Thursday, January 29, 2009

Africa Trying to Avoid “Lost Decade”

IRIN Africa

The World Bank said Wednesday that Africa must continue to invest in infrastructure projects, such as new roads and energy plants, or it could face the possibility of a “lost decade” of development. The term “lost decade” refers to the 1990s in Asia, where many Asian countries failed to invest in infrastructure amid the Asian financial crisis and had their economic growth stunted as a result. However, the source of funding for such infrastructure during the current global credit crisis is a question that many African countries are struggling with.

The theme of the upcoming summit of the Africa Union (Feb. 1-3 in Ethiopia) will be “infrastructure.” Optimism that Africa could survive the global credit crisis unscathed is beginning to wane. The crisis is causing a drop in demand for African exports and commodities, a drop in remittances from abroad and a drop in taxes collected domestically. The summit will focus on finding “flagship” infrastructure projects to coordinate and invest in.

But, amongst this economic turmoil, it is clear that continued infrastructure development must be a priority for Africa. When it comes to energy consumption, Africa uses about a third less than the world average, and according to the African Development Bank, it will cost about $37 billion a year until 2020 to provide universal access to electricity in Africa. While these facts are somewhat discouraging, some experts point out that Africa has the potential to tap vast amounts of clean energy like hydroelectric and geothermal power.

New infrastructure may also help battle growing unemployment in Africa. The International Labor Organization predicts that upwards of 50 million jobs could be lost in Africa in 2009. These loses would largely erase the gains that Africa has made in the past few years.

It is believed that China may continue to invest heavily in African infrastructure projects. Where the money ultimately comes from is still up in the air, but as of now Africa appears to be committed to funding infrastructure even as the credit crisis wrecks havoc across the globe.

1) Should other countries, such as the US, worry about how entrenched China is becoming in Africa? Do Western countries fear that large scale infrastructure funding will appear to be some form of neocolonialism?
2) Before the current crisis hit the globe many emerging economies in Africa provided some of the highest investment returns. Credit is extremely tight now across the globe, but should investors continue to be weary of Africa given the increased gains in political stability throughout the continent?

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