Shift from traditional approach to integration to ‘developmental regionalism’, report urges
The Economic Development in Africa Report 2013, subtitled “Intra-African Trade: Unlocking Private Sector Dynamism”, says that efforts to date to spur jointly reinforcing economic growth on the continent have relied on a ‘textbook’ and ‘linear’ approach to regional cooperation that does not fit with Africa’s situation. It says that what is required is a “21st century approach to dealing with 21st century challenges”.
The report, released on 10 July 2013, suggests that African countries should adopt a new approach to regional integration, referred to as “developmental regionalism”, which encompasses cooperation among countries in a broader range of areas than just trade and trade facilitation, to include – for example – investment, research and development, as well as policies aimed at accelerating regional industrial development and regional infrastructure provision, such as the building of better networks of roads and railways.
Harvesting the many benefits that can come from vibrant regional markets – spurred by African leaders’ 2012 decision that they will eliminate barriers to intra-African trade – depends on an expansion of the continent’s private sector, the report notes. Selling in nearby markets gives firms cost advantages through proximity, potentially reduced transport expenses, better knowledge that allows goods to be fitted to local conditions, and, if sufficient customers can be found, enough critical mass to justify expanding industry.
But additional holistic approaches – a form of enhanced teamwork – are required of African governments to enable the private sector to expand and thrive, the report says. Experiences elsewhere in the world indicate that setting up regional markets will result in a greater demand for goods; African businesses must therefore be encouraged and enabled to provide these goods or they will lose out to foreign competitors, the report warns.
The capabilities of African countries must be enhanced so that they can produce a wider range of sophisticated goods that they can then trade with one another – a process that economists call expanding productive capacity. The report says that regional industrial policies are an important tool for developmental regionalism. African countries need to coordinate their national industrial policies around regional industrial policies in order to build complementarities in what can be produced and traded within Africa.
The Economic Community of West African States (ECOWAS) has such a regional industrial policy which has yet to be fully implemented, the report notes. One of its objectives is to promote local processing and the creation of value added in the sectors and subsectors where the region as a whole enjoys high comparative advantage (such as mining, and the processing of agricultural products).
The concurrent development of national and regional industrial policies can stimulate the development of regional industrial value chains in Africa, in turn offering African countries larger opportunities to trade more goods among themselves. Examples are the cotton-textile-apparel value chain, and the livestock-meat-canned products value chain.
A second element of developmental regionalism lies in strengthening the capacity of the private sector in Africa as an important driver for expanding regional cooperation. So far in Africa, governments have been the only active force for regional integration, while the private sector has remained a passive participant in the process, the report contends. There is a need to create mechanisms for constant dialogue between States and the private sector so that the problems and challenges faced by existing and prospective businesses are clear to governments, and well-coordinated plans can be established for dealing with them. In Mauritius, for example, the Joint Economic Council, a coordinating body of the Mauritian private sector, meets on a regular basis with the Government to discuss broad economic policies.
A third element of developmental regionalism consists in building economic linkages among African economies in specific sectors of activity, through the creation of “development corridors,” the report says. Developmental regionalism goes beyond trade, and encompasses cooperation among African countries in a wide range of areas including investments in transport and in production-related infrastructure, as well as in agriculture and industrial projects.
Cooperation in a wide range of areas can help African countries build international competitiveness. The Maputo Development Corridor, linking Gauteng Province in South Africa to the port of Maputo in Mozambique, has been hailed as a successful, true transport corridor that has unlocked landlocked provinces in one of the most highly industrialized and productive regions of Southern Africa. There are currently more than 20 corridors in operation in Africa, but most tend to be traditional transport corridors. There is a need to go beyond that and to create industrial development corridors as well, the report says.
Developmental regionalism is not a vague concept, the report notes. It is actually being carried out elsewhere. An example is the Greater Mekong Subregion Project in South-East Asia, which is promoting economic linkages and boosting development among six countries sharing the Mekong River (Cambodia, China, the Lao People’s Democratic Republic, Myanmar, Thailand and Viet Nam), with assistance from the Asian Development Bank. The joint strategic development programme is based, among other things, on public–private partnerships, shared use of natural resources, and the creation of economic development corridors. One new project involves marketing the Mekong area as a single travel and tourism destination.
While there are elements of a “developmental” integration agenda in some African subregions, such as the proposed Tripartite Free Trade Area that will cover 26 countries mostly in Eastern and Southern Africa, the report says that more numerous and more comprehensive developmental integration programmes should be designed and implemented in Africa.