GREAT Insights’ Editor Dr San Bilal talks to Mr Kalilou Traoré, ECOWAS Commissioner in charge of industry and private sector promotion.
ECOWAS countries have made progress in many areas but there are still many challenges to attract more investment. To this end, the new strategy for private sector and the new strategy of industrial development were adopted to better address priorities and engage the private sector.
San Bilal: What is the regional dimension of private sector promotion? Isn't it first and foremost a national matter? Kalilou Traoré: The Economic Community of West African States (ECOWAS) was created to achieve a politically and economically stable area favourable for development. It comprises 15 countries with over 340 million people and will have a market of over 400 million consumers in 2020. The region has recorded a steady growth of 5% of GDP on average for over a decade. While ECOWAS countries have made progress in many areas, there are still many challenges to attract more investment. Everyone agrees that the private sector must be the engine of development. To make this possible we need to create an enabling environment for business development. The investment deficit of the private sector in our countries still depends largely on the quality of our business environment. This is an important challenge for all development stakeholders that requires a combination of efforts by member states, regional institutions, the international community and the private sector. The main private sector development responsibility rests with the national authorities who need to create the appropriate environment and establish administrative mechanisms, fiscal, infrastructural needed. The role of the region may be at three levels:
- to give the private sector a larger market for business development;
- to assist Member States by pooling efforts through cooperation, harmonisation and implementation of joint projects; and
- to establish integrator mechanisms and projects.
As a regional organisation, ECOWAS is supporting its Member States through regional programmes and expertise on improving the business climate and attracting more investment. The regional actions have the advantage of pooling efforts, reducing costs, sharing experiences and giving greater visibility and predictability for investors. The Region focuses on the development of a strong and dynamic private industrial sector, allowing local industrial transformation, taking into account the comparative advantages, to meet the needs of the growing regional market and to integrate into global value chains with transformed products.
Business people keep complaining about the overly bureaucratic and lengthy procedures for doing business in West Africa, far beyond African good performers such as Mauritius and Rwanda. What can you do about it? The gap between policy statements and the business environment in many African countries is striking. Despite several programmes implemented at national and regional level, we must recognise that there are still many challenges. The causes of under development are many and this requires us to continuously improve the logic and quality of our approach in setting priorities. This exercise led us to develop a new strategy for private sector development, endorsed by the Council of Ministers of ECOWAS, which revolves around five axes:
- business environment
- regional market
- competitiveness
- SME development strategy
- private sector financing
The strategy also sets priority areas with particular focus in the field of agribusiness, digital economy, trade, public buildings and works, finance and crafts. The role of this strategy is to harmonise policies and pool efforts, building on positive experiences and developing capacity building projects for countries. Particular emphasis will be placed on SMEs strategy with the promotion of intelligent local content principles while promoting market opening. SMEs constitute over 80% of regional companies involved but less than 15% in the regional GDP. To remedy this situation, the Commission has launched a study to establish a regional SME support policy. This policy will focus on capacity building, development of entrepreneurship, access to finance, access to national and regional markets etc. This programme will engage governments, financial institutions and development partners. Its review by the member States began in April.
What has been ECOWAS achievement so far and what are your priorities? The integration efforts in the region have led to a fivefold increase in the volume of regional trade between 2003 and 2013. This is significant even if intra-ECOWAS trade still represents less than 15% of total trade by ECOWAS countries, dominated by massive oil exports, mining products and agriculture. The region GDP reached US$675 bn in December 2013, following a decade of steady average growth of 5%, and is expected to grow by 7.1% in 2015. Among the Common Market achievements we can mention the Free trade area since 2000, the Customs Union since 2015, the regional competition policy, a regional monetary cooperation programme for the single currency, several sectoral policies, several projects interconnection of transport networks, energy and telecommunications, and now a new regional private sector development strategy and a new regional industrial strategy. We also have some key on-going programmes to build and strengthen the regional market (see Box).
Click on the image to enlarge What are the main challenges you have encountered so far? And how do you plan to overcome them? ECOWAS countries have made progress in many areas: democracy, governance, security, trade, infrastructure investment etc. But most countries are still in the lower rankings in the Doing Business reports of the World Bank. We know, through experience, that improving the Business Climate is a long way process of work because it requires significant changes in the habits and skills capacities. But most of all, many are afraid of change, even the necessary ones, which often face established public or private interests. Even if reforms are made, the implementation may take a long time because of low capacity and lack of willingness to change. The reasons for this are numerous. Key challenges include weak capacity and capabilities of Member States to make the necessary reforms and to implement EU rules to improve the business climate. All that still weighs heavily on the performance of the regional market, the flow of investments, competitiveness and the development of local entrepreneurship. This situation challenges us to double efforts and refine our approach on concrete targets. Therefore, in addition to cross-cutting actions to strengthen the business environment, we will develop the sectoral approach on high-potential sector.
West Africa is pursuing its integration process and opening up to foreign companies. Does it mean that the ECOWAS market is doomed to be dominated by few Nigerian and Ivorian companies, and some large multinationals, European and Chinese companies? What about private sector development from other countries in the region? The development of the economy requires massive investments that are unfortunately lacking in our region. The gap for financing of the economy in our region amounts between US$40 to 50 billion per year. We are currently implementing several programmes that aim at attracting investment from abroad as well as from within the region. Consequently, the private sector, including large multinational corporations at regional and national levels have an important role to play. We encourage all ECOWAS Member States to include the regional dimension in their development strategies including investment and trade. We therefore appreciate the efforts and commitment of the countries strongest economies in the region, like Nigeria, Ghana and Côte d’Ivoire, to engage in that direction because it is the entire region that benefits. The integration process is designed so that each country derives maximum benefit. This will be achieved if all countries have an ambitious regional expansion strategy, based on their comparative advantages. We will support Member States to achieve this trend with our sectoral approach to bring together countries that share specific sectoral benefits.
How do you concretely associate the private sector in your industrialisation plan for West Africa? Dialogue with the private sector is essential at both national and regional levels to set priorities of our action. We have several programmes to strengthen the partnership with the private sector. We support the establishment and operation of regional organisations such as the Federation of Chamber of Commerce,the Federation of employers' organisations, the Federation of Women Business, NEPAD Business Group, sectoral associations in the field of industry, banking, insurance, pharmaceuticals etc. Concerning our industry strategy, the Region adopted in 2010 a common industrial policy developed to strengthen regional cooperation in the industrialisation process. The objectives of this policy are:
- Diversify and expand the base of regional industrial production gradually increasing the local raw material processing rate from 15-20% to an average of 30% by 2030.
- Gradually increase the industrial sector contribution to regional GDP from a current average of 6-7% to over 20% by 2030.
- Gradually increase the intra-community trade in West Africa less than 12% to 40% by 2030, with a 50% share of regional trade in industrial products.
- Gradually increase the volume of exports of industrial products in West Africa to the global market from 0.1% to 1% by 2030.
- The revised implementation strategy of this policy has two main parts. A cross section which focuses on cross-cutting issues of industrialisation and a sectoral section that focuses on priority sectors.
The cross section has four axes:
- Strengthening of national policy, uniform, and regional cooperation
- Promotion of opportunities and market access
- Supporting industrial competitiveness
- Mobilising resources
The sectoral part will target four key areas:
- Agribusiness and food industries
- Pharmaceutical industry
- Building materials industry
- Industries automotive assembly and machinery
Although the region has significant comparative advantages in many industrial production sectors, these sectors are struggling to develop. Each sectoral plan will establish a regional framework with a political commitment by Member States, the availability of technical expertise and involvement of financial institutions. Although the agro-industry sector is the main regional manufactory, we cannot limit the ambitions of the Region to this sector. We intend to benefit from the strong growth in demand for manufactured goods in other sectors at regional and international level. We plan to organise the first edition of the ECOWAS industry forum in July 2016, which will be an opportunity to bring to also bring together all private sector actors, financial partners and external technical experts concerned by the regional industrial development.
This article was published in
GREAT Insights Volume 4, Issue 5 (August/September 2015).
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