ANNUAL REPORT ON INTEGRATION IN AFRICA (ARIA-2002) OVERVIEW

ANNUAL REPORT ON INTEGRATION IN AFRICA (ARIA-

2002)

OVERVIEWOVERVIEW

Establish objective analytical tools, methods and

benchmarks for tracking regional integration in Africa

Establish objective analytical tools, methods and

benchmarks for tracking regional integration in Africa Assist member States, regional

integration organs and other stakeholders in developing their policies and programmws

Assist member States, regional integration organs and

other stakeholders in developing their policies and programmws

ARIA’s MISSION STATEMENT ARIA’s MISSION STATEMENT

Assess performance in major sectors

Assess performance in major sectors

SCOPE OF ANALYSIS

Examine performance of RECs Examine performance of RECs

Assess overall trends in regional integration across countries

and sub-regions

Assess overall trends in regional integration across countries

and sub-regions Identify critical issues and the

wayforward in regional integration

Identify critical issues and the wayforward in regional

integration

INDICATORS ASSESSING REGIONAL INTEGRATION

Innovative indices of quantitative and qualitative indicators : Innovative indices of quantitative and qualitative indicators :

Cover sectoral, national, sub- regional and Africa wide performance

Cover sectoral, national, sub- regional and Africa wide performance

Serve as benchmarks to measure and compare performance

Serve as benchmarks to measure and compare performance

MAIN FINDINGS

I. RECs AND AFRICA’S INTEGRATION

Building blocks

Africa has 14 RECs varying design, seven of which are considered building blocks

Africa has 14 RECs varying design, seven of which are considered building blocks

RECs map the entire continent, some are sub-sets of the seven

major ones

RECs map the entire continent, some are sub-sets of the seven

major ones

UMA

COMESA/EAC/IGAD

ECOWAS/UEMOA

MRUECCAS/CEMAC

CEPGL

SADC/SACU

IOC

CEN-SAD

To be effective RECs require political commitment and rationalization

To be effective RECs require political commitment and rationalization

Trade liberalization schemes fully or partially

implemented by almost all RECs

Trade liberalization schemes fully or partially

implemented by almost all RECs

RECs have achieved success

Some RECs (UEMOA, CEMAC) already exist as monetary unions. Others such as ECOWAS, COMESA, EAC actively pursuing monetary cooperation

Some RECs (UEMOA, CEMAC) already exist as monetary unions. Others such as ECOWAS, COMESA, EAC actively pursuing monetary cooperation Headway in infrastructure

development particularly in West Africa (ECOWAS) and southern Africa (SADC)

Headway in infrastructure development particularly in

West Africa (ECOWAS) and southern Africa (SADC)

Joint development of energy-eg. SADC power pool

Joint development of energy-eg. SADC power pool

Some RECs ( ECOWAS, CEMAC, EAC) made progress in free

movement of people

Some RECs ( ECOWAS, CEMAC, EAC) made progress in free

movement of people

Some tangible results but generally:

Results not matched protracted efforts

Results not matched protracted efforts

Many unfinished AEC protocols

Many unfinished AEC protocols

Little interaction among the RECs

Little interaction among the RECs

Regionalism not effectively mainstreamed in member country structures and operations

Regionalism not effectively mainstreamed in member country structures and operations

Low REC capacity particularly caused by shortage of

financial resources

Low REC capacity particularly caused by shortage of

financial resources

Overlapping membership Overlapping membership

0

5

10

15

20

25

30

35

Overlapping Membership

7

27

18 1

1 2 43

1. Membership to 1 REC

2 .Membership to 2 RECs

3. Membership to 3 RECs

4. Membership to 4 RECs

Countries

Membership

RECs made significant efforts on trade

liberalization

RECs made significant efforts on trade

liberalization

A. TradeA. Trade

II. SECTORAL PERFORMANCE

UEMOA, SACU, CEMAC already are custom unions (CUs)

UEMOA, SACU, CEMAC already are custom unions (CUs)

COMESA, ECOWAS, SADC,ECCAS AND UMA not yet CUs. But COMESA launched its FTA

COMESA, ECOWAS, SADC,ECCAS AND UMA not yet CUs. But COMESA launched its FTA

Greater harmony needed in trade liberalization programs

Greater harmony needed in trade liberalization programs

Formal intra-REC trade still low at about 10.5%

Formal intra-REC trade still low at about 10.5%

Intra-REC trade benefits are not widely shared since only a few countries dominate export trade

Intra-REC trade benefits are not widely shared since only a few countries dominate export trade

Would be higher if informal trade is recorded

Would be higher if informal trade is recorded

SADC, ECOWAS, CEN-SAD, COMESA, are top four

in intra- REC trade

SADC, ECOWAS, CEN-SAD, COMESA, are top four

in intra- REC trade

0

5

10

15

20

25

30

35

Four Best Performers in intra-REC Trade

Exports

Imports

%

SADC ECOWAS CEN-SAD COMESA

UEMOA and CEMAC put high premium on policy

convergence and making significant headway through surveillance mechanisms

UEMOA and CEMAC put high premium on policy

convergence and making significant headway through surveillance mechanisms

B. Macro-economic convergenceB. Macro-economic convergence

African countries making efforts to meet targets ( inflation rates, budget deficits etc.)

African countries making efforts to meet targets ( inflation rates, budget deficits etc.)

ECOWAS, COMESA and EAC also established

parameters

ECOWAS, COMESA and EAC also established

parameters

Inflation rates progressively reduced : UMA, UEMOA and

CEMAC leading. SADC and COMESA lagging

Inflation rates progressively reduced : UMA, UEMOA and

CEMAC leading. SADC and COMESA lagging

0

5

10

15

20

25

30

35

Inflation (1994-1999)

SADC UMA

10

UEMOA

10

CEMAC

12

ECOWAS COMESA

%

15* 17*

* Excluding Angola

and DRC

7

Budget deficits cut. UMA, CEMAC, SADC, ECOWAS and COMESA moved to acceptable levels

Budget deficits cut. UMA, CEMAC, SADC, ECOWAS and COMESA moved to acceptable levels

-6.0%

-5.0%

-4.0%

-3.0%-2.0%

-1.0%

0.0%

1.0%

UMA CEMAC UEMOA SADC ECOWAS COMESA

BUDGET DEFICIT AS % OF GDP

1994-1999

FDI grew by about 1.2% annually (1994-1999)

FDI grew by about 1.2% annually (1994-1999)

Most FDI went to SADC, CEN- SAD, COMESA and ECOWAS

Most FDI went to SADC, CEN- SAD, COMESA and ECOWAS

Capital Markets emerging-would encourage FDI inflows Capital Markets emerging-would encourage FDI inflows

% Share in Total FDI Inflows to Africa, by REC ( 1994-1999)

% Share in Total FDI Inflows to Africa, by REC ( 1994-1999)

21

16.4

11.9

5.4

3.1

2.7

1.9

COMESA

ECOWAS

UMA

UEMOA

IGAD

ECCAS

SADC

CEN-SAD 21

FDI Flows to REC as % of their GDP

(1994-1999)

FDI Flows to REC as % of their GDP

(1994-1999)

2.0

1.9

1.9

1.8

1.4

1.0

0.9

UEMOA

CEN-SAD

SADC

UMA

ECOWAS

ECCAS

IGADCOMESA

2.8

Inadequate infrastructure and physical integration Inadequate infrastructure and physical integration

C. InfrastructureC. Infrastructure

Limited infrastructure and networks, particularly in

energy, transport and communications

Limited infrastructure and networks, particularly in

energy, transport and communications

Still a major constraint Still a major constraint

Results in or compounds high cost of doing business Results in or compounds high cost of doing business

However some notable achievements

A number of transport missing links of the Trans African Highway filled in (e.g. ECOWAS)

A number of transport missing links of the Trans African Highway filled in (e.g. ECOWAS)

Railways interconnection projects in West Africa and Eastern sub-regions conceived

Railways interconnection projects in West Africa and Eastern sub-regions conceived

Major efforts on Air transport liberalization underway (Yamoussoukro Decision/Open Skies)

Major efforts on Air transport liberalization underway (Yamoussoukro Decision/Open Skies) Some recent achievements in telecommunications. Private

sector leading expansion of services

Some recent achievements in telecommunications. Private

sector leading expansion of services Progressive cooperation in hydropower, oil and gas pipelines

D. Production sectorsD. Production sectors

Supply side constraints Supply side constraints

Very limited REC cooperation in productive sectors Very limited REC cooperation in productive sectors

Low range of products constrained inter and intra-REC trade

Low range of products constrained inter and intra-REC trade

Inadequate attention to building and managing regional food reserves.

Inadequate attention to building and managing regional food reserves.

III. OVERALL ASSESSMENT USING INDICATORS

SADC, COMESA, and ECOWAS made good progress through 1997, however momentum weakened thereafter

SADC, COMESA, and ECOWAS made good progress through 1997, however momentum weakened thereafter

REC trends REC trends

Pace of Integration by RECPace of Integration by REC

Above average

6.6%

6.3%

6.0%

Average

4.7%

4.6%

4.2%

UEMOA

CEN-SAD

SADC UMA

ECOWAS

CEMAC

Close to average

3.7%

3.7%

3.6%

Erratic

COMESA

IGAD

EAC CEPGL

ECCAS

IOC

MRU

Pace of Integration by RECPace of Integration by REC

Overall continental trends Overall continental trends

A discernible move towards greater integration with

a burst from 1994 through 1997, but a general slow-down thereafter

A discernible move towards greater integration with

a burst from 1994 through 1997, but a general slow-down thereafter

The average pace towards integration in 1994 -1999

was 4.7 %, faster than GDP growth

The average pace towards integration in 1994 -1999

was 4.7 %, faster than GDP growth

The burst in 1995 aside, the real pace of integration was only 1 -2%

The burst in 1995 aside, the real pace of integration was only 1 -2%

Composite regional integration index

0

20

40

60

80

100

120

140

1994 1995 1996 1997 1998 1999

Weighted average

Recent developments could spur enhanced progress in regional integration:

Recent developments could spur enhanced progress in regional integration:

Implementation of FTA by 11 members of COMEASA Implementation of FTA by 11 members of COMEASA

Future prospectsFuture prospects

Beginning of the implementation of the SADC trade protocol

Beginning of the implementation of the SADC trade protocol

Increased energy coordination in ECOWAS and UEMOA Increased energy coordination in ECOWAS and UEMOA

Attempts to revive integration efforts in ECCAS

Attempts to revive integration efforts in ECCAS

Fast track monetary harmonization by non-UEMOA members of ECOWAS

Fast track monetary harmonization by non-UEMOA members of ECOWAS

IV. OUTSTANDING ISSUES AND THE WAY FORWARD

How can gains and losses from trade

liberalization schemes be reconciled and losses minimized ?

How can gains and losses from trade

liberalization schemes be reconciled and losses minimized ?

A. Trade A. Trade

Shouldn’t the supply-side constraints be addressed first ?

Shouldn’t the supply-side constraints be addressed first ?

How can informal trade be mainstreamed and

measured regional integration arrangements ?

How can informal trade be mainstreamed and

measured regional integration arrangements ?

How best can RECs attain policy convergence

among their members ?

How best can RECs attain policy convergence

among their members ?

B. Macroeconomic convergence B. Macroeconomic convergence

C. Physical integration C. Physical integration

What needs to be done to complete missing

links in infrastructure

What needs to be done to complete missing

links in infrastructure

How can the private sector be attracted to invest in physical infrastructure ?

How can the private sector be attracted to invest in physical infrastructure ?

D. Strengthening RECs D. Strengthening RECs

How best can the RECs be rationalized ?

How best can the RECs be rationalized ?

How can RECs have supranational authority to enforce decisions ?

How can RECs have supranational authority to enforce decisions ?

How can effective coordination between RECs and

Countries be attained ?

How can effective coordination between RECs and

Countries be attained ?

How can political and stakeholders support be solidified for accelerating regional integration ?

How can political and stakeholders support be solidified for accelerating regional integration ?

E. African Union and regional integration

E. African Union and regional integration

How can the phases of the Abuja Treaty (AEC) be aligned to the African Union time table and process ?

How can the phases of the Abuja Treaty (AEC) be aligned to the African Union time table and process ? How can the Union reinforce and complement the activities of RECs ?

How can the Union reinforce and complement the activities of RECs ?

How can the Union institutions be sequenced and aligned to ensure maximum support to regional integration.

How can the Union institutions be sequenced and aligned to ensure maximum support to regional integration.

How can RECs be made more effective in building the

African Union ?

How can RECs be made more effective in building the

African Union ?

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Recent developments could spur enhanced progress in regional integration:

Recent developments could spur enhanced progress in regional integration:

Implementation of FTA by 11 members of COMEASA Implementation of FTA by 11 members of COMEASA

Future prospectsFuture prospects

Beginning of the implementation of the SADC trade protocol

Beginning of the implementation of the SADC trade protocol

Increased energy coordination in ECOWAS and UEMOA Increased energy coordination in ECOWAS and UEMOA

Attempts to revive integration efforts in ECCAS

Attempts to revive integration efforts in ECCAS

Fast track monetary harmonization by non-UEMOA members of ECOWAS

Fast track monetary harmonization by non-UEMOA members of ECOWAS

Early momentum may be due to : Early momentum may be due to :

The initial impulse of coming into force of AbujaTreaty

The initial impulse of coming into force of AbujaTreaty

Two possible explanations

Earnest effort to harmonize the mandates and policies of the RECS

Earnest effort to harmonize the mandates and policies of the RECS

UEMOA, ECOWAS, SADC-above the average

UEMOA, ECOWAS, SADC-above the average

CEMAC, CEN-SAD, UMA on the average line CEMAC, CEN-SAD, UMA on the average line

EAC, IGAD, COMESA close to average EAC, IGAD, COMESA close to average

CEPGL, ECCAS, MRU, IOC lagging with erratic

performance

CEPGL, ECCAS, MRU, IOC lagging with erratic

performance