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07.06.2004 Business & Finance

Africa still wallowing in trade difficulties

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Accra, June 7, GNA - The 2004 African Development Report says Africa's problem is not whether to trade, "but what to trade in". The Report released at the just-ended African Development Bank Meeting in Kampala, Uganda, said another issue was the terms on which trade should take place with the developed countries or between themselves.

The Report said there could be no doubt that there were both static and dynamic gains from trade and that trade itself provided a vent for surplus production.

It said as usual, 60 per cent of the Continent's exports were derived from the sale of primary commodities. "But the price of primary commodities have been deteriorating for at least a century at an average rate of 0.5 per cent per annum."

The ADB Report said Africa ran a system where the foreign sector was lagging behind domestic growth partly due to insufficient demand for primary products of developing countries from industrial countries since the demand for primary goods increased less than proportionally to increases in global incomes.

The situation, the Report noted, "is also partly because of the necessity of developing countries to buy capital goods from industrialized countries".

The Report said international trade in primary products had not transmitted growth from the developed to the developing countries the way it did in the 19th century.

The Bank suggested to African countries not to ignore the supply side of the equation, but to pay attention to the question of how these investments would promote export earnings in their totality and in composition.

"A growth strategy that concentrates on expanding investment in human and physical capital without due regard to the foreign exchange productivity investment would be short-lived because balance of payment constraints will eventually put an end to such expansion rendering domestic resources including human capital, under utilized," the Report said. June 7 04.