Excellency Commissioner Mohamed Daramy, Commissioner Trade, Customs, Tourism, Mines, Industry and Free Movement Presentation Format: Common Market and the Investment Climate -------------------------------------------------------------- (1). Mr. Chairman/Mr. Rapporteur, Please permit me to take this opportunity to express on behalf of the President of the ECOWAS Commission, Dr. Mohamed Ibn Chambas, my colleague Commissioner, the ECOWAS delegation and on my own behalf my gratitude to the President of the Republic of Ghana, His Excellency, Mr. John Agyekum Kuffour, the Government and people of Ghana for the warm welcome and generous hospitality extended to all delegations. (2). Let me also express my since appreciation to the workshop organizers, the UEMOA Commission, the ECA (SRO-WA, the Ghana Chamber of Commerce and Industry and of course the ECOWAS Commission. (3). Mr. Chairman/Mr. Rapportuer, the session this morning will examine and evaluate the status of our regional integration within the context of trade and trade facilitation, improvements of business climate, infrastructural development, regional competitiveness, macroeconomic convergence and challenges and opportunities for the private sector. (4). The establishment of a common market has been and is still one of the aims and objectives of the ECOWAS Commission. This aim or objective is reflected in the provisions of sub section 2(d) of Article 3 of the Revised ECOWAS Treaty. The establishment of a common market follows a series of steps, such as: == the liberalisation of trade among member states, the abolition of non- tariff barriers to establish a free trade area, the adoption of a common external tariff and a common trade policy vis a vis third countries (Article 37 of the Revised Treaty) == the removal between member states of obstacles to the free movement of persons, goods, services, capital and the right of residence and 1
establishment. Actions BEFORE we get to the boarders, actions at the BORDERS and actions beyond the BORDERS. == the Commission is mandated to coordinate the adoption of common policies in the economic, social, financial and cultural sectors to enhance the establishment of an economic union leading to the establishment of a monetary union. == ECOWAS is also mandated to enhance the creation of an enabling environment to support SMES and to harmonise national investment and competition policies leading to single investment and competition policy frameworks. (5). A single regional market has several attendant advantages: • common policies, procedures and practices will make entry into a single market less costly; • permits economies of scale; • can improve marginally attractive economies because small markets usually ignored by investors on a stand alone basis can be evaluated within a large market on an incremental basis; and • enhances the transfer of technology within the region. etc (6). What role has ECOWAS played so far in trade and trade facilitation? • adoption of the ECOWAS/UEMOA CET based on 4 bands, 0%, 5%, 10 and 20%. Nigeria has a fifth band of 50% (498 tariff lines) to protect local production. • Studies on a common customs code, common definition of customs value, previously based on the (Brussels definition, WTO art VII GATT, threshold value and lump sum values), harmonization of VAT and indirect internal taxes have been completed and validated at a steering committee workshop. • Studies on regional competition and investment policies have been completed, validated and presented to the ECOWAS Parliaments for its advisory opinion 2
• 4 teams have been dispatched to compile a list of sentsitive products in member states • A West Africa common industrial policy has been developed etc (7). Despite all the efforts at the establishment of a common sub regional market, the region still faces many complex and daunting challenges, among which, are the following: • The EECOWAS Trade Liberalisation Scheme (ETLS) has not progressed as envisaged due to problems of definition of rules of origin and documentation in support of deriving benefits under the Scheme; • failed to enhance competitiveness or failed to combat supply side constraints; • private-public partnerships that are key determinants of competitiveness in the private sector have not been established • lack of knowledge of the specific industrial capacities and capabilities across the whole value chain of member counties, a key tool in modernizing our industries; • inadequate research and development efforts; • inability to provide a link between trade, industry and market access; • deficient in our efforts to close the technology gap; • national policies not aligned to regional adopted policies • Inability to demonstrate compliance with international product and service quality standards; (8 ). THE WAY FORWARD 3
• Support to the private sector in areas, such as, helping to improve its productive and hence its competitiveness capacity; • improving infrastructure, adequate education and health systems and institutional support to improve domestic savings and stream lining business registration and establishment procedures; • removal of cumbersome administrative and legal barriers; • there is a need to encourage our industries to shift from a culture of assistance and rent seeking to a culture of building productive capacities and capabilities; • enhance capacity utilization making it easy to recoup fixed committed costs.; The most successful trading counties follow a progression: From commodities to labour intensive manufacturing to production of high technology goods to capital goods and finally services. Most of the countries in our region are drawing plans to enter the second stage. Statistics based on studies by UNIDO indicates that, in 2004 the sub region contributed only 0.4% of global trade, its share of Africa’s foreign trade dropped from 25 % (1986) to 20.5% (2002). INVESTMENT It is generally agreed that wealth creation and poverty reduction are closely correlated to economic growth, which is itself directly linked to the volume of sustainable investment entering a country. Africa does not receive excessive amounts of private investment. The barriers to investment whether local, regional or foreign vary greatly across the region. The reasons for this variation are due to basic issues of governance, the legal framework, regulatory environment, incentives, tax policy and lack of basic infrastructure etc. 4
The main barriers to investment have to be evaluated in terms of the particular type of investor. Presently in our sub region we can discern the following classes of investors: (1). • SUBSIDIARIES OF LARGE EUROPEAN TRANSNATIONAL CORPORATIONS: == characterized by long history of more than 30 years in host country; == generally robust in terms of absolute size measured by sales revenues, employment and net assets; == major users of local content almost entirely unprocessed natural resources, == rates of new investments are low, == growth inhibited by limitations of local market and cannot grow by acquisition because of dominant market position (2). • NEW GENERATION OF NORTHERN FDIS == the recent arrivals (post 1990); == not subsidiaries of large TNCS; == greater share in manufacturing and service sectors; == relatively small and use a high proportion of local resource content; == more dynamic than the TNCS in terms of export growth and employment; == difficult to identify and target by policy interventions (3) • NEW GENERATION OF ASIAN FDIS == Subsidiaries of small TNCS are concentrated in low value export sectors like the garments and textile sectors; == absorbs large amounts of unskilled labour and generates substantial amounts of export; == adds little value to production and generate low wage employment 5
` (4). • INVESTORS FROM WITHIN THE REGION == relatively small firms that target the domestic market and some the export markets; == the most cautions group of the new generation FDIS (lifetime savings invested); == invests for the longer term and have above average growth rates in terms of employment generation, per capita spending on training and consistent sales record. (5) • SOUTH AFRICAN FDIS == some are large, rapidly expanding service companies particularly in financial service and telecommunications sectors; == in terms of size, investment levels and growth, they have dominated or are dominating the African market. These classifications underscore the growing importance of investor groups that currently are not adequately captured by the investment strategies of the host countries. Factors influencing investment: The performance of any economy depends upon the soundness and adequacy of its economic policies, factor endowments, technological know=how or acquisition, human resource capabilities, good governance, adherence to the rule of law and promotion of fundamental human rights etc. In theory, this is what the West preaches to us. 6
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