Analyzing Cameroon s Poverty Reduction Strategy Paper By Abdelali Soto Vazquez 1

Transcription

1 Analyzing Cameroon s Poverty Reduction Strategy Paper By Abdelali Soto Vazquez 1 Table Contents Abstract... 1 Areas of Reform Addressed by Cameroon s Poverty Reduction Strategy Paper... 1 Strategic Areas on Cameroon s PRSP Related with Structural Reforms... 2 Evaluating the Privatization Strategy... 2 Evaluating the Poverty Diagnosis... 6 Evaluating Participation in the PRSP Making Process... 7 Evaluating the Overall Structure of the Reforms and Its Intended Implementation Graduated from the Masters of Arts in Managemnet Developmet from Rhur- Universitat in February 2006

2 Abstract This paper examines the PRSP for Cameroon prepared by the World Bank in 1993, focusing in the privatization policy as part of the structural reforms aimed to fight poverty and to make more efficient the national economy. 1

3 Areas of Reform Addressed by Cameroon s Poverty Reduction Strategy Paper 2 Since the 1990s, major changes in economic policies have been witnessed. In the macroeconomic sphere, structural economic policies were introduced by The International Monetary Fund and The World Bank, aimed at facilitating the operations of markets thereby improving efficiency and economic growth. The structural reforms, usually associated with what came to be called the Washington Consensus, reorient policies on international trade, finance and taxation, private sector participation in areas previously reserved for the state and institutional reforms. Comparing these combined steps, discussed within the context of the Economic Reforms, Income and Poverty course, with those appearing in the case of Cameroon s PRSP; one can come to two main conclusions: a) No direct reference with regard to an exchange rate policy strategy is stated somewhere along the poverty reduction strategy paper. This can be explained to some extent by the several adjustment programs that Cameroon pursued with modest success since late 1980s. But which contributed to an improvement in the terms of trade and a reduction in the current account deficit from 3 percent of the GDP in to 1.5 percent in In spite of this, Cameroonian authorities stress the importance of trade liberalization in order to strengthen and diversify their economy. b) The PRSP strategy emphasizes the importance of the fiscal policy, which was not directly referred as one of the reform areas in class but was partially addressed during the Public Sector Reform sessions and Domestic Financial Markets Reforms 2 PRSP, will be used along the text to abbreviate Poverty Reduction Strategy Paper 1

4 Strategic Areas on Cameroon s PRSP Related with Structural Reforms Key Strategic Areas of Cameroon PRSP Promoting a stable macroeconomic environment Diversifying the economy for accelerated growth Strengthening the private sector as the main engine for grow Developing infrastructure to support the production and social sectors Accelerating regional integration Building capacity and enhancing human resources Improving governance, the efficiency of administrative services and institutional framework Source: Cameroon Poverty Reduction Strategy Paper, p XII, 2003 Structural Reforms discussed in Class Fiscal policy reform 1 Public sector reform Institutional reforms Trade policy Public sector reforms Public sector reforms Domestic Financial Market Reforms Capital account Public sector reforms Trade policy Capital Account policy Domestic Financial Market Reforms Public sector reforms Institutional Reforms Finally is important to say that although reforms largely shared the objective of facilitating the operation of the markets, also as discussed during lectures, they varied substantially from country to country in their composition, depth and application, but is not within the purposes of this paper to deal with these issues. Evaluating the Privatization Strategy Focus on the privatization of state monopolies and price liberalization to allow market forces to allocate resources, Cameroonian PRSP describes participation of the private sector as integral to its efforts in modernizing the economy. Resulting on large efforts to restructure and privatize large public enterprises since late 90s, the process has taken a variety of forms, going from complete or partial sale of state assets, to contracting out, concession and leasing contracts, and the introduction of market concepts, concerns and work methods in public firms. 2

5 The following section will try to give a general overview on how this structural reform is reflected in the PRSP focusing first on those sectors where predominantly restructuring and privatization strategies are considered, then the focus will move to a short discussion about the different elements which authorities should taken into account to increase the chances of success of the privatization attempts under the economic theory framework. The paper indicates that structural reforms targeted here are concern with the privatization of major agroindustries, large utilities such as railroad, electricity, water and port activities. The Cameroonian economy is highly dependant on the agriculture, thus is not surprising to find government intervention up to a large extent. The Cameroonian Development Corporation (CDC) was preparing the privatization of banana, rubber and palm oil production. Also within rural activities a strategy to improve the participation of the private investor-- in crops cultivation, forestry, cattle fattening and processing, and non traditional stock farming--has been considered. It consists on enhancing the integration of global and subregional markets, modernize production facilities, foster trade organizations, improving the access to equipment and medicines, define appropriate institutional and regulatory frameworks, etc... Other two sectors experiencing a transfer in their ownership are the railways operations and port activities. In the first case a concession contract was signed and fund for financing track rehabilitation works was established. Port reform program included large institutional modification, rehabilitation and modernizing infrastructure in order to shift to the private sector the operation, management and maintenance of part of industrial and commercial activities from Duoala port. In spite of the privatization of electricity in 2001, the power sector has suffered from supply quality problems because lack of investment by the concessionaire, making necessary a renegotiation on contractual terms to start addressing this problem and to make its management more efficient and transparent. As for the Water Company, a series of reforms were put in place to privatize the still state- owned to promote access to the service. 3

6 Other sectors where we can perceive an active private sector involvement under some of the forms referred in the initial paragraph are: Education Area Housing within the Urban poverty strategy) Transportation Social protection Organizational structure -Private sector as provider of service or as a member of some broader body for planning, implementing and monitoring educational policies --A mixed capital corporations: one to build and regulate real state and other to grant credits. --Contract and concessions to provide the service -- Concessions and licenses for management Source: Cameroon Poverty Reduction Strategy Paper, p , 2003 Evaluation of this policy should not be focus only in the restructuring and privatization process as the only end but also on the achievements of other strategic areas. In the next paragraph a review of the main conditions that contribute to an integral privatization policy will be consider under the Cameroonian experience. Improvement of governance and the provision of appropriate institutional and regulatory frameworks, conducive for private enterprises, is an important task that governments should accomplish. As referred to some extent in the aforementioned section, in most areas institutional and legal frameworks reforms preceded the privatization processes. Furthermore, three main actions concerning private sector support policies and institutions can be identified as having an overall impact; First in August 2000 was implemented the National Governance and Corruption Prevention Program, aimed to fight corruption, enforce the rule of law and promote government/private sector/ and NGOs partnerships. Second is the creation of the Audit Court and The Constitutional Council along with an audit study to identify the factors of the poor performance of Cameroon s legal system. Third, this refers to a series of activities to enhance the private sector in general. Among the main measures it comprises are strengthening the regulatory framework provided by the Organization for Harmonization of Business Law in Africa, specially for coming investments and the implementation of the instruments planned in the Investment 4

7 Charter, including a Competitiveness Regulatory Council, Industry Commerce Observatory, etc. Ensuring the involvement and effective participation of different actors, reconciling the interests from multiple stakeholders and the assimilation of externalities either positive or negative when engaging in privatization, are all crucial conditions to reach an efficient outcome out of it. Regarding this issue, the Cameroonian strategy put a lot of emphasis on developing and promoting SME and SMI s participation, either as shareholders or suppliers of some created partnerships, in some of its private sector participation initiatives. Under this premise, measures to favor vulnerable groups (women, rural population, and young), training and capacity building programs and improved access to credit can be found. A special fund to improve the quality of credit application, build management capacity, and reduce indebtedness risks was established. A strong complement to the condition previously described is to develop competitive markets. In accordance with this three main arguments can summarize, how Cameroonian authorities are planning to do this. Firstly through restructuring the financial sector which also comprises the privatization of the Banque Internationale du Cameroun por l Epargen et le Credit and strengthening the implementation of the Douala Stock Exchange.; Secondly is the provision of infrastructure in order to develop internal and international markets. Special importance is given to road and rail network in construction and maintenance, as well as river and lake transportation, all of them with private participation. Much attention is given also to information and communication technologies, where site selection for community telecenters took into account the existence of commercial activities, specially farming, to make them more profitable by making price, quantity and product information available to producers. Thirdly, and not less important, is the provision of competent human capital by developing a curricula for vocational and technical education subsector in partnerships with private sector, not only for financing purposes but also oriented to meet the needs of labor market through a more realistic curricula. This last strategy in combination with the promotion of SMEs and SMIs, and a large plan to boost tourism and related services, are kind of compensatory measures that Cameroonian authorities, are willing to adopt in an effort to foster people active participation in the economy, including privatized firms, hoping to help to a more even distribution of gains. 5

8 The conclusion to make at the end of this cross-look on the specific measures of this core area and its transversal conditions is that, it will be worth assessing the execution of this strategic reform, not only from the perspective of specific measures contained in its implementation but combined to the other specific actions on economic diversification, structural reforms, building of infrastructure, upgrading of human resources and governance. Evaluating the Poverty Diagnosis In the preparation of the PRSP, Cameroon s government employed as base method a monetary approach to assess poverty and identify its characteristics. This quantitative analysis used the results of two major household surveys conducted in 1996 and The analysis was complemented by a qualitative evaluation of poverty and its determinants, based on participatory consultations with the population across the entire country. The quantitative analysis shows that: (i) the incidence of income poverty in Cameroon remains high, affecting 40.2 percent of the population in 2001, which does, however, constitute a marked 13.1 percent improvement over the 1996 level of 53 percent; (ii) poverty in Cameroon varies considerably according to regions, doubling between rural (50 percent) and urban areas (22 percent). Finally, a quantitative analysis of the determinants of poverty confirms the importance of such factors as the agro- economic region, the sector of economic activity, education level, and the availability of and access to infrastructure services in Cameroon. The main conclusions of the quantitative analysis are supported by findings from the participatory consultation with the population, which was organized by the authorities. Qualitative Participatory consultation meetings conducted to assess the state of poverty revealed that for an important segment of the population, poverty can be perceived by the difficulty for meeting their essential needs, access to basic public services. The population also perceives poverty as the result of a weakening social value system. Poverty is a complex social and economical phenomenon; it has many dimensions and several determinants, what someone may consider necessary to satisfy their needs can vary across time and cultures. As a result is very difficult to reach an agreement upon 6

9 the most appropriate method for measuring poverty. Nevertheless Cameroon s PRSP shows a very extensive and detailed analysis in its poverty evaluation that not only allows identifying the poor but at the same time provided the authorities with a valuable set of recommendations from the population regarding key strategic areas and priority actions for the poverty reduction strategy. While each one of the reform policies are in its own right, they should be viewed together as they are mutually dependant. In particular, Cameroonian populations have stressed the overriding need for public actions designed to improve their capacity to generate economic activities and to take their development in their own hands, including government support to the rural sector and to facilitate their insertion into the economy through well-targeted actions. This stresses the impact that all strategies oriented to the development of the private sector in general, and the agriculture sector in particular, are one of the best means for reducing poverty in Cameroon and stimulating economic growth. Evaluating Participation in the PRSP Making Process When the time to elaborate the PRSP came, Cameroon -with one of the most diverse populations in Africa- adopted a participatory approach that involved six major groups of actors. They are target groups (women, youth, and street children, handicapped) and beneficiary communities, local representatives and administrative workers, public and parapublic administrations, the civil society, the private sector, and development partner s representatives. Since its initial launching in January 2000 and to its final presentation on December 2002, participatory consultations were implemented. At these gatherings, population appraised the notion of poverty and proposed actions likely to help alleviate the phenomenon. About 10,000 people (about 40% of them women) drawn from some 200 groups expressed their views on these issues throughout the country. Similarly to the PRSP formulation, the participatory element equally appears in the monitoring and evaluation mechanisms, that aim to call upon different stake holders to contribute at different stages. Looking at the institutional framework which enables actors of participatory process to express themselves, three major structures are identified to contribute. They are: (i) The 7

10 Committee for Supervising and Coordinating Government Activities for a control and management structure of HIPC resources. (ii) The National Participatory Development Program (PNDP) at its conception aimed at reducing poverty and promoting sustainable development in rural areas by organizing beneficiaries and building their capacities. The operational mechanism comprises (iii) The Technical Committee for Monitoring Economic Programs (CTS) in charge of the follow up and evaluation of PRSP s implementation which also will produce by- yearly execution reports of the PRSP, based above all on data and/or analyses produced by the National Institute of Statistics, the ministries in each sector, and qualified nongovernmental entities. Aligned with this execution reports, the National Statistics Institute has adopted a minimum statistical program to measure the outcomes and impacts of PRSP on the population and to help government to take corrective measures when necessary. In summary, the setting up of a participatory approach in the follow-up and evaluation mechanism for the PRSP implementation addresses four main components, namely institutional and statistical mechanisms, participatory follow-up, and appreciation of beneficiaries, to formalize participation as an essential element in the fight against poverty. However, a closer examination at this process once it has been put into practice can reveal the need of a major commitment from the authorities and the community itself to reach its development objectives. Evaluating the Overall Structure of the Reforms and Its Intended Implementation The formulation of the PRSP in Cameroon was done within a framework of a large participatory process involving the civil society, private sector and donors beside government services. Moreover, the government showed keenness to include all actors in decision making on the PRSP and sought consensus on its final version. Priority setting is aligned with people needs- according to what can be perceived from the poverty diagnosis- furthermore number of instruments have been envisaged to achieve PRSP's targets effectively. They include prioritization of projects and programs, preparation of Medium Term Expenditure Framework to provide resource requirements for achieving the targets Similarly, the PRSP considers mechanisms to start devolving more functions and responsibilities to local authorities, and to promote intra and inter-ministries 8

11 coordination. As well community involvement has been provisioned, through carrying out several programs that are basically participatory in nature. Also, an in principle, a participatory framework for effectively monitoring and evaluating PRSP s execution, with selected indicators, has been designed. It is expected that with the effective implementation of the framework, the quality and coverage of the assessment will improve significantly. The PRSP has also recognized that corruption among official and local people is one of the biggest threats to national development. Hence, some measures have been designed to tackle it. Finally and notwithstanding the multiplicity of the factors that can influence on the success of poverty reduction strategies, it seems that the adequate structures have been put in place. Whether reforms can hope to succeed depends on its design and the strategy for implementing them, but they also depend on the political will to put the poor at the center and to counter the interest groups that may have a particularly strong incentive to keep the status quo. 9