Kingombe, C. 2013. Towards successful deeper regional integration? The role of the African Development Bank. GREAT Insights, Volume 2, Issue 7. October 2013. Maastricht: ECDPM.
How can the African Development Bank (AfDB) assist the process towards deeper regional integration in Africa? This article briefly addresses the concept, dynamics and major drivers of regional integration before presenting some of the features of the Bank’s forthcoming New Regional Integration Strategy and its role in the rapidly changing regional landscape.
State of Regional Integration in Africa
‘Pan-Africanism’ through its different shades is a political vision for a unified African continent. Following the effervescence of the immediate post-independence era, it was eventually the economic arguments for regional integration that gained the upper hand. Africa has a number of unique growth-retarding constraints including the continent’s fragmentation into many small domestic markets coupled with low purchasing power, landlocked national economies often with insufficient access to major markets etc. Africa’s leaders therefore quickly recognised the importance of regional integration as a tool to capture its own regional market; to exploit economies of scale; and to pool resources for investments.
Notwithstanding the fact that this realisation has been dawning on Africa’s policy makers, at least since the signature of the Abuja Treaty adopted in 1991 with its proposed ambitious time frame, the eight Regional Economic Communities (RECs) recognised by the African Union (AU) and forming the ‘‘pillars’’ of the African Economic Community (AEC) are moving towards implementation at different speeds. (1) East African Community (EAC) is the most advanced community with an estimated Intra-REC trade share of total exports of 23% in 2009, and with a Protocol on the Establishment of a Common Market which entered into force on 1st July 2010. COMESA, which launched its customs union in June 2009, only has an intra-REC trade share of 8.9% in 2011. Southern African Development Community (SADC) (with a share of 9.9% in 2011) and the Economic Community of West African States (ECOWAS) (6.3% in 2011) have made progress in building their free trade areas (FTAs) and each plan to launch a customs union, in 2013 and 2015 respectively. The Economic Community of Central African States (ECCAS) with the lowest share of intra-REC trade at 0.6% in 2011 launched its FTA in 2004, but is facing enormous challenges in its practical application. (2)
Steps to foster intra-regional trade
The RECs and their member States are moving at different speeds in the integration process. Not only has the implementation of the agreed FTAs been problematic, the RECs are also facing non-tariff barriers (NTBs) to trade. The RECs have different approaches in dealing with such barriers with some RECs yet to establish a NTB monitoring systems.
One of the main tools used to facilitate trade is the one-stop border post (OSBP) widely adopted to minimize delays at cross border points on major transport corridors in various RECs, including in COMESA, EAC, ECCAS, ECOWAS and SADC. Moreover, ECOWAS has for example established national road transport and transit facilitation committees to ensure the free flow of trade and transport.
Other areas of progress include the many new railway development projects under way in Africa; various air transport initiatives and programmes under implementation such as COMESA’s recent energy programme. In the area of free movement of persons, some results have been achieved by AMU, EAC and ECOWAS, less so in CENSAD, COMESA, however, ECCAS, IGAD and SADC are still facing considerable challenges in the implementation of decisions on the free movement of persons which have been taken at the regional level.
Finally, at its 18th ordinary session, held in January 2012 in Addis Ababa, Ethiopia, on the theme of “Boosting intra-African trade”, the Assembly of Heads of State and Government of the AU adopted a decision and a declaration that reflect the strong political commitment of African leaders to accelerate and deepen the continent’s market integration through the establishment of a continent-wide FTA.
AfDB’s new Regional Integration Strategy
Regional Integration has been part of the Bank’s mandate since its creation in 1963. (3) To give impetus to this mandate, in 2000 a policy on economic cooperation and regional integration was adopted. Regional integration gained added prominence with the establishment of a new dedicated department responsible for regional integration in 2006. This was followed by the development of the Regional Integration Strategy (RIS 2009-2012 extended to 2013) that places emphasis on rationalisation to overlapping regional integration initiatives, harmonised REC policies, investment and industrial development and capacity building; and four Regional Integration Strategy Papers (RISPs 2011-2015), only temporarily excluding the Northern Africa.
The Bank’s newly approved Ten Year Strategy (TYS) (2013-2022) identifies regional integration as one of the five core priority areas that the Bank will focus on creating larger, more attractive markets, the structural transformation of African economies that could enhance intra-African trade and inclusive growth. It builds on the Bank’s comparative advantages centred on its financing capacity, its widespread country and regional presence, research and analytical expertise and its multi-sectoral capacity and reach.
The new RI Strategy will operationalise the TYS and will thereby be geared at unlocking Africa’s potential through regional integration. The AfDB will substantially scale up infrastructure investment aimed at increasing productivity and competitiveness, at deepening spatial, economic and social integration, at creating opportunities and promoting inclusion and thereby contributing to sustainable structural transformation. Within this broad spectrum of ambitions, the RIS will focus concretely on coordinating policy dialogue at the national, REC and continental levels, on reducing transaction costs, on improving the speed and flow of goods and services, on improving connectivity of people and of systems, on adopting appropriate policies to harmonise and simplify complex customs procedures and regulations, on rules of origin and other forms of barriers. The AfDB will scale up operations, especially in the private sector with a greater operational selectivity focusing on its competitive advantage in infrastructure financing. The RIS will adopt a differentiated approach for fragile states to middle income economies, which is necessary to address diverse challenges and opportunities for inclusive growth.
The new regional strategic framework, which is to guide interventions in regional integration, will benefit from insights from the internal and external review processes on the Regional Operations as contained in the Operations Evaluation Report 2012, the Development Efficiency Report 2012 (dedicated to regional integration); the review of the achievements of the RIS 2009-2012; and the mid-term reviews of the RISPs.
What Role the AfDB sees for itself in the changing landscape?
The combination of the current growth dynamism and optimism on the continent and the development challenges ahead—not to mention changes in the global economy and in Africa make the time right for a renewal of the AfDB’s strategy for Africa. The AfDB in line with its status as Africa’s premier development institution has invested significant resources, both financial and non-financial in supporting regional integration initiatives.
Looking forward, the Bank, as already stated in the Strategy 2013 – 2022, acknowledged the need to respond to fundamental changes in Africa’s development landscape with a new strategic orientation, drawing upon the long established tradition as a partner of choice, catalyst, adviser and knowledge broker.
COMESA, EAC and SADC are pursuing a tripartite FTA arrangement which will unify their combined market space of over 500 million people, thus providing a stepping stone and impetus towards realising the continental FTA. At their second summit, held in Johannesburg, South Africa in June 2011, the heads of State and government of the three RECs signed a Declaration Launching the Negotiations for the Establishment of the Tripartite Free Trade Area (TFTA), and adopted a road map for establishing the TFTA as well as a set of negotiating principles, processes and an institutional framework. In order to support this Tripartite process, the Bank has designed a multi-year Tripartite Capacity Building Project (TCBP), to support the Tripartite negotiation processes, the development of trade facilitation instruments and industrial cluster action plans in the TFTA. The TCBP will focus on (i) the software development of a comprehensive non-tariff measures (NTMs) database at the national and regional levels facilitating operators to register complaints about such barriers; (ii) statistics and information database; (iii) improved capacities for private sector in the market integration negotiations and implementation; and (iv) enhanced capacity for industrial development through actions plans for value chain development.
The Bank’s strengthened field presence, through its on-going decentralisation process, will allow it to have full engagement in shaping the Tripartite regional integration agenda.
Another important role of the AfDB is to encourage Member States to give adequate priority to mainstreaming agreed regional integration programmes and projects at the national level and rigorously implementing them, while ensuring that there is collective dialogue with the private sector and civil society in order to strengthen their engagement in the process.
Finally, the AfDB’s could play an important role in strengthening a more rigorous monitoring and evaluation of the integration process. There is a major need to develop a clearer understanding of the outcomes and impacts of Africa’s various regional integration processes, particularly progress made with the implementation of the AU Action Plan for Boosting Intra-African Trade. The AfDB has developed a system of indicators to more effectively monitor and evaluate the regional integration activities. The system aims at monitoring the level of integration of a given regional grouping and shall be utilised to compare regional integration processes in different regions across Africa. The system of indicators will respond to the question: ‘Are the resources achieving the desired outcomes and impacts?’ ‘What progress are we making with the implementation of the various AU initiatives?’