Brexit, now in full remorse, has been a test of the place of regional economic integration in the world. As right-wing populism recedes, following the tragicomic reign of Donald Trump in the West and the election of the pro- EU Emmanuel Macron in France, the developmental approach taken by the Tripartite (the Common Market for Eastern Africa – East African Community and the Southern Africa Development Community) might well be a best practice for the whole world in pursuing regional economic integration.
The approach bases regional economic integration on at least three simultaneously critical pillars – building of large regional markets to support critical levels of investment, cross-border economic infrastructure including rural infrastructure, and industrialisation, with a focus on small to medium-scale enterprises, for social economic transformation.
Political economists such as Dani Rodrik and happiness economists such as Joseph Stiglitz and Jeffrey Sachs have long called for such an approach though only in sketches traceable in their overall narrative and specific suggestions for addressing inequality and other economic challenges from the current version of globalisation. The upshot of the academic, political and economic turmoil surrounding globalization for over 20 years, is that creation of decent jobs, economy-wide rather than for a privileged few, remains a core priority for governments and regional economic integration bodies, going to their very legitimacy.
The United Nations Economic Commission for Africa (ECA) has done some brilliant work over the years, through its annual Economic Report on Africa and Assessing Regional Integration in Africa, on which to consistently build in terms of deeper and specific analysis, and in terms of implementation of Decisions and Action Plans so far agreed by the African Union. That work supported the adoption by the African Union in 2012 of the Action Plan for Boosting Intra-Africa Trade (BIAT) and the initiative to negotiate and conclude an Agreement establishing a Continental Free Trade Area covering the 55 African countries – the negotiations were eventually launched on 15 June 2015. BIAT has seven clusters or programme areas, including enhancement of productive capacities and t r a d e facilitation. It is estimated that implementation of the Continental FTA together with trade facilitation measures will double intra- Africa trade by 2022 to about 25 percent of total trade, which is still diminutive.
There has been a perceived dichotomy between trade and industrialisation, and between manufacturing or goods and services; with the policy implication of focusing on manufacturing, away from trade or markets and away from services. This approach has been wrong to the extent that without markets, investment and production would not be forthcoming in the first place. Also, services inputs make up 60 percent of the value of manufactured products, many of which derive their efficacy from their services components – think of a mobile phone or an aircraft or a computer, and in the internet of things, practically about all items.
This has been explained in the 2015 ECA Economic Report on Africa themed Industrialisation Through Trade, and in the World Bank publication by Nora Dihel on The Unexplored Potential of Trade in Services in Africa of 2016. Appropriate trade policies and instruments support industrialisation, and services in Africa will be part of the solution through facilitative policies in key areas such as movement of skills, and creation of regional markets for financial, energy and transport services that support competitiveness.
In addition, it can no longer be argued that resources should move from the agricultural sector to the industrial sector and then to services, as the pre-ordained development trajectory. CalestousJuma has over the years argued, for instance in his 2011 book The New Harvest with a second edition in 2015, as well as the joint WTO-World Bank publication of 2015 called The Role of Trade in Ending Poverty, that poverty in the rural areas will only be eradicated through agricultural modernization and enhancement of agricultural productivity through innovation and the building of rural infrastructure. African Regional Economic Communities have programs in this area, and of course governments, that include interventions for providing agricultural inputs and rural infrastructure as well as structured trading. The Common Market for Eastern and Southern Africa (Comesa) for instance, has established a specialised agency called the Alliance for Commodity Trade in Eastern and Southern Africa (Actesa), which supports small scale farmers with inputs and extens ion services. Such interventions will be a basis for agro-based industrialization, where agriculture is not equated to just farming, but construed broadly to encompass the regional and global value chains from seeds to final products on shelves in retail outlets.
Rather, all these elements (trade, innovation, infrastructure, manufacturing) are part and parcel of the same holistic interventions for industrialisation.
The emphasis on value addition and diversification, while in order, has mostly been implemented upside down without the desired industrialization results. Interventions have sought to achieve value addition and diversification usually through investment incentives into mainly the natural resources or extractive sector. Yet what should be done first, or at least simultaneously, is building the technological and innovation capabilities at the national and regional levels, through dedicated interventions. It is when such capabilities exist in critical amounts that value addition and diversification will happen.
There are many good practices on how to harness technology, skills, creativity and innovation from around the world, or how to restructure our education systems along the lines of entrepreneurial universities (Strathmore University in Nairobi for instance), and how to put in place partnerships between universities and researchers, banks and other financing institutions and industry especially SMEs, with a view to identifying ideas that can be commercialised into whole new industries, getting patient or angel capital/ investors for the ideas, and twinning fledgling entrepreneurs with seasoned entrepreneurial or tutoring networks around the world.
… To be continued
*The author is the Director of Trade and Customs at the Common Market for Eastern and Southern Africa – Comesa