# 28. Investment, Competiveness and Trade in West Africa

Proposal for the Sixth Annual Conference on Regional Integration in Africa (ACRIA 6) on the theme: investment and competitiveness in Africa

Toussaint Houeninvo, t.houeninvo@afdb.org

and

   Khadidiatou Gassama, k.gassama@afdb.org

Abstract

The West African region is an extension of the same fragmentation that characterizes the African continent. It is made up of countries whose domestic markets are too small to achieve the economies of scale that could allow them to have the robust and equitable growth likely to create sustainable jobs. Under these conditions, regional economic integration, which fosters free movement of goods, services, persons and capital between national markets, is essential for achieving the aforementioned growth and job-creation objectives.

In this regard, the 2020 Vision of the Economic Community of West African States (ECOWAS) aims to "create a borderless, peaceful, prosperous and cohesive region....” The pillars of the regional strategic plan derived from this vision include, (i) deepening economic and monetary integration; and (ii) strengthening mechanisms for integration into the global market.

Despite the wide range of opportunities offered by the ECOWAS single market and the institutional progress achieved in terms of regional integration within the zone (free trade area, adoption of a Common External Tariff in 2013 which enter into effect on January 2015, prospects of a single currency in 2020); there are persistent constraints that severely limit the benefits which the countries could derive from regional integration to boost their competitiveness.

The proposed paper analyses, over the period 1995-2011, among others, Foreign Direct Investment inflows in the ECOWAS as well Intra-regional investment flows, the impact of regional integration on growth, trade and income per capita. The findings of the analysis are the following:

-The progress of trade and the impact on economic growth are still timid. Countries that are seen as the powerhouses of the region are either little involved in trade within ECOWAS (Nigeria, Ghana and Cape Verde) or have a moderate economic growth rate.

- Based on the Revealed Comparative Advantage indicators, the 15 ECOWAS member countries have been assessed in terms Regional competitiveness and intra-regional performance

-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

-With regard to intra-regional FDI, in terms of number of countries (not the volume), Côte d’Ivoire seems to be the main source of FDI in ECOWAS.

-The lack of a regional stock exchange and 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.

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

-Accelerate the implementation of ECOWAS Community Development Program

-Pursue institutional reforms in the electricity sector in member countries including accelerating the implementation of the WAPP Master Plan projects.

-Upgrade of corridors, by putting in place regional initiatives in the form of incentives for the development of economic activities along the corridors and in surrounding areas

These recommendations are expected to foster goods processing and generate new niches for trade and investment opportunities to boost the competitiveness of the region.


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