power and ulations and especially the mili- influence of the "externals" for tary, which took power in many continuity was also very strong, countries and led to worsening of because they could threaten to dis- the economic and political crises rupt national economies and could in those countries. The OAU ally themselves with the local therefore began to take up eco- groups which wanted continuity. nomic development as part of its Hence it was easier for heads of mandate, and UNECA began to state to continue inherited eco- be more active. All this took place nomic policies and strategies at the in the context of a strong debate country level, while at the same in all African countries regarding time approving radical and alterna- alternative paths to development. tive economic strategies and poli- OAU resolutions and programs on cies at the OAU level. Schizophre- development absorbed ideas from nia between their countries and this debate, which tended to rein- the OAU became a standard politi- force the strong continental cal behavior of political leaders. nationalism at the root of the 6. Given this situation, the more

120 COOPERATION SOUTH es 124 crises deepened in African coun- are driving globalization. Since tries and the more countries NEPAD has dropped these princi- became indebted, the easier it was ples, it is not surprising that the for the externals to ensure that G8 countries have welcomed traditional economic strategies NEPAD with open arms and and policies continued and given it moral support. expanded. Indeed, as African 8. Finally, and needless to say, the countries weakened, the externals African people, and indeed even the had a unique opportunity to inter- people of the so-called international vene strongly at the country level, community, are nowhere to be seen essentially to direct country eco- in this struggle for the development nomic strategies and policies and soul of the African continent.

Schizophrenia between their countries and the OAU became a standard political behavior of African political leaders.

often literally to manage and It is argued that the AU will be differ- administer key economic institu- ent from OAU because African leaders tions. This happened during the are now more committed to exploit the 1980s, and some would say contin- global system through effective, con- ues to the present at least in certed action mainly through the AU's many smaller countries. NEPAD Program. Also, because the AU 7. There is a fundamental differ- will involve civil society in its decision- ence between all previous African making and operations, it will be stronger initiatives (especially since Mon- and enable Africans to negotiate more rovia, 1979) and the NEPAD of effectively with external institutions such 2001-2002. They all had at their as the WTO, Cotonou, AGOA etc. core the LPA principles, which However, to reduce the power of the are absent in NEPAD. From the "international community" at the coun- perspective of the WB/IMF and try level and those driving globalization donor community, these principles at the global level, it is necessary to have obviously make African initiatives an effective and clean developmental radical, ideological and leftist. slate, which might come about through Following these principles would NEPAD, and also to have a strong and make African economies difficult capable AU that transcends OAU's to exploit and bring under the weaknesses through the collective will of hegemony of the countries which all member states.

2002 121 125 THE AFRICAN UNION: by like-minded strong states which felt PROSPECTS AND CONSTRAINTS threatened either by Communists or by The creation of the African Union in secessionism. They therefore focused on Sirte (Libya) in 1999, the adoption of its security and stability in order to elimi- Constitutive Act in Lome, July 2000, and nate armed conflicts between member its inauguration in Durban, July 2002, states and to promote economic policies were important milestones in the process based on capitalist economies. African of creating political continental unity countries are not being threatened from and the African Economic Community. outside nor do they have industrial

The creation of the African Union in 2002 was a major achievement of African leaders and a triumph for Pan-Africanism.

It .was a major achievement of African economies which need larger markets. le.aders and a triumph for Pan-African- Their economies are essentially all simi- ism. The AU is expected to be a much lar exporting raw material. Unlike stronger organization than the OAU. the ASEAN countries, they do not have Among its new principles are the right of a strong entrepreneurial class capable of the Union to intervene in a member strong open competition. While the EU state, respect for democratic principles, and ASEAN started with a small num- human rights and good governance, and ber of countries, with the possibility of promotion of social justice and gender others joining them, the African Union equality. Its development focus is similar started with all African countries as to that of the LPA. members. Thus, the most important The AU has been described as an driving force of the AU is the aspiration "aspirational union." Unlike the EU or of people and their leaders for a common ASEAN, it does not have solid common identity and unification. factors or forces on which to build. Both The AU process has been very fast. It the EU and ASEAN were created during was consummated within three short the cold war in the face of outside years from Sirte in 1999 to Durban in threats to their security. This is not the July 2002. The OAU had one year to pre- case with Africa. The EU members were pare for the "transition" from the OAU to highly industrialized and their industri- the AU, and the AU Commission has a alists wanted a larger and expanded mar- one-year "interim" period to set up the ket. Furthermore, the EU was driven by core organs of the AU and to develop a few powerful core countries France its program. The AU faces very serious, and Germany. The ASEAN was formed immediate challenges to obtain appropri-

122 COOPERATION SOUTH 1 6 ate human resources for a solid, efficient 3. Relationship between the differ- Commission with the professional and ent organs of the AU is not clear intellectual capacity to prepare, manage especially between people's and implement relevant programs, and to organs Pan-African Parliament secure the financial resources required to (PAP), Economic, Social and establish and operationalize its various Cultural Council (ESCC), Court organs. It is not clear how and where of Justice on the one hand, and these resources can urgently be obtained, the state-dominated organs the so that AU can start on a better footing Assembly, the Executive Council, than the OAU. and the Permanent Representative The longer term issues are even more Committee. complex and numerous and include the 4. Relationship at the decision- 8 following: making and operational level a 1. Relationship between the AU between the Commission, Execu- and the RECs is key to any move tive Council and Permanent Rep- in economic cooperation and resentative Committee will be eventual economic integration. crucial and needs full clarification The role of the RECs must be clar- lest the Union become ineffective ified, internal cohesion estab- and often paralyzed. lished, and the relationships 5. While all members of the among the RECs and between Union have equal status and them and the AU must be thought rights, it is obvious that they are through and properly established. not equal. The larger and more

The most important driving force of the African Union is the aspiration of people and their leaders for a common identity and unification.

2. Relationship between NEPAD powerful countries would eventu- and CSSDCA must be ironed out, ally want to establish some form of especially over the issue of peace, hegemony and play leading roles stability and conflict resolution. in various spheres. How will this The vital issue of how these two work out in the Union? important intergovernmental 6. The NEPAD program, once organizations will work within it begins to be operational, the AU, since each has established will inevitably create hierarchy its own Secretariat and organiza- amongst countries fast and tional structure. slow-track countries based on

200 2 123 127 their performance in the Peer Africa and the Future, December 1995.

Review mechanism. What will be oBujra, A. "Editorial Note" in Africa Develop- the implications of such hierarchy? ment, vol.VII, No.1/2, 1982. Much will depend on the speed, o CODESRIA-TWN, "Africa Declaration." quality and operation of theorgans Conference on Africa's Development Chal- established by the Interim Commission. lenges, Accra, 26 April 2002. Much will also depend on the reaction 13 Economic Commission for Africa (ECA), of the Union Assembly to the Commis- Biannual Report of the Executive Secretary, sion's work and to the speed with 1979-1980.

which they establish functioning peo- oMohammed, Abdul, "First African Union ple's organs the PAP, the ESCC, the Summit: Report and Reflections." Unpub- Court of Justice and how effective lished report, July 2002, Addis Ababa. the people's role will be. At this point OAU, "What Kind of Africa in the Year we are at the level of speculation and 2002?", Addis Ababa, 1979.

expectation. fie oSalim, Salim A.,"The Challenges Facing Africa for the Coming Decade," DPMN Bulletin, vol. 8, No. 2, August 2001, Addis Ababa.

NOTES oWorld Bank, Can Africa Reclaim the 21st Century? Washington, 2000.

"Prime Minister Metes Zinawi's Speech at oWorld Bank, EDI Policy Seminar Report NePAD Symposium." 27 May 2002, Addis No.18, Washington, 1989. Ababa. Published in The Ethiopian Herald, Addis Ababa, 2nd June 2002.

REFERENCES

Adedeji, Adebayo, "Africa and the Develop- ment Crises", in Africa Guide, 1978. Adedeji, Adebayo, "From the Lagos Plan of Action to NEPAD and from the Final Act of Lagos to the Constitutive Act: Whither Africa?", Keynote Address at African Forum for Envisioning Africa: Focus on NEPAD, Nairobi 26-29 April, 2002. Amin, Samir, "Africa and the Global System" in Bujra, Abdalla (Guest Editor) of African Development Review, A Special Number on

124 COOPERATION SOUTH ea 128 DOI on

ACCESS TO ESSENTIAL DRUGS adopting policies that go further than MAY BE UNDERMINED BY TRIPS in protecting patents. GLOBAL PATENT AGREEMENT Patents give big international pharmaceutical firms monopoly over production A third of the world's population still has of new drugs, including, for example, no access to essential drugs. In the poor- those needed to treat HIV/AIDS. There est countries of Africa and Asia this fig- is concern that they may push up prices, ure rises to half. With the global agree- and the TRIPS rules could thus limit poor ment on intellectual property rights countries'freedomtobuy cheaper (TRIPS) forcing countries to introduce "generic" versions of patented drugs. For new patent protection laws over the next example, in January 2001, South African decade, this situation could worsen, HIV/AIDS treatment activist Zackie according to a new report from the Lon- Ahmat went to Thailand to buy 5,000 don-based Panos Institute. pills of the generic version of an anti-fun- Developing countries have until 2005 gal drug patented by the US pharmaceu- or 2016 to implement TRIPS-compliant tical giant Pfizer. He paid $0.21 a pill. legislation on pharmaceuticals. So far The price of the patented version in many governments have drafted or South Africa was $13. enacted legislation that seems to priori- The Panos Report, Patents, Pills and tise patent rights over public health. Public Health: can TRIPS deliver? warns Some countries are being pressurised into that patent legislationis not being

2002 125 1. 2 9 debated widely enough in most develop- nel and poor health infrastructures. ing countries, and the process of intro- The report examines alternative ducing it needs to be more consultative approaches and gives examples where dif- and transparent. ferential pricing (where poorer countries In Uganda, for example, American pay considerably less for a product than consultants were brought in to review wealthier ones) and compulsory licensing the country's patent laws and make pro- (where a patent is overridden in return for posals for reform. The result was the a payment of a royalty) have potential, drafting of laws which, according to although they are not free of problems. local campaigners, are skewed in favour Two countries highlighted in the of business interests rather than social or report, show how differently patent pro- development needs. tection can impact on the nation's pub- The principle of extending access to lic health: essential drugs in poor countries is widely Brazil is seen as a model for other coun- supported, but the means of doing this tries of what can be achieved for public is still hotly disputed, says the report. health by boosting local production of According to the World Bank, middle- drugs such as the anti-AIDS drug AZT, income countries may benefit from lowering prices through competition and increased foreign investment, but if the negotiating discounts on patented drugs. cost of drugs rises as a result of patent sys- Between 1996 and 2001 around 358,000 tems spreading throughout the developing AIDS hospitalizations were prevented, world, there is a real danger of restricting saving around $1.1 billion. access to drugs, such as anti-AIDS drugs, On the other hand, Thailand's capac- where they are most needed. The World ity to provide essential drugs for its peo- Health Organisation suggests that imple- ple has been severely limited in the last menting patent protection where it does decade due to relentless pressure from the not already exist would result in the aver- US to tighten up its patent laws which, age price of drugs rising, with projected they complained, meant the loss of $30 increases ranging from 12 to 200 percent. million a year in sales for the American The pharmaceutical industry argues pharmaceuticalindustry,becauseit that patent systems promote innovation referred only to pharmaceutical processes and investment in research and develop- and not products. The US went as far as ment. Without patents, new ones would imposing $165 millions' worth of sanc- not be developed to tackle diseases such tions on eight Thai products exported to as tuberculosis and HIV/AIDS. They the US. The US continued to exert pres- believe the real barriers to making drugs sure until the patent laws were changed more available are poverty, weak political and made even more restrictive than the leadership, lack of trained health person- international TRIPS agreement requires.

126 COOPERATION SOUTH "This report should be a wake-up call "Hospital personnel know enough to developing countries to look carefully about AIDS. But out of lack of care and at how they go about complying with fear, doctors are afraid to treat AIDS TRIPS legislation and make sure that patients. Moreover, intimidating media access to essential drugs is kept as an reports about AIDS feed into that fear," overriding right for the entire population says Daniel Marguari, program manager not just a wealthy few" says Martin of the Spiritia Foundation, a Jakarta-based Foreman, author of the Panos report. nongovernmental organization that advo- The full Panos report and additional cates for the needs and rights of people liv- country studies can be downloaded from ing with HIV/AIDS. www.panos.org.uk. For further information There is also discrimination in the contact Mark Covey, , Media & Communi- work place, where a person publicly cations Officer on Tel +44 207 239 7622 or identified with AIDS can be fired. +44 208 960 1282 Email markc@panoslon- When persons known to be living with don.org.uk. HIV/AIDS want to buy food from a street vendor, the vendor often insists that these customers use their own plates, says Christin Wahyuni, a Spiritia AIDS AND DISCRIMINATION program officer. The right toconfiden- tiality is often denied to people with In the Asia and Pacific region, when a HIV/AIDS, including by the media. person known to have HIV/AIDS checks Spiritia meets with health authori- into a hospital, the patient's registration ties, private companies, local officials, sheet may carry the code "SIDA", French the media and people with HIV/AIDS for AIDS. Bed sheets can be similarly to stress that they have the same rights marked, and the AIDS patient may be asotherpeople.The NGO also separated from other sick people. Hospi- publishedabooklet,"Empowering tal staff may not even want to touch the Patients," about their rights in hospitals patient a social outcast. These subtle and consultations with doctors. and less subtle forms of discrimination in At the regional level, the Singapore- the health services against people living based Asia Pacific Network of People Liv- with HIV/AIDS are rooted more in fear ing with HIV/AIDS works in six ASEAN than in ignorance. At the end of 2001, countries. It plans to publish the results of according to UNAIDS, 7.1 million peo- its survey on discrimination. An ASEAN ple in Asia and the Pacific were living formal session in November 2001 was with HIV, the virus that makes the addressed by a person living with AIDS in human body's immune system defenseless southeast Asia to emphasize empower- against killer diseases. ment of people with HIV/AIDS by their

200 2 127 131 participation in decision-making pro- member states is how to provide ICT ser- cesses that affect them. At a global level, vices to rural and agricultural communi- the denial of equal treatment to people ties. To help close that gap, in February with AIDS and the discrimination and 2002, an e-Farmers project was launched stigma they face is such a festering issue to make available an Internet-based trad- that it was a theme in the fourteenth ing e-hub that will link the trading needs annual International Conference on of small farmers and large companies AIDS, held in Barcelona in July 2002. in many countries. The project is an By Warief Djajanto, ASEAN partnership with a private group ASEAN Features, Jakarta incorporated in Singapore the Agri- tani e-Hub Pte Ltd. Jailani Mustafa, business architect of Agritani and principal adviser to the ASEAN FARMERS GOING ASEAN e-Farmers task force, cited as an ON THE INTERNET example a fruit farmer in Bandung, Indonesia, who may earn 700 rupiah Many of the 200 million farmers and agri- (US$0.07) for each pineapple he grows. culture workers in the 10-nation Associ- Malaysian farmers, with good market ationof Southeast Asian Nations access through the Internet, can earn (ASEAN) will soon have the opportu- 2 1/2 times more than Indonesian farm- nity of going Internet a tool that ers. That same Indonesian pineapple promises to make farmers earn more and can fetch 30,000 rupiah (US$3.00) in buyers pay less. Amman, Jordan, a more than 40-fold In November 2000, the 10 ASEAN increase. Imagine that example multi- member states signed off on a blueprint plied in the US$150-200 billion worth of for development of e-ASEAN. This annual trade in agricultural products in information structure will facilitate e- ASEAN countries, and one can see the commerce, e-society and e-government; potential impact of the e-Farmers project. promote liberalization of investment and Asian farmers get a low profit margin trade in information and communica- because of fragmentation and poor infor- tions technologies (ICT); and build mation. Small land holdings prevent the technological capacity through human use of advanced technology for better out- resources development. The hope is to put and better utilization of services; it is "bridge the digital divide among its not efficient to run half-empty trucks of member countries and within each of agricultural produce from farm to market. them," says ASEAN Secretary-General Just as important, farmers do not get real- Rodolfo C. Severino Jr. time information on where they can get A challenge facing most ASEAN the best price, so demand and supply are

128 132 COOPERATION SOUTH e mismatched. "Middlemen take advan- global flows. tage. When you sell in small volumes, you A structural factor in the region has can't demand a good price," says Mustafa. been thecompletionof economic Farmers can overcome that disadvantage reforms, which attracted much of the by getting good information on the e-hub. wave of FDI during the 1990s. Actions To access the e-hub, farmers can join like the privatization of large state-owned a cooperative and do not need to be firms in energy and basic services trig- computer-literate. Trained personnel of gered FDI of US$18 billion in 2000, but a cooperative or a local farmers' bank only US$1.35 billion in 2001. Also, can help member-farmers get access, link transnational companies' purchases of them to buyers and arrange all the large national companies had generated details from insurance and shipping to an annual average FDI of US$43 billion financial settlement. In the province of in 1999-2000, but only US$25 billion in Jambi in Indonesia, several sites involv- 2001, which saw mainly consolidation in ing hundreds of farmers' cooperatives the newly enlarged organizations. have been identified as part of the e-hub The percentages of regional FDI flows with the support of a joint govern- in different countries during 2001 were ment/non-government task force. Thai Mexico, 35 per cent (up from an average farmers have also begun to use the e- 18 percent for 1995-2000); Brazil, 32 per hub. Cambodia and Malaysia were slated cent (down from 35 per cent); Central to join in late 2002. American and the Caribbean, 6 per cent From ASEAN Features, Jakarta (unchanged); Chile, 6 per cent (down from 8 per cent); and Argentina, 4 per cent (down from 17 per cent). The report reviews elements that FOREIGN INVESTMENT could encourage capital inflows and DOWN IN LATIN AMERICA strengthen regional development as well; AND THE CARIBBEAN calls for making FDI policies more active, more explicit and stronger in their After a decade of unprecedented growth, "development dimension" and their link- the flows of foreign direct investment age to national strategies; traces the grow- (FDI) into Latin America and the ing role of transnational firms in the Caribbean fell from US$105 billion in region's economy; and notes such disad- 1999 to US$80 billion in 2001. Prelimi- vantages as the enclave-like style of most nary data for 2002 show no sign of a transnational firms and their weak impact turnaround. However, as a region, the on competitiveness. A special chapter 10 per cent decline in 2001 compares within the report focuses on Argentina. favorably to a 50 per cent reduction in These data and findings are in a recent

2002 129 report on foreign investment in Latin Fs There continues to be a need for America and the Caribbean, which is structural reforms designed to available in Spanish (go to ) and forth- accelerate the integration of the coming in English. region into the global economy From ECLAC through liberalization, deregula- tion and privatization, as the key to sustained and rapid growth. But stabilization and adjustment UNCTAD CALLS FOR policies may have a temporary NEW POLICIES FOR adverse impact on the poor, thus AFRICAN DEVELOPMENT requiring safety nets and targeted spending programmes to mitigate How are multilateral financial institutions that impact. tackling the problems of poverty in el Because growth may not automati- Africa? This is the question asked in a new cally trickle down to the poor, stilidy by UNCTAD titled From Adjust- greater emphasis should be given ment to Poverty Reduction: What is New? to the public provision of primary After almost two decades of structural education and health care. adjustment programmes, poverty in Africa si There is a need to achieve policy has risen, slow and erratic growth are the "ownership" based on wide-rang- norm, rural crises have intensified, and ing consultations with civil society de-industrialization has damaged future and the poor, but ownership growth prospects. The study looks at the should go beyond the design of effects on economic growth and income safety nets and extend to macro- distribution of the packages on offer from economic policies and develop- the multilateral financial institutions. It ment strategies. concludes that these packages need a care- According to the study, inflation is not ful, frank and independent assessment if the principal economic challenge in most they are to deliver on their promises. The African countries. Instead, macroeco- study also cautions that any fresh policy nomic policies should be designed with initiatives must be matched with adequate growth and the goal of raising productive external resources, debt reduction and bet- investment in the forefront. The study ter market access if they are to succeed. also warns against "quick poverty fixes" The study examined 27 Poverty that redirect public spending to social Reduction Strategy Papers (PRSPs) pre- sectors at the expense of other types of pared on African countries, and describes public investment, and notes that social four policy approaches which seem to impact analysis has not yet been included characterize them: as an integral part of PRSPs.

130 134 COOPERATION SOUTH Rapid trade and financial liberaliza- idea that fighting corruption by diminish- tion is still expected to increase the access ing government resources and responsi- of the poor to financial and other assets bilities will bring the desired improve- that could allow them to escape from ments is off-target, the study contends. It poverty. But any explanation of how this calls for a focus on quality government, happens is missing from the PRSPs. The not smaller government. study argues instead for proper sequenc- The study recommends considerable ing of reforms in line with institutional pruning of the political conditionalities capacities, effective regulation and man- that have increasingly been attached agement of capital movements, and lim- to aid and debt reduction in recent ited, time-bound protection for certain years. An average of 114 conditions are industries to allow active nurturing of the attached to multilateral lending to coun- industrial sector. tries in sub-Saharan Africa, of which The study welcomes the attention almost three quarters relate to gover- given to raising standards of education nance. It is difficult to reconcile coun- and health care. However, the recom- tries' "ownership" of their policies of mendation to combine fully funded pri- economics and governance with these mary education and basic health care conditions, which go well beyond the with across-the-board user fees for higher original rationale of protecting the levels of education and health care sug- financial integrity of the multilateral gests a misplaced faith in markets as the financial institutions. fairest way to deliver on these goals. The Access to developed countries' markets study shows that increased public expen- remains essential if African economies are diture across all levels remains the surest to grow out of poverty. Despite some way of reducing income inequality, recent initiatives, trade barriers are still although differentiated subsidies and user excessive. The financing gap facing fees and a progressive tax system would African economies is just as daunting. ensure that the rich pay more for the pro- The recent pronouncements at the vision of such services. International Conference on Financing The new approach puts considerable for Development and at the 0-8 Summit emphasis on improving governance as a promise a reversal of the decline in prerequisite to sustained growth. But the resources, but fall well short of the addi- UNCTAD study says there should be no tional $10 billion needed in annual aid illusions about the pace at which institu- to kick-start African growth. And the tions can improve, nor any doubt that debt overhang persists despite the long- imposing a common institutional stan- standing efforts of the international dard on countries with varying conditions community to design acceptable pro- is likely to be counterproductive. And the grammes and timetables. The study calls

2002 131 j..1 5 for a fresh and bolder approach on all take on frankincense and myrrh at south fronts, with growth rather than charity Arabian ports at Muscat and Sur. Bigger as the motivation for recasting interna- ships as long as 180 feet carried up to tional rules of engagement in the fight 1,000 tons of cargo on monsoon winds against poverty. along the 3,500-mile round trip to and from India, and even beyond. Finding large quantities of teak, a hardwood native to India, in Berenike, archaeolo- ANCIENT SOUTH-SOUTH gists assume that it came from ships built TRADE BETWEEN EGYPT, of teak in India, probably carrying Indian INDIA AND JAVA crews, and eventually damaged and dis- mantled at Berenike. Building ruins. Teak, coconuts and batik The Indian Ocean route rivaled the cloth from India. Metal and sail cloth better known Silk Road which ran over from ships. Imported sapphire and beads. land from China through Samarkand Stores of peppercorns from the East. and Baghdad to Tyre and Antioch on the Inscriptions and other written materials Mediterranean's eastern coast. Involving in 11 different languages. A discarded less cost and hardship than the Silk customs archive written on potsherds. Road, the sea route was sometimes its These are among the artifacts uncov- only reliable alternative when rivals ered at the site of the ancient interconti- blocked its path. Located about 600 nental port of Berenike on the Red Sea miles south of Suez near the Egypt-Sudan coast of Egypt, as recently reported by border, Berenike was the greatest, but archaeologists after eight years of excava- only one, of the Red Sea ports that tions. These findings confirm historical hosted the cargoes, crews and merchants accounts of a robust seaborne trade across of ocean commerce. Two other likely the Indian Ocean which reached to India ports are being studied by archaeologists and as far east as Thailand and Java. The at Myos Hormos and Nechesia. remains are described as the most exten- One of the archaeologists studying sive so far found of the ancient world's the area, Dr. Willeke Wendrich of the east-west maritime commerce. University of California at Los Angeles, Berenike lasted as a maritime center, described the long-lasting South-South including periods when it thrived and trade route as highly productive. He declined, from the third century B.C. said, "We talk today about globalism as until about 400 A.D. From Berenike, if it were the latest thing. But trade was ships went southward to Ethiopia, Soma- going on in antiquity at a scale and scope lia and Kenya for ivory, tortoise shell, that is truly impressive." e drugs and slaves. Other ships sailed east to

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.3 7 BEST COPY AVAILABLE A 21 ST CENTURY VISION Excerpt from Nobel Lecture by Kofi Annan, United Nations Secretary-General

Wehave entered the third millennium through a gate of fire. If today, after the hor- COOPERATION SOUTH is devoted to ror of 11 September, we see better, and we criticalanalysis and discussion of see further we will realize that humanity development issues of importance to is indivisible. New threats make no distinc- the South.To this end, it welcomes the tion between races, nations or regions. A exchange of ideas and experience new insecurity has entered every mind, from all sectors, disciplines and view- regardless of wealth or status. A deeper points, and from sources ranging from awareness of the bonds that bind us all in policymakers and scholars to practi- pain as in prosperity has gripped young tioners and community activists. and old. Readers wishing to take an active In the early beginnings of the twenty- part in this dialogue are invited to first century a century already violently comment on articles published in the disabused of any hopes that progress towards journal and to contribute articles global peace and prosperity is inevitable for possible publication. Letters and this new reality can no longer be ignored. It manuscripts, which are subject to must be confronted. editing, should be sent to the Editor- The twentieth century was perhaps the in-Chief, Cooperation South, as follows: deadliest in human history, devastated by innumerable conflicts, untold suffering, and unimaginable crimes. Time after time, a Mail: group or a nation inflicted extreme violence Special Unit for TCDC on another, often driven by irrational United Nations hatred and suspicion, or unbounded arro- Development Programme One United Nations Plaza, gance and thirst for power and resources. In New York, NY 10017 response to these cataclysms, the leaders of the world came together at mid-century to Fax: unite the nations as never before. (212) 906-6352 A forum was created the United E-mail: Nations where all nations could join [email protected] forces to affirm the dignity and worth of every person, and to secure peace and development for all peoples. Here States could

134 COOPERATION SOUTH 11) 138 unite to strengthen the rule of law, recog- mental right to education. What begins nize and address the needs of the poor, with the failure to uphold the dignity of restrain man's brutality and greed, conserve one life, all too often ends with a calamity the resources and beauty of nature, sustain for entire nations. the equal rights of men and women, and In this new century, we must start from provide for the safety of future generations. the understanding that peace belongs not We thus inherit from the twentieth only to States or peoples, but to each and century the political, as well as the scien- every member of those communities. The tific and technological power, which if sovereignty of States must no longer be used only we have the will to use them give as a shield for gross violations of human us the chance to vanquish poverty, igno- rights. Peace must be made real and tangi- rance and disease. ble in the daily existence of every individ- In the twenty-first century, I believe ual in need. Peace must be sought, above the mission of the United Nations will be all, because it is the condition for every defined by a new, more profound, aware- member of the human family to live a life of ness of the sanctity and dignity of every dignity and security. human life, regardless of race or religion. The rights of the individual are of no less This will require us to look beyond the importance to immigrants and minorities in framework of States, and beneath the sur- Europe and the Americas than to women in face of nations or communities. We must Afghanistan or children in Africa. They are focus, as never before, on improving the as fundamental-to the poor as to the rich; conditions of the individual men and they are as necessary to the security of the women who give the State or nation its developed world as to that of the develop- richness and character. ing world. Over the past five years, I have often From this vision of the role of the recalled that the United Nations' Charter United Nations in the next century flow begins with the words: "We the peoples." three key priorities for the future: eradicat- What is not always recognized is that "We ing poverty, preventing conflict, and pro- the peoples" are made up of individuals moting democracy. Only in a world that is whose claims to the most fundamental rights rid of poverty can all men and women have too often been sacrificed in the sup- make the most of their abilities. Only posed interests of the State or the nation. where individual rights are respected can A genocide begins with the killing of differences be channelled politically and one man not for what he has done, but resolved peacefully. Only in a democratic because of who he is. A campaign of 'eth- environment, based on respect for diversity nic cleansing' begins with one neighbour and dialogue, can individual self-expres- turning on another. Poverty begins when sion and self-government be secured, and even one child is denied his or her funda- freedom of association be upheld. Mi

2002 135 139 http://www.tcdcwide.net

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THE WEB OF INFORMATION FOR DEVELOPMENT

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and a network of TCDC stakeholders sharing the

WIDE electronic venue to build capacity

U N CA D P PROTECTING CREATIVITY AND SPREADING ITS BENEFITS: The Two Sides of Intellectual Property Rights (IPR)

"ROAD MAP" FOR INTELLECTUAL PROPERTY RIGHTS. What are they, why are they important, what international trade rules deal with them, and what future IPR strategies would help developing countries?

BALANCING HEALTH NEEDS AND DRUG RESEARCH INCENTIVES. Hannah E. Kett ler and Chris Collins offer ways of improving access to essential drugs in developing countries while making it attractive for patent-holding drug companies to do R&D.

PRICING MEDICINES TO BENEFIT POOR COUNTRIES. How to price drugs for diseases such as malaria which mainly exist in the poor countries, and for diseases such as AIDS which afflict rich and poor countries alike? Jagdish Bhagwati responds.

CAPACITY BUILDING FOR MANAGEMENT OF IPR. Developing countries can share experience on strategies and structures for handling intellectual property rights at national level. Mart Leesti and Tom Pengelly survey the scene and suggest improvements.

IN THE NEWS: CURRENT ISSUES IN IPR

O FROM NORTH-SOUTH TO SOUTH-SOUTH:THE TRUE FACE OF GLOBAL COMPETITION. How to stop"a race to the bottom" in wages and labor conditions among developing countries working to attract foreign investment? Robert J. S. Ross and Anita Chan explore the question.

O COSTA RICA'S TECHNOLOGY STRATEGY: ROOTS AND OUTCOMES. Andrés Rodriguez- Clare weighs the country's transformation into a knowledge-driven economy.

O PATHS FOR ARAB COOPERATION:WELL MAPPED, LITTLE TRAVELED but with much room for expansion, says the Arab Human Development Report.

0 LESSONS ON PUBLIC HOUSING FROM SINGAPORE FOR SAO PAOLO and on how south-south transfer processes work in practice are provided by W. E. Hewitt.

O AFRICA:FROM THE OAU TO THE AFRICAN UNION. The history of pan-Africanism and current prospects for continental unity are assessed by Abdalla Bujra.

United Nations Development Programme One United Nations Plaza New York, NY 10017 www.undp.org ISSN 0259-3882 141 U.S. Department of Education Office of Educational Research and Improvement (OERI) National Libraty of Education (NLE) Walked Banta Infamiliiim Can Educational Resources Information Center (ERIC)

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