President of the Trade and Development Board Ambassador Hasans of Latvia,
Excellencies,
Distinguished delegates,
Ladies and gentlemen,

1. The Group of 77 and China would like to start by thanking the Secretariat, in particular the Division on Africa, LDCs and special programmes, for the Economic Development in Africa Report, EDAR, 2022: Rethinking the foundations of export diversification in Africa – The catalytic role of business and financial services.

2. Africa remains one of the least diversified regions, with commodities accounting for more than 60% of total merchandise exports in 45 African countries. This overreliance on commodities leaves African countries vulnerable during periods of commodity price shocks, leading to lower productivity and investment, shrinking the profits of exporting firms, weakening fiscal balance, and offsetting long-term growth.

3. To this end, the consensus has been for export diversification to be viewed as a viable remedy, expected to promote productivity growth, increase demand for local intermediates and services, and to encourage spillovers of technological advancement. Many African countries have thus adopted export diversification policies and strategies focused on venturing into new products and sectors.

4. On the basis of the EDAR 2022, the Group of 77 and China consider it timely for African countries consider the drivers of export diversification with an orientation toward more economic, financial and trade-related factors in their diversification strategies are needed. For instance, the relevance of services as driver of diversification and value addition warrants further reflection.

5. The pursuit of such a path is based on the experience of advanced economies and emerging markets, in which the sophistication and diversification of exports were achieved on the back of the services sector, especially high-knowledge intensive services. These services have a catalytic impact in creating viable value chains and expanding markets and industries. A stronger service sector with increased value-added across sectors is key in enhancing the productivity and competitiveness of exports and facilitating viable integration of countries into productive value chains. However, services are weakly internalized in other economic sectors in most African countries. One of the main challenges that African countries are facing in the services sector are structural. It is critically important to strengthen the domestic supply capacity of services sector including having appropriate regulatory frameworks, putting in place the right sequence of policy reforms and market liberalization, and addressing major constraints facing fragile and small businesses.

6. Our Group therefore takes note of the EDAR 2022 effort to highlight the great potential for African countries of transforming and achieving higher levels of diversification and competitiveness through services. It shows the transformative role of services, particularly high-intensity services such as ICT and financial services may have on export diversification for African countries. Most African countries have relatively liberalized their services trade policies, but that has not been translated into tangible benefits for export diversification. We believe that strengthening regional services cooperation through African Continental Free Trade Arrangement, will enhance services trade competitiveness in Africa and support regional industrial development.

7. Our Group takes note of the increase in services exports in Africa to account for about 17 percent of total exports between 2015 and 2019. However, services remain highly concentrated in two traditional service sectors of transport and travel. Consequently, attempts to exploit services opportunities for value addition, market expansion and industrial upgrading through ICT and financial services have achieved limited success. The reality of the matter is that the market expansion for foreign suppliers in the ICT and financial services sectors has led to a deterioration in provision of services particularly in rural areas for many developing countries. These services are driven by profit and international competition; leading to the decimation of small players which end up being bought by bigger players. Therefore, protection of sensitive services sectors and development of SMEs, are critical policy options that African countries may consider as drivers to scale-up productive capacity and regional value chains.

8. In conclusion, the Group of 77 and China takes careful note of the conclusion of UNCTAD’s Economic Development in Africa Report 2022 that the services sector, in particular specific services and MSMEs, could provide a powerful push for export diversification in Africa, with the right policies and implementation of the AfCFTA as key enablers.

9. Our Group would therefore like to echo the EDAR 2022 calls for regulatory frameworks to assist private sector and MSMEs and to anchor the dynamic influence of services and technology for export diversification on the continent going forward.

I thank you, Mr. President.