Service on WTO and Trade Issues (July09/02)
Geneva, 25 Jun (Kanaga Raja) -- The global economic crisis, which has reached the African continent, requires the re-examination of existing approaches to international development, with one important response being deeper regional integration to address the long-standing structural weaknesses of African economies, the UN Conference on Trade and Development (UNCTAD) said Thursday.
its "Economic Development in
It argues that better links between countries, ranging from paved roads to banking cooperation, are needed to spur mutual economic growth. Weak physical and institutional infrastructure is the key obstacle to increasing intra-African trade and investment.
report notes that
to UNCTAD, the data available for the first quarter of 2009 reveal a
drastic plummet in FDI flows. The 54% decline was apparent among the
57 countries for which quarterly data on FDI inflows were available
as of mid-June 2009 (which account for roughly 60% of global inflows).
Forty-three countries, including major host countries such as
FDI outflows for the same period fell by 57% for 47 countries (accounting also for about 60% of global FDI outflows) for which such data are available. Thus, the majority of these countries (37 out of 47), including major investors such as France, Germany, Japan, and the United States, experienced declines in FDI outflows in the first quarter of 2009, said UNCTAD.
Recent data on cross-border M&As confirm this trend: they decreased by 77% for all countries in value in the first quarter of 2009 as compared to the first quarter of 2008, and by 62% over the last quarter of 2008.
UNCTAD has projected a gloomy outlook in terms of prospects for FDI for the rest of the year. If the first quarter trend continues, projections for the whole of 2009 are for global FDI inflows to drop by close to half.
annual UNCTAD report on Africa meanwhile says that while recognizing
that over the last two decades,
As part of a broader, well-designed development strategy, regional integration could enhance productive capacity, intensify economic diversification and improve competitiveness, the report argues, recommending the need for African countries to strengthen their regional physical infrastructure such as roads, railways, telecommunications and regional airlines in order to boost regional integration.
there are more regional organizations in
Some regional groupings have made some progress in their attempts to integrate, but the performance is mixed, says the report. It highlighted several promising cases, including CEMAC (Economic and Monetary Community of Central Africa) which has managed to form a monetary and customs union, and has harmonized the competition and business regulatory framework.
example is COMESA (Common Market for Eastern and
the benefits from regional integration are not the same for all members
of these groupings - in ECOWAS (Economic Community of West African States)
region, for example, three countries (
to the report, there remain economic and institutional challenges to
furthering intra-regional trade in
Institutional challenges include bureaucratic and physical hindrances, such as road charges, transit fees and administrative delays at borders and ports. Other challenges are related to the lack of coordination and harmonization of policies and regulations at the regional level, non-implementation issues and overlapping membership.
Despite the long history of regional integration on the continent, the level of intra-African trade remains low in comparison with intra-regional trade in other regions, both developed and developing. Over the period 2004-2006, intra-African exports represented 8.7% of the region's total exports. Intra-African imports, on the other hand, represented 9.6% of total imports.
back over the period 1960-2006, it appears that
"This was largely a consequence of the pattern of trade favoured by colonial rulers, which was extractive and outward-oriented, and did not encourage African countries to develop strong trade linkages among themselves."
Analysing more closely the trade patterns of the main exporters and importers from the region, the report finds that altogether, four countries (of which three are oil producers) account for over half of Africa's total exports to the rest of the world and eight countries together account for over three quarters of it.
With respect to top intra-African exporters, the report points to two countries that are particularly important to intra-African trade - South Africa's exports to the region alone represent almost a quarter of the total, while Nigeria's are worth roughly half that proportion.
at the top importers of African products, the report reveals the vibrant
terms of exports, the composition of intra-African exports is fairly
evenly distributed between fuels, non-fuel primary products and manufactured
goods. Non-fuel primary exports represent 30% of the total, 11% of which
represents exports of ores and minerals. Hence, agricultural product
exports account for only 19% of total intra-African exports, despite
the fact that agriculture accounts for nearly 30% of the production
of goods in
A more detailed look at the products traded with the rest of the world shows a high concentration of trade around a few products. The top seven exports by value make up more than two-thirds of the total. Intra-African trade is less concentrated. Thirty-nine products account for two-thirds of intra-African exports.
Overall, says the report, the more diversified nature of intra-African trade, when compared with its exports to the rest of the world, suggests that expanding intra-African trade could yield significant benefits to African countries in terms of diversifying their production to non-traditional products and especially manufactures.
explaining the low level of intra-African trade in comparison to trade
within other regions, the report finds that transport costs are arguably
the most important impediment to intra-African trade. Econometric estimates
find that transport costs in
The report also highlights the inefficiency of border procedures such as breakdowns of the electronic system for document lodging, poor coordination in the inspection of goods between different actors, overly zealous inspection of goods, insufficient opening times at the point of entry, and delays in duty refunds, among others, as imposing a heavy cost on intra-African trade mostly through the delays they cause. It is estimated that crossing a transit territory implies an additional 4% increase in trade costs irrespective of the distance covered.
The report notes that improving physical infrastructure can have an important effect on raising the levels of intra-African trade. Halving transport costs in a typical landlocked country, for example, can increase the country's trade fivefold.
the main intra-African road network could generate trade expansion of
around $250 billion over a period of 15 years for an investment of $32
billion, including maintenance. It is estimated that from the above-mentioned
Important as improvements in hard infrastructures are, they represent only a part of the solution to the constraints limiting intra-African trade. Many other issues - together termed "soft" infrastructure - impact on trade costs. These include the policy and regulatory environment, the transparency and predictability of trade and business administration, and the quality of the business environment more generally.
to some analysts, says the report, soft infrastructure issues such as
customs procedures and regulatory environment have been identified as
the main obstacles to intra-African trade. In
Services represent, or have the potential to become, significant sources of export earnings for a large number of African economies. This is particularly true of sectors such as tourism, trade logistic services (transport, harbours, etc.) or construction, among others, says the report, pointing to the importance of an efficient services sector on trade efficiency, a favourable trade balance of most African countries, and the competitiveness of African producers, both domestic and international.
report makes a range of policy recommendations on measures that African
countries could consider taking on to unlock the opportunities offered
by regional economic integration. These include deepening regional economic
integration to aid Africa's participation in the world economy; adopting
a regional cooperation strategy centred on infrastructure development;
and adopting a clear development strategy to help