An analysis of the Economic Challenges of Namibia and How the Donor Community should Assist Country Paper for the International Conference on Development Cooperation with Middle Income Countries (MICs), Madrid, Spain, 01 – 02 March 2007 Office of the President National Planning Commission Private Bag 13356 Windhoek NAMIBIA www.npc.gov.na 1 Executive Summary The development agenda of the new Millennium emphasizes the internationally agreed development goals, including the Millennium Development Goals (MDGs). Middle Income Countries (MICs) are home to about 40% of the worlds poor (those surviving on less than one US dollar a day). It is therefore, difficult for the world to achieve the MDGs without sustained support and increased assistance to the MICs. The international community should therefore focus on the needs and priorities of the MICs in general, and the lower middle-income countries in particular, to enable these countries to achieve the MDGs through the creation of conditions conducive to global peace and security. Although classified as a lower middle income country, Namibia, due to legacies of its colonial and apartheid history, has one of the most unequal distribution of income and wealth in the world (Gini Coefficient of 0.66 versus and average of 0.43 for all MICs), with the situation of the bulk of its population more similar to that of their counterparts in Least Developed Countries (LDCs). Redressing this tremendous inequality and improving the status of the large majority of the population in a legal and orderly manner would be feasible only in the medium and long-term, which would require substantial resources. The country also faces a number of other economic and social challenges, including poverty, the HIV/AIDS pandemic inadequate economic growth, high levels of unemployment, inadequate capacity, and low levels of industrialization, which also require additional resources. Given the vulnerability of the economy to the volatility in international financial markets, increased grant aid and concessional loans are the appropriate means with which the international community should assist Namibia. “Aid for Trade” and Technical Assistance (TA), which is demand driven, sustainable and, aligned to national development plans and 2 strategies are vitally important. Furthermore, there is a need to strengthen the cooperation/coordination among the donors to enhance the Government of Namibia’s leadership and ownership of the development process. Both the Government and the donors should be accountable to the achievement of development results on the ground. At the global level, the World Bank and other international financial institutions (IFIs) should create a special concessional window, either as part of or along the same lines as the International Development Association (IDA), for MICs in general and lower middle income countries in particular, to enable this group of countries to access additional resources to effectively execute the internationally agreed development goals, including the MDGs. This is not only in the interest of the MICs but also of the global community at large. MICs will be in a position to supply goods and services to the rest of the world. They will also become important markets for products from elsewhere because of enhanced buying power. MICs will further be in a position to increase their contribution to many global public goods. 3 Table of Content Executive Summary….……………………………………………………….. 1 Table of Content.………………………………………….…………………… 3 1. Introduction…………………………………………………….………….. 4 2. Case of Middle Income Countries (MICs) in the World Development Agenda…………………………………………………………………….. 5 3. Namibia’s Basic Economic Problem…………..…….…………………..… 7 3.1 Poverty …………………………………………………………….. 8 3.2 HIV/AIDS, malaria, and other communicable diseases ...……….…9 3.3 Unequal Distribution of Income …..……………………….…….. 9 3.4 Inadequate Economic Growth ………………………………. …... 10 . 3.5 High Level of Unemployment .…………………………………... 10 3.6 Human Resource Development …………………………………. 11 3.7 Inadequate Capacity ………………………………………………..11 3.8 High Cost of Infrastructure Development ;;….……………….…… 12 3.9 Gender Equality and Women’s Empowerment ……..……..……... 13 3.10 Industrialization and Foreign Direct Investment (FDI) ……….… 13 3.11 Trade Expansion and Regional and Global Integration ..….…….. 15 4. What the Donor Community Should Do To Assist Namibia …….….……. 16 4.1 Increased Development ..………………………………………….. 16 4.2 Aid Modalities.………………………………………………..…... 17 4.3 Enhance Aid Effectiveness………………………………..………. 17 5. Conclusions..………………………………………………….…..…………18 4 An analysis of the Economic Challenges of Namibia and How the Donor Community should Assist 1. Introduction The relationship between the donor community and the developing countries has changed in many ways since the beginning of 2000. The Millennium Declaration and Millennium Development Goals (MDGs) are demonstrative of the continuation of the consensus reached at the global level that world peace and security are contingent upon the reduction in poverty in its different manifestations, promotion of gender equality and empowerment of women, environmental sustainability, improvement of health and access to education by all, with the support of the developed countries. Simultaneously, the developing countries have been formulation and implementing poverty reduction strategy papers (PRSPs) as a basic requirement for receiving assistance from the Bretton Woods Institutions. The Monterrey Consensus of the International Conference on Financing for Development (2002) highlighted the importance of increasing international finance and technical cooperation for development. This was followed by the initiatives of Multilateral Financial Institutions (MFIs) and the Development Assistance Committee of the Organization for Economic Cooperation and Development (OECD-DAC) to enhance and ensure the effective and efficient use of foreign aid through harmonization, alignment and managing for results. New aid modalities such as Sector Wide Approaches (SWAPs) and Direct Budget Support (DBS) were introduced to enhance synergies and generate improved results and impacts of development efforts in developing countries. The Paris Declaration on Aid Effectiveness (2005) emphasized the: (i) harmonization of donor operational policies and procedures to reduce the transaction cost on aid recipient countries; (ii) alignment of aid to recipient country development priorities and plans as articulated in National Development Plans; and (iii) mutual (donor and recipient) accountability for the results. The Declaration also contained twelve indicators and targets, among which is the reiteration of the need for the donor countries to fulfill their commitment to provide 0.7% of GNI as aid to developing countries. A 5 number of developed countries have also launched bilateral initiatives, such as the Millennium Challenge Account (MCA) of the US Government, as means to promote strengthened accountability on the part of the providers of aid and the responsibility of recipient countries to promote stable democracies with poverty eradication and god governance. The foregoing development clearly indicates that a new development agenda has been firmly established. The requisite policies, strategies and approaches along with some of the funding arrangements tot implement the development agenda were put in place to generate the expected results toward achieving the internationally agreed development goals, including the MDGs. Thus, developing countries and the developed world are partners in the process of development the results of which would ensure a stable and prosperous world with peace and security. However, a careful analysis of the donor interventions indicates that their assistance has largely been biased in favor of Least Developed Countries (LDCs). This has continued despite evidence that the Middle Income Countries (MICs) are home to about 40% of the poor people (those with less than on US dollar a day). This group of countries has been largely marginalized in the allocation of concessional aid, even though they face significant development challenges in achieving MDGs and other internationally agreed development goals. The nature and extent of these challenges vary considerably within this heterogeneous group. However, all the Middle Income countries face an agenda that calls for achieving the MDGs and other development targets in continued partnership with the international donor community. 2. Case of Middle Income Countries (MICs) in the Global Development Agenda As indicated above, about 40% of the world’s poor (subsisting on US$ 1 a day or less) live in the MICs. Some MICs continue to face pervasive poverty, while in others, pockets of poverty-stricken communities as concentrated in backward areas. While MICs are determined to play a pivotal role in achieving the MDGs, they are facing challenges with respect to tackling inequality, social exclusion and economic and social vulnerability. In some countries, these challenges have been exacerbated by the scourge of HIV/AIDS and other communicable diseases. Another 6 challenge is that donor assistance to MICs is not always focused on achieving the MDGs. These challenges, if not addressed effectively may result in some MICs sliding down to a least developed country level. On the policy front, while some countries have made significant strides in reform, many lag behind. Even amongst the advanced reformers, there is still a large unfinished policy agenda, and the institutional capacity to manage reform varies greatly. There are also considerable differences in terms of the integration of these countries in the global economy. Many MICs still do not have adequate access to international capital markets; and those with access must contend with the volatility in private capital flows. In addition to assisting the MICs in addressing these challenges, the case for continued engagement of the international donor community derives from the increasing importance of the group of countries in relation to a range of global public goods. Thus, enhancing the developed countries partnerships with the MICs is key to success in such areas as global poverty reduction, maintenance of international financial stability, improvement of global economic governance, protection of the global environment, and the systematic fight against the health threats. The subject of the development cooperation with MICs has generated heated debate in recent years. Some have argued that the MICs have reached a stage in their economic progress that brings into question the rationale for continued engagement of both Multilateral and Bilateral donors in these countries. At present, the MICs reportedly receive US$17 billion of net development assistance. But there is on consensus among the international donor community on the continued need for their assistance to the MICs. Further, it is necessary to have aid commitments over the medium term, with a high degree of predictability and flexibility, in order to ensure the smooth implementation of development programs in the MICs. MICs need tailor-made interventions from the international donor community that are responsive to the specific economic and social challenges being faced by these countries. The economic and social challenges that Namibia faces in achieving the internationally agreed development goals, including the MDGs are considered in the above context and presented in the following. 7 3. Namibia’s Social and Economic Challenges As indicated above, the development challenges faced by MICs are diverse and need tailor-made interventions; and the Republic of Namibia is no exception. For example, Namibia can boast about its political stability, well functioning democracy, low level of crime and high degree of political commitment for economic growth and development based on the country’s long-term vision, “Vision 2030”, National Development Plans (NDPs), Poverty Reduction Programs (PRPs), all of which have been aligned to the achievement of the MDGs. Macroeconomic stability and good fiscal management are maintained through the Medium Term Expenditure Framework (MTEF). The country is also fortunate as the necessary foundations for democracy, political stability, peace and security, which are prerequisites for economic development, are in place. Thus, while maintaining the necessary balance on the fiscal front, the Government of the Republic of Namibia (GRN) is committed to stimulate and sustain economic growth to reduce poverty and income inequality and ultimately reach the goal of improving the living standards of its people to the level of a developed country by 2030. In this endeavor, the international donor community has been providing complementary funds to fill some of the investment gaps in the development programs. However, the gap between the development resource needs of the country and the complementary funding provided by the international community has been widening over the past decade. Since independence in 1990, Namibia has endeavored to formulate development plans and programs based on systematic analyses of its development challenges and priorities, which have been highly appreciated and endorsed by the international community as the basis for provision of their development assistance to the country. However, aid flows have continued to decline steadily from US$110 per capita in the 1990s to US$60 per capita in 2005. In addition, the number of bilateral donors active in Namibia declined from 22 in the 1990s to 17 in 2006, and there are indications that another three donors might be leaving the country next year (2008). There has been no significant inflow of FDI to compensate for the loss of ODA. Furthermore, donor assistance in the form of technical assistance (TA) and other areas is not as enthusiastic and effective as it should be. Thus, there is an urgent need to analyze and identify the ways in which the donor 8 community should more effectively assist. Accordingly, Namibia’s development challenges are analyzed and presented in this sub-section, followed by recommendations on the nature and extent of development assistance required from the international donor community. It is Important to note that Namibia is in general doing better than the average LDCs in Sub-Sahara Africa, but worse than the average lower-middle income countries. The economic and social challenges facing Namibia include the following: 1. Poverty 2. HIV/AIDS, malaria and other communicable diseases 3. Unequal distribution of income 4. Inadequate economic growth 5. High level of unemployment 6. Human Resource Development 7. Inadequate capacity 8. High cost of infrastructure development 9. Gender equality and women’s empowerment 10. Industrialization and foreign direct investment (FDI) 11. Trade expansion and regional and global integration 3.1 Poverty Poverty has been one of the development challenges since independence in 1990. It has many dimensions encompassing income/expenditure/consumption, low human development, social exclusion, ill being, lack of capacity and function, relative deprivation, vulnerability, including uncertain livelihoods and lack of means to meet the basic needs. Appropriate policies, strategies and plans have been designed but additional resources are required to constructively and decisively reduce poverty. Since independence, the Government of Namibia has pursued policies and programs to reduce poverty, including the formulation of a Poverty Reduction Strategy (PRP) in 1998. A number of the policies and strategies have been incorporated into the long-term Vision 2030. Of Namibia total population of 1.9 million, around 35% are estimated to be living below the poverty line of US$1 a day. Most of the poor live in rural areas, as do the majority (more than 60 percent) of the total population. 9 3.2 HIV/AIDS The HIV/AIDS prevalence rate of 19.7% in Namibia is one of the foremost challenges facing the nation, communities, families and individuals. The negative impact of HIV/AIDS on health and longevity is a major factor contributing to a reduction in the population growth rate from 3.1% per annum to 2.6%. Although the rate of new HIV infection is slowing down, there are now more HIV positive people falling ill and dying, leaving behind a rising number of orphans (estimated at about 120,000). The roll out of anti-retroviral (ARV) treatment and the prevention of mother to child transmission (PMTCT) have begun to register some successes but access to the treatment has not yet reached all those who need it due to lack of sufficient resources and personnel. 3.3 Unequal Distribution of Income Although Namibia has one of the higher GDP per capita among Sub- Saharan African countries, it also has one of the most unequal distribution of income and wealth in the world (Gini Coefficient of 0.6 versus an average of 0.43 for all MICs). Reducing inequality in income distribution is one of the major and most difficult challenges facing Namibia, where well over 60% of the national income is captured by the richest 10% (or less) of the population. In fact, the present state of the remaining 90% of the population of Namibia is comparable to their counterparts in the African LDCs. According to the Namibia Household Income and Expenditure Survey (NHIES2003/04), the consumption of the bottom (first) quartile (25%) of the households accounted for 6.4% of the total while that of the top (fourth) quartile accounted for 66.1%. The Gini Coefficient has declined from 0.7 to 0.6. Although the decline seems small, it is significant as it is very difficult to achieve significant reductions in he Gini Coefficient in the short and medium term. The decline is a testimony to success of Government policy in the area. The high level of concentration of income and wealth has been inherited form the colonial past and is deep-rooted; with a large majority the 10 Namibians marginalized in all aspects of their life. The very high degree of inequality is detrimental to sustained and equitable economic growth, poverty reduction and social cohesion. The Government of Namibia has been struggling to put in place the right policies, priorities and plans to redress the inequalities with due regard to fairness and adherence to national and international standards. But, inadequate resources are a major impediment for more rapid progress in this regard. 3.4 Inadequate Economic Growth It is generally accepted that economic growth benefits the poor and that rapid and sustained economic growth is necessary for poverty reduction. Since independence, the economy of Namibia has witnessed modest growth (average of 4.1% per annum) with stable macro economic conditions; but the growth has not been rapid enough to substantially reduce poverty rates. Furthermore, the average growth rate masks the wide fluctuations caused by, among others, the variations in the weather (about 30% of the population is dependent on subsistence agriculture, which accounts for about 2% of GDP; and meat, fish and other food processing account for almost half the manufacturing sub-sector). These factors erode the benefits from the modest economic growth. 3.5 High Level of Unemployment The current labor market situation in Namibia is characterized by people willing and able to work, but can’t find jobs. According to the 2004 Namibian Labor Force Survey, the overall unemployment rate in 2004 rose to 36.7% from 33.0% in 2000. The unemployment rate among youth (15 to 24 year olds) is much higher at about 60%, which is one of the highest in Africa. About two-thirds of the unemployed are in the most productive age group of 16-45 years; and more than half the labor force is unskilled and un-or semi-educated, which is as a result of the history of the country, as the unemployed tend to be primarily the previously disadvantages Africans. The population is small and scattered over a large area dependent primarily on subsistence agriculture. A significant proportion (about 30%) of the employed depends on agriculture, which accounts for less than 5% of GDP. The employment in other sectors such as mining is modest (2%) as 11 compared to its contribution to GDP (about 11%). Thus, there is a significant mismatch between the sectoral shares of employment and their contributions GDP. Also, the pace of growth of the sectors with high concentrations of the employed is rather slow. A structural shift in employment requires a considerable shift in economic growth towards sectors that rapidly generate more remunerative jobs, such as tourism and the services sector in general. This requires substantial public and private investments. 3.6.Human Resource Development There is a mismatch in the labor market between demand and supply of labor and this one of the main reasons for rising unemployment in the country. The country has just launched the Education and Training Sector Improvement Program (ETSIP), which is a strategic plan to increase the service delivery of the education sector. The donor community can support Namibia to develop her human resource development plan with financial and technical assistance to the country. In fact, in the long run, shortfalls in human resources would be significantly reduced if the ETSIP can secure the necessary financial and technical support However, the question of how to meet short to medium term shortfalls in human resources remains crucial. Diaspora is a source of help but Namibia’s Diaspora is not significant at all. In some sectors the country has benefited from the services of professionals form other African countries that have surpluses. Cooperation with the International Organization for Migration (OM) and other agencies could go a long way in mitigating the situation. 3.7.Inadequate Capacity It is acknowledge that the limited capacity for service delivery is one of the basic obstacles for economic growth and development in developing countries including Namibia. The capacity developments requirements encompass the human resources, institutions including research and 12 development (R &D), systems and the enabling policies, including the laws norms. Strengthening the service delivery capacity is a dynamic process, as the demands for services continue to increase with economic and social development. So, capacity created at a point in time cannot be assumed to remain relevant for ever, unless the institutions, systems and personnel continue to progress. The critical capacity strengthening areas include not only those at the macro level to formulate and manage policies and plans including budgeting and financial management, but also those at the intermediate and grassroots levels to implement and monitor and report on performance of development operations. The Government of Namibia has implemented its first-generation reforms focusing on basic market opening such as trade liberalization, fiscal adjustment and rationalization of public expenditure, removal of arbitrary government interventions in domestic product markets and financial deregulation. the country is poised to embark on the second-generation reforms, covering among others the development of sound and competitive financial systems, capital market Development, adoption of international standards in financial transparency, enhanced socially responsible and accountable corporate governance, legal and regulatory environment for private transactions, competition policies and related legislations and institutions. Strengthening the regulatory and institutional framework for the financial sector is crucial to foster efficient private sector led growth and increase economic resilience, while guarding against external shocks. 3.8. High Cost of Infrastructure Development Compared to other Sub-Saharan African countries, Namibia has developed a reasonable infrastructure such as roads, electricity and water supply, telecommunications and sea and air transportation. Notwithstanding, the existing infrastructure is not adequate for a broad based industrialization drive in the country. In addition, tourism development that has the potential to increase economic growth, is highly dependent on a developed infrastructure. Maintenance and expansion of the infrastructure is very expensive because of the vast size of the country. The delivery of public services to the population that is spread thin all over the country is a major 13 challenge. As a result, the country requires additional resources to maintain and extend its infrastructure to all parts of the country for the benefit of all its citizens. At present, Namibia imports part of its electricity from South Africa, which itself is experiencing power shortages currently. The potential supply of power from natural gas by 2010 from the kudu Gas field is a bright spot, although meeting the growing domestic demand for power in the intermediate years would require substantial investments in thermal power generation. The tourism sector is showing dynamism with significant increases in tourist arrivals. Significant resources are required to improved and expand the tourism infrastructure. 3.9. Gender Equality and Women’s Empowerment The low level of gender equality and women’s empowerment in Namibia poses many challenges to the country. Since independence, the country has made significant progress in promoting greater gender equality in the rights and opportunities towards empowering women, including under the Second National Development Plan (2001-2005).Also, the political commitment to gender equality is strong. For example, the proportion of seats held by women in the National assembly had increased from 9% in 1993 to 19% in 2003 and to 27% in 2006; and gender parity has been achieved at regional and local levels of government. Despite the progress so far, two gender-related issues remain a challenge for Namibia. First is the gender imbalance in the economic and business decision-making levels. Second are the cultural and social attitudes and the persisting perceptions on the traditional roles of women in society.However,the 2004 Namibia MDG Report showed that if the prevailing trends continue, the country could make good progress towards achieving the MDG relating to the promotion of gender equality and empowering women by 2015. 3.10 Industrialization and Foreign Direct Investment (FDI) The size of the manufacturing sector is modest (about 10.5% of GDP).However; the bulk of it is based on the processing of meat, fish and other food products and production of beverages (including beer). It is 14 difficult to expand the industrial sector without additional substantial domestic private investment and FDI. The comparative international indices compiled by the World Bank/IFC, United Nations, and other private entities portray Namibia to be not a particularly favorable destination for potential foreign investors. For example, the world Economic Forum’s latest Africa Competitiveness Report based on a recent survey results highlights that the most problematic factors for doing business in the country an inadequacy of a trained workforce (ranked first out of 14 indicators; This is an important area where the international donor community can assist the Government (through among others the provision of technical assistance and training opportunities for Namibians to improve the environment for private investment in the country. The lack of adequate manufacturing activities in the country is a colonial legacy that neglected industrialization, training of engineers and other professionals, and foreign direct investment. Thus, the country’s pre- independence industrial policy and strategy was based on domination and exploitation by the colonial power that created dependency and adversely affected local initiatives. Favorable and incentive based industrialization policies and strategies introduced after independence to promote a modern industrialization process and attract foreign direct investment (FDI) to fill the investment gaps have not been successful. The donor community can assist to finance the government’s efforts to develop domestic capacity, including entrepreneurship development. The challenges related to industrialization and foreign investments have imposed tremendous challenges for economic growth and development in Namibia. These challenges have direct and indirect impact on some of the other economic sectors indicated and discussed above and hence ways and means have to be found to resolve them in line with the country’s Vision 2030, which includes the goal of creating “a prosperous and industrialized Namibia”. The donor community can assist in this endeavor in many ways. 15 3.11 Trade Expansion and Regional and Global Integration Namibia is a trade-dependent country, with the value of trade exceeding the GDP. Exports of goods and services averaged 48% of GDP during 2001-2005 and the imports of 53%. Ores, minerals, copper and refined zinc account for about 50% of the value of goods exported, followed by processed and preserved fish (more than 20%) and live animals (about 7%). There is considerable scope to expand the exports of fish as well as other agricultural products targeted at niche markets. Among imports , transport equipment has largest share (about 17 percent) followed by food products and beverages (14%), refined petroleum products (14%),chemical products, fabricated and other machinery and equipment (13%) and rubber and plastic products (13%). The economy of Namibia is tied closely with those of its neighbors, particularly South Africa both in terms of merchandise trade and free capital flows under the Common Monetary Area (CMA). Given that international trade is such a dominant part of the economy of Namibia, the country’s future depends on the expansion of trade, which should gradually reduce its dependence on foreign aid. In fact, the country’s long-term goal as indicated in its Vision 2030 is to provide development assistance to the needy countries in the world. However, the expansion of international trade is a challenge .At present raw materials account for 85% of Namibia exports, while consumption goods account for a large share of its imports .As a result, the country’s trade account has been in deficit sine independence .the Government has been trying to change the structure of trade by increasing the share of higher domestic value added goods in the exports, including through diversification of products and the export destinations; and a lower share of consumption goods in the imports; including through diversification of the sources of imports. In this respect, it should be mentioned that under the African Growth Opportunity Act-2000 (AGOA) and EU`s duty free access, Namibia has huge opportunities to expand its trade but due to supply side constraints, available opportunities have not been fully exploited. This means that Namibia needs not only market opportunities for trade but it also requires 16 “Aid for Trade” at the same time. Furthermore, the international community should also help regional trade integration efforts. Thus, Namibia has a long way to go in order to achieve its goals of expanding trade and integrating into the global economy. In this regard, the country needs both technical and financial support from the international community. 4. What the Donor Community Should Do To Assist Namibia. Namibia needs significantly increased concessional assistance form the international community in order to effectively address the basic economic and social problems discussed in the preceding sub-sections. Some possible avenues for cooperation and collaboration with the international donor community are discussed in the following sections to facilitate the dialogue between the donors and the Government of Namibia. Such a dialogue with the international partners is timely as the Government is in process of formulating the third National Development Plan (NDP3), with the involvement of all the stakeholders including the private sector and donors. 4.1 Increased Development Assistance The main emphasis of the Government of Namibia is to increase the volume and quality of investments in the economy, including through official development assistance (ODA) to complement its own investments .On its part, the Government has endeavored to increase its tax and non-tax revenues through effective and efficient tax administration measures. it demonstrated a relatively good husbandry of the resources and maintained macroeconomic stability in recent years. However, it is recognized that domestic resources alone would be inadequate to meet the huge investments. In this context, the Government is convinced that increased foreign assistance in the form of grants will be the preferred option. In this connection the World Bank and other international financial institutions are urged to create a special window for MICs to access affordable funding. Access to concessional loans will be a feedback option, as the public debt at 32%o of GDP cannot be stretched further lest it becomes unsustainable .In other words, new financial products and 17 modalities should be invented and implemented to meet Namibia’s shortfalls in investment funds. 4.2 Aid modalities Direct budgetary support is the most preferred mode of external assistance, which allows for flexibility in the allocation and utilization of ODA in accordance with national development plans and priorities. At the sectoral level, the adoption of Sector-Wide Approaches (SWAps) may be suitable in specific sectors such as Education, Energy, Export/Trade Promotion, Health, Industrialization and rural development. As indicated in the preceding sub-section, inadequate capacity is a continuing impediment to stimulating economic growth. In addition to capital investments capacity building and technical assistance should continue as important components of ODA, with renewed focus on building local capacities and transfer of skills from foreign experts to their local counterparts. In this regard, the Government has endeavored to produce a National Strategic Framework on Human Resources Development and capacity Building, which could form the basis for Government-Donor dialogue. Often the technical assistance (TA) is driven by the donors and consultants have often absorbed a significant portion of ODA which sometimes impose an extra burden on the government systems and administration. It is important for the technical assistance to be demand driven, in order to meet the priority development needs of the country and ensure that the leadership and ownership of the initiatives rest with the Government. Technical assistance should also focus on the sustainability of the initiatives, including skills, institutions and systems even after completion of the TA projects. This can be assured among others through the integration of the initiatives with the regular government development operations. 4.3. Enhance Aid Effectiveness There are 17 bilateral donors in Namibia and from time to time the International Financial Institutions (IFIs) have take interest in the country’s economy. Donors provide aid in accordance with their operational policies and their comparative advantages. In the spirit of the Paris Declaration on 18 Aid Effectiveness, it is important for donors to harmonize their operational policies to reduce the transaction costs for the Government of Namibia. This will entail greater cooperation/coordination and collaboration among the donors on their roles in Namibia. Namibia has recently launched the preparation of the Third National Development plan (2007/08-2011/12) within the overall framework of the long-term Vision 2030 and the MDGs. The donors should align their country assistance strategies and interventions to the priorities identified in the Third National Development Plan and ensure the bridging of the resource gap for implementation of the Plan. In addition, the donors should utilize the Government institutions and systems and procedures in such areas as procurement and financial reporting (suggesting improvement where necessary) rather than soliciting for new institutions and procedures to be established for aid disbursement and management. The donor community should boost the national capacities and the Government’s leadership and ownership of the development process. The Government and the donors should meet on a regular basis through a Donor- Namibia Government Development Forum to review the aid commitment and disbursements, the results achieved, the challenges encountered and the means to address and resolve them. The emphasis should be on achieving concrete development results on the ground in addition to the focus on aid disbursements. Both parties should be accountable to the outcomes and the results. For example, the donors should ensure predictability of aid flows in the medium-term and flexibility in utilization of aid to enable the Government to plan the development programmes and purse their implementation, monitoring and evaluation. On its part, the Government will make available the necessary complementary facilities, personnel and financial resources to ensure the timely implementation of the programmes. 5. Conclusions The development agenda of the new millennium is informed by the internationally agreed development goals, including the MDGs. MICs are home to about 40% of the world’s poor (those surviving on less than one US dollar a day). It is difficult to achieve the MDGs without sustained partnerships and increased focus on the MICs. Therefore, the international community should focus on the needs and priorities of the MICs in general, and the lower middle income countries in particular, to enable this group of 19 countries to achieve the internationally agreed development goals, including the MDGs through sustained economic growth and contribute to global stability, peace and security. Although classified as a lower middle income country, Namibia has one of the most unequal distribution of income and wealth in the world (Gini Coefficient of 0.66 versus an average of 0.43 for all MICS), with the situation of the majority of its population more similar to that of their cohorts in the African LDCs, this is a legacy of the and apartheid era. Redressing this tremendous inequality and improving the living standards of the large majority of the population in a legal and orderly manner requires substantial resources. The country faces a number of other economic and social challenges, including poverty, HIV/AIDS and other communicable diseases, inadequate economic growth, high levels of unemployment, inadequate capacity, and low levels of industrialization. Addressing these challenges requires substantial additional financial, technical and human resources and capacities both from domestic and international sources. Given the vulnerability of the economy to the volatility in international financial markets, increased grant aid and concessional loans are the appropriate means with which the international community should assist Namibia.” Aid for Trade” and Technical Assistance (TA), which is demand driven, sustainable and aligned to national development plans and strategies are vitally important. Furthermore, there is a need to strengthen the cooperation/coordination among the donors to enhance the Government of Namibia’s leadership and ownership of the development process. Both the Government and the donors should be accountable to the achievement of development results on the ground. At the global level, the World Bank and other IFIs are urged to create a special concessional window either as part of or along the same lines as the international Development Association (IDA) for MICs in general, and the lower middle income countries in particular, to enable this group of countries to access additional resources to effectively execute the internationally agreed development goals, including the MDGs. This is not only in the interest of MICs but also of the global community at large, as the improvement in the living standards of the people in MICs will contribute to many global public goods.
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