regional integration as structural transformation - twn

regional integration as structural
Tetteh Hormeku
Accra, May 6-8, 2014
intro: the challenge of coherence in advancing
economic integration
• A question of strategy (and related agenda)
• With 3 characteristics:
– Speaks to the total reality of the challenges of
economic development;
– lends itself to sequenced and inter-locking
operationalisation driven by clear priorities;
– enables constituency building and political
intro: proposed elements of strategy
• Three interconnected elements
– economic integration as a constitutive element of structural economic
transformation in Africa (not as framework, result, etc);
– structural economic transformation as a necessary condition, a motor,
of sustained economic development (not as by-product);
– driven by the twin processes of, and interaction, between agrarian
transformation and industrialisation [also taking on-board resource
• A strategy and agenda
– integration formulated in response to initial conditions/binding constraints,
etc deriving from Africa’s primary commodity export dependent economic
– various policies –trade, monetary, sequenced and referenced to its unfolding.
the challenge of strategy-context
Illustration of the Difficulty: Recommendation for urgent action for African
Union within next two to three years. (ARIA 2004)
• Reconcile the African Union with the African Economic Community Treaty
and the New Partnership for Economic Development to clear any lingering
confusion, misinterpretation, and misunderstanding about the link -- or
lack of it – among these various blue-prints.
• Establish the African Parliament to mobilise popular support, spur debate
over the African Union, and promote timely democratisation and
transparency of the process.
• Establish consultative mechanisms to institutionalise involvement of all
the strake-holders, including the private sector and civil society, a the early
challenge of strategy –context (contd)
• Establish the African Court of Justice to play a
vanguard role with the African Parliament in
promoting good governance, human rights and
democratisation of the African Union’s institutions
and organs and in building a strong moral and
constitutional foundations for it.
• Establish the Economic, Social and Cultural Council
with relevant technical committees to prepare the
groundwork for accelerating regional integration
(policy convergence, infrastructure).
challenge of strategy-context (contd)
• Adopt special concurrent measures to move quickly towards the free
movement of people, goods, services and capital as a precursor to
accelerating the amalgamation of Africa’s economic and market spaces
under the African Union.
• Ensure that the key African Union financial institution, the African
Investment Bank, complements existing regional financing institutions and
meets the financing needs of the African Union, the regional economic
communities and related programmes.
• Establish the African Central Bank after progress has been made towards
monetary unions at the regional and sub-regional levels. Priority should go
to strengthening monetary unification enough at the sub regional level to
create a continental central bank.
challenge of strategy (contd)
• Trade and Market Integration
• Manufacturing co-operation and role of the private
• Macro-economic policy convergence, monetary and
financial integration
• Infrastructure
• Cross-cutting issues –peace, health and gender
• Global exigencies, especially WTO, and therefore
integration in the multilateral system.
• Which is priority?
– It is as though each of them equally important.
And in fact they are being pursued simultaneously.
• Coherence.
– Which rely on prior progress of another?
– with economic imperatives.
Example of Monetary convergence criteria
monetary convergence criteria
(Primary) Criteria
Inflation Rate
3% or less; BCEAO2%
10% or less (2000);
5% or less (2003)
Total Debt to GDP
70% or less
External Debt
payment arrears
Domestic debt
payment arrears
Budget Deficit to
10% or less
Interest Rate
Currency stability
n. a. (20% of
reserves kept at
French treasury
3months or more
(2000); 6months of
more (2003)
Membership of
challenge of strategy-explaining the
• Legacy of Contested Paradigms
– and related paradigms on the gains of gain of
• Ascendancy of neo-liberalism and free trade
paradigm to development since SAP years
gains of economic integration
• two broad types of argument
• within existing patterns of production and
– Traditional theory: Viner and co
– Scale and Competition effects
• in defiance of, a restructuring of, existing
existing patterns
• Viner: Trade Creation and Trade Diversion
– Efficient allocation of resources on static
assumptions of comparative advantage
– Inapplicability
• Scale Effects
– More dynamic
– But in the end they operate within existing
scale effects and existing patterns:
an elaboration
• Examples of UNCTADs 2009 and 2013
– Measure potentials of intra-African trade
– Tries to assess the reasons why potential not
– weak attraction forces v. strong forces of opposition
– weak forces: small economic size, income levels and demand
– strong opposition forces: high trade costs, etc– infr, energy,
– Recommendation: addressing these costs
– Comments:
• Costs and solutions are same reasons for low development account for
low intra-African trade
scale effects and existing patterns:
an elaboration (contd)
• UNCTAD 2013 Stylised facts about the nature of intra-Africa trade
– Rising but low level of trade external compared to other regions
• primary commodity dominated)
– intra-african trade up but low share Africa’s external trade (1996-1011)
• (fell 1998-2001 and 2009 due to global crises)
share of intra-African trade higher for non-fuel exporters, than for fuel
large share of informal trade in intra-African trade
significant part of regional trade within borders of RECs
importance varies between national economies
unexploited opportunities in various trade categories
manufacturing share of intra-African trade higher than in external
trade but falling (continously)
– intra-industry trade is low an inhibits expansion of intra-African trade
scale effects and existing patterns:
an elaboration (contd)
• Comment: Analysis shows large coincidence
of the structure of inter-African trade with the
overall primary commodity structure.
– Coincidence of moments of stress
– Opportunities: the SITC domination of chemicals
fertilizers compared to others
– National Distribution of Intra-African trade:
– Nature of African firms and challenges
• informality; micro- size; weak inter-firms linkages;
Africa then and Now.
• 1968 Assessment of potential. Almost same as
– Low income
– Primary commodity export
– Small intra-African trade, which is
• nevertheless of major significance for several countries
– Mali, BF, Niger
• High proportion accounted for by a few countries
– imports: Kenya, Algeria, Ghana, Taganyika; export: Kenya,
Morocco, I. Coast, Mail, UAR
• clustering within four sub regions
pattern defying-integration
• Early development economists in early post-indece era
• Need to look beyond existing patterns of production to what
is likely to emerge in the future, when comparative advantage
and trade patterns are different
• inputs of factors of production, esp. capital and labour are
variable, and the character and effectiveness of factors are
assumed to be bound up the CHARACTER/ORGANISATION of
• Actual trade flows and the actual degree of competitiveness
or complementarity are regarded as largely irrelevant, since
they are not necessarily indicative their potentialities.
pattern defying-integration (contd)
• Preference for industrialisation
• Develop industrial exports and importsubstituting industries
• Integration as reinforcing the growth effects of
industrialisation, provides the conditions to
meet the challenge of industrialisation more
effectively and efficiently.
purpose of integration
• How to use the various
characteristics/features of integration for
industrialisation; location, choices, types, etc.
• Given the polarisation and concentration
effects of industrialisation, how to incorporate
issues of distribution and equity in allocation
• How fiscal, trade, monetary policies reflect
• ECOWAS (as in Treaty of Lagos) consisted of
two inter-locking processes:
– a number of time-tabled commitments with respect to a
tariff standstill, trade liberalisation, fiscal harmonisation,
and the introduction of common external tariffs; coupled
– untime-tabled obligations to adopt wider policy measures
of ‘positive’ economic integration, including industrial cooperation
Note: 1993 revision took the latter away
limits of market-based import
• import substitution formulated around current
consumption patterns
• weak backward-forward linkages between
agriculture and industry
fertilisers, equipment and app. machinery
process agric raw materials, fibres, etc
low-priced consumer necessities
jobs for labour released from agric
raw materials for domestic industry
food-stuff for wage-workers
expand exports to earn f/e
release labour for expanding industry
• therefore did not achieve structural transformation
but actualy reinforced dualistic economic structure
inherited from colonialism
Two updates
• Re-establish a genuine sectoral connection
– Primarily: agrarian transformationindustrialisation
• the four elements of Ann.S
– Reinforced by a secondary: agrarian
transformation-manufacturing-extractive industry
• Redefine the location of industry to include
intra-industry specialization or production
chains/value chains
strategy and agenda
• Coherence with processes
– interventions around and in support of enterprise
– unctad’s corridors, etc...
• Policy coherence
– Trade
– Monetary
– Investment
– Etc
• Research
• Politics: constituency building
• Organization. networks and institutions.

similar documents