African Development Bank - Indian Ocean Commission Countries … · 2019-06-29 · Indian Ocean Commission Countries A Flagship Study on Regional Integration Summary Final Report

Indian Ocean Commission CountriesA Flagship Study on Regional Integration

Summary Final ReportDecember 2012

Indian Ocean Commission CountriesA Flagship Study on Regional Integration

Summary Final ReportDecember 2012

Bank’s Future Cooperation with the Indian Ocean Commission

Flagship Study Report

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Copyright © 2013 African Development

Bank Group

Angle de l’avenue du Ghana et des Rues

Pierre de Coubertin et Hédi Nouira

BP 323 -1002 TUNIS Belvédère (Tunisia)

Tél: +216 71 333 511 / 71 103 450

Fax: +216 71 351 933

E-mail: [email protected]

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The Knowledge & Information Center (KVRC),

African Development Bank

Address: BP 323 - 1002 TUNIS Belvédère

(Tunisia)

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The findings, interpretations and conclusions expressed in

this report are those of the author/s and are not necessarily

those of the African Development Bank. In the preparation

of this document, every effort has been made to offer the

most current, correct and clearly expressed information

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use.

For more information about this report and other

information on the Indian Ocean Commission Member

States, please visit

http://www.afdb.org/en/countries/southern-africa/

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Regional integration of Africa is at the core of the African

Development Bank Group’s mandate. To this end, Regional

Integration Strategy Papers (RISPs) are prepared to

complement Country Strategy Papers (CSPs) as the main

instruments for programming Bank support to Regional

Member Countries (RMCs). The Southern Africa and East

Africa RISPs for 2011-2015 both discuss the specific

challenges faced by countries belonging to the Indian Ocean

Commission (IOC) due to their geographic location, poor

linkages to the continent, small domestic markets, and

vulnerability to climate change.

This Flagship Report analyses the above challenges and

provides a framework for Bank support to and collaboration

with the IOC and its Member States, namely, Comoros,

Madagascar, Mauritius and Seychelles. The study was

commissioned by the Bank and carried out by a consultancy

firm under the supervision of Regional Department South B

and a task team comprising staff from East Africa Regional

Resource Centre (EARC), Regional Department East B

(OREB), Water and Sanitation Department (OWAS) and

NEPAD, Regional Integration and Trade Department (ONRI),

among others. The team reviewed the Bank’s strategic

documents on regional integration and held consultations

with the IOC and its Member States. The specific objectives

of the study were to:

• Analyze the challenges faced by the IOC Member

States, both individually and collectively;

• Identify actual and potential growth drivers in the region;

Recommend ways to strengthen the Bank’s

partnership with the IOC based on the strategic

directions and comparative advantages of both

organizations, while identifying capacity constraints that

need to be addressed; and

• Suggest priority areas for intervention by the Bank and

areas of collaboration with other partners, with the aim

of developing a pipeline of projects.

The major findings and proposed areas of cooperation were

discussed and validated by representatives from the IOC

Member States and the IOC Secretariat at a workshop held

in Port Louis, Mauritius in November 2011. Further

discussions with IOC’s representatives and internally at the

Bank confirmed the main findings and recommendations of

the study.

It is my expectation that this report will form a solid basis for

future regional integration work in the IOC region, and will be

widely used by all stakeholders in the island states to support

the agenda of integration with the rest of the continent.

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Foreword

Zondo SAKALA

Vice President, Country and Regional Programs and Policy

African Development Bank Group

The African Development Bank (AfDB) has always embraced

the vision of an empowered, prosperous and integrated

continent. Regional integration has been part of its Charter

since its establishment in 1964, and has been given priority

in all major Bank strategies. The AfDB’s Strategy for 2013 –

2022 establishes the strategic emphasis on inclusive green

growth, which is to be embodied in all the AfDB’s activities

including interventions and knowledge products.

This Flagship Report analyses the strengths, weaknesses,

opportunities and threats (SWOT) that the IOC Member

States face in the process of regional integration and the

areas in which cooperation among the countries can be

enhanced through targeting key constraints relevant to

infrastructure linkages, institutional capacity and vulnerability

to disasters and pandemics. It aims to inform the ways in

which the AfDB can proceed to strengthen support for the

IOC Member States, whose needs have not been sufficiently

addressed in the existing RISPs.

The preparation of this Flagship Report was based on broad

cross-complex collaboration and coordination. Extensive

stakeholder consultation is another important aspect during

the preparation. The Flagship Report is organized in a way

that, following the statement of purpose of the report,

Chapter 2 presents an analysis of growth and

macroeconomic performance in the IOC region, Chapter 3

covers structural constraints to growth and regional

cooperation, Chapter 4 identifies challenges and

opportunities for regional cooperation, Chapter 5 draws a

framework for strategic cooperation with the IOC Member

States, and Chapter 6 summarizes the conclusions and

recommendations.

Recognizing the need to respond to our clients’ demands

and adapting to a changing environment, the AfDB will

continue to dialogue with the IOC grouping, both at the

regional and country level, to enhance the assistance through

our regional integration efforts.

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Preface

Chiji OJUKWU

Regional Director

Regional Department South B

This report was prepared by the African Development Bank’s

Regional Department South B (ORSB) with assistance from a

Bank-wide task team and a group of consultants. The task

team was led by Ms. Barbara Ramos, Economist (ORSB),

who handed over to Ms. Martha Phiri, Principal Country

Economist (Mauritius Liaison Office) and subsequently to Mr.

Oscar Pitti Rivera, Economist (ORSB) and Ms. Helga Peres,

Country Portfolio Officer (ORSB), who redrafted the final

consultant report. The team received overall guidance from

Mr. Ernest Addison, Lead Economist (ORSB) and publication

of the work was assisted by Ms. Xin Long, Economist (ORSB).

The report benefitted from valuable feedback from staff in

different departments, including Richard Walker, Principal

Regional Economist (EARC); Philippe Trape, Senior Country

Economist (OREB); Abdelkrim Bendjebbour, Resident

Representative (Madagascar Country Office, MGFO); Jean

Marie Vianey Dabiré, Senior Country Economist (MGFO);

Hajavola Rakotondrazaka, Private Sector Field Officer

(MGFO); Bruno Boedts, Chief Operations Officer (MGFO);

Nancy Ogal, Senior Water and Sanitation Engineer (OWAS);

Davies Makasa, Principal Transport Engineer (Transport and

ICT Infrastructure Department, OITC); Maria Mdachi, Senior

Education Analyst (Ethiopia Country Office / Human and

Social Development Department, ETFO/OSHD); El Iza

Mohamedou, Chief Political Analyst (Fragile States Unit,

OSFU) and Mtchera Chirwa, Chief PPP Infrastructure

Specialist (Southern Africa Resource Centre, SARC). Staff

from the AfDB’s NEPAD, Regional Integration and Trade

Department (ONRI) also provided valuable support.

Mr. Aloysius Ordu (the then Vice President, Country and

Regional Programs and Policy, ORVP), Mr. Chiji Ojukwu

(Director ORSB), Mr. Septime Martin (Resident

Representative, Angola Country Office, AOFO) and Mr. Steve

Kayizzi-Mugerwa (Director, Development Research

Department, EDRE), helped to initiate the project and

secured the funding.

The administrative staff of ORSB, Ms. Jacqueline Busumbru,

Ms. Meriem Aloulou, Mr. Kayode Olukayode and Ms. Dorra

Ben Niran have contributed to the successful execution of

the project. Valuable editorial service was provided by

Deborah Davis. It is to acknowledge that the maps and

diagrams used in this publication do not, in any way, imply

recognition of any states or political boundaries by the African

Development Bank or the authors.

Vice President: Zondo SAKALA

Regional Director:Chiji OJUKWU

Lead Economist: Ernest ADDISON

Lead Consultant: Ivan LINHART

Core Task Team: Barbara RAMOS, Martha PHIRI, Helga

PERES, Oscar PITTI RIVERA

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Acknowledgements

ACRONYMS AND ABBREVIATIONS

EXECUTIVE SUMMARY

1. PURPOSE OF THE REPORT

1.1. THE BANK AND REGIONAL INTEGRATION

1.2. REGIONAL INTEGRATION ARRANGEMENTS IN THE IOC REGION

2. GROWTH AND MACROECONOMIC PERFORMANCE IN THE IOC REGION

2.1. THE IOC MEMBER STATES: DIVERSITY AND COMMONALITIES

2.2. GROWTH AND MACROECONOMIC PERFORMANCE

2.3. MACROECONOMIC POLICY AND PERFORMANCE

3. STRUCTURAL CONSTRAINTS TO GROWTH AND REGIONAL COOPERATION IN THE IOC

3.1. REGIONAL TRADE

3.2. PRIVATE SECTOR DEVELOPMENT

3.3. REGIONAL INFRASTRUCTURE

3.4. AGRICULTURE, FISHERIES AND SUSTAINABLE DEVELOPMENT

3.5. SOCIAL COHESION, CIVIL PROTECTION AND SECURITY

4. CHALLENGES AND OPPORTUNITIES FOR REGIONAL COOPERATION

5. A FRAMEWORK FOR STRATEGIC COOPERATION WITH THE IOC MEMBER STATES

5.1. REVIEW OF THE BANK’S INTERVENTION AT COUNTRY AND REGIONAL LEVELS

5.2. INSTITUTIONAL CAPACITY BUILDING OF THE IOC SECRETARIAT, MEMBER STATES AND PRIVATE SECTOR

5.3. REGIONAL INFRASTRUCTURE DEVELOPMENT

5.4. NATURAL DISASTER AND REGIONAL PANDEMICS RESPONSE MANAGEMENT

6. RECOMMENDATIONS FOR PROGRAMMING SUPPORT TO THE IOC

ANNEXES

ANNEX 1: KEY ECONOMIC AND SOCIAL INDICATORS BY REGIONAL MEMBER STATES

ANNEX 2: KEY MACROECONOMIC INDICATORS (EXCLUDING REUNION)

ANNEX 3: CSP PRIORITIES OF COMOROS, MADAGASCAR, MAURITIUS AND SEYCHELLES

ANNEX 4: EASTERN AFRICA RISP

ANNEX 5: SOUTHERN AFRICA RISP

ANNEX 6: PROPOSED ACTION PLAN

REFERENCES

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Table of Contents

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Acronyms and Abbreviations

ABEDAADBADB-BADB-XADFAGOAAICDATSAUCCICESCOMESACOSEPDTAEACEARCECCASEDFEIBEPAEASSyEUFTAHDIIBRDIFINSEEIOCIPPAIPPFICTJICAKFMDGsNEPADOPEPORCEOREBORSBPARDACPIDAPLOsPRIDERECRISRISPRMCESADCSARCSEFASEGASEGANETUCCIIOUNDP

Arab Bank for Economic Development in AfricaAfrican Development BankAutomatic Dependent Surveillance – Model BAutomatic Dependent Surveillance – Model XAfrican Development FundAfrican Growth and Opportunity ActAfrican Infrastructure Country DiagnosisAid for Trade StrategyAfrican UnionChamber of Commerce and IndustryCOMESA-EAC-SADC Tripartite ArrangementCommon Market for Eastern and Southern AfricaEmergency and Civil Protection CentreDouble Taxation AgreementEast African CommunityEast Africa Regional Resource CentreEconomic Community of Central African StatesEuropean Development FundEuropean Investment BankEconomic Partnership AgreementEastern Africa Submarine Cable SystemEuropean UnionFree Trade AreaHuman Development IndicatorInternational Bank for Reconstruction and DevelopmentInvestment FundNational Institute for Economic and Employment Statistics Indian Ocean CommissionInvestment Promotion and Protection AgreementsInfrastructure Project Preparation FacilityInformation and Communication TechnologyJapanese International Cooperation AgencyKuwait FundMillennium Development GoalsNew Partnership for Africa DevelopmentOrganization of the Petroleum Exporting CountriesRegional Department Central Regional Department East BRegional Department South BProject in the agricultural sector based in ComorosProgram for Infrastructure Development in AfricaPermanent Liaison OfficersIntegrated Regional Development Programme for TradeRegional Economic CommunityRegional Integration StrategyRegional Integration Strategy PaperRegional Multi-disciplinary Centre of Excellence Southern Africa Development CommunitySouthern Africa Resource CentreSustainable Energy Fund for AfricaSurveillance Épidémiologique des AlertesSubmarine Extended Gateway NetworkUnion of Chambers of Commerce and Industry of the Indian OceanUnited Nations Development Programme

This Flagship Study was commissioned with the aim of

providing input into the African Development Bank’s (AfDB)

activities in support of integration of the Indian Ocean

Commission (IOC) Member States. In addition to enabling

the Bank to enhance dialogue with the states of the IOC, the

study serves as a knowledge product for policymakers in the

region, Development Partners, officials from the private and

public sectors, and experts involved in the IOC regional

integration process.

The Bank’s main instrument for programming support to

regional integration are the Regional Integration Strategy

Papers (RISP), which provide the overarching framework

for intervention in the five regions (Center, East, North,

South and West). RISPs also recognize the specificities of

certain groups of countries within each region. The RISPs

for Southern and East Africa, for example, acknowledge

the specific challenges faced by the countries belonging to

the IOC, due to their geographic location, poor linkages to

the continent, small domestic markets, and high

environmental vulnerability. These challenges have been the

subject of discussions between the Bank and the IOC

Secretariat on several occasions, including past missions

of the IOC Secretariat to Tunis, and recently during the last

Bank’s Annual Meetings held in Arusha, Tanzania (May

28th – June 1st, 2012). The discussions focused on the

need for specific interventions and innovative instruments

to support the participation of small island states in regional

programs.

The study proposes that the AfDB should focus its future

cooperation with the IOC on three areas: (a) institutional

capacity building of the IOC, its Member States, and its

private sector; (b) regional infrastructure development; and

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Executive Summary

(c) response management related to natural disasters and

regional pandemics.

1.1. The Bank and Regional Integration

Regional integration is at the core of the African Development

Bank’s mandate for the continent. The Regional Integration

Strategy (RIS) sets regional infrastructure and institutional

capacity building as priorities for each region—west, east,

southern, north and central Africa—and the Regional

Integration Strategy Papers (RISPs) focus Bank support in

each region on the provision of regional public goods,

regional financial integration, and Aid for Trade.

The RIS clearly states that innovative instruments are needed

to help Africa’s small, isolated and environmentally vulnerable

island countries to participate in regional programs.

However, no specific efforts to address the needs of the

island states are included in any of the regional strategies.

This Flagship Report aims to fill that gap by providing a

framework for Bank support to the four African small island

states that comprise the IOC – Comoros, Madagascar,

Mauritius and Seychelles. The study analyzes the challenges

faced by the IOC Member States; identifies growth drivers

and capacity constraints; recommends ways to strengthen

the Bank’s partnership with the IOC; and suggests priority

areas for intervention.

1.2. Regional Integration Arrangements in the IOC Region

The IOC was created in 1984 to promote sustainable

development of its Member States, speak for them in

international fora, and defend their interests with regard to

specific environmental and economic issues. Since 2005,

the IOC has also played an active role in promoting regional

trade and economic cooperation, transport and ICT

infrastructure, human development, and a regional cultural

identity. In 2009, the IOC adopted an Aid for Trade strategy

that prioritized development of a maritime corridor to

facilitate trade, the promotion of renewable energies, and

enhancement of food security. In 2011, the Council of

Ministers approved the establishment of an IOC economic

and trade area to catalyze the development of regional

economic integration programs, instruments and

mechanisms, as a stepping stone to integration with the

continent’s larger economic communities, including the

Tripartite arrangement (COMESA-EAC-SADC, or CES).

Despite the political willingness of Member States, however,

cooperation in the region has been constrained by the

limited institutional capacity of the IOC Secretariat to

implement regional initiatives; and by the absence of a

regional strategy to strengthen economic and trade

cooperation, outline key activities, or identify necessary

financial and human resources. This study provides a

knowledge base and offers guidance for policymakers in

the region, including private and public sector officials and

experts involved in the IOC regional integration process. It

reviews the status of regional cooperation in the areas of

trade, infrastructure, private sector development, social

cohesion and sustainable development; identifies growth

drivers and constraints; proposes areas for Bank support

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1. Purpose of the Report

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to and enhanced cooperation with the IOC; and suggests

an action plan for implementation.

2.1. The IOC Member States: Diversity and Commonalities

The IOC Member States have heterogeneous economies,

geographies, populations, and social indicators. GDP per

capita ranges from around US$430 in Madagascar and

US$810 in Comoros to around US$23,000 in Reunion.

Mauritius and Seychelles rank 52nd and 77th in the Human

Development Index and are classified as middle-income

countries (MICs), while Comoros and Madagascar rank

163rd and 151st, have extremely high poverty rates, and are

unlikely to meet the MDGs for infant and maternal health,

environmental protection, and malnutrition by 2015.

The economies also vary widely in size. Seychelles and

Comoros have nominal GDPs of less than US$1 billion and

very limited national markets; while Madagascar, Mauritius

and Reunion have nominal GDPs above US$1 billion and

relatively well-developed internal markets relative to

population size. Madagascar has a population of almost 20

million, which represents 87 per cent of the total population

of the IOC region and is more than 200 times the population

of Seychelles.

In spite of these differences, regional integration can help all

IOC states to overcome the challenges of isolation and

remoteness, the risk of marginalization in wider regional

groupings, climate vulnerability, and the lack of natural

resources (except in Madagascar). A key issue is to define a

multi-dimensional strategy that can address the differing

needs of these remote island countries while helping the

entire region to integrate with a distant continental

constituency.

2.2. Growth and Macroeconomic Performance

The IOC region has experienced poor economic growth

performance since 2008, as a result of political instability in

Madagascar and Comoros, and poor performance in

Madagascar and Reunion. Madagascar, in particular, has

seen increased economic and social fragility since the

eruption of political instability in 2009. Real GDP for the IOC

states has been well below growth rates on the continent

and in EAC and SADC for the past few years (Figure 1). The

global crisis exacerbated the effects of the region’s insularity

and other structural constraints.

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2. Growth and Macroeconomic Performance in the IOC Region

Figure 1 Comparative Regional Real GDP Growth Rates (2005-2011)

Sources: AEO 2011, EAC Statistical Portal, SADC and INSEE

The services sector accounted for around 60 per cent of the

regional GDP in 2010, compared to 20 per cent each for

industry and agriculture. The main growth drivers are tourism,

construction and public works, agro-food processing, and,

to a minor extent, light industries such as textiles. To enhance

resilience against external shocks and maximize unexploited

potential, further diversification of exports is necessary.

Telecommunications and renewable energy are growing

rapidly, and may become strategic sectors for the region in

the short to medium term. There is also huge potential for

growth in banking and financial services, international

contracting, and business services. However, the full

potential of these sectors remains unexploited due to the lack

of reliable transport and telecommunications infrastructure to

connect the IOC states with the wider CES regional grouping.

Other constraints include the lack of a legal and regulatory

framework for trade in services, and impediments to the free

movement of persons. While there have been efforts to

improve governance and the business environment, much

remains to be done, especially in Madagascar and Comoros.

Growth performance by country

In Comoros, the services sector contributed 45.3 per cent

to GDP in 2010, followed by the agriculture sector at 44 per

cent, and the industrial sector, at only 10.7 per cent of GDP

in 2010. Economic growth in 2010 was negatively affected

by political tensions related to the democratic transition

process, and a shortfall in external demand for the country’s

most important cash crops, ylang-ylang and vanilla (Comoros

is the world’s leading producer of ylang-ylang and the

second world’s producer of vanilla after Madagascar). Long-

term sustainable growth will depend on strengthening

political governance, diversifying exports, improving the

business environment, and providing the infrastructure

necessary for private sector development, including in the

tourism sector. In 2010, Comoros ranked 121st out of 139

countries on the World Governance Index.

In Madagascar, the composition of the economy has not

changed over the past 30 years. The services, agriculture

and industry sectors represent 58, 28 and 14 per cent of

GDP, respectively. Political instability over the past years has

led to the closure of preferential access to the United States

and EU markets for Madagascar’s textile products; a

suspension of development aid; and a freezing of

infrastructure and public works financing. Foreign investors

face a high risk of expropriation and discretionary revision of

concession contracts. The country represents significant

investment opportunities if governance is improved.

Madagascar currently ranks 104th on the World Governance

Index.

In Mauritius, a relatively diversified economy combined with

long-term political stability has resulted in steady growth,

driven by the services sector, particularly real estate and

business activities; transport, storage and communications;

and financial intermediation. The banking and financial

sector, considered by analysts to be mature and healthy,

represents 12 per cent of GDP and has played a critical role

in growth by facilitating access to lower-cost credit for

private sector firms. The traditional sectors of tourism,

fisheries and textiles have nearly recovered from the effects

of the global crisis. However, the economy is highly

dependent on the EU market and remains vulnerable to

external shocks. The challenges are to diversify export

markets, enhance productivity and competitiveness in

traditional sectors, strengthen governance, and improve

transport and communications infrastructure. Mauritius

ranks 30th on the World Governance Index and 1st in Africa

in the Doing Business Indicators.

In Reunion, which is an overseas Department of France,

efforts to diversify the economy include the development of

high-intensity knowledge, renewable energy, and ICT. French

internal transfers (45 per cent of GDP in 2009) and EU

structural development funds (€1.89 billion for the period

2007-2013) have enabled Reunion to develop infrastructure

that connects it with the rest of its national territory (France)

and the African continent. The global financial crisis and

European debt crisis caused real GDP growth to fall in 2009

and 2010. Growth turned slightly positive in 2011, aided by

strong performance in the tourism sector. Challenges include

promoting productive activities oriented toward markets

other than the EU, and increasing the competitiveness of

local production against imports. Local enterprises now

provide only half of consumption needs and a mere quarter

of employment. The development of the local private sector,

in particular small and medium-size (SME) industries, is

critical for economic growth and job creation.

In Seychelles, the services sector represents roughly 73 per

cent of GDP in 2010, compared to 20 per cent for industry

and only 2.4 per cent for agriculture. Tourism has been the

main driver of growth after the global financial crisis, due in

large part to Government efforts to develop new markets,

increase flights to Seychelles, and construct high-end

tourism infrastructure. Other growth drivers are the

construction and ICT sectors, and the positive impacts of the

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Government’s economic reform program. However, growth

remains fragile and subject to structural constraints. The

country ranks 103rd out of 183 countries for ease of doing

business, lack diversification, and imports most food

commodities. The fisheries industry is still suffering from a

lack of infrastructure, declining fish stocks, and increasing

acts of piracy in Seychelles’ waters. The latter also affects

the yachts and cruise ships segment of the tourism sector

and the price of food imports.

2.3. Macroeconomic Policy and Performance

The macroeconomic environment in four out of the five IOC

Member States is relatively stable as a result of prudent fiscal

and monetary policies implemented during the past ten years

(Reunion’s macro policies are not considered here because

they are aligned with France). However, the policies of the

different countries are not convergent due to the lack of a

regional policy and to the structural differences among the

economies.

All four countries have huge structural current account

deficits, reflecting their high import dependency and low

export performance. All are characterized by large budget

deficits except for Seychelles, which shows a surplus as a

result of strict IMF programs during 2008-2011. Reunion,

and to some extent Comoros, have benefited from

remittances and the fixed exchange rate arrangement with

France. Mauritius, Madagascar and Seychelles have an

independent monetary policy framework, with flexible

exchange rate regimes that allow adjustments when

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necessary to restore internal and external equilibrium.

3.1. Regional Trade

Despite the political will and efforts of the IOC Secretariat and

Member States to accelerate economic and trade

cooperation, intra-IOC trade has been very limited –

averaging only 3.2 per cent of total IOC trade for the period

2008-2010 (Table 1).

The composition of this trade is much more diverse than

trade with the rest of the world. While intra-regional exports

are dominated by limited amounts of manufactured

products / intermediates and raw materials (textile semi-

finished, fiber, paper, soap, lumber, animal feed, fish and

shellfish, nuts, vegetables), exports to the rest of the world

(mainly the EU) are mostly primary products (vanilla, ylang-

ylang, minerals).

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3. Structural Constraints to Growth and RegionalCooperation in the IOC

Member StatesIntra-Regional Trade (percent of total trade)

2008 2009 2010 Average 2008-2010

Comoros 3.6 4.0 2.9 3.5

Madagascar 2.4 4.5 3.3 3.3

Mauritius 2.3 3.2 2.2 2.5

Reunion 4.4 4.3 4.2 4.3

Seychelles 5.2 4.5 1.5 4.1

TOTAL 2.9 4.0 2.9 3.2

Constraints to intra-regional trade include inadequate

maritime and aviation infrastructure, absence of an effective

trading regime, lack of progress in creating an integrated

economic and commercial zone, and the limited movement

of persons and professionals. Added to these are the

Secretariat’s weak institutional capacity for setting standards

and resolving trade disputes.

The IOC authorities and Member States are aware that

strengthening economic and trade cooperation within the

region is strategically essential to unleash the potential of a

broader regional market. To that end, Comoros, Madagascar,

Mauritius, and Seychelles have signed an interim Economic

Partnership Agreement (EPA) with two of their closest

neighbors on the continent, Zambia and Zimbabwe.

Negotiations on the final agreement are still ongoing, and are

focused on (a) harmonized regional market access rules for

EU exports to the region; (b) rules and commitments on

services and investment; (c) trade facilitation and cooperation

on technical barriers to trade, sanitary and phytosanitary

standards and rules of origin; and (d) issues such as

intellectual property rights, competition, transparency in

government procurement, and sustainable development.

The IOC has also joined the CES Tripartite process, launched

by the Heads of States of member countries with a view to

implementing a free trade agreement (FTA) among the three

regional economic communities (RECs) by 2012. The main

purpose of the CES Tripartite agreement is to harmonize the

commitments of the three RECs. This process aims to (a)

create a single market “from Cape to Cairo”; (b) minimize the

challenges of multiple memberships and accelerate the

process of regional and continental integration; and (c)

establish a Tripartite FTA within the CES.

Other efforts toward integration include (a) the adoption of

an Aid for Trade Strategy (ATS), which aims to increase food

security and promote integration with COMESA; and (b) the

creation of an economic and trade area among Member

States aimed at boosting the regional integration process as

a vector of development, and preparing the region and its

economic actors to meet the challenge of globalization. This

new economic and trade space is designed to be coherent

with the Tripartite process, with the four IOC states (all except

Reunion) expected to work together to implement the

Tripartite initiative roadmap, while reserving their rights to

Source: International Trade Centre (ITC); Annuaire sur la Coopération de la Reunion 2011.

Table 1 Share of intra-IOC trade in total trade of the IOC

apply the principle of “variable geometry” in areas such as

liberalization of services, which remains a very important area

for the IOC. The IOC economic and trade area will build on

already initiated actions aimed at:

• Lowering transport and communication costs, including

through more competitive broadband connectivity;

• Developing a regional tourism strategy and industry

using “Vanilla Islands” branding, based on private sector

ventures and the complementary tourism assets and

attractions of the different islands;

• Developing regional agro-industry subsectors.

Madagascar, with its vast agro-industry potential, will

become the region’s main source of food staples, as

per the Regional Food Strategy. With the IOC region

now a net importer of staple food products, there is also

an opportunity for the IOC states to set up regional joint

ventures in food production, and mechanisms to

facilitate intra-regional trade of agricultural and agro-

industrial products.

3.2. Private Sector Development

There are different levels of private sector development in the

region, as reflected in the states’ business environment

rankings. While Mauritius is classified 23rd out of 183

countries, according to the 2012 World Bank Doing Business

Indicators, Comoros ranks 157th, and Seychelles and

Madagascar rank 103rd and 137th, respectively.

Aside from Reunion, which benefits from its interaction with

major French companies and French government investment

in infrastructure and renewable energy, the region attracts a

low level of foreign investment compared to other RECs. FDI

flows to the IOC were US$1.67 billion in 2010, compared to

US$2.1 billion and US$4.6 billion to EAC and CEMAC.

Madagascar attracts most of the FDI in the region (51.5 per

cent of the total in 2010). However, Mauritius is the largest

investor in other IOC Member States, and its private sector

has an exceptional presence and dynamism in the region,

due in large part to its proactive pursuit of bilateral trade

agreements. Major investments by Mauritian firms are

targeted towards tourism (hotel construction) in Seychelles;

and to the telecom, financial, and manufacturing (mainly

textiles and sugar) sectors in Madagascar.

Despite these important signs of progress, private sector

development in the region continue to be constrained by

difficult access to credit, and by:

• Low availability of regional infrastructure, particularly

maritime and aviation infrastructure, which hinders the

movement of goods and increases the cost of

transport. In Madagascar, the poor state of road

networks and the lack of electricity also hinder the

effective exploitation of the potentials in agricultural

sector;

• Lack of policy harmonization, rules of origin, andFL

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mechanisms for resolving trade disputes, which makes

it difficult for companies to establish themselves and

develop strategic partnerships across the region;

• Lack of a private sector development strategy or an

entity that specializes in removing constraints that

hinder private sector development;

• High cost of inputs, due to high transport, energy and

labor costs.

The IOC has identified the following areas of private sector

development as critical for the region: (a) food security and

agribusiness; (b) ICT; (c) tourism; (d) finance; and (e) maritime

trade, including port services. Particular importance has been

placed on tourism (the “Vanilla Islands” concept) and

agribusiness (particularly in Madagascar), both of which have

high growth potential and offer huge opportunities for

economic cooperation. Cross-cutting efforts in the areas of

capacity building and knowledge transfer are also needed to

encourage regional collaboration.

Member States have also created structures for advancing

public-private dialogue and improving the business

environment. At the regional level, the Union of Chambers of

Commerce and Industry of the Indian Ocean (UCCIIO) was

organized to strengthen regional economic integration

through trade promotion and inter-island productive

investment. The UCCIIO also aims to promote strategic

networks and facilitate the establishment of private sector

partnerships in growth-driving sectors.

3.3. Regional Infrastructure

The African Infrastructure Country Diagnosis (AICD) and the

Program for Infrastructure Development in Africa (PIDA) do

not consider the IOC Member States to be a regional

grouping of countries, and therefore do not provide the

region with the same type of support for its integration efforts

that is provided to COMESA, SADC and EAC. Instead, most

support is provided to individual states by individual

development partners (Table 2).

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Member StatesDevelopment Partners

Energy (renewable) ICT Transport

ComorosEU, AFD*, Moroccan

Fund*, ABEDA*AFD*, Moroccan Fund*,

ABEDA*EU, AFD*, Moroccan Fund*,

ABEDA*

MadagascarEU, AFD, WB, ADB,

ABEDAAFD, WB, JICA, ADB, KF, EIB,

ABEDA, OPEP OPEC

Mauritius AFD, Arab Bank, KF IBRD

Reunion EU, AFD EU EU

Seychelles ADB, EIB

IOC AFD, EU AFD

Infrastructure constraints by sector

The development of regional infrastructure in the IOC is

constrained by lack of financing, limited private sector

participation, limited human resources, and lack of policy

coordination and harmonization. The region also lacks an

integrated approach to creating synergies and spillover

effects among sectors. For example, trade facilitation cannot

be addressed if infrastructure and private sector

development are not included in the Aid for Trade Strategy

(ATS). Similarly, infrastructure development, trade facilitation

and private sector participation are required to address food

security and increase tourism. The key constraints in each

infrastructure sectors are described below.

Maritime transport. The region faces major constraints in

regional maritime transport infrastructure, which undermine

the potential of the key sectors of tourism and agro-industry,

and hinder efforts to integrate with the continent. There is no

regional maritime transport infrastructure development

strategy, and the three international ports that could serve as

regional hubs (Port Louis, Port Reunion and Port of

Toamasina) remain largely in the hands of public authorities.

There is little private sector activity, except in the shift toward

private sector handling of container cargo and some tourism

transport. The lack of effective regional shipping services

adds, on average, 30 to 40 per cent to the cost of imports

and exports. Private shipping firms have not been successful

Table 2 Key Partners and Respective Interventions in the Infrastructure Sector

(*) Unspecified infrastructure sector

because of the limited size of markets, long distances, and

limited food production in Madagascar, which until now has

not realized its potential to meet the food security needs of

the entire region. Finally, increasing acts of piracy against

private cruise ships harms high development potential of

tourism’s yacht and cruise subsector, which now accounts

for only 0.37 per cent of the global market.

Air transport. The ability of the region’s air transport sector

to connect the islands is hindered by exorbitant freight costs

and limited air traffic rights. In addition, some national airlines

do not meet minimum safety standards, and have lost the

right to operate in Europe. The UCCIIO is very involved in

regional discussions to find solutions to these issues. In the

meantime, there are ongoing negotiations with the EU to

encourage EU airlines to service the region. Efforts are also

underway to improve security in the sector through regional

harmonization of air surveillance. The latest generation air

surveillance system, Automatic Dependent Surveillance

(ADS-X), has been tested by Reunion, Madagascar and

Seychelles. These countries are now ready to replace their

individual country air surveillance systems with the

harmonized ADS-X approach.

Road infrastructure. The poor quality of aging domestic

road networks increases the costs associated with maritime

shipping, and negatively affects investment in maritime

infrastructure. Compounding this is the monopoly of certain

road transport carriers, which makes it difficult to enforce

safety standards. The projected investments in the Port of

Ehoala and in road infrastructure leading to the port are likely

to facilitate trade by improving access to the southern regions

of the country.

Renewable energy. Renewable energy contributes to the

generation of electricity and energy in all Member States –

an estimated 15 per cent in Comoros, 23 per cent in

Mauritius, 36 per cent Reunion, 5 per cent in Seychelles,

and 60 per cent in Madagascar, which is highly dependent

on renewable energy because of its low level of

electrification. There are numerous regional and bilateral

initiatives underway in the sector, notably the bilateral

partnership between Reunion and Mauritius to develop

electricity from renewable energy sources (in particular

bagasse) and protect the environment through waste

management and sustainable consumption of electricity.

Reunion has also been investing in research and

development aimed at bio-ethanol production from micro

algae and electricity generation from ocean currents. In the

region as a whole, however, growth of the sector is

constrained by lack of financing, inadequate legal and

regulatory frameworks for private sector participation, lack

of mechanisms for dispute resolution, limited knowledge

sharing, lack of policy harmonization, and the absence of

centers of excellence to provide skilled labor for the sector.

ICT. Most IOC countries have reasonably well-developed

national ICT backbones on their main island, but few

connections on secondary islands. International

connections to the region are limited and very expensive.

Mauritius and Reunion are currently served by the South

Africa Far East (SAFE) network. The Lower Indian Ocean

Network (LION) provides a second link to Madagascar, with

a planned link connecting Mayotte (an island state not in the

IOC) to Mombasa, Kenya. None of the submarine cable

networks in the eastern part of the continent includes all the

IOC Member States. The region lacks the fiber optic

networks needed for reliable high-speed internet, which is

a prerequisite for expanding tourism and international trade.

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Despite efforts at reform, an unfavorable regulatory

environment constrains development of the broadband

market. A regional effort to put in place a common fiber

optic network has been slow to materialize.

To address these constraints, the future regional strategy

for the IOC will incorporate sector programming tools, in

particular for multi-sectoral regional infrastructure. There are

also efforts to strengthen cooperation in research and

development, particularly for renewable energy; to develop

and harmonize sector regulations; and to facilitate

knowledge sharing and technology transfer.

3.4. Agriculture, Fisheries and Sustainable Development

The agriculture and fisheries sectors represent both a real

potential for sustainable economic development and the

achievement of food security in the IOC Member States.

The analysis on growth drivers clearly illustrates the

importance and contribution, for instance, of the agriculture

sector to GDP in these countries. Both sectors are

important for the Bank to promote the Inclusive Growth

Agenda through job creation and poverty reduction. In

addition, the two sectors are closely related to the

environmental sector, henceforth requiring a sustainable

development approach to growth under environmental

safeguard for the IOC Member States.

Agriculture

The agriculture sector remains underdeveloped and subject

to multiple common constraints, including, among others:

limited land surface under the pressure of population

growth, climatic conditions exposing crops and livestock to

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health risks, high dependence on imports of agriculture

inputs, and limited access to international market. For

instance, Madagascar, which is the basket of food supply

for the region, faces many challenges that often threat this

crucial role, such as: (i) lack of financing – the share of the

agriculture sector in the state budget decreased to around

20 per cent in 2010 compared to the pre crises period1, (ii)

insufficient infrastructure as shown by the 2010 African

Infrastructure Development Index (AIDI)2, (iii) low productivity

resulting from lack of mechanization and modernization of

agriculture technics, (iv) poor business environment

especially in terms of difficult access to land and credit for

agriculture activities, and (v) lack of research and

development while the sector is particularly vulnerable to

plagues and crops’ diseases. Despite the willingness and

engagement of the IOC Members States in developing

sustainable agriculture to enable food security, it should be

noted that gaps exist for meeting this challenge. An

example is the limited number of active regional projects or

initiative aimed at promoting agriculture development. As of

end 2012, there is only one active project – the “Regional

Initiative for the Adaptation of Small-scale Agriculture to

Climate Change in the Islands of the Indian Ocean” –

financed with the support of the EU.

Fisheries

In spite of its potential that could be capitalized with the

improvement of maritime transport, development of the

fisheries sector in the IOC Member States has been proven

to be much complex when compared to other sectors. Poor

infrastructure and knowhow, limited access to international

markets, primarily the European and USA due to non-

compliance with and respect of rules of origins, health

sanitary measures and environmental adherence, and weak

reporting system with regard to illegal and unregulated

fishing, have been indicated as the main handicaps affecting

the sector’s development. Compounding the challenges is

the act of piracy that affects both the security of fishing fleet

and the economic viability of the fishing activity. To address

these development constraints, significant efforts have been

made to ensure sustainable management of species, to

comply with health sanitary regulations and traceability, and

to improve the security in Indian Ocean. Among others the

following actions have been recorded: (i) adoption in 2010

of a regional strategy for fisheries and aquaculture, (ii)

training of independents and accredited experts and

establishment of laboratories and relevant institutions to

proceed with necessary certifications (excluding in Comoros

and to a minor extent in Madagascar), (iii) establishment of

fishing ports equipped with cold storage in all of the IOC

Member States (to a minor extent in Comoros and

Madagascar), and (iv) increasing presence of patrol vessels

using high technologies (e.g., radar, satellites) to deter illegal

fishing and act of piracy.3

Environment and Sustainable Development

Protecting the population from the effects of natural

disasters and global warming is of paramount importance

to the IOC. Efforts to strengthen regional capacity in these

areas over the past five years have included (a) formalization

of the Mutual Assistance Network and reinforcement of

regional capacity in terms of civil protection, with the

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1 The share of the agriculture, fisheries and forestry sectors in the 2010 state budget was only 11.6 percent according to the World Bank’s Revue des Dé-penses Publiques Madagascar: Politique budgétaire et investissement public en période d’instabilité politique. (September 2011).

2 AIDI is a composite of five indicators: (i) net electricity generation (kilowatt-hours per capita); (ii) total mobile and fixed-line telephone subscribers (percentageof total population); (iii) paved roads (percentage of total roads); (iv) access to water (percentage of population); and (v) access to sanitation (percentage ofpopulation). In 2010, Madagascar’s AIDI score was 14.38 out of 100, ranking 48th out of 53 countries; and the country has the lowest AIDI within the fourAfrican IOC Member States.

3 In the framework of the Regional Plan for Fisheries Surveillance (PRSP), 28 joint surveillance missions representing over 800 days of sea patrols, 700 hours ofair patrols have been carried out. Twenty offences were identified and seven boarding and inspections were ordered (see annex 5 for details on the project).

support of the French Cooperation; and (b) a pilot Regional

Program on Prevention and Management of Risk of Natural

Disasters, aimed at reducing the human and economic

impact of natural disasters, supported by the AFD. In

addition, the EU’s 10th EDF is providing between €170,000

and 250,000 over 2011-2014 to finance alert systems,

strengthen disaster resistance in post-disaster

reconstruction projects, and promote awareness of climate

change-related risk among the local authorities and

population. At the country level, Comoros has integrated

risk management by the Emergency and Civil Protection

Centre (COSEP) into its national growth and poverty

reduction strategy, with the support of UNDP; Madagascar

has developed a national strategy for disaster management,

also in partnership with UNDP, which focuses on long-term

national capacity building as well as regional and

international cooperation; Mauritius has established a

National Centre for Disaster Management, to complement

the existing initiatives such as the National Committee of

Natural Disasters; and Seychelles coordinates its disaster

responses through the National Committee for Disaster

Management.

3.5. Social Cohesion, Civil Protection and Security

Social and human developments are priorities for the IOC

Secretariat and the individual Member States. The Secretariat

aims to minimize disparities in health, education, social

welfare, and disaster preparedness among the states by

aligning national strategies with regional strategies and

leveraging the states’ capacity to contribute to programs at

the regional level. This is particularly important for

Madagascar and Comoros, which have suffered from political

instability and frequent natural disasters.

Health and Regional Cooperation

The region has achieved significant progress in terms of

health sector development, but the states show substantial

discrepancies in some health indicators. Mauritius and

Seychelles allocate more than 20 per cent of their national

budgets for health expenditures, and display levels of health

relatively close to those of developed countries. Comoros

and Madagascar allocate 8 and 9 per cent, and their health

indicators are close to Sub-Saharan Africa averages.

Development is threatened by pandemics associated with

poverty and natural disasters, particularly rabies, polio,

measles, and malaria. HIV/AIDS is also a persistent problem.

Given the IOC’s prospects for increased trade and tourism,

strengthened mechanisms and alert protocols are essential

to prevent the spread of disease across the region. To that

end, the IOC has partnered with other institutions to launch

three main programs: (a) URSIDA, a partnership with the

Ministry of Foreign Affairs of France, aimed at training

approximately 100 medical personnel in emergency services;

(b) AIRIS, in cooperation with the Bank and UNAIDS, aimed

at improving the quality of life of people living with HIV/AIDS,

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and increasing screening in remote areas; and (c)

RSIE/SEGA, a joint initiative of the IOC and the African

Development Fund, aimed at minimizing the risk of epidemics

across the states through the regular exchange of sanitary

information.

Education and Regional Cooperation

The region has made significant progress in improving

access to education and training, but lacks a critical mass of

professionals in key areas such as disaster risk management,

food security, renewable energy, maritime infrastructure,

tourism, and health and sanitation. To address these

shortcomings, the IOC plans to develop exchange programs

among the region’s universities and research centers, as well

as centers of excellence to train a network of technical

experts. The IOC is already benefitting from the work of the

Regional Multidisciplinary Centre of Excellence (RMCE) in

Mauritius, led by COMESA, which represents one of the few

initiatives in the education and research sector supported by

the development partners in the region. The RMCE promotes

exchanges between the universities of the IOC Member

States and those in the rest of Africa, Asia and Europe, with

the aim of strengthening the capacity of IOC experts to

efficiently manage regional integration processes and

challenges.

Civil Protection and Maritime Security

The IOC promotes information sharing and best practices

among Member States in the areas of security, governance,

and combatting trafficking and fraudulent activities. The

Convention on Regional Security, signed by the states in

March 2006, promotes exchanges in the areas of judicial

policy, administrative and public order, and security police. The

region also benefits from an EU-funded €23 million maritime

security program that aims to reinforce national and regional

capacity to arrest, transfer, and detain pirates, and to mitigate

the negative economic impact of piracy on Member States.

Other initiatives include (a) the IOC Regional Security Platform

(2007-2008), which facilitates information sharing among the

national security services in areas such as trafficking, terrorism,

illegal fishing, and financial malpractice; and (b) the IOC

Regional Judiciary Platform, which facilitates regional

cooperation on judicial matters. Most assistance provided by

development partners to address security-related challenges

is channeled through the African Union. The French army also

has bilateral and multilateral privileged liaisons with both the

IOC and SADC Member States, aimed at providing support

to the AU African Standby Force (ASF), and developing the air

force and navy in the concerned countries. Other bilateral

exchanges between Member States entail information sharing

between Mauritius and Seychelles in the fields of air force and

naval expertise; and between Reunion and, respectively,

Mauritius, Seychelles and Madagascar on the development of

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their police departments.

Regional integration in the IOC is a multidimensional

process, involving a complicated mix of economic,

commercial, political, cultural and social challenges and

opportunities for cooperation.

Challenges include:

Structural constraint of insularity. Small economic size,

long distances from the continent and between islands of

the same country, lack of natural resources (except for

Madagascar), and vulnerability to natural disasters require

that the IOC’s regional integration strategy evolve in parallel

with national integration strategies.

Fragility. Political instability in Comoros and Madagascar

has hampered economic development in the region and

deprived the people of those nations of access to social

basic services. Both countries are also frequently hit by

tropical storms, which impact both human and physical

capital. But while Comoros has access to Fragile State

Facility to aid in reconstruction efforts, Madagascar is not

considered a fragile state according to the Bank’s

classification.

Limited connectivity and lack of regional infrastructure.

Long distances and lack of regional infrastructure constrain

intra-regional trade and movement of people, which makes

it difficult for the IOC states to compete in the global

market. There is no specific strategy to develop regional

infrastructure within the IOC; and the IOC’s maritime and

ICT infrastructure needs are largely neglected in other

continental and regional programs.

Limited capacity to implement regional initiatives. The

IOC lacks capacity for strategic planning across countries

and sectors. It also lacks qualified staff to deal with specific

issues such as trade, environment, or maritime regional

infrastructure; as well as reliable regional data and statistics.

In addition, there is lack of coordination between the

Secretariat and the states, despite the existence of the

Council of Ministers and the permanent liaison officers

(PLOs) representing each country in the Secretariat.

Heterogeneity of member states. The states’ different

geographies and levels of socio-economic development

make it difficult to define common objectives and regional

projects that could reduce shipping costs and increase

economies of scale. The fragmented markets, high costs

of doing business, and lack of start-up capital are also

major constraints to private sector development and

expansion in the region.

Risk of marginalization in wider regional groupings. The

risk of being marginalized by regional strategic frameworks

is compounded by the CES Tripartite Arrangement, which

creates a semi-continental integrated group of 26 countries

on the continent, with a total population of close to 600

million and a cumulative GDP of more than US$850 billion.

Participation of Reunion in IOC regional initiatives.

Reunion’s participation in regional initiatives may require the

establishment of new regional policies, which implies a

possible conflict between IOC and EU legal and regulatory

frameworks, particularly for trade. In cases where policies

cannot be reconciled, Reunion might be forced to opt out

of the IOC framework.

Risk of natural disasters and climate change effects. A

key challenge for the region is to consolidate efforts to

strengthen the capacity of national and local authorities to

limit the impact of natural disasters and to provide post-

crisis assistance across the five island states.

Piracy and maritime insecurity. The national police, justice,

and defense services of the IOC Member States lack

sufficient resources to combat drug trafficking, clandestine

immigration, falsification of documents, terrorism, maritime

piracy, illegal fishing and sexual tourism. They also lack the

resources to fulfill regional security objectives and

consolidate peacebuilding.

Opportunities include:

Ease of achieving consensus. The small number of

member states makes it easier to achieve consensus than

in larger regional groups, such as SADC (15 members) or

COMESA (19), when regional-level intervention is necessary

to address both common and country-specific challenges.

Membership of France/Reunion in the IOC regional

grouping. The France/Reunion membership has significant

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4. Challenges and Opportunities for RegionalCooperation

potential to strengthen the region’s economic and political

profile, given its specialized institutions in agri-business and

biotechnology and its ability to attract French and EU

private sector investment.

Expansion of market and economies of scale. The limited

size of the IOC economies presents an opportunity to

expand possibilities for intra-regional trade, which could lay

the foundation for sectoral specialization and export market

diversification, including towards African countries and

emerging economies.

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5.1. Review of the Bank’s Intervention at Country and Regional Levels

Given its limited resources in relation to the needs of the IOC

region, the Bank will focus its efforts on areas where it has a

clear comparative advantage and expects to make a

substantial contribution to addressing the structural

constraints to growth. The guiding principles of Bank support

are elaborated in Box 1. Identification of specific interventions

will be based on the commitment and ownership of key

stakeholders (regional and national institutions, private sector,

civil society), and their political will to translate Bank

assistance into concrete actions. To promote ownership, the

local partners will fully participate in the design and

implementation of projects, and actively participate in

monitoring and evaluation activities.

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5. A Framework for Strategic Cooperation with the IOC Member States

Box 1 Guiding Principles to Accelerate Trade and Economic Cooperation within the IOC

Trade and economic cooperation within the IOC could be accelerated through a package of measures and reforms aimed

at achieving five main strategic objectives:

1. Elimination of all Unnecessary Tariff and Non-Tariff Barriers to Trade:

- Eliminating or drastically reducing quotas, embargoes, permits, import licenses, TBTs such as norms, SPS,

and other prohibitions placed on imports;

- Simplification of rules of origin; and

- Reduction of tariffs barriers/measures according to an agreed target and timeline.

2. Promoting Trade in Services:

- Establishment of a mobility regime for professionals (such as contractual services suppliers and independent

professionals, e.g., financial professionals, legal experts, and engineers, etc.), notably through visa facilitation/

elimination; and

- Liberalization of trade in services, in particular in transport, telecommunications and financial services.

3. Improving the Business Regulatory Framework:

- Improving the IOC Member States’ ranking in the Ease of Doing Business;

- Improving the states’ ranking in the Corruption Perception Index;

- Improving perceptions of governance;

- Implementing Double Taxation Avoidance Agreements and Investment Promotion/Protection Agreements; and

- Facilitating the flow of capital and creating a networking of agreements to attract investments to the region.

4. Improving Trade Facilitation and Logistics Performance Index:

- Reducing costly delays at entry and exit ports; and

- Enhancing customs facilitation and transit regimes critical for maritime shipping and logistics.

5. Capacity Building through Peer Learning and Support:

- Public-private partnerships;

- Trade and investment facilitation; and

- Research and development.

Source: Concluding outcomes of the seminar, “Mauritius Experience – Deepening Cooperation with the African Development Bank and its Regional MemberCountries”, Tunis, Tunisia, September 2012.

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These guiding principles address the most immediate

structural needs to support integration. Other sectors of

equal importance for the region, such as human capital

development, transport infrastructure, environment

protection, food security, and mobility of professionals, will

be addressed in future programs. The three main areas of

cooperation derived from these principles are shown in

Figure 2.

The first set of interventions, Area of Cooperation N°1, will

seek to incentivize the IOC Secretariat to go beyond its

functional responsibilities and embrace a strategic role in

designing and implementing regional projects and programs

for trade facilitation and investment promotion. Area of

Cooperation N°2 will support regional transport for which

political willingness of Member States, and effective

commitment from development partners, are in place or in

the process of being mobilized. Area of Cooperation N°3 will

support natural disaster response management, consistent

with the Sustainable Regional Development pillar of the IOC’s

new strategic guidelines.

5.2. Institutional Capacity Building of the IOC Secretariat, Member States and Private Sector

Strengthening the capacity of the IOC Secretariat, Member

States and non-governmental partners, particularly the

private sector, is a precondition for pursing any other

strategic objective. The IOC has been essentially functioning

as repository of grants, with a limited role in designing and

implementing regional initiatives. The organization needs to

be institutionally strengthened so it can play its necessary

role in promoting and supporting integration within the IOC,

and eventually integrating the IOC into COMESA, SADC

and the Tripartite CES. The IOC also aims to play a more

prominent role in promoting public-private partnerships

(PPPs), especially in the area of infrastructure financing. This

requires developing a regional platform for public-private

dialogue, and enhancing the capacity of the UCCIIO and its

member Chambers of Commerce to participate in defining

regional trade facilitation and investment programs and

PPPs.

Figure 2 Proposed Bank’s Future Areas of Cooperation with the IOC

The first Area of Cooperation will focus Bank support on:

• IOC Secretariat: The creation of a Strategic Planning

and Economic Trade Division housing three specialized

units focused on (a) strategic planning and resource

mobilization; (b) economics and trade; and (c) planning

and technical support for regional infrastructure

development. This agency would play a proactive role

in implementing key reforms to accelerate trade and

economic cooperation;

• National institutions in charge of trade and investment

promotion: Strengthening the capacity of national

institutions to (a) implement decisions made at the

regional level aimed at promoting intra-regional trade

and investment; (b) promote and mobilize investment

for PPPs; and (c) support exchanges of experiences

and best practices on PPPs and improving the

business environment; and

• Private sector institutions / associations: Efforts by the

UCCIIO and national Chambers of Commerce to: (a)

foster dialogue on opportunities for private sector

participation in the regional integration process; (b)

develop knowledge networks focused on sharing best

practices and identifying opportunities for trade and

investment in the region; (c) promote the development

of results-based PPP initiatives, and develop

dedicated PPP funds in close collaboration with local

governments and private sector representatives; and

(d) promote partnerships between the public and

private higher learning/training institutions, and

between the educational system and industry, in order

to meet labor market demands and enhance the

mobility of skilled workers among the Member States.

5.3. Regional Infrastructure Development

The proposed second Area of Cooperation aims at

addressing the region’s infrastructure gaps. Due to the

enormity of the infrastructure needs, technical and financial

cooperation with other development partners will be of

paramount importance. As the development of transport

infrastructure will require a political decision to establish a

regional port, a maritime shipping system and settle the

internal barriers in Madagascar (political crisis, restructuring

of the agricultural sector, internal transportation), the Bank

will focus its support in the near term on developing energy

infrastructure and telecommunications.

The second Area of Cooperation will focus Bank support

on:

• The energy sector: (a) preparation of a strategy,

blueprint and investment plan for the sector; (b)

establishment of a facility, housed in the Bank’s Energy

Department, to co-finance investments in renewable

energy and facilitate technical and financial

partnerships with the private sector; (c) establishment

of a regional observatory on best practices in

renewable energy to allow investors and professionals

to access information on existing companies and

renewable energy projects; (d) creation of a regional

university program aimed at strengthening links among

universities, and relying in particular on the “Ecole

Polytechnique de Madagascar,” which trains water

engineers; and (e) provision of technical and financial

assistance to carry out studies on: (i) the renewable

energy potential in each Member State; and (ii) regional

harmonization of sectoral policies, legislation and

regulatory procedures; and

• The ICT sector: (a) preparation of a harmonized

Regional Master Plan for the sector, covering issues

such as access doors, available bandwidth capacity,

pricing policies, and access to information for

investors; (b) improved coordination between

regulators and private sector operators to strengthen

monitoring of the sector liberalization process; (c)

capacity building programs for private operators and

regulators in partnership with universities, following the

example of the Academy of ICT in Mauritius; and (d)

establishment of a working group to oversee

preparation of projects in the ICT sector. The working

group will comprise the IOC Secretariat, along with

representatives of relevant Ministries of Member

States, the private sector, and technical and financial

partners. It will be supported through the Bank’s

Infrastructure Project Preparation Facility (IPPF) and

other available instruments and frameworks.

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5.4. Natural Disaster and Regional Pandemics Response Management

Bank assistance in disaster response management will

support:

• Capacity building in response management of relevant

regional and national institutions;

• The creation of a regional centre of excellence focusing

on environment and management of risk of natural

disasters; and

• Reconstruction of social and productive infrastructure

destroyed by natural disasters.

Bank assistance in pandemic response will support:

• Establishment of a regional response coordination

mechanism; and

• Creation of regional centre of excellence for infectious

diseases. This action will be part of the “Support

Capacity Building Project for Achieving the MDGs in

Related Areas of Health in the IOC Member States,”

for which the Bank is currently mobilizing resources.

The RISPs for Eastern and Southern Africa are presently the

two strategic frameworks governing the Bank’s support to

the IOC regional grouping. However, neither addresses the

challenges and priorities of the IOC. If the RISPs remain the

strategic framework for the Bank’s regional operations in

the IOC, it will be important to ensure that their mid-term

reviews explicitly take the main proposed actions for the IOC

into account, and specify how they will be implemented.

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While a mid-term adjustment of the RISPs would be a

positive step, it would be preferable for the IOC to have a

dedicated regional integration strategy paper; however, it

would be preferable if a dedicated regional integration

strategy paper were prepared for the IOC region, in view of

the specific challenges facing the IOC Member States as a

result of their insularity, and of the risk of marginalization of

IOC priorities within broader regional groupings. In addition,

within the current Bank’s configuration, each of the IOC

Member States belongs to a different regional department:

Comoros to OREB, Madagascar to ORCE, Mauritius to

ORSB, and Seychelles to EARC. This could hamper the

Bank’s future intervention by affecting coordination and

impeding synergies between projects/activities.

Another option for the strategic framework for the Bank’s

regional operations could be the establishment of a new

dedicated regional strategic program for the IOC regional

organization. This will enable the Bank to specifically target

the IOC Member States by providing a dedicated assistance

taking into account the challenges of island states.

The overarching objective of this study is to identify areas

where the Bank can provide support to the IOC, given its

mandate and available financial and technical resources. With

a view to fast tracking the implementation of identified

actions, it is recommended that the proposed areas of

cooperation be broken down into concrete projects and

programs. Following approval of the study by Bank

management, a multi-sector mission should be conducted

to identify key projects and programs. The mission, to be led

by relevant Bank Departments and the IOC Secretariat,

should also hold discussions with Member States on key

implementation issues, including the need to establish a

dedicated working group for each regional initiative and

project identified.

Upon identification of potential projects and programs, the

next step will be to mobilize resources through the Bank’s

various financing instruments and from technical and financial

partners. To promote private sector participation in the

financing of regional infrastructure, it is recommended that a

facility be established to co-finance regional projects, as well

as to provide additional resources to ongoing projects to

ensure their financial and operational viability.

For activities for which resources are already available (such

as the Fragile State Facility to support capacity building of

the IOC Secretariat) or are in the process of being mobilized

(such as ongoing discussions regarding grants for a health

sector project and a research and innovation project), it is

proposed that implementation begin as soon as the

resources are mobilized, even before the relevant study is

finalized. Thereafter, these activities could become part of the

institutional capacity building activities identified by the study.

For the purpose of ICT regional infrastructure, it is

recommended that the Bank establish a dedicated regional

working group for project preparation and resource

mobilization, and provide technical support to the group for

the duration of project preparation. Upon the identification of

financing resources, the working group would be replaced

by the Strategic Planning and Technical Support for Regional

Infrastructure Development Unit, housed in the Secretariat

which would be responsible for implementing the project.

Another recommendation is related to the objectives of the

IOC Member States to fully integrate with COMESA, SADC

and the CES Tripartite process, and be connected to the

African continent. To help further these objectives, the Bank

could encourage the NEPAD Secretariat and the AU to

consider expanding the Program for Infrastructure

Development in Africa (PIDA) – the main programmatic

instrument to promote connectivity within the continent – to

include the IOC region.

Finally, the Bank’s support to the IOC should be evaluated

prior to starting a new implementation phase of projects and

programs, in order to draw lessons learned from the Bank’s

current interventions – including at country level – and to

measure the impact of the Bank’s support to regional

integration within the IOC.

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6. Recommendations for Programming Support to the IOC

Annexes

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Indicator Comoros Madagascar MauritiusReunion /France

Seychelles

Surface Area (Km²) 1,860 587,000 1,866 2,504 454

Population (millions) 0.65 19 1.3 0.8 0.09

GDP/GNP (US$ billions, 2009) 0.5 8.5 8.0 18.71 0.750

GDP/GNP per Capita (US$, 2009) 810 410 7,250 23,163(a) 8,450

Poverty Rate (%) 45 77 <1.5 - <0.5

HDI Ranking 163 151 77 - 52

Under-Five Mortality Rate (/1,000) (2010) 85.6 62.1 15.1 4.1 13.5

Maternal Mortality Ratio (/100,000 livesbirths) (2008)

340 440 36 - 0.4

Urban Population with Access to Impro-ved Sanitations Facilities (%, 2008)

50 15 93 97 100

Literacy Rate (2009) 74 64 88 - 92

School Enrollment on Primary (% net) 78 79 93 99 95

ANNEX 1 KEY ECONOMIC AND SOCIAL INDICATORS BY REGIONAL MEMBER STATES

ANNEX 2 KEY MACROECONOMIC INDICATORS (EXCLUDING REUNION)

Source: World Human Development Report 2011, UNDP, World Bank Development Indicators; (a) Data for 2008.

Source: AEO, 2012.

Indicators 2008 2009 2010 2011 (Estimation) 2012 (Projection)

COMOROS

Real GDP rate (%) 0.6 1.1 2.1 2.5 3.2

Inflation (%) 4.8 4.8 2.9 3.0 2.8

Budget balance (% of GDP) -2.6 0.6 4.1 -3.1 -3.6

Current account (% of GDP) -11.6 -7.6 -10.2 -11.7 -12.2

External debt (% of GDP) 49.7 51.9 39.5 34.9 31.6

MADAGASCAR

Real GDP rate (%) 7.1 -3.7 0.5 0.6 2.4

Inflation (%) 9.2 9.0 9.2 10.1 9.8

Budget balance (% of GDP) -1.9 -2.5 -1.6 -1.3 -1.2



MAURITIUS

Real GDP rate (%) 5.5 3.1 4.1 4.0 4.1

Inflation (%) 9.7 2.5 2.9 3.0 3.9

Budget balance (% of GDP) -2.1 -6.6 -4.7 -4.4 -4.3


External debt (% of GDP) -4.8 15.1 12.8 15.7 17.7

SEYCHELLES

Real GDP rate (%) -1.3 0.6 6.0 4.0 4.5

Inflation (%) 37.0 31.7 -2.4 2.5 2.9

Budget balance (% of GDP) -3.4 5.1 2.5 3.8 -0.2



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Cou

ntry

CSP

Duration

Pillars

Main compon

ents

On-go

ing or proposed

projects/activities

4

Com

oros

2011

-201

5

-Develop

men

tof th

e Ene

rgy Sec

tor in

supp

ort to Eco

nomic

Diversification

-Enh

ance

d private sector com

-pe

titiven

ess an

d ec

onom

ic diversifica-

tion

-Stren

gthe

ning

eco

nomic go-

vernan

ce th

roug

h su

pport for struc

tural

reform

s, pub

lic fina

nce man

agem

ent

and im

prov

emen

t of the

bus

iness en

vi-

ronm

ent

-Drin

king

Water and

San

itatio

n Project (o

n-go

ing)

-Cap

acity Building Project Sup

port (o

n-go

ing)

-Ene

rgy Sec

tor Project Sup

port (p

ropo

sed)

-Bud

get s

uppo

rt (p

ropo

sed)

-ESW (p

ropo

sed): G

rowth Driver Diagn

osis (2

nd pha

se); Tourism M

as-

ter Plan; Sec

tor Reh

abilitation of Crash

Crops

; Private Sec

tor Profile

-Rural You

th Enterprises Project Sup

port (p

ropo

sed)

-Bas M

ango

ky Exten

sion

Project (p

ropo

sed)

-Gov

erna

nce Institu

tiona

l Sup

port Project (prop

osed

)-

Roa

d RN9 Project

Mad

agascar

2006

-200

9;Tw

o exten-

sion

s: 201

0-20

11;

2012

-201

3

-Im

prov

e the

quality of rural infra

-structure

-Im

prov

e Go-

vernan

ce

-Agriculture infra

structure

-Acc

ess to drin

king

water and

sanitatio

n infra

structure

-Tran

sport infrastructure

-PPP and

private sector deve-

lopm

ent p

romotion

-Man

agem

ent o

f pub

lic fina

nce

-Project Sup

port fo

r Fish

ing Com

mun

ity of Tuléa

r (on-go

ing)

-Irrigation Sch

eme Reh

abilitation Project of M

anom

bo (o

n-go

ing)

-Lo

wer M

ango

ky Rice Sch

eme Reh

abilitation Project (o

n-go

ing)

-Figh

t aga

inst STD

and

HIV/AIDS (o

n-go

ing)

-Roa

d of Tuléa

r (on-go

ing)

-Program

for Drin

king

Water Sup

ply an

d Rural San

itatio

n (on-go

ing)

-Amba

tovy Cob

alt-Nicke

l Private Mining Project

Mauritius

2009

-201

3

-Red

ucing

structural bottlene

cks

to com

petitiven

ess an

dtrad

e -

Enh

ancing

pu-

blic sec

tor efficienc

yan

d so

cial service

deli-

very

-Enh

ance

com

petitiven

ess an

dim

prov

e investmen

t clim

ate

-Con

solidate fisca

l perform

ance

and im

prov

e pu

blic sec

tor efficienc

y-

Widen

the circle of o

pportunity

throug

h pa

rticipation, soc

ial inc

lusion

and su

staina

bility

-MIC G

rant Deb

t Man

agem

ent C

apac

ity Building (on-go

ing)

-MIC G

rant Sup

port to

Pub

lic Sec

tor Efficien

cy (o

n-go

ing)

-MIC G

rant Sew

age/Water Plan (iden

tification stag

e)-

MIC G

rant Hea

lth Sec

tor Strateg

y (on-go

ing)

-CPSE Bud

get S

uppo

rt (o

n-go

ing)

-Con

tainer Exp

ansion

(ide

ntifica

tion stag

e)-

East-Coa

st Trunk

Roa

d (iden

tification stag

e)-

Plaines W

ilheims Stage

(OWAS to

com

plete PCR fo

r Ju

ne 201

2)

Seychelles

2011

-201

5

-Stren

gthe

ning

Private Sec

tor Develop

-men

t and

Eco

nomic

Com

petitiven

ess

-Infra

structure de

velopm

ent

-Ena

bling finan

cing

and

regu

la-

tory enviro

nmen

t-

Hum

an cap

acity develop

men

t

-Fe

asibility Study

for Water Sup

ply in M

ahe (on-go

ing)

-Policy Based

Partial C

redit G

uarantee

(on-go

ing)

-Seych

elles Sub

Marine Cab

le Project (o

n-go

ing)

-Water Sup

ply Im

prov

emen

t Project (p

ropo

sed)

-Line

of C

redit to SMEs (propo

sed)

-PPP Framew

ork (propo

sed)

-Infra

structure Action Plan (propo

sed)

-Hum

an Resou

rce Develop

men

t Plan (propo

sed)

-Institu

tiona

l Sup

port Project (p

ropo

sed)

-Statistical Cap

acity Building Program

(on-go

ing)

ANNEX 3 CSP PRIORITIES OF COMOROS, MADAGASCAR, MAURITIUS AND SEYCHELLES

4Excluding

emerge

ncy assistan

ce (g

rant).

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ANNEX 4 EASTERN AFRICA RISP

ANNEX 5 SOUTHERN AFRICA RISP

Pillar 1: Regional Infrastructure Pillar 2: Capacity Building

Broad Areas of

Focus

• Regional Transport/Trade Facilitation

Infrastructure

• Regional Energy Development (clean

energy and interconnectors)

• Information and Communications

Technology (ICT)

• Development of Shared Water Re-

sources

• Support to the CES Tripartite Arrangement

• Support to infrastructure, trade facilitation,

statistical and legal frameworks for PPPs capacity

building

• Strengthening institutions (RECs/IGOs,

continental organisations, special utilities and natio-

nal implementing units)

• Enhancing the financial and technical ca-

pacity of regional multilateral institutions and agen-

cies that invest in regional infrastructure and private

enterprises

RPGs/Cross-

cutting Issues

• Regional Public Goods – Climate Change, Management of Shared Water Resources and

Trans-boundary Animal Diseases Control

• Cross-cutting Issues: Gender and Environment

• Knowledge Management and Networking

Pillar 1: Regional Infrastructure Pillar 2: Capacity Building

Areas of Focus

• Regional Transport/Trade Facilitation

Infrastructure

• Regional Energy Development

• Information and Communications

Technology

• Support to the CES Tripartite Arrangement

• Institutional Strengthening

• Trade and Transport Facilitation and Aid for

Trade

Cross-cutting

Issues

• Regional Public Goods: Gender, Environment and Climate Change

• Knowledge Management and Networking

• Macroeconomic Convergence

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Area of

Coo

pe-

ration

Com

po-

nent

Action

Description

Potential sou

rce

of fu

nding

at Bank level

Potential P

art-

nership

Proposed

Ti-

meline

1.1. IO

CSec

retaria

tca

pacity

building

Action 1

Sup

port th

e establish-

men

t of a

unit s

pecifically

dedica

ted to strateg

icplan

ning

, mon

itorin

g &

evalua

tion (M

&E) a

nd re

-so

urce

mob

ilization -

Strateg

ic Plann

ing an

dResou

rce Mob

ilization

Unit.

Strateg

ic plann

ing an

d M&E are particularly im

portan

t for im

plem

entin

gregion

al program

s an

d projec

ts but also to im

prov

e the ca

pacity of the

IOC in m

obiliz

ing reso

urce

s an

d pred

ictin

g external aid. In ad

ditio

n, th

eun

it will also

con

tribute to prepa

re, implem

ent a

nd m

onito

r the IOC re

-gion

al integration strategy. It s

hould be

noted

that th

e availability of m

e-dium

/long

term

strateg

y with

action plan

, multi-year bud

get a

nd M

&E

system

is essen

tial to attaining the eligibility status

for the EU Agree

-men

ts Con

tribution. This will en

able th

e IOC to

acc

ess ad

ditio

nal re-

source

s fro

m th

e EU and

other develop

men

t partners for the

implem

entatio

n of re

gion

al projects/prog

rams.

FSF / Reg

iona

l Dep

art-

men

ts (R

D) / The

matic

Trus

t Fun

dEU / W

B / AFD

2013

-201

5

Action 2

Sup

port th

e establish-

men

t of a

n Eco

nomic and

Trad

e Unit.

This unit w

ill ha

ve th

e man

date to

: (a) diagn

ose, inform

and

com

mun

i-ca

te on ec

onom

ic develop

men

ts in th

e region

; (b) sup

port and

coo

rdi-

nate th

e Mem

ber States in trad

e ne

gotiatio

ns and

implem

entatio

n of

agreem

ents trad

e in th

e region

, inc

luding

trad

e services agree

men

t(CES Trip

artite, EPA

, WTO

, etc.); (c

) produ

ce statistical inform

ation, in-

clud

ing region

al trad

e an

d investmen

t; (d) c

ondu

ct fe

asibility stud

ies

and diag

nostic studies on trad

e an

d investmen

t; an

d (e) sup

port th

eim

plem

entatio

n of re

gion

al fram

ework or strateg

ies su

ch as the STS

.

FSF / RD / The

matic

Trus

t Fun

dEU / W

B / AFD

/ UNCTA

D20

13-201

5

Action 3

Sup

port th

e de

velopm

ent

of cap

acity of the

IOC

Sec

retaria

t in region

al in-

frastructure plan

ning

throug

h the crea

tion of a

dedica

ted Unit o

f Plan-

ning

and

Tec

hnical Sup

-po

rt fo

r Reg

iona

lInfra

structure Develop

-men

t.

This unit w

ill be

resp

onsible in defining for ea

ch infra

structure sector a

blue

print, inform

ation tools includ

ing ca

rtog

raph

y (SIG) a

nd a fram

e-work for region

al collabo

ratio

n in th

is area. It w

ill also

see

k at stren

g-then

ing pa

rtne

rship with

nationa

l, region

al (e

.g., RIA du COMESA, o

rthe Investmen

t Fun

d of COMESA) a

nd con

tinen

tal ins

titutions

ope

ra-

ting in th

e infra

structure sector. F

urthermore the Unit w

ill play a critical

role to

stren

gthe

n co

llabo

ratio

n with

region

al (D

BSA) a

nd con

tinen

tal

developm

ent b

anks (A

DB) a

s well as de

velopm

ent p

artners in promo-

ting region

al infra

structure.

FSF / RD / The

matic

Trus

t Fun

dEU / W

B20

13- 20

15

1.Institutional capacity of theIOC, Member States and Private Sector

ANNEX 6 PROPOSED ACTION PLAN

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Area of

Coo

pe-

ration

Com

po-

nent

Action

Description

Potential sou

rce

of fu

nding

at Bank level

Potential P

art-

nership

Proposed

Ti-

meline

1.2.

Nationa

l re-

levant insti-

tutio

ns /

depa

rt-

men

ts in

charge

of

trad

e an

dinvestmen

tprom

otion

Action 1

Implem

entatio

n of dec

i-sion

s mad

e at re

gion

allevel aim

ing at promoting

intra-region

al trad

e an

dinvestmen

t.

The expe

cted

sup

port is to

improv

e the ca

pacity of m

embe

r co

untries

to coo

rdinate at nationa

l level th

e im

plem

entatio

n of agree

men

ts esta-

blishe

d at re

gion

al level. Th

is sup

port cou

ld be the establishm

ent o

f ade

dica

ted structure at nationa

l level (o

r tech

nica

l assistanc

e su

pport to

the structure alread

y existin

g) to

dea

l with

gov

ernm

ent c

oordination on

region

al integration issu

es. A

system of track

ing im

plem

entatio

n of re

-gion

al dec

isions

cou

ld sou

gh in m

onito

ring the prog

ress and

effe

ctive-

ness of the

region

al agree

men

ts m

ade an

d iden

tifies co

nstraints

towards

libe

ralizing trad

e an

d investmen

t reg

imes acros

s the IOC re

-gion

. A sup

port cou

ld be prov

ided

to re

levant nationa

l ins

titutions

toim

prov

e da

ta collection on

trad

e an

d investmen

t. Fina

lly, tec

hnical and

finan

cial assistanc

e to im

plem

ent a

n exch

ange

exp

erienc

e an

d be

stprac

tices program

on PPP sho

uld also

to be co

nsidered

.

FSF / RD / O

NRI / The

-matic Trust Fun

dEU / AFD

2013

-201

5

Action 2

Sup

port trad

e ne

gotia-

tions

, inc

luding

the EPA

san

d internationa

l trade

nego

tiatio

ns

All the IOC m

embe

rs cou

ntrie

s co

nclude

d an

Interim

EPA

with

the EU,

but three

out of fou

r sign

ed th

e EPA

(excluding

Com

oros

) and

only tw

o(M

auritius an

d Seych

elles) started

its im

plem

entatio

n. Sup

port is nee

-de

d for effective im

plem

entatio

n of th

e EPA

signe

d an

d for prep

aring

next ro

und ne

gotiatio

ns of E

PAs (includ

ing trad

e facilitation an

d co

ope-

ratio

n on

tech

nica

l barrie

rs to

trad

e, san

itary and

phytosanitary stan-

dards an

d rules of orig

in).

ONRI / RD

WB / EU /

UNCTA

D20

12-201

3

Action 3

Cap

acity building of na-

tiona

l ins

titutions

inch

arge

of the

promotion

of PPP to

acc

omplish

their mission

.

Besides th

e training

of p

ublic age

nts, te

chnica

l assistanc

e sh

ould be

prov

ided

to coo

rdinate po

licies on

PPP and

facilitate syne

rgies at re

-gion

al level throu

gh increa

sing

pub

lic-private po

licy dialog

ue. Tec

hnical

assistan

ce is also expe

cted

to put in place

app

ropriate legislation an

dstrategy

to PPP.

ONRI / RD / O

PSM

WB / AFD

/ EU

2013

-201

5


FL

AG

SH

IP S

TU

DY

IN

DIA

N O

CE

AN

CO

MM

ISS

ION

S

um

ma

ry F

ina

l R

ep

ort

Area of

Coo

pe-

ration

Com

po-

nent

Action

Description

Potential sou

rce

of fu

nding

at Bank level

Potential P

art-

nership

Proposed

Ti-

meline

1.3.

Private sec-

tor institu

-tio

ns /

asso

cia-

tions

Action 1

Sup

port th

e CCI a

nd th

eUCCIIO

in th

eir efforts to

prom

ote trad

e an

d in-

vestmen

t in the region

.

Suc

h su

pport c

an con

sist in organ

izing regu

lar private-pu

blic fo

rums

dialog

ues arou

nd sub

jects related to th

e private sector participation in

the region

al integration proc

ess. A con

crete exam

ple is th

e lead

ersh

ipof th

e UCCIIO

in promoting the co

ncep

t of “Iles Va

nille" in re

latio

n to

the tourism sec

tor. In add

ition

to th

at, the

private sector sho

uld be

invi-

ted to participate in trad

e an

d investmen

t protoco

l neg

otiatio

ns. A

tech

nica

l sup

port can

be given to private sector assoc

iatio

ns in th

eprep

aration of pap

ers / do

cumen

ts as a co

ntrib

ution fro

m th

em to

these co

mmercial and

trad

e ne

gotiatio

ns. T

his is im

portan

t to sh

ow th

eview

of the

private sector in a struc

tured man

ner an

d effectively co

ntri-

bute to

wards

pub

lic-private dialog

ue. F

urthermore, in order to

mee

t the

labo

r marke

t nee

ds in areas suc

h as IT

C, ren

ewab

le ene

rgy, agricul-

ture, m

ining an

d en

terprise de

velopm

ent, it is propo

sed to sup

port th

ecrea

tion of partnersh

ips be

twee

n the pu

blic and

the private high

er lear-

ning

/training institu

tion as w

ell as indu

stry of the

IOC M

embe

r States

and ad

voca

te fa

cilitating mov

emen

t of p

rofessiona

ls acros

s the region

.

Them

atic Trust Fun

d /

OPSM / RD / Reg

iona

lPub

lic G

oods

(RPG)

WB / EU / AFD

2013

-201

5

Action 2

Sup

port coo

rdination ef-

forts be

twee

n na

tiona

lIPA and

CCI.

This w

ill co

nsist o

f the

estab

lishm

ent o

f networks fo

r kn

owledg

e, best

prac

tices and

exp

erienc

e sh

aring in promoting trad

e an

d investmen

t.Th

e ne

twork will serve also

to disseminate inform

ation on

trad

e an

d in-

vestmen

t opp

ortunities in th

e region

. Tec

hnical and

fina

ncial assistanc

ewill be

nec

essary to

put in place

a re

gion

al portal tha

t cou

ld be ho

sted

by th

e UCCIIO

.

Them

atic Trust Fun

d /

OPSM / RD

WB / EU / AFD

2014

-201

5

Action 3

Promote an

d su

pport the

developm

ent o

f results-

based PPP initiatives.

Sim

ilarly to

other RMCs, th

e ob

jective is to

develop

in close collabo

ra-

tion with

the loca

l Gov

ernm

ents and

private sector re

presen

tatives of

the IOC M

embe

r States, and

PPP ded

icated

fund

s. Selec

ted projec

tswill be

requ

ired to dem

onstrate th

e de

velopm

ent o

utco

mes of the

re-

source

s co

mmitted

, suc

h as inco

me an

d em

ploy

men

t creation while

simultane

ously co

ntrib

uting to th

e co

mpa

nies’ g

rowth. T

he Ban

k ca

nalso

leverage

its role as a lead

ing finan

cial institu

tion in Africa

to assist

loca

l com

panies in id

entifying

other fo

rms of PPP program

s, suc

h as in

the area

of tec

hnical sup

port and

cap

acity building.

Them

atic Trust Fun

d /

OPSM / RD

WB / EU / AFD

2013

-201

5


FL

AG

SH

IP S

TU

DY

IN

DIA

N O

CE

AN

CO

MM

ISS

ION

S

um

ma

ry F

ina

l R

ep

ort

Area of

Coo

pe-

ration

Com

po-

nent

Action

Description

Potential sou

rce

of fu

nding

at Bank level

Potential P

art-

nership

Proposed

Ti-

meline

2.1.

Ren

ewab

leEne

rgy

Action 1

Prepa

ratio

n of a strateg

y,blue

print a

nd investmen

tplan

for the rene

wab

leen

ergy

sec

tor.

This includ

es providing

tech

nica

l and

fina

ncial assistanc

e to develop

thos

e instrumen

ts and

organ

ize a region

al ro

undtab

le of d

evelop

men

tpa

rtne

rs.

Them

atic Trust Fun

d /

OPSM / RD / SEFA

20

14-201

5

Action 2

Estab

lishm

ent o

f an ob

-servatory on

region

al best

prac

tices in th

e field of

rene

wab

le ene

rgy.

The ob

servatory will allow investors an

d profession

als to acc

ess inform

a-tio

n of existing co

mpa

nies and

rene

wab

le ene

rgy projec

ts (h

ydro, g

eo-

thermal, w

ind, bioga

s, hyd

ro tu

rbines, m

arine, biofuels, etc.). This

initiative will also

improv

e kn

owledg

e of best p

ractices and

facilitate the

establishm

ent o

f tec

hnical and

fina

ncial p

artnersh

ips with

in th

e private

sector. G

iven

the finan

cial con

straints, s

uch initiative co

uld be

don

ethroug

h a PPP project, c

ombining

, und

er th

e au

spices of the

IOC, the

participation of th

e UCCIIO

, Cha

mbe

rs of C

ommerce

, Ind

ustry an

d Agri-

cultu

re of the

Mem

ber States an

d the Ene

rgy Age

ncy of Reu

nion

.

Them

atic Trust Fun

d /

ONEC / O

NRI / RD /

SEFA

UE / AFD

/UNDP

2014

Action 3

Estab

lishm

ent o

f a fa

cility

to fina

nce region

al re

ne-

wab

le ene

rgy projec

ts.

A fa

cility co

uld be

estab

lishe

d which

wou

ld aim

at fac

ilitating the finan

cing

of re

newab

le ene

rgy projec

ts in private sector and

calls fo

r prop

osals for

PPPs. The

facility co

uld also

be tapp

ed by the IOC M

embe

r States, w

howou

ld like

to see

more inno

vative projec

ts in th

eir resp

ective co

untries.

The sp

ecific arrang

emen

ts fo

r the establishm

ent o

f suc

h a facility remain

to be de

fined

. During the ph

ase of re

source

mob

ilization (see

Ann

ex 9

below), the IOC and

the Ban

k will toge

ther exp

lore in detail the

imple-

men

tatio

n of suc

h an

instrumen

t.

Them

atic Trust Fun

d /

ONEC / RD / Fac

ility to

be created

UE / AFD

/UNDP

2013

Action 4

Sup

port re

gion

al univer-

sity program

.

The ne

ed fo

r training

and

upg

rading

tech

nica

l skills is one

of the

fund

a-men

tal p

roblem

s facing

the en

ergy

sec

tor. An initiative co

uld be

develo-

ped throug

h a region

al university program

, stren

gthe

ning

link

s be

twee

nun

iversities an

d relying in particular on the “Eco

le Polytec

hnique

de Ma-

daga

scar”, w

hich

trains

water eng

inee

rs. M

oreo

ver, training

in alternation

remains

to be de

velope

d for the training

of tec

hnicians

.

ONRI / O

NEC / RD /

RPG

UE / AFD

/ W

B20

14-201

5

Action 5

Provide

tech

nica

l and

fi-

nanc

ial assistanc

e to

carry ou

t ESW.

Two main stud

ies are targeted

:-

Study

to develop

a m

apping

of the

poten

tial o

f the

rene

wab

leen

ergy

for ea

ch of the

IOC M

embe

r States. The

study

will seek

to ans

-wer, a

mon

g othe

r qu

estio

ns: W

hat k

ind of ene

rgy proc

essing

gen

eration

is th

e mos

t ade

quate?

Wha

t are th

e estim

ated

cos

ts? Th

is study

will

build on the da

taba

ses be

ing de

velope

d with

in th

e region

as the ge

othe

r-mal poten

tial o

f Reu

nion

and

the da

taba

ses of re

gion

al re

source

s for

wind an

d so

lar to be de

velope

d un

der the su

pport p

rogram

for rene

wa-

ble en

ergy

(EU / IO

C).

-Study

on the region

al harmon

ization of sec

toral p

olicies, legisla-

tion an

d regu

latory proce

dures.

ONRI / O

NEC / RD

UE / AFD

/ W

B20

13-201

4

2.Regional Infrastructure Development

FL

AG

SH

IP S

TU

DY

IN

DIA

N O

CE

AN

CO

MM

ISS

ION

S

um

ma

ry F

ina

l R

ep

ort

Area of

Coo

pe-

ration

Com

po-

nent

Action

Description

Potential sou

rce

of fu

nding

at Bank level

Potential P

art-

nership

Proposed

Ti-

meline

2.2.

ITC Sec

tor

Action 1

Prepa

ratio

n of a Reg

iona

lMaster Plan for the ITC

sector.

The Reg

iona

l Master Plan (RMP) for th

e ITC sec

tor to be prep

ared

will in-

clud

e, amon

g othe

rs, a

region

al integrated

app

roac

h de

aling with

issu

esof acc

ess do

ors, listing the available ba

ndwidth cap

acity (d

omestic and

internationa

l), and

pric

ing po

licies ac

cess inform

ation to investors. It w

illbe

presented

to develop

men

t partners an

d the private sector during a re-

gion

al ro

undtab

le. T

he Ban

k’s su

pport is expe

cted

for bo

th th

e prep

ara-

tion of th

e RMP and

the realization of th

e region

al ro

undtab

le.

ONRI / O

ITC / RD / RPG

WB / UE / AFD

2013

-201

4

Action 2

Improv

e co

ordina

tion be

t-wee

n regu

lators and

pri-

vate sec

tor op

erators.

Estab

lishm

ent o

f a re

gion

al con

sultatio

n/co

ordina

tion structure invo

lving

private op

erators an

d pu

blic re

gulators w

ith th

e aim of d

ealing with

the

grad

ual liberalization of th

e sector and

the im

plem

entatio

n of IT

C-PEP.

This w

ill allow id

entifying

investmen

t projects to be includ

ed in th

e Reg

io-

nal M

aster Plan for the ITC sec

tor.

ONRI / O

ITC / RD

WB / UE / AFD

2014

Action 3

Develop

cap

acity building

prog

rams for the private

operators an

d the regu

la-

tors in th

e teleco

mmun

i-ca

tion sector.

Spe

cifically, th

e Ban

k ca

n assist th

e IOC in coo

rdinating be

twee

n the is-

land

s an

integrated

app

roac

h of training

s throug

h: (a

) digital university (a

ssu

ggested by

the Mau

ritius Cha

mbe

r of Com

merce

); (b) p

artnersh

ips

betw

een un

iversities su

ch as the pa

rtne

rship be

twee

n the Aca

demy of

ICT an

d the ICC O

TAM in M

auritius or th

e Master in TNSI5foun

ded in

2005

in partnersh

ip w

ith th

e scho

ol and

GOTICOM PIC of M

adag

asca

r.

ONRI / O

ITC / RD

WB / UE / AFD

2014

Action 4

Provide

tech

nica

l and

fi-

nanc

ial assistanc

e to

carry ou

t ESW.

-Kigali p

rotoco

l Implem

entatio

n Progress Study

in th

e IOC re

gion

.-

ITC lega

l and

regu

latory harmon

ization stud

y in th

e IOC re

gion

.Th

e stud

y will establish a scen

ario fo

r the segm

entatio

n of th

e ITC m

arke

tan

d the scop

e of th

e ha

rmon

ization of th

e lega

l and

regu

latory fram

e-works (m

ostly in te

rms of pric

ing an

d regu

latio

n).

-Revisit the situation an

d the feasibility stud

y for the SEGANET

projec

t.-

Prepa

ratio

n of th

e SEGANET projec

t and

fina

ncial p

ropo

sal.

ONRI / O

ITC / RD

WB / UE

2014

-201

5

Action 5

Sup

port th

e establish-

men

t of d

edicated

wor-

king

group

for projec

tprep

aration prop

osals.

For ea

ch project selec

ted, a w

orking

group

(com

posed by

the IOC,

Mem

ber States, dom

estic private sector and

the Ban

k) w

ill set u

p an

d will

discus

s an

d work in th

e prep

aration of PPP projects. The

Ban

k’s/NEPA

DIPPF initiative will be

the main instrumen

t to tech

nica

lly and

fina

ncially as-

sist th

e prep

aration of re

gion

al IT

C projects.

ONRI – IP

PF / Th

ematic

Trus

t Fun

d / OITC / RD

WB / UE / AFD

2013

- 20

15

2.Regional Infrastructure Development

5Th

e Tech

nologies New

System In

form

ation (TNSI) trains

ann

ually aroun

d thirty en

gine

ers fro

m various

scien

tific fields

suc

h as com

puter scienc

e, m

athe

ma-

tics or physica

l scien

ces. To ac

hieve this M

aster, lesson

s are mad

e in part b

y the University and

partly by private sector eng

inee

rs.

FL

AG

SH

IP S

TU

DY

IN

DIA

N O

CE

AN

CO

MM

ISS

ION

S

um

ma

ry F

ina

l R

ep

ort

Area of

Coo

pe-

ration

Com

po-

nent

Action

Description

Potential sou

rce

of fu

nding

at Bank level

Potential P

art-

nership

Proposed

Ti-

meline

2.3.

Tran

sport

sector

3.1.

Natural di-

sasters

3.2.

Reg

iona

lpa

ndem

icdiseases

Action 1

Provide

tech

nica

l and

fi-

nanc

ial assistanc

e to

carry ou

t ESW

The following stud

ies may be co

nduc

ted as a prerequ

isite to

furthe

r su

p-po

rt th

e region

al tran

sports infra

structure:

-Tran

sport m

aritime co

rridors stud

y (as stated

in th

e Sou

thern

Africa

RISP).

-Reg

iona

l air tran

sport re-orga

nizatio

n stud

y in re

latio

n to th

e “Iles

Vanilles” con

cept (p

ut in place

com

mon

itineraries for serving the island

s,low cos

t promotion prod

ucts, p

ossibility to com

bining

tran

sports, e

tc.).

-Inter-island

maritime tran

sport s

tudy

to id

entify the ad

equa

te:

tran

sport c

hain, m

ulti-mod

al tran

sportatio

n sche

me, port tariffs, trad

e fa-

cilitation mea

sures, non

-tariff barrie

rs, s

cope

of d

iversification of traffic

(passeng

ers, agricultural foo

d co

mmod

ities).

ONRI – IP

PF / Th

ematic

Trus

t Fun

d / OITC / RD /

RPG

WB / UE

2014

-201

5

Action 1

Sup

port re

levant nationa

linstitu

tions

in pos

t crises

resp

onse m

anag

emen

tan

d risk mitiga

tion for na

-tural d

isasters situ

ations

.

To date, th

e Ban

k assistan

ce in th

e region

was based

on a ca

se by ca

sesu

pport, which

is provide

d after the na

tural d

isaster ha

s oc

curred

. It is

strong

ly sug

gested

the establishm

ent o

f a ded

icated

fund

for po

st crises

resp

onse m

anag

emen

t following oc

curren

ce of n

atural disasters. S

uch a

fund

will prim

arily ta

rget th

e reco

nstruc

tion of critical infra

structure, m

ainly

road

s, and

ens

uring ba

sic urge

nt nee

ds to

pop

ulations

. Sup

ports fro

mothe

r so

urce

s of fina

ncing sh

ould sup

port th

e establishm

ent o

f a ded

ica-

ted ce

nter of e

xcellenc

e de

aling with

enviro

nmen

t and

man

agem

ent o

frisk of natural disasters.

OSHD / Clim

ate Cha

nge

Facility / RPG

AFD

/ EU /UN

Age

ncies/

WB/JICA/

EIB/IA

D

2013

-201

5

Action 1

Improv

ing region

al coo

rdi-

natio

n to re

spon

d to pan

-de

mic disea

ses.

Put in place

/ope

ratio

nalize mec

hanism

for region

al coo

rdination resp

onse

to th

e threat of p

ande

mics diseases. S

uch a mec

hanism

of c

oordination

shou

ld allow th

e Mem

ber States to sha

re inform

ation in re

al time an

d im

-plem

ent p

rotoco

l actions

rap

idly. It is also prop

osed

to exten

d the pre-

viou

s finan

cial assistanc

e to prevent and

figh

t aga

inst HIV/AIDS and

enlarge the su

pport to the co

ntrol o

f other disea

ses su

ch as malaria.

Suc

h a finan

cial instrumen

t may be flexible en

abling the Ban

k to interven

ein situ

ations

of n

atural disasters w

ith risk of propa

gatio

n of disea

ses wi-

thin th

e region

. In ad

ditio

n, it is propo

sed the establishm

ent o

f mec

ha-

nism

s of coo

rdination an

d the crea

tion of one

region

al cen

ters of

exce

llenc

e for infectious

disea

ses.

OSHD / RPG

AFD

/ EU / UN

Age

ncies/

WB/JICA/

EIB/IA

D

2012

-201

5

3.Response management to natural disasters and regional pandemics

2.Regional Infrastruc-ture Development

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ort

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Contact:Avenue du GhanaAngle des Rues Pierre de Coubertinet Hedi NouiraBP 323Tunis-Belvedere 1002TunisiaInternet: www.afdb.org

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