Economic integration

Economic integration helps boost trade and investment in Africa | Work in development


The collapse of virtual borders is one of the most remarkable things that has happened in our lifetime. In the world of cyberspace, time and distance have become almost secondary considerations when it comes to doing business. Services ranging from software development to accounting can be provided worldwide in the blink of an eye. Future business leaders will find it hard to imagine a time when communication was neither immediate nor virtually free.

But in the physical world, integration between and even within countries has occurred at a much slower pace. In some areas, high transportation costs are compounded by archaic work practices, such as requiring cash deposits of $ 1,000 to $ 5,000 instead of accepting insurance. At too many borders, goods still drag and wait unnecessarily, increasing costs and hurting the competitiveness of businesses.

There are many successful examples of regional economic integration, from the single European market to, increasingly, the East African Community (EAC), the fastest growing bloc on the African continent. But for every success, there is a graveyard of blocked or delayed regional initiatives to remove barriers to trade and investment.

This is unfortunate, because for many small economies, especially landlocked ones, regional integration is not a political option, it is a necessity. Building trade blocks with neighboring countries can help small countries gain access to ports. This can help them achieve economies of scale, facilitate investment, gain a foothold in multinational production networks and increase the competitiveness of the private sector.

The key is to see what worked. In the EAC, which last month brought South Sudan into the partnership, success has been gradual but effective. The strongest ingredient has been political will, visionary leadership, focus, inclusion and joint monitoring, both from the public and private sectors. An effective regional integration agenda must put aside populist politics and stop appeasing interest groups. It must focus on achieving tangible and concrete results for citizens and businesses, because only these results will lead to real economic transformation.

The second lesson is that we need to look at both hard and soft infrastructure at the same time. Physical infrastructure – that is, roads, physical connectivity and better ports – is crucial for goods and services to flow unhindered. But just as critical are the soft tissues connecting the physical infrastructure to political guidelines. Reform archaic tariff structures, change legacy and restrictive laws, identify and fight non-tariff barriers, facilitate border trade: it is oil that greases the wheels of trade within regions, and even with the rest of the world. world.

Finally, all of this is useless unless your private sector is equipped with the tools to compete and take advantage of it. Small and medium-sized enterprises (SMEs), which in most economies account for over 95% of businesses and the vast majority of all jobs, need to be able to benefit from regional trade and investment. Governments need to understand the challenges of their SME sectors and put in place measures to help them become more competitive, connect with foreign buyers and suppliers, and adapt to changing market conditions.

Connectivity and the digital economy will be high on the agenda of the World Economic Forum on Africa this week in Kigali, Rwanda.

In the EAC, we see exactly the kind of virtuous circles that can result from thoughtful and concerted work. The recent decision to eliminate intra-regional mobile roaming charges has spurred a boom in data and voice trade and ICT service providers are expanding to serve the larger market.

The World Economic Forum meeting on Africa in Kigali this week offers a unique opportunity for governments, the private sector and development partners to leverage technology and regional integration for sustainable and inclusive growth in Africa.

Valentine Rugwabiza is the Rwandan Minister of the East African Community and Arancha González is the Executive Director of the International Trade Center.

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