Country Paper for the International Conference on Development by hpq74941

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									  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
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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
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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.
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                           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
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   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
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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
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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.
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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
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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.
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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
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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
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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
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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
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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
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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.
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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
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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
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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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