Africa "Net Creditor" to Rest of World, New Data Shows
By <
http://www.ipsnews.net/author/carey-l-biron/> Carey L. Biron
WASHINGTON, May 29. 2013 (IPS) - Over the past three decades, Africa has
functioned as a "net creditor" to the rest of the world, the result of a
cumulative outflow of nearly a trillion and a half dollars from the
continent.
The new data, to be formally released Wednesday by the African Development
Bank (AfDB) and Global Financial Integrity, a Washington-based watchdog
group, stands in stark contrast to widely held images of Africa receiving
massive amounts of foreign aid.
"While these figures are amazing, we have to recognise that they're being
directly facilitated by Western banks and tax havens." -- GFI's Clark
Gascoigne
Foreign assistance levels are indeed high for Africa - following on a 2005
pledge among the Group of Eight (G8) rich countries, the continent receives
more than 50 billion dollars a year, making it the world's most
aid-dependent region. Yet according to the
<
http://www.gfintegrity.org/storage/gfip/documents/reports/AfricaNetResource
s/gfi_afdb_iffs_and_the_problem_of_net_resource_transfers_from_africa_1980-2
009-web.pdf> new joint report, the interplay of corruption, tax evasion,
criminal activities and other factors resulted in a net outflow of some 1.4
billion dollars between 1980 and 2009.
"In development circles we talk a lot about how much aid is going to Africa,
and there's this feeling among some in the West that after we've been giving
this money for decades, it's Africa's fault if the continent's countries
still haven't developed," Clark Gascoigne, communications director at Global
Financial Integrity (GFI), told IPS.
"In fact, our research shows that while the West has been giving money to
Africa, far more is flowing out illicitly. Further, you can assume that
illicit outflows from other regions would likely lead to high net resource
transfers from other developing regions, as well."
In Africa, this trend appears to have particularly strengthened over the
past decade, during which time some 30.4 billion dollars every year are
thought to have illegally leaked from the continent. Of that, around 83
percent is thought to have come from North African countries alone.
Over the full three decades, perhaps counter-intuitively, dark-money
outflows appear to have originated particularly in resource-rich countries,
those most prominently engaged in oil, gas and other natural resource
extraction. Some of the most notable include Nigeria, Libya, South Africa
and Angola.
Such findings are bolstered by a new
<
http://www.revenuewatch.org/sites/default/files/rgi_2013_Eng.pdf> index,
released last week by the Revenue Watch Institute (RWI), another watchdog
group, that for the first time systematically correlated governments'
economic dependency on natural resources and low human development
indicators.
The RWI index looked at 58 countries responsible for the vast majority of
the world's petroleum, copper and diamond extraction, and reported that the
profits of their extractive sectors added up to more than 2.6 trillion
dollars in 2010, far outweighing Western aid flows. Yet more than 80 percent
of those countries had also failed to put in place satisfactory standards
for openness in these sectors - and half hadn't even taken basic steps in
this regard.
"In resource-rich countries, the natural resource sector is usually the main
source of illicit financial flows," the AfDB-GFI study states, noting a
finding by the International Monetary Fund (IMF) that Angola's oil sector in
2002 failed to report around four billion dollars.
"These countries generally lack the good governance structures that would
enable citizens to monitor the amount and use of revenues from the natural
resource sector. Often, rents and royalties derived from resource management
are not used to support the social and economic development of resource-rich
countries but instead are embezzled or expended in unproductive ways through
corruption and cronyism."
The impacts of this mass leakage on both African public coffers and foreign
development-focused aid are clear.
"The resource drain from Africa over the last 30 years - almost equivalent
to Africa's current gross domestic product - is holding back Africa's
lift-off," Mthuli Ncube, chief economist and vice-president of the African
Development Bank, said Tuesday.
"[But] the African continent is resource-rich. With good resource husbandry,
Africa could be in a position to finance much of its own development."
Halting "absorption"
The new report, which is being released Wednesday at the African Development
Bank annual meetings in Morocco, does not look into country-specific drivers
of these outflows.
Yet while it is clear that differing levels of strengthening of
country-level regulatory mechanisms will be required to ensure that natural
resource development in Africa benefits public sector aims, it is impossible
to ignore the role of Western countries in this ongoing situation.
"While these figures are amazing, we have to recognise that they're being
directly facilitated by Western banks and tax havens that allow for the
creation of anonymous shell companies, by Western governments that don't
share tax information and continue to lack adequate money-laundering
enforcement," GFI's Gascoigne says.
"While the onus for change is on both national and international players
alike, the Western countries can control the international component of this
dynamic - the international financial structure."
The AfDB and GFI analysts are encouraging strengthened alignment of
financial policies between African countries and those countries that are
"absorbing" these illicit flows. The United States, for instance, continues
to be the largest incorporator of shell companies in the world, while
Gascoigne says there is also far more that Washington and other Western
capitals can do on swapping tax information and refusing to tolerate bank
and tax haven secrecy.
In this regard, many observers are eagerly awaiting the G8 summit slated to
be held in the United Kingdom in mid-June. The first part of this year has
seen unique international momentum build around issues of tax evasion and
tax havens, energised particularly by depleted government coffers in the
aftermath of the global economic crisis.
British Prime Minister David Cameron, who is hosting the upcoming summit,
has taken on the issue of tax evasion as a key priority for his government's
G8 presidency this coming year. He has been widely praised for his recent
leadership on the issue, particularly for pushing a new global standard
under which governments would automatically share tax information.
European Union countries have now largely aligned themselves with the U.K.
stance. But key to watch at the June summit will be whether the United
States, Canada, Japan and Russia agree to sign on to a robust new initiative
- or choose instead to stand in the way of greater reform.
"Curtailing these outflows should be paramount to policymakers in Africa and
in the West because they drive and are, in turn, driven by a poor business
climate and poor overall governance, both of which hamper economic growth,"
GFI chief economist Dev Kar, formerly with the IMF, said Tuesday.
"The slower growth rate results in more aid dependency, with foreign
taxpayer funds filling the shortfall in domestic revenue - to the extent
that tax evasion is a part of illicit flows."
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Received on Wed May 29 2013 - 18:57:08 EDT