Transcript Investment, Competiveness and Trade in West Africa

The 6th Annual Conference on Regional Integration in Africa (ACRIA6)
Jointly organized by
CREPOL WAIFEM WAMA & WAMI
Investment, Competiveness and Trade in West Africa
Lagos, July 1-2, 2015
Dr. Toussaint Houeninvo ,
African Development Bank
Regional office for Dakar, Senegal
Presentation Outline
1-Introduction
2- Impact of ECOWAS Free Trade Area on Countries openness and
trade structure
3- Regional Specialization and intra-regional performance
4- Regional Integration, economic growth and income per capita
5- Key competitiveness factors and impedement to investment in
ECOWAS
6- FDI and intra-regional FDI in the ECOWAS
7- Conclusion and Policy recommendations
2
1 – Introduction
•
The West African region similarly to the whole African continent is
fragmented .
•
Several measures have been put in place in West Africa to overcome
the fragmentation of the ECOWAS zone since the signing of the
ECOWAS treaty in 1975.
•
Despite, some progress made in the integration process including
defining sector policies and multilateral surveillance, conflict resolution,
less progress has been achieved in intra-regional trade and investment
which are still low
•
Intra-regional trade (export and import in % of total trade) over 20082010 is estimated at 8. 2% against 91.2% for the trade with the rest of
the world although average tariff has been reduced from 16.6% to
10.2% from 2000 to 2010
3
1 –Intoduction (cont..)
• The paper assess the impact of regional Integration on different
competitiveness and trade components: Change in openness and trade
structure; Country diversification/specialization and intra-regional trade
performance; economic growth and income per capita; It analyses the key
factors that led to low investment per capita; low FDI and intra-regional
FDI
• Finally Policy recommendations have been made to remove those
constraints and boost investment competitiveness and trade in west Africa
4
2 – Impact of ECOWAS Free Trade Area on Countries
openness and trade structure
•
Since Balassa (1961), it is widely known that there are five steps in the
integration process corresponding to various levels of
regional
integration
•
These are the Free Trade Area (FTA), the Customs Union (CU), the
Common Market (CM), the Economic Union (EU), and the Political
Integration
•
The ECOWAS treaty was signed in 1975 but the instruments needed for
its implementation took time to be in place
•
In fact, the trade liberalization scheme of ECOWAS which began in
1979 was limited to crude products (agricultural products, crafts and
crude oil). It has ben extended to industrial products in 1990 (15 years
after the Treaty) and free movement without visas was not effective
until 2006 (31 years after the treaty)
•
5
Graph 1. Openness of ECOWAS Econmies: Comparison of 1995-2002 and 2005-2012
140.0
Liberia
120.0
Cape Verde
Average 2005-2012
100.0
Togo
80.0
Côte d'Iv.
Gambia
Guinea
Ghana
Senegal
60.0
Guinea-Bissau
Mali
Sierra Leone
40.0
Benin
Niger
Burkina F
20.0
0.0
30.0
40.0
50.0
60.0
70.0
Average 1995-2000
Countries that coud act as locomotives (Pop size
and GDP) experenced smaller openness (under
80.0
90.0
100.0
2 – Impact of ECOWAS Free Trade Area on
Countries openness and trade structure (cont..)
• As a result, it appears that most of the trade is still with the rest of the
world.
•
ECOWAS exports to high income countries represents 63.6% of total
ECOWAS exports over 2005-2011 which is still high even if there is a 9.59
points percentage decrease (relative value) from it 69.7% level over
1995-2000.
• Regarding imports the region still imports 49% from High income
countries over 2005-2011 even if there is an important 39.18% decrease
(in relative value) as compared to it 68.2% over 1995-2000
• Unfortunately this decrease in imports from developed countries did not
benefit ECOWAS intra trade but has been captured by trade with East
Asia
• Asia which gained 125.37% (in relative
value) rising from 6.7% in 19957
2000 to 15.1% over 2005-2011
2 – Impact of ECOWAS Free Trade Area on Countries
openness and trade structure (cont..)
• At the same time ECOWAS export to East Asia is still negligible around
1.1% over 2005-2011 and experience even a slight decrease as compared
to its 1.8% level over 1995-2000.
• One of the reasons is that most of the commodities are not processed in
the zone and this limits leverage this could create in terms of trading
among ECOWAS Countries.
• In fact, due to business climate and constraints related to infrastructure
(energy, transport, logistics, technology) and some structural reforms,
processing of those crude products in ECOWAS countries is not
competitive.
8
3 –Regional specialization and intra-regional performance
3.1- Method for computing the specialization indicator: The Revealed
Comparative advantage
•
Analysis of specialization and performance of ECOWAS intraregional trade will be done here through the Revealed Comparative
Advantage indicator
•
It is equivalent to the share of exports of a ‘Good’ j compared to all
exports of a given country i divided by the share of exports of this
‘Good’ in total exports of a reference area (ECOWAS)
97
3 –Regional specialization and intra-regional performance
(cont..)
8
3 –Regional specialization and intra-regional performance
(cont..)
11
Mali
Burkina Faso
Niger
Liberia
Cape Verde
Nigeria
10
9
9
6
6
4
9.3
9.3
6.2
6.2
4.1
10.3
Guinea Bissau
10
10.3
Guinea
12
12.4
Sierra Leone
13.4
Ghana
15
15.5
Benin
17
17.5
Côte d'ivoire
18
18.6
Togo
23
23.7
Gambia
23
with
23.7
Presence
RCA (%)
Senegal
of
with
27.8
Number
products
RCA
27
Total number of
products
considered (97)
13
3.2-Result of the computation of the Specialization indicator (2008-2011)
• Table 3. Positioning of Countries of the Region in Terms of Revealed
Comparative Advantage (RCA)
3 –Regional specialization and intra-regional
performance (cont..)
3.2-Result of the computation of the Specialization indicator (2008-2011)
• Countries that have the most products with an RCA, are Senegal, The
Gambia and Togo (with more than 20 products with RCA over a total
of 97 commodities). They appear to be the most diversified countries of
ECOWAS
• At the other extreme, countries such as Liberia, Cape Verde and
Nigeria have respectively 6 and 4 commodities with RCA for the period
2008-2011
12
4 – Regional integration, economic growth and income
per capita
• Economic growth and improvement in the conditions of life are some of
the expected effects of regional integration although those results cannot
be solely attributed to regional integration given their complexity.
• Improvement in conditions of life is approximately measured by income
per capita.
• The GDP of the region has experienced a higher growth rate (4.3%) than
the world average (3.5%) over 2008-2011
• But in terms of GDP per capita, it growth by 1.7% against 2.3% for the
rest of the world showing therefore a lower performance given the high
population growth in the region, nearly 2.6% on average as shown in the
following table
13
4 – Regional integration, economic growth and income
per capita (cont..)
ECOWAS and World
GDP growth 2000-2011 (PPA, dollar 2005)
GDP per capita growth 2000-2011 (PPA, dollar
2005)
WAEMU
3.3%
0.6%
Non WAEMU ECOWAS
4.6%
2.1%
ECOWAS (Whole)
4.3%
1.7%
World
3.5%
2.3%
Sub-Saharan Africa
(Developing Countries only)
4.9%
2.4%
• Indicators for WAEMU =>, one can hardly conclude that this
improvement is attributable to the12integration process, although it
14
probably contributed.
4 – Regional integration, economic growth and income
per capita (cont..)
• Comparing growth in GDP per capita by country during the 2000s and it
level of the beginning of the period => the best performing countries Economic growth rate significantly higher than trend-are Cape Verde,
Nigeria, Liberia, Sierra Leone, Senegal and Ghana.
• These results support the view that regional integration has probably
some minor impacts on the GDP of countries that have more trade with
the region
• However, countries that could be used to lead the locomotive to transmit
growth through trade in the region are more anchored to the rest of the
world in their trade than within ECOWAS (Nigeria, Ghana) or have little
weight in terms of GDP per capita (Mali, Burkina Faso) (see graph)
15
4 – Regional integration, economic growth and income
per capita (cont..)
Graph GDP growth and initial level of GDP per capita and population per
country, 2000-2011
Average annual GDp growth PPA $2005 during the decade 2000-2011
9%
Liberia
Sierra Leone
8%
7%
Ghana
Burkina Faso
6%
Cape verde
Nigeria
Mali
5%
Benin
Niger
Senegal
4%
Gambia
Guinée
3%
Togo
2%
Guinea Bissau
1%
Côte d'Ivoire
0%
0
500per capita at the beginning 1,000
GDP
of the period in PPA $ 2005 1,500
Size of bubbles: Population at end of the period
16
2,000
2,500
5 – Key competitiveness factors and impediment to
investment in ECOWAS
Infrastructure and structural reforms are the most impeding factors
State of competitiveness
Country
Relatively favourable factors
Impeding factors
Benin
Macro, health, primary education, labor market Effectiveness
Narrow market, Infrastructure, Higher Education and
Training
Burkina Faso
Macro, labor market efficiency, goods market efficiency,
institutions
Infrastructure, primary education and higher education,
technological readiness preparation
Côte d'Ivoire
Macro, labor market efficiency, goods market efficiency,
institutions
Narrow market, Infrastructure, Primary education and higher,
technological readiness
Gambia
Institutions, Innovation, Education, Training
Narrow Market
Ghana
Financial market, education, extensive market, higher
education
Infrastructure, technological readiness
Liberia
Macro, institutions,
Narrow market
Mali
Macro
Higher Education and Training, Infrastructure
Niger
Macro, extensive market
Infrastructure, primary education
Nigeria
Extensive, macro
Infrastructure, technological readiness
Senegal
Macro, technological readiness
Market size, infrastructure, higher education and training
Sierra Leone
Institutions
Narrow market, education
Guinea
Labour market
15
Infrastructure, Narrow market
5 – Key competitiveness factors and impediment to
investment in ECOWAS (cont..)
As a consequence and considering political instability investment per active population in
ECOWAS is low in comparison to other regions.
Regions/Decades
1990s
($ 000)
2000s
($ 000)
2006-2011
($ 000)
WAEMU
15.6
25.9
33.6
17.1
43.2
57.9
ECOWAS
16.7
38.7
51.6
South Africa
179.2
257.6
348.7
Middle
Income
Countries (Developing)
32.2
74.7
107.5
Middle
Income
Countries (All income
levels)
65.8
149.4
217.4
East Asia and Pacific
45.6
150.6
227.8
World
241.4
340.9
397.2
Non
ECOWAS
WAEMU
16
6– FDI and intra-regional FDI in the ECOWAS
• With regard to Foreign Direct Investment (FDI) flows to ECOWAS, the
most attractive countries are Nigeria (over 60% of ECOWAS FDI) and
Ghana (18.3%) at the end of the decade.
• Côte d'Ivoire, which received about 15% of ECOWAS FDI over the
1995-2000 period, witnessed a sharp drop in FDI inflows over the
second half of the 2000’s, mainly due to the protracted political
instability it experienced.
• This was to the advantage of Ghana, whose FDI inflows doubled over
the same period.
• Overall ECOWAS FDI share is still negligible 0.3% of World FDI in
1995-2000 to 0.7% in 2005-2011. Non WAEMU Countries share
increased from 74.5% of FDI to 87.5% while WAEMU share decreased
by half from 25.5% to 12.5%
19
6– FDI and intra-regional FDI in the ECOWAS (cont..)
FDI Share of region's goods
exports (2005-20111average)
(B/A
2006-2011 Average (D)
2006-2011 Average (B)
Country and Period
1995-2000 Average (%) (%)
Foreign Direct Investment Flows to ECOWAS Countries (in USD million )
1995-2000 Average (A)
•
Benin
35.5
54.6
1.7%
0.5%
1.5
1.2%
Burkina Faso
11.9
39.5
0.6%
0.3%
3.3
1.0%
Cape Verde
27.0
143.2
1.3%
1.2%
5.3
0.0%
Côte d'Ivoire
305.7
393.1
14.8%
3.4%
1.3
9.6%
Gambia
10.0
58.6
0.5%
0.5%
5.8
0.0%
Ghana
147.6
2 142.7
7.1%
18.3%
14.5
6.3%
Guinea
22.2
166.4
1.1%
1.4%
7.5
1.2%
Guinea-Bissau
3.1
10.5
0.1%
0.1%
3.4
0.1%
Liberia
92.3
402.7
4.5%
3.4%
4.4
0.2%
Mali
52.1
62.5
2.5%
0.5%
1.2
1.8%
Niger
7.2
501.1
0.3%
4.3%
70.0
0.9%
Nigeria
1 234.8
7 088.6
59.6%
60.7%
5.7
74.6%
Senegal
83.9
330.9
4.0%
2.8%
3.9
1.9%
Sierra Leone
8.2
211.9
0.4%
1.8%
25.7
0.3%
Togo
29.9
71.5
1.4%
0.6%
2.4
0.8%
WAEMU
529
1 464
25.5%
12.5%
2.8
8.1%
Non WAEMU
1 542
10 214
74.5%
87.5%
6.6
91.9%
ECOWAS
2 071
11 678
100.0%
100.0%
5.6
World
684 237
1 743 048
WAEMU / ECOWAS
25.5%
12.5%
ECOWAS /World
0.3%
0.7%
2.5
18
0.5
2.2
6– FDI and intra-regional FDI in the ECOWAS (cont..)
•
Côte d’Ivoire provides intra FDI in 10 ECOWAS countries against 9 for Nigeria (in numbers
of Countries and not the volume of FDI)
Investors’ Countries of Origin
Recipient Countries
Nigeria
Benin, Burkina Faso, Cote d’Ivoire, Gambia, Ghana, Liberia, Niger, Senegal, Togo
Cote d’Ivoire
Benin, Burkina Faso, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Nigeria,
Senegal, Togo
Ghana
Gambia, Guinea, Nigeria
Sierra Leone
Ghana, Nigeria
Burkina Faso
Cote d’Ivoire, Niger
Togo
Ghana, Nigeria
Benin
Ghana
Guinea
Ghana
Liberia
Ghana
Mali
19Ghana
7 – Conclusion and policy recommendations
• Among the factors that impeding the Regional to exploit it potential in
terms of competitiveness, investment and improvement of conditions of
life are the following:
 Political instability and fragility
 The lack of interconnection among the existing country specific stock
exchanges is also a constraint to investment and trade performance at
regional level
 Poor intraregional transport facilities (road, railways, Air and Maritime)
are among the major constraints to competitiveness and regional
enterprise investment.
 Similarly alarming West Africa’s energy low consumption per capita, low
electrification rate, predominance of biomass, high cost of production in
most countries, mediocre performance and quality of services, have been
identified as impediment to competitiveness in the region
21
7 – Conclusion and policy recommendations (cont..)
• Based of those findings the main policy recommendations include:
 Eliminate effectively non-tariff measures in all ECOWAS member
countries by strengthening regional solidarity and compensation;
 Speed up regional reforms aimed at putting in place a regional investment
market: regional investment code and the protocol on the regulation of
regional investment
 Pursue structural reform that will facilitate at national as well as regional
level raising national and regional saving rate to facilitate the financing of
private investment
 Accelerate regional initiative in promoting affordable access to energy
both in the production and the distribution;
 Upgrade of corridors, by putting in place regional initiatives in the form of
incentives for the development of economic
activities along the corridors
23
and in surrounding areas
• Thank you
23