Transcript Presentation to BITC November 2013 final version

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Regional Integration:
Positioning Botswana as a regional
economic hub
Experiences from Kenya
Presentation by Cyrille Nabutola to BITC
20th November 2013
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Index
1.
2.
3.
4.
5.
6.
Introduction
Overview of integration
Global trends
The Kenyan Experience
Leveraging Botswana for success
Conclusion
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Introduction – A brief overview of EPZA
•
Established in 1990 as a semi-autonomous state corporation to
promote, facilitate and create and enabling business
environment for investments in Kenya’s free economic zones;
•
Implement an incentivized programme for export
oriented investments. Transitioning to Special Economic
Zones.
•
Performance status in year 2012:
•
•
•
•
•
Over 40,000 Kenyans employed by EPZ firms (direct) and 160,000
indirectly.
48 zones established hosting 90 enterprise across different sectors
with investments exceeded USD 447 Mn.
Annual EPZ exports topped USD 470 Mn.
Supporting USD 211 Mn. in domestic expenditure.
Attracted investors from over 15 countries drawn from the
Americas, Asia, Australia, Europe, and Africa.
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Introduction - What is integration?
• These are deliberate programmes based on
agreements among governments of 2 or more
countries that offer common approaches and
treatment usually of a preferential nature on a variety
of socio-political and economic issues.
• My presentation will focus on regional integration and
more specifically on issues of economic integration.
These are typically characterized by trade, monetary
and fiscal policies jointly developed, adopted and
applied by member countries.
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Introduction – Why do countries seek integration?
Some key reasons:
1.
Market and resource benefits – access to a wider market
base, manufactured products and factors of production
e.g. Egypt selling into Kenya & Ethiopia;
2.
Investment benefits – attraction of investments from
member countries (intra) as well as from third countries
targeting wider market base encompassing member
countries e.g. S.A. investors in Botswana & Tanzania;
3.
Economies of scale – access to larger markets and raw
materials allow for upscale of production, lower costs and
attendant benefits e.g. Tanzanian cotton used in Kenya;
4.
Logistical advantages – access to transport corridors and
seaports for cargo and people movement e.g. Uganda,
Rwanda & Burundi through Kenya.
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Overview of integration
#
Levels of
Integration
Characteristics
1
Global
Agreements at WTO, UN levels.
2
Regional
Preferential treatment agreements among
member and partner countries e.g. SADC.
3
Bilateral
Preferential treatment between 2 countries
e.g. U.S. and South Korea covering vehicle
imports.
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Overview of integration (…continued)
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Stages of Economic Characteristics
Integration
1
FTA (Free Trade Area) No tax tariffs between member countries
and member countries imposing their own
external tariffs on non-member countries
e.g. NAFTA (North America Free Trade
Area).
2
Customs Union
No tax tariffs between member countries
and member countries adopting and
imposing common external tariffs on nonmember countries e.g. EAC (East Africa
Community)
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Overview of integration (…continued)
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Stages of Economic Characteristics
Integration
3
Common Market
Free movement of products and factors of
production/resources between member
countries, no tax tariffs between member
countries and member countries adopt and
impose common external tariffs on nonmember countries e.g. EU.
4
Economic Union
Common market + common currency;
Coordinated fiscal and monetary policy
among member countries i.e. EMU
(Economic and Monetary Union) e.g. EU
countries that have adopted the Euro.
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Global Trends (Europe)
The European Union (EU):
•
Established through Treaty of Maastricht (1992);
•
28 member countries with a combined population of 509
million (7% of the world’s population);
•
EU GDP in 2012 was USD. 17.4 trillion (US’s USD. 15.7 trillion);
Accounted for 20% of global trade, 16.4% of global imports
(2011) and 15.4% of global exports (2011). Two thirds of EU
trade was among member countries;
•
Challenges include global recession and economic issues
among member countries (Greece, Spain, Portugal, etc.);
•
Emergence of new economic powerhouses e.g. Turkey with
GDP of USD. 1.4 trillion and Poland with GDP of USD. 0.9 trillion.
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Global Trends (Asia)
The Association of South East Asian Nations(ASEAN):
•
Established through Treaty originally by five nations i.e. Indonesia,
Malaysia, the Philippines, Singapore and Thailand (1967),
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10 member countries with a combined population of 670 million (9
% of the world’s population);
•
ASEAN GDP in 2012 was USD. 3.6 trillion (US’s USD. 15.7 trillion).
Attracted USD. 111.4 billion in FDI in 2012 (China 121.1 billion).
Accounted for 30% of global trade (2011). 25.4% of ASEAN trade
was among member countries;
•
Challenges include: political, economic and social diversity
among member countries (democracy, border disputes,
unemployment, etc.);
•
Emergence of new economic powerhouses e.g. Indonesia with
GDP of USD. 1.2 trillion and Thailand with GDP of USD. 0.6 trillion.
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Global Trends (Africa)
The Common Market for Eastern and Central Africa (COMESA):
•
As a successor to the Preferential Trade Area (PTA) established in 1981,
COMESA was established in 1994,
•
19 member countries with a combined population of 389 million (5 % of the
world’s population);
•
COMESA GDP in 2012 was USD. 0.7 trillion (US’s USD. 15.7 trillion). Attracted
USD. 9.3 billion in FDI in 2012 (China 111.4 billion). Accounted for less than 2%
of global trade in 2012. 8% of COMESA trade was among member countries
accounting valued at USD. 18.4 billion in 2011;
•
Challenges include: Infrastructure, political and economic issues among
member countries;
•
Key players in intra-COMESA trade in 2011 were Kenya with an export
market share of 20%, Egypt with an export market share of 16% and D.R.
Congo with an export market share of 12.4%.
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Global Trends (Africa)
The East African Community (EAC):
•
Initially established in the 1970s, but collapsed due to political
wrangles among member countries. Current EAC took form in
2010 through signing of EAC protocol;
•
5 member countries with a combined population of 200 million (3
% of the world’s population);
•
EAC GDP in 2012 was USD. 0.8 trillion (US’s USD. 15.7 trillion).
Attracted USD. 1.7 billion in FDI in 2011 (Africa USD. 55 Billion or 3.5%
of global total). Accounted for less than 1% of global trade in 2012;
•
13% of EAC trade was among member countries valued at US$. 4.5
billion in 2011;
•
Challenges include: Infrastructure, security and economic issues
among member countries;
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Global Trends (Africa)
The Sothern Africa Development Community (SADC):
•
Begun as Southern Africa Development Community Conference in 1980 and
was converted into a development community in 1992. SACU was
established in 1910 .
•
SADC has 15 member countries with a combined population of 234 million (4
% of the world’s population). SACU covers 5 countries (Botswana, Lesotho,
Namibia, South Africa and Namibia).
•
SADC GDP in 2010 was USD. 0.6 trillion (US’s USD. 15.7 trillion);
•
Attracted USD. 9.3 billion in FDI in 2012 (China 111.4 billion). Accounted for
less than 2% of global trade in 2012 valued at USD. 353.6 billion in 2011. 4% of
SACU trade was among member countries;
•
Challenges include: Infrastructure, political and economic issues among
member countries;
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Global Trends (Africa)
Into the future:
•
Tripartite discussions currently being held towards merging
COMESA, EAC and SADC into one mega trade block;
•
Benefits will include a much larger market, resource pool,
increased
competition,
increased
investment
inflows/outflows and increased intra-Africa trade;
•
Major challenges will include resolving trade disputes, nontariff barriers especially on food and agri-products, and
monitoring of value addition in member countries to qualify
for rules of origin thresh-hold;
•
Integration will no doubt include ECOWAS in West Africa at
some point.
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Kenya
Some Quick Facts:
• Gained independence in 1963,
• New constitution in 2010, 47
county governments,
• Area 582,650 Sq. Km.,
• President H.E. Uhuru Kenyatta
(elected 2013),
• Pop. 43 million (2012 est.),
• GDP PPP US$ 37.34 Bn. (2012 est.),
• Gateway to East & Central Africa,
• Capital Nairobi (pop. 4,000,000).
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Botswana
Some Quick Facts:
• Gained independence in 1966,
• 9 administrative districts,
• Area 581,730 Sq. Km.,
• President Lt. Gen. Seretse Khama
Ian Khama (elected since 2008),
• Pop. 2 million (2012 est.),
• GDP PPP US$ 14.41 Bn. (2012 est.),
• At the heart of southern Africa,
• Capital Gaborone (pop. 225,000).
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The Kenyan experience
Key Benefits:
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By 2012, Kenya’s exports had a market share of 20% in COMESA and 57% in
EAC. Kenya was Uganda’s largest FDI source and Uganda was Kenya’s
major export market;
•
Kenyan companies and MNCs continue to expand into the region tapping
into a wider pool of resources, opening branches, subsidiaries and forming
strategic alliances. Many Kenyan professionals in EAC/COMESA countries;
•
Kenya has leveraged on its strategic location, infrastructure and business
ecosystem towards becoming the economic hub for the region;
•
Embarked on the Lamu Port South Sudan Ethiopia (LAPSSET) project
considered Africa’s most ambitious infrastructure project will create a Rail,
Road and Oil Pipeline network that will link the Indian Ocean on Kenya’s
coast with the Atlantic Ocean on Cameroun’s coast.
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The Kenyan experience
Major Challenges:
•
Under the terms of the EAC agreement, Kenyan exporters had to
endure five years of paying higher tax tariffs on regional exports
giving their neighbouring competitors an edge;
•
Differences in interpretation of the protocol and customs’
regulations by institutions in member countries remain a major
challenge creating artificial non-tariff barriers;
•
Poor infrastructure and connectivity within the region continues to
increase cost of doing business among member countries;
•
Security concerns, conflict and political instability in some countries
within the trading blocks remain a challenge for traders & investors;
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Examples of Kenyan regional success stories
Company
Sector
Trading Blocks Active
Brookside Dairies
Milk & Dairy Products
EAC + COMESA + SADC
Bamburi Cement
Cement & Cement
Products
EAC + COMESA + SADC
East Africa Breweries
Alcoholic Beverages
EAC + COMESA + SADC
Equity Bank
Banking & Financial
Services
EAC + COMESA + SADC
KenolKobil
Petroleum products
EAC + COMESA + SADC
Kenya Airways
Airline (Passenger &
Cargo)
EAC + COMESA + SADC +
ECOWAS + Asia + Europe
KCB Bank
Banking & Financial
Services
EAC + COMESA + SADC
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Leveraging Botswana for success
Strategic issues:
•
What are Botswana’s current comparative and
competitive advantages over her neighbours?
•
Which industrial clusters and sectors will be strategic for
Botswana in its future trade with regional partners?
•
What resources are required to realize Botswana’s strategic
goals and how will those resources be developed?
•
What partnerships and linkages can Botswana develop
across the regional trading blocks for success?
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Leveraging Botswana for success
Opportunities for consideration:
•
Economic vibrancy can only be achieved by attracting
economic activity through investment, trade and tourism –
case of Dubai.
•
Botswana has a vibrant beef industry, what about leather
and what opportunities are there for it on the continent?
•
Botswana can be the regional hub for shopping and
conventions - what kind of incentives and infrastructure
would be required to make that happen?
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Leveraging Botswana for success
Opportunities for consideration:
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Can Botswana’s leverage on investments in ICT and the
knowledge economy to create high quality jobs – case of
Rwanda?
•
Can Botswana supply reliable and affordable electricity to
countries across Africa?
•
How does Botswana’s investment in infrastructure work for
the region?
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Thanks for listening
www.epzakenya.com
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