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48406 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank
ACCELERATING REGIONAL INTEGRATION
IN WEST AFRICA:
A BACKGROUND DISClTSSION PAPER
By
Charles Humphreys Charles N'cho-Oguie Luis de Azcarate Florence Charlier Marie-Franyoise Marie-Nelly Gaston Gohou
Coordination Group for West Africa Africa Region, AFTM4 December 2001 Copyright © 2001 The International Bank for Reconstruction and Development! THE WORLD BANK Africa Region Human Development Department 1818 H Street NW Washington DC 20433 USA
Callisto Madavo, Vice President Paula Donovan, Sector Director Emmanuel Akpa, Sector Manager
A copy of this report may be obtained from: Internal Document Unit The World Bank 1-202-473-4641
For further information about the Africa Region Regional Integration Unit, please send an e-mail message to the following address: [email protected]
The views and conclusion expressed in this report are those of the authors and do not necessarily reflect the opinions of the World Bank or any of its affiliated organizations.
Cover design by World Bank Printing and Graphics Department Photos courtesy World Bank staff members and the World Bank Photo Library. Acknowledgments
This report is prepared by the Coordinating Group for West Africa, led by Charles Humphreys, AFTM4. The paper was produced as part of the preparatory work leading to the formulation of a World Bank Regional Integration Assistance Strategy (RlAS) for West Africa (World Bank, July 2001). This work has especially benefited from three important and related reports produced at the World Bank, namely "Trade Blocs" (World Bank, 2000), "Can Africa Claim the 2pt Century" (World Bank, 2000), and "A Southern Africa Subregional Assistance Strategy" (World Bank, 1999). The paper has also benefited from comments and inputs from many individuals and institutions, namely the ECOWAS Executive Secretary, the UEMOA Commission, the AIDB and the EU Development Division. Others have provided valuable technical assistance in the course of the project, including Hafef Haddad, Deborah Kulback, Steve Dorst, Emmanuel Pinto and Simplice Zouhon-BL CONTENTS
INTRODUCTION ...... 1 I. WEST AFRICA: BACKGROUND AND TRENDS IN REGIONAL INTEGRATION. 9
1.1. BACKGROUND ...... 9 A. Difficult Geography and High Fragmentation ...... 9 B. Fragile Social and Political Conditions ...... 12 C. Widespread Poverty and a Difficult Demography ...... 14 D. High Costs of Doing Business in the Subregion ...... 18 1.2. KEy TRENDs TOWARD IN1EGRATION IN WEST AFRICA ...... 21 A. In National Reforms and Subregional Cooperation...... 21 B. In Regional Integration Arrangements ...... 22 C. In Integration Policies ...... 25 II. CONCEPTUAL FRAMEWORK AND GUIDELINES FOR ACCELERATING INTEGRATION IN WEST AFRICA ...... 35 II.I. RATIONALES FOR "DEEPENING" INTEGRATION IN WEST AFRICA: So.ME THEORETICAL INSIGHTS ...... '" ...... 36 A. Possible "Traditional Gains" from Accelerated Integration in West Africa ...... 37 B. Non traditional "Gains" from Accelerated Integration in West Africa ...... 43 11.2. CHARACIERlZING SUBREGIONAL GoODS AND ACTIVITIES ...... 46 II.3. QUALIFYING DEP1H OF REGIONAL IN1EGRATION ...... 52 11.4. GuIDING PRINCIPLES FOR ACCELERATING REGIONAL INTEGRATION IN WEST AFRICA ... 53 m. STRATEGIC AREAS FOR ACCELERATING INTEGRATION IN WEST AFRICA ...... S9 Ill. I. IMPROVING GoVERNANCE AND PREVENTING CONFLICTS: PEACE AND SECURITY ...... 59 II1.2. INVESTING IN PEOPLE: HuMAN REsOURCES AND CAPACITY ...... 61 A. In Health: Communicable - Diseases ...... 62 B. In Education: High-Education and Capacity Building ...... 63 Ill.3. BuILDING A COMMON SUBREGIONAL EcONOMIC SPACE ...... 65 A. Harmonizing Macroeconomic Policies ...... 66 B. Integrating Markets ...... 68 111.4. STRENGTHENING PARTNERSIDP ...... 79 IV. CONCLUSION: HOW COUNTRIES AND DONORS CAN SUPPORT INTEGRATION IN WEST AFRICA ...... 81 ANNEXES ...... 87 SELECTED BIBLIOGRAPHy...... 119
11 List of Figures
Figure 1: The Countries of West Africa VII Figure 2: Main Regional Economic Integration Arrangements in Africa Viii Figure 3: West Africa, Key trends 1 Figure 4: West Africa, a Large Plot, but a Small Pot (1999, GDP in Billion US$) 9 Figure 5: West Africa, A difficult Geography 9 Figure 6: West Africa and India 11 Figure 7: West Africa, Key Political Trends 12 Figure 8: West Africa, Human Poverty Index, 1998 14 Figure 9: West Africa, Income by Region 1999 14 Figure 10: West Africa, GNP per Capita by Regional Group, 1999 (US$) 15 Figure 11: West Afric a, Share ofForeign Workers, Selected Countries (%) 16 Figure 12: West Africa, Cost of Electricity by Region (US$/kwh) 18 Figure 13: West Africa, Comparing International Phone Prices 19 Figure 14: West Africa, Electricity Prices and Scale for Low Income Countries 19 Figure 15: West Africa, lllV Infection (% of pop. Aged 1549) 20 Figure 16: West and Central Africa, Overlapping Regional Arrangements 23 Figure 17: West Africa, Real GDP Growth in UEMOA and non UEMOA Countries, 1983-99 66 Figure 18: West Africa, Inflation in UEMOA and non UEMOA Countries, 1983-99 67
List of Tables
Table 1: West Africa, Social Indicators (1999) I Table 2: West Africa, Social Indicators (1999), Selected Countries 5 Table 3: West Africa, Key Economic Indicators (1999), Selected Countries 6 Table 4: West Africa, Intra Regional Trade (1999), Selected Countries 7 Table 5: West Africa, Indicators of Macroeconomic Convergence 8 Table 6: West Africa, Geography and Fragmentation 10 Table 7: West Africa, Key Political Trends, 1999 12 Table 8: West Africa, Selected Factor Costs, 1999 18 Table 9: West Africa, Indicators of Macroeconomic Convergence 28 Table 10: UEMOA, Macroeconomic Convergence 1994-1999 29 Table 11: Depth of Regional Integration 51
List of Boxes
Box 1: ECOWAS, Economic Community of West African States 33 Box 2: UEMOA, West African Economic and Monetary Union 34 Box 3: Competition as a Driving Force in Telecommunications 41 Box 4: An Assessment of Competition in Telecommunications Among Developing Countries 42 Box 5: National and Global Public Goods 47 Box 6: Trade Links Between Nigeria and Its Neighbors 71 Box 7: The Yamoussoukro Decision: The liberalization of the Air transport Market in Africa 74
iii Annexes A. Boxes Box AI: UEMOA, A Smnmary of Tariff Reform 87 Box A2: The Africa Growth and Opportunity Act (AGOA) 88 Box A3. A Fragmented Regional Sky 89 Box A4. The Cotonou Agreement 90 Box AS. The World Trade Organization 92
B. Statistical Annex: Table 1: UEMOA at a glance 94 Table 2: UEMOA Social Indicators 96 Table 3: ECOWAS at a glance 97 Table 4: ECOWAS Social Indicators 99 Table 5: West Africa and Geography 100 Table 6: Population, total 101 Table 7: Gross Domestic Product (current US$) 102 Table 8: Gross Domestic Product (Real Growth rate) 102 Table 9: Gross National Income per Capita (US$ current) 103 Table 10: GNI per capita (Real Growth rate) 103 Table 11: Structure of the Economy 104 Table 12: Inflation, Consumer prices 104 Table 13: Official Exchange Rate (National currencyIUS$) 105 Table 14: Ratio of parallel market to official exchange rate, period average 105 Table 15: Tax revenue (% ofGDP) 106 Table 16: Taxes on International Trade 106 Table 17: Overall surplus/deficit, ex.cap.grants 107 Table 18: Gross Domestic Investment 107 Table 19: Net Foreign Direct Investment (% ofGDP) 108 Table 20: Trade (Export + import, % of GDP ) 108 Table 21: Exports of Goods and Services 109 Table 22: Imports of Goods and Services 109 Table 23: Direction of Trade Matrix, Exports, 1990 110 Table 24: Direction of Trade Matrix, Exports, 1995 110 Table 25: Direction of Trade Matrix, Imports, 1990 111 Table 26: Direction of Trade Matrix, Imports, 1995 111 Table 27: Real interest rate (%) 112 Table 28: Deposit interest rate (%) 112 Table 29: Commercial Bank Spread (Lending rate - Deposit rate) (%) 113 Table 30: Money and quasi money (M2) as % of GDP 113 Table 31: External debt, total 114 Table 32: Total debt service to Export ratio 114 Table 33: West Africa, World Bank Poofolio by Sector, 1999 115
IV ABBREVIATIONS AND ACRONYMS
AAA Analytical and Advisory Activities ACMAD Centre Africain des Applications Meteorologiques pour Ie Developpement (Niamey, Niger) ACP African, Caribbean and Pacific ADI African Development Indicators AfDB African Development Bank ASEAN Association of Southeast Asian Nations BCEAO Banque Centrale des Etats de FA/rique de l'Ouest (Central Bank of West African States) BOAD Banque Ouest A/ricaine de Developpement (West African Development Bank) CAS Country Assistance Strategy CBIIRIFF Cross Border Initiative / Regional Integration Facility Forum CEAO Communaute Economique de I 'Afrique de I 'Ouest (Economic Community of West Africa) CEMAC Communaute Economique et Monetaire de I 'Afrique Centrale (Economic and Monetary Community of Central Africa) CESAG Centre A/ricain d'Etudes Superieures en Gestion (Dakar, Senegal) CET Common External Tariff CFA Communaute Financiere A/ricaine (African Financial Community) CILSS Comite inter-Etats de Lutte contre la Secheresse dans Ie Sahel CIMAO Cimenterie d'A/rique de I 'Ouest CNPE Commission Nationale des Politiques Economiques (National Economic Policy Commission) DGF Development Grant Facility EAMAC Ecole Africaine de la Meteorologie et de l'Aviation Civile (Niamey, Niger) EAMAU Ecole A/ricaine des Metiers de I 'Architecture et de l'Urbanisme (Lome, Togo) ECOMOG ECOWAS Monitoring Group ECOWAS Economic Community of West African States EIEIER Ecole Inter Etat d'Ingenieur de l'Equipement Rural (Bobo Dioulasso, Burkina Faso) ESIAE Ecole Superieure Inter A/ricaine d 'Electricite (Bingerville, Cote d'Ivoire) ESMAP Energy Sector Management Assistance Programme ESMT Ecole Superieure Multinationale des Telecommunications (Dakar, Senegal) EU European Union FAIR F OMS d 'Appui a l'Integration Regionale (Fund to Support Regional Integration) FDI Foreign Direct Investment FTZ Free Trade Zone FTA Free Trade Area GATT General Agreement on Trade and Tariffs GEF Global Environmental Fund IDF Institutional Development Fund IFC International Finance Corporation JSA Joint Staff Assessment MIGA Multilateral Investment Guarantee Agency MNF Most Favored Nation NAFTA North American Free Trade Area NGO Non-governmental Organization NTB Nontariff barrier OCP Onchocerciasis Control Program OECD Organization for Economic Co-operation and Development OHADA Organisation pour ['Harmonisation du Droit des Affaires en A/rique OMVS Organisation pour la Mise en Valeur du Fleuve Senegal (Senegal River Valley Authority) OURES Open, Unified and Regional Economic Space PARI Programme d'Appui a['Integration Regionale PCS Pre/evement Communautaire de Solidarite PPIAF Public -Private Infrastructure Advisory Facility PRSP Poverty Reduction Strategy Paper RIA Regional Integration Agreements
v RIAS Regional Integration Assistance Strategy RTAs Regional Trade Arrangements UEMOA Union Economique et Monetaire Ouest Africaine UMOA Union Monetaire Ouest Africaine UNDP United Nations Development Program VAT Value Added Tax WARO West African Health Organization WAEN West African Enterprise Network WDI World Development Indicators WDR World Development Report WTO World Trade Organization
vi Figure 1: The Countries Of West Mrica
GUINEA BISSAU -2.1% $160 1.2
~ LEONE -6.6% 130 4.6 ~ BENIN 4.2% 5.1% $310 3.0 $380 4.6 6.1 nm Real GDP Growth 1995-99 (avg. ann. %) Gross National Income per capita (USS, 1999) Population Total (million, 1999)
vii Source: Authors, World Bank WDI 2001 data Figure 2: Main Regional Integration Arrangements (RIAs)in Africa
~ AMI}. AllbMaglJmbUDt 011: 0tlIIII Bolder JDiIiaIive Vlll Introduction 1. In the recent past, the countries of West Africa have made important progress in Table 1: West Africa: Social Indicators national economic reforms for accelerating (1999) growth and reducing poverty. They have West Low improved the macroeconomic environment, Africa Income % of Population living below $lIday (%) 53 liberalized trade and investment, enhanced Literacy Rate (%): 53 68 private sector participation through Gross primary enrollment (%): 81 104 privatization programs and improved the Female primary enrollment (%): 70 103 Infant Mortality (per 1000): 87 69 business environment through legal-judicial Life Expectancy at birth (years): 52 63 reforms. Although the jury is still out, there Prevalence ofHIV/AIDS, 15-49 yrs (%): 3.5 are indications that these comprehensive reforms have to date produced mixed Source: Authors results. One main reason is that national reforms policies have been embraced in different countries with varying degrees of commitment, consistency, and thus success. But, on balance, countries of the sub region have achieved a satisfactory degree of macroeconomic stability, and they have experienced renewed per capita income growth, especially since 1994. However, the evidence also indicates that these encouraging gains have so far failed to translate into tangible impacts in terms of economic diversification, quality growth, and poverty reduction. Throughout the subregion, the economic base still remains fragile, dependant on primary commodities as ever before and hence vulnerable to terms of trade shocks that have become only too frequent. Figure 3: Key Trends 1998 Poverty: (pop. Below $1/day. %) WestAtrica SSA South Asia L. America west Africa SSA South Asia L. America WestAtrica SSA South Asia L. America West Africa SSA South Asia L. America Source: Authors, World Bank, WDI 2001 1 2. Recent investigations into the reasons for this lackluster perfonnance point to a number of critical factors. Chief among them are: (i) A weak human resource base that has contributed to keeping factor costs high, and poor governance and weak institutions that have combined to raise country risk, hinder foreign investment and, thus impede quality growthl. (ii) Excessive fragmentation, which compounds an already difficult geography and disadvantageous natural conditions. This is reflected in many landlocked countries, sparse populations, tiny and segmented markets, which inhibits competition and economies ofscale and contributes to high infrastructure and production costs2• (iii) Non-competitive policies and insufficient "openness 113, or refonn programs that have lacked consistency, credibility, and hence effectiveness, primarily because of frequent policy reversals or lukewarm implementation. This has contributed to raising the cost of doing business (including country risk, costs of transactions, information, infrastructure and ancillary public services), thus inhibiting economic transfonnation, especially in transaction-intensive sectors such as manufacturing and high value-added services. (iv) Weak capacity for governments to build coalitions and private operators to "network" for common purposes and joints ventures. This has hindered the abilities of oountries that are predominantly small, weak and poor, to partner in developing trans-boundary resources such as river basins, increasing supply of common goods such as tropical agricultural R&D, and fighting common woes such as infectious diseases (HIV/AIDS, Malaria, etc). Insufficient networking may also have hampered countries' capacity to build effective coalitions and to fonnulate strong collective bargaining strategies for defending common interest in global or multilateral forums (ex: WTO negotiations, relations with ED and with multilateral organi:mtions)4. st 3. A recent World Bank study on how Africa can "Claim the 21 Century" 5 identified four essential policy-focus areas whereby the continent could chart a more prosperous future for its people. The so-called "circles of cumulative causation" include: (i) improving governance and resolving coriflicts; (ii) investing in people; (iii) increasing competitiveness and diversifying I Modem endogenous growth theories and a wealth of related empirical work have highlighted the importance of such factors as human capital, governance and institutions in explaining cross-country long-term growth differentials. A large body of empirical studies on the so called "conditional convergence models" (Barro 1996; Sachs and Warner 1995; Bloom and Williamson 1997) have confirmed the contributions of such factors as education and health, demography, geography, "openness", "rule of law" and "democracy" on long-term growth. Many empirical works on the determinants of foreign investment have also established the importance of factors related to governance and institutions, such as "rule of law" and "judicial system" in explaining differences in foreign investment and quality growth across countries. 2 According to Bloom and Sachs (1998), geographic factors and the spatial distribution of population may have lowered growth potential by as much as 1 percent in Africa relative to other regions. 3 Most recent work on the factors behind slow growth in Africa have concurred on the "centrality of openness", to use Collier's expression. In relative terms, lack of openness may have cost as much as 1 percentage point in lower economic growth to Africa (Easterly and Levine, 1997, Collier and Gunning, 1998, Bloom and Sachs, 1999). 4 Collier and Gunning (1993) argued that country-specific multilateral trade liberalization, policy harmonization, and regional cooperation in a limited set of areas (ex: infrastructure, power and communication), and a strong and coordinated strategy for external relation were the best options for SSA to foster growth and regional integration, and to avoid marginalization in the global economy. 5 Can Africa Claim the 21 st Century? The World Bank, 2000. 2 economies; (iv) strengthening partnership, reducing aid dependence and debt. That same study stresses that, in many of these areas, enhanced subregional cooperation would make the above policies more effective as compared to the country-by-country approach. The objective of the present discussion paper is to make a similar case in the specific context of West Africa. The paper argues that, despite important obstacles to overcome, deeper integration would indeed offer countries of the subregion great opportunities for enhancing competitiveness and fostering quality growth. This, in turn, would significantly strengthen national growth and poverty reduction strategies and help forge a brighter future for the populations of West Africa. Governments as well as private operators in the subregion are increasingly cognizant of this fact, and they have been lobbying the donor community for a more structured and intensified support to regional integration in the subcontinent. 4. Specifically, we argue that accelerated integration would yield important benefits to countries of the subregion, beyond possible net trade creation. The first is enhanced credibility of national policies, the result of joint commitments and policy lock-ins which regional arrangements would typically provide. This, in tum, would foster convergence in economic policies, contribute to lowering country risk across the sub-region, and thus strengthen countries' efforts to attract investors and spur quality growth. The second and probably the most important benefit ofall is improved competitiveness and visibility, the result of economies of scale and intensified competition in a broader, unified and opened subregional market. This would contribute to de-fragmenting the regional economies, lowering production and trade costs, and thus enabling countries to more effectively diversify economies and compete in the global market. The third benefit is networking and institutionalized partnership among governments as well as private operators. Regional integration arrangements provide an organized framework for multicountry cooperation. It entails regular and structured encounters that are essential for countries to build trust and to develop networks and coalitions. The result is improved capacity to develop common goods - such as a "power-pool", and to fight common woes such as infectious diseases and conflicts. Enhanced partnership would also help countries to coordinate a strong strategy for external relations, to be "noticed" and to increase bargaining power, and thus to more effectively participate in world forums and favorably affect the global agenda. 5. The paper argues that these various benefits constitute important subregional "externalities", which the country-by-country policy setting has failed to capture. To do so would require enhanced coordination of national policies in some areas, and in others, alignment ofcountry programs within a well-crafted regional integration strategy (RlS). 6. But as much as excessive fragmentation (geographic, political and economic) makes integration a worthwhile goal, it also enormously compounds the difficulties for countries that are so diverse, mostly small and poor to pull together for building a common economic space. Moreover, while the new regional arrangements in West Africa have rejected the discredited import-substitution models of the past, regional integration still does involve significant risks. Most preoccupying is the danger that, depending on initial conditions and integration policies, regional integration arrangements could create divergence rather than convergence of participating economies, leading to tensions, conflicts and sometimes the collapse of integration altogether. This would tend to be the case especially in the context of poor countries ("south-south" integration), where some may have a head start in manufacturing, and 3 where ex~ernal tariff i~ hip" leading to trade divers~on in favo~ of the more advanced countries or areas m the subregIOn . In the case of West Africa, trade diversion could occur in favor of the more developed urban coastal areas (Cote d'Ivoire, Gham and Nigeria), with concomitant agglomeration of both labor and capital in those areas. By contrast, inland countries such as Burkina Faso and Niger could experience relative if not absolute - impoverishment, trading away capital as well as labor. Clearly, such alarming trends are a threat to poverty reduction efforts and to integration altogether. 7. However, it may well be that divergence between the coastal and the sahelian economies is more likely and could be more severe in the absence of regional integration. Small markets and landlockedness would continue to raise production and trade costs, hinder economic diversification, trade and growth, and lead to the sort of factor exodus that Burkina Faso, Mali and Niger have experienced in the 1970s and the 1980s. By contrast, the building of an open and unified subregional market would result in lower production costs, enhanced scale and competition, and thus create a more competitive environment which would benefit the sahelian as well as the coastal econo mies. By the same token, the free movement of labor and capital implied by integration would not only facilitate agglomeration, reduce factor costs and enhance global competitiveness in high growth areas, but also allow the fruit of growth to be redistributed throughout the subregion. 8. With these mixed preoccupations in mind, the paper outlines a realistic, pragmatic and yet ambitious strategy for accelerating integration in the sub-region, with the aim of maximizing the net benefit to the people of West Africa. It also calls for increased sensitivity from governments to regional issues and a more concerted incorporation of cross-border issues in the design of national programs. From the donor community also, the paper calls for a more effective articulation of national policies with regional objectives in the design of country assistance programs. In particular, the paper identifies key strategic areas and financing instruments whereby the donor community could encourage multicountry work and support, in a proactive fashion, accelerated integration in West Africa. 9. Section 1.1 describes salient features of the West African economic and social conditions. It highlights the main issues and obstacles to integration, many of which also provide empirical rationales for an enhanced subregional dimension to countries' national reform agenda. Section 1.2 describes the forces behind the current resurgence of regional integration on the policy agenda in West Africa. Section II invokes important fmdings in the recent ~oretical as well as the empirical literature on trade, capital flows and migration, globalization and regional integration, in an attempt to buttress the case for an Open and Unified Regional Economic Space (OURES) in West Africa. The section also lays-out a conceptual framework and a few guiding principles for formulating and implementing a realistic integration strategy for West Africa. Section III identifies important strategic areas where enhanced cooperation or deeper integration may yield the most benefits to the subregion as a whole. Section IV suggests priority areas for increased donor support. 6 Although this view is widely held in traditional trade literature, it is far from being a consensus opinion among economists. A rapidly growing body of analytical work on the "non-traditional gains from integration" is lending support to "deeper integration", precisely in the "south-south" context. 4 Table 2: West Mrica: Social Indicators (1999), Seleded Countries Pol!!!!atlon Poverty Total GNP per ,. of pop ECOWAS. Population Share Suriace % of total Urban O-14yr pop. capita, under Area ECOWAS % pop. % pop 1999 ('JO ECCNiASf milion lJS$ $llday Benin 1.9 6.0 2.6 41.0 46.8 380 45 Burtdna Faso 4.6 10.7 4.8 17.0 47.0 240 eo Cote d'lvol... 5.4 14.5 6.4 45.0 44.5 700 35 Guinea BIssau 0.6 1.2 0.5 22.9 42.6 Mall 20.9 10.6 4.7 29.0 47.0 250 70 Niger 21.3 10.1 4.5 20.0 48.8 190 75 Senegal 3.3 9.0 4,0 46,0 45.1 530 40 Togo 1.0 4.5 2.0 32.0 46.1 330 66 Ghana 4.0 18.5 8.2 37.0 43.6 390 45 Guinea 4.1 7.1 3.1 31.0 45.5 540 40 NIgeria 15.6 121.3 53.8 42.0 44.6 300 eo UEMOA 59.0 66.6 29.5 31.6 46.0 390 45 ECOWAS 5940· 225.4 100.0 34.8 45.5 340 60 8SA 23626· 626.3 276.6 33.0 44.3 480 Mlcldlelncome 57993" 1496.4 664.0 29.8 2,950 Source : ADI 2000, WDll999: World sank. and Authors • : in square km Health Education life Intont HIV Inloctlon I..... cy Primary _ry GNP/CapIta (US$I 5 Table 3: West Africa: Key Economic Indicators (1999), Selected Countries a.nll'! ! .:t7 r,; ElIoll't_FiKO z{· ;j,S ~>~. _.'. ~;:?J~' ::::' .;;'~ , ..·,K.~- 1 :::•. -;1 ~, COle< d't\!Oin!< " 2 GLlliill:taSI_u o~~ ~ t, Mali '::.f 1f1 , " .:~4,4 Niger 2 28 -~ .- 1! (I s.~ Ji 1j ~~ "" H Toto 1" 1\1 21 1 Ghana lOb 44 .'''i B t, Gl.IIIftfa .i NI""rib UE~OA ECOWA5 ). "{ 91>A 1• '1,gc I S .. nln e~_FUO I ~;. Cottd'",O Senln i !:; SuR_F_ f. C ~I , " t.:S j cote d'lv 0In i f; - 3t! 1 Mali ;::(1 9 3 9 24 S Nllil'i'r 1i}--! ? t2 " ~ j 1 1~, ,:!. ~;.~ s.~ n r () Togo D :: 1Ji i -.. '~~(1 GI"wla ~2.Gl Ct,-:;: 2L!.4 '.' ~!)J GUIIIlea 8 ,1 yo:, fj Nl;II!riII :JJ) (; :; .:,~ UEMOA 1 1; :- - : ECOWAS j ;} .:1 i SSA 6 Table 4: West Africa: Intra Regional Trade, Selected Countries Intra-ECOWAS Import, 1997 Country Share of INTRA-ECOWAS IMPORT Selected Millions Percentage Countries US$ ECOWAS'!al WOrld!bl 30 Benin 73 4.0 12.1 Burkina Faso 122 6.7 26.1 25 Cote d'ivoire 478 26.4 17.4 20 Ghana 346 19.1 13.0 Guinea 50 2.8 8.7 15 Mali 268 14.8 37.3 10 Mauritanie 6 0.3 1.3 Niger 78 4.3 16.6 5 Nigeria 120 6.6 2.2 0 Senegal 120 6.6 10.0 Mali Niger 10 0.6 6.1 Ghana Nigeri&>negal Togo Benin Guin!t4hurilanie Sierra Leone Cote d'ivoire Burkina Faso Togo 76 4.2 20.3 Total 1813 100.0 11.0 (a) Country import from ECOWAS as % oftotallntra-ECOWAS import; (b) Country import from from ECOWAS as % of Country Global import Source: ADI 2000, WDI 1999; World Bank, and Authors Intr&-ECOWAS Export, 1997 Country share of INTRA-ECOWAS EXPORT Selected Millions Percentage Countries US$ ECOWAS'!al World (bl 35 Benin 10 o 2.7 30 Burkina Faso 33 1 19.6 Cote d'ivoire 838 33 20.3 25 Ghana 268 11 9.2 20 Guinee 12 o 1.8 15 Mali 405 16 74.4 Mauritanie 37 1 9.0 10 Niger 55 2 18.1 5 Nigeria 698 27 7.3 O~~~~~~~~~SL~~~~~~-,--~ Senegal 130 5 33.0 Mali Gha"'Senegai N~ cita' TogoGuinee Benin Sierra Leone 5 o 10.4 Cote d'iVOi~igeria eU=A!lha Faso Togo 19 1 8.1 Total 2539 100.0 12.6 (a) Country import from ECOWAS as % oftolallntr... ECOWAS Export; (b) Country import from from ECOWAS as % of Country Global Export Source: ADI 2000, WDI 1999; World Bank, and Authors Tariff Mean Selected Countries 1992 1995 Benin 34.2 6.1 Mean Tariff, 1995 Burkina Faso 72.2 32.2 Cote d'ivoire 37 21.4 Mali 35 19.7 Niger 44 20 '"j Senegal 34 24.4 II 1,I,n,I,I,1 1,1 • III $ II , I , , Togo 35 18.3 ~ Ghana 17 8.5 Bur1cina F.80Se~IN~ d'lvo~ NIger Mall T09fndoneollfialaysiRl. Afr1ca Ghana - Niseria 35.7 23.5 South Africa 11 8.7 Malaysia 16.69 9.1 Indonesia 25.2 13 Source: AD12000, WDI 1999; World Bank, and Authors 7 Table 5: West Mrica: Indicators of Macroeconomic Convergence 1/ GDP Growth rate ~%) Inflation (%) Overall surplus/deficit (%) 1996 1997 1998 1999 1996 1997 1998 1999 1996 1997 1998 1999 Benin 5.6 5.7 4.5 5.0 4.9 3.5 5.8 0.3 -4.0 -4.0 -1.0 -1.0 Burkina Faso 6.0 4.7 6.2 5.8 6.2 2.3 5.1 -1.1 -7.0 -9.0 -8.0 -11.0 Cote d'Ivoire 6.9 6.2 5.8 1.6 2.5 4.0 4.7 0.8 0.0 0.0 0.0 -1.0 Guinea-Bissau 4.7 5.3 -28.2 8.0 50.7 49.1 6.5 -0.7 -20.0 -25.0 -16.0 -14.0 Mali 3.2 6.8 3.4 5.4 6.8 -OA 4.0 -1.2 -6.0 -6.0 -7.0 -8.0 Niger 3.4 2.8 10.4 -0.6 5.3 2.9 4.5 -2.3 -3.0 -6.0 -6.0 -9.0 Senegal 5.1 5.0 5.7 5.1 2.8 1.8 1.2 0.8 -4.0 -2.0 -3.0 -3.0 Togo 9.7 4.2 -2.2 2.1 4.7 8.3 1.0 -0.1 -6.0 -3.0 -6.0 -6.0 Cape Verde 3.9 5.1 8.0 7.9 6.0 8.6 4.4 .. -24.0 -18.0 -13.0 -13.0 Ghana 4.6 4.2 4.7 4.4 46.6 27.9 14.6 12.4 -11.0 -11.0 -8.0 -8.0 Guinea 4.6 4.8 4.5 3.3 -6.0 -6.0 -6.0 -5.0 Liberia Mauritania 5.5 3.2 3.7 4.1 4.7 4.6 8.0 4.1 5.0 4.0 2.0 2.0 Nigeria 4.3 2.7 1.8 1.0 29.3 8.2 10.3 6.6 9.0 1.0 -13.0 -7.0 Sierra Leone 5.0 -17.6 -0.8 -8.1 23.1 15.0 35.5 34.1 -5.0 -7.0 -11.0 -11.0 Mean WAEMU 5.70 5.04 4.83 3.47 4.73 3.20 3.75 -0.39 -4.29 -4.29 -4.43 -5.57 ECOWAS 5.23 4.61 4.71 3.75 10.88 6.52 5.78 2.04 -4.75 -5.00 -5.75 -5.83 Standard Deviation WAEMU 2.21 1.33 3.79 2.46 1.62 2.64 1.91 1.17 2.36 2.98 3.10 3.99 ECOWAS 1.77 1.28 3.12 2.39 13.98 7.66 3.96 4.50 8.15 5.88 4.67 4.43 Coefficient of Variation WAEMU 0.39 0.26 0.78 0.71 0.34 0.83 0.51 -3.04 -0.55 -0.70 -0.70 -0.72 ECOWAS 0.34 0.28 0.66 0.64 1.29 1.18 0.68 2.21 -1.72 -1.18 -0.81 -0.76 Source: WDI 2000 and Authors 1/ Bee"""" they appear t<> be obvious outIi ..... SiOIlll Leone and Guinea·Bi888U have not been included in the calculation ofmeans and standanI deviation. 8 I. West Mrica: Background and Trends in Regional Integration 1.1. Background 7 10. The 15 countries of West Afiica have a Figure 4: combined population of 231 million, spread west Africa., A Difficult Geography over an area of 6.4 million square kilometers, and with a combined GDP of US$96 billion (1999). This is roughly 80% equivalent to the size oflreland's GDP, with 60 times the Irish population and 90 times 60".4 its land size; in short, an internal market limited in size, diversification and 20% sophistication. Common woes that characterize most of Sub-Saharan Afiica are Distance to Landlocked % Population particularly pronounced in the West Afiican Core Markets total Area Density subregion. These include (i) a difficult Source: WDI 2001 fordata tropicallsahelian geography with many '------' landlocked states; (ii) fragile social and political conditions; (iii) predominantly poor economies, natural resource dependent, land-intensive, with low productivity and high vulnerability to frequent terms of trade shocks; (iv) economic policies that, in years past, were hostile to the market and the private sector, or reforms that have lacked consistency and credibility. Despite some marked improvements over the past decade, most of these factors are still prevalent and have combined to maintain costs high and to perpetuate the negative stigma attached to the subregion and the subcontinent as a business address. A. Difficult Geograpby and Higb Fragmentation .------~ 11. The rapidly expanding literature on Figure 5: ''Economic Geography" has highlighted the West Africa: Large Plot, but a Small Pot importance of natural conditions and (1999, Current GDP in Billion US$) fragmentation as determinants of costs, competitiveness, and hence, the pace of 500 +--==------1 economic diversification and long-term 400 growth. In a recent study, Bloom and Sachs 300 (1999) have argued that "the root of Afiica' s 200 poverty lies in its extraordinarily 100 disadvantageous geography", which, o combined with the spatial distribution of its population - may have cost the subcontinent as much as 1 percentage point in lower Source; WDI 2000 for data and authors calculations 7 West Africa comprises the 8 countries of the West African Economic and Monetary Union (Benin, Burkina Faso, Cote d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal, Togo) and the other members of the Economic Community of West African States (Cape Verde, Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone). 9 growth relative to other regions 8. The growth-inhibiting features that they described are especially prevalent in West Africa (Figure 5 and Table 6). In particular, the subregion can be characterized as (i) a large land mass, remote from major markets of Europe, North America 9 and the Pacific Rim , and 91 percent of which is non-arable; (ii) sparse, poor and predominantly rural populations; (iii) a high proportion of landlocked states, accounting for nearly Y2 of the total land area, against V4 for South-East-Asia. The region is roughly one-third desert, one third Sudano-Sahelian with rather irregular rainfall and one third humid and more favorable for agricultural development. Internal distances are enormous and transport infrastructure networks are only partially interconnected between countries - since they had been originally conceived to serve the colonial interests rather than the region's - and they are generally poorly maintained. Table 6: West Mrica, Geography and Fragmentation Sparseness and Fragmentation Accessibilities Median ed' . Distance Number of Land Area M la~ Medl~n Total Land % of non- % fAr a % Coast to Core Population Density Area arable 0 e to Land Markets Countries by (~~try (million) (pop/sq km) (million) land Landlocked Area (a) (b) Regions West Africa 15 260 9.6 36 5,940 91 47.1 0.6 4,991 Sub Saharian Africa 47 274 7.1 25 24,267 90 32.7 1.2 6,237 The "Balkans" (c) 10 56 6.4 81 56 29.4 East and South-East Asia 12 331 42 166 7,364 23.3 11.5 3,396 Transition Countries 25 24,000 0.9 2,439 Latin America 22 284 10.8 39 19,964 90 7.5 2.3 4,651 Selected Countries India 3288 962 318 3,288 45 0 5,839 Indonesia 1905 200 109 1,905 90 0 5,768 China 9597 1227 130 9.597 87 0 2.103 Brazil 1 8547 164 19 8,547 94 0 6,812 ~: Bloom and saCIiS, 1999, table 2; and authOrs' catCUhltion fbi the West -African case. (a) Km of coastline per 1,000 km2 ofland area. (b) Unweighed average linear distance in km from capital city to the closest of the following port : New York, Rotterdam, Tokyo (c) the Balkan includes countries such as Slovenia, Croatia, Bosnia, Yugoslavia (Serbia, Kosovo and Montenegro), Macedonia, Bulgaria, Albania, Greece, Romania and the European part ofTurkey. 8 According to Bloom and Sachs (1999), "economic policies and governance, which receive the largest share of economists' attention, are perhaps not the dominant factors impeding economic growth in Africa .... And that various aspects of tropical geography, demography, and public health are vitally important .... Our statistical estimates, admittedly imprecise, give two-third of the weight of Africa's growth shortfall to such "non-economic" conditions, and only one-third to economic policy and institutions". 9 Using Bloom and Sachs' methodology (Table 5, col. 10), we have estimated that WA's distance to core market is around 5,000 km, that is twice the level for Transition Countries of Eastern Europe, nearly 50 percent higher than that of East and South-East Asia, but more favorable than India and Indonesia. 10 12. Comparing West Africa to India illuminates the excessive fragmentation Figure 6: of the subregion. For example, as Sparsity, West Mrica and India indicated in Figure 6, West Africa has a GDP per capita that is comparable to India's. By sharp contrast, West Africa comprises 15 countries, with nearly twice the land size of India but only one quarter of India's population and 40% roughly one tenth of its population density. Also, mostly because of the 20% vast sahelian zone, West Africa's ratio of arable to total land area is only one GNP per Land area Population Pop. Density Arable Land (million) fifth of India's. The consequence of low Source: ~[M~) dat~OOo k(2) (hbt/km2) ('000 km2) income, sparse population, and small and landlocked states is the prevalence of tiny and segmented markets, which hinders economies of scale and breeds monopolies. Sparsity and "landlockedness" also raise the costs of infrastructure service delivery, and thus, 10 hamper trade, investment and growth . Low per capita income is certainly a long-tenn development issue. But "landlockedness" and small markets are also the manifestations of excessive "fragmentation". Therefore, enhanced subregional cooperation and regional integration could benefit the subregion as means for "de-fragmenting" economies, expanding markets beyond national boundaries, and bus creating a competitive economic space that would serve as a practice field for countries in the global competition. 10 Research worldwide, including sub-Saharan Africa has found that: the median landlocked country has only 30% of the trade volume of the median coastal country; halving transport costs increases the volume of trade five times; improving infrastructure from the 75th to the 50th percentile increases trade by 50%; and geography and infrastructure problems explain a large part of the relatively low level of African trade. (See Limao and Venables, 1999.) 11 B. Fragile Social and Political Conditions Figure 7: 13. On the political front, countries of West Africa: Key Political Trends, 1999 the subregion have made significant efforts toward "internal opening", and recent 100"10 developments in Nigeria and Senegal have SO% been encouraging. Yet, despite the much 60% heralded commitment to democracy, decentralization and grass-root participation, the democratic process remains painstakingly slow, plagued with uncertainty and impaired by frequent policy 0% Potilical Rigbt CAmuption in Gov. reversals. Many countries of the subregion have remained politically polarized, with Political Rights: Less =most free.; Corruption index: Less=more corrupted little true grass-roots participation, and with CG: Corruption in the Gov., (ICRG), Less =Most corrupt power sharing and power transfer mechanisms that serve as a source of natio nal conflicts with considerable costs to the countries themselves and spillovers to the rest of the subregion. Table 7: West Africa, Key Political Trends, 1999 oemacratiCi Governance Bights Eflelciency of Political CM! #ofOCPres. # of Coup AverageTerrn TypeofLElllder CG RLI Public Sevice ~~~ (1~ (2) RIght (4) Liberties Elect. (6) dEtat (7) length (8) (9) (10) DeIiveIy (3) (5) 1980$ 1990s 1980s 1900 1980s 1990s 1980s 1990$ Benin -0.4 3.8 2 2 0 0 5 M C,MC -0.9 Burkina Faso 2 -0.4 5 4 0 1 2 0 7 M M -0.5 Cote d'ivoira 2 -0.3 3.8 6 4 0 2 0 1 10 5 C C -0.1 Mali 2 -0.5 3.4 3 3 1 C M,C -0.3 Niger 1 -1.1 7 5 2 M -0.8 Senegal 3 -0.1 4.0 4 4 2 2 0 0 10 5 C C -0.9 Togo 2 -0.8 4.0 6 5 0 2 0 0 10 10 M M -0.9 Ghana 2 0.0 3.4 3 3 1 0 5 5 M C -0.1 Guinea 3 -0.8 4.2 6 5 0 1 0 5 10 M M -1.0 Mauritania -0.6 6 5 Nigeria 1 -1.1 4.0 6 4 -1.1 UEMOA 2.0 -0.5 3.8 4.7 3.9 2 8 4 4 10 6 -0.6 ECOWAS 2.0 -0.6 3.8 4.9 4.0 2 8 4 4 8 7 -0.7 SSA 2.19 -0.6 4.1 4.6 4.2 -0.7 Middle income 2.9 -0.1 4.0 3.2 3.5 -0.1 Noles: (1) Corruption Perception Index, 0 to 10: 10 = least corrupt. (Transparency International, 1999), also see World Bank COITUption index (1, Corruption in the Governernent, International Country Risk Guide (ICRG). February 2000. Scale : 0 to 6: 6=least COITUpt (2) Rule of Law Index; scale, no limit; higher better. World Bank 1999 (3) Efficiency of Public Service Delivery. Scale: 1 to 6: 1 = be6t. (World Bank. 1999) (4) scale: 1 to 7: 1 = most free. Data from Freedom House 1999 (5) scale: 1 to 7: 1 = most free. Data from Freedom House 1999 (6) Number of Multiparty contested Prasidantial Election over the decade (7) Number of Coup d'Etat (8) Average Tenn Langth of seating President (9) Type of Leader (M = military, MC = military converted to civilian; C = civilian) (10) Scale : no limit; higher better 12 14. For example, fractious political rivalries have plagued Liberia and Sierra-Leone, and the spillover into other countries, notably Guinea, has mt been satisfactorily resolved so far. There are indications that arms and diamonds trade involving these and other countries in the region may be continuing. While a degree of political stability has been restored in Cote d'Ivoire since the military coup of December 1999, after the municipal elections of March 2001, the situation remains somewhat unsettled politically in a country which had been, by far, the most economically advanced in the region. In the past twenty years or so, only Senegal in West Africa, has had a reasonably well- functioning and somewhat "competitive" multiparty system, with a series of truly contested presidential elections, no military government ever, and two 11 relatively smooth transitions from one civilian incumbent president to amther • Up until the past five years and with a few exceptions, sitting presidents in many West African countries were military officers who have seized power through non-democratic means, or in few cases, have remained in power through tightly controlled electoral processes. But recent trends - especially in Nigeria, Ghana and Cote d'Ivoire are encouraging, indicating a progressive consolidation of the democratic process in the subregion. 15. One costly consequence of the difficult emergence of democracy in the subregion has been the prevalence of poor governance. This has translated into poor or inconsistent policies, deficient administrative services and inadequate supply of essential social goods such as infrastructure, health and education. Another consequmce is widespread ethnic-based national conflicts with spillovers and debilitating costs to the entire subregion. In particular, the past two decades have seen an explosion of such conflicts in West Africa (the Casamance in Senegal, the Gambia, Guinea-Bissau, Liberia, Mali, Nigeria and Sierra-Leone, etc) 12. By some 13 estimates , conflicts may have accounted for as much as 1.5 points in average annual growth slack over the past three decades, that is nearly half of the per capita annual growth rate of the subregion during the 1995-1999 period. 16. Clearly, poverty, poor social conditions, and political tensions are not conducive to closer relations among countries. At the same time, promoting political rights and developing conflict prevention and conflict resolutbn mechanisms fall precisely in the realm of activities that require multicountry cooperation, if not outright integration. And given the social costs of conflicts, such activities could bring significant net benefits to the subregion as a whole. Altogether, although fragile social conditions would make multicountry work especially difficult in West Africa, it is also true that enhanced cooperation and lock-in arrangements that would force countries to jointly commit to democracy and achieve political convergence would considerably help transform the current conflict-ridden political and social climate into a growth-enhancing environment. 11 From LS Senghor to A. Diouf, then lately from Diouf to A. Wadd. 12 For more on this subject, see Mbi and Dia, "The Impact of Conflicts in Africa", the World Bank, 1999. They provide details on the costs of these conflicts in Eastern Africa and West Africa, and discuss possible World Bank role in conflict prevention or resolution activities. 13 Easterly and Levine (1997) argued that ethnic diversity was the cause of the high incidence of conflict in Africa, because it makes cooperation difficult... But the evidence shows that many civil wars in Africa occurred in countries with few but large ethnic groups: Burundi, Rwanda, Sierra Leone, Sudan, Liberia, etc. Collier (1999) advanced a more plausible argument, namely the lack of democracy and rights in the face of ethnic diversity and abundant mineral resources. His analysis indicate that "Among diverse societies, democracies grow 3 percent per year more rapidly than dictatorships ... ". He also argued that the implied loss of growth by the conjunction of low rights and high ethnic diversity is around 1.5 percent per year, which about the magnitude of Africa's underperformance relative to other broad regions (the "Africa dummy"). 13 c. Widespread Poverty and a Difficult Demography 17. By all indications, the subregion stands among the poorest of the world. For example, Figure 8: according to UNDP's various indicators of Human Poverty Index, 1998 human development (the Human Development Index (HDI), the Ruman Poverty Index (HPI) and the Gender-related Development Index 60 (GDI»14, five of the ten lowest ranking countries 5 of the world are in West Africa (UNDP 1999i • 40 The median per capita income is around $lIpersonlday for the subregion as a whole, 20 which indicates that roughly one person out of two lives below the standard international o "abject poverty" line. But there are salient West SSA South India Indonasia Latin regional features in income and poverty trends Africa Asia America Source: UNDP data and Autbol'll among countries of the subregion, which also provide ground for a subregional approach to growth and poverty reduction strategies. 18. Income and Poverty by Broad-Region: Per capita income distribution indicates that Figure 9: economic disparities are much more pronounced West Africa, Income by Region 1999 across broad sub-regions than among countries, 100% especially along the "Humid Coast/Sahelian (RC/SH)" line. For example, Mean per capita income in Nigeria and Ghana are about the same as in UEMOA countries. By contrast, mean 40% income is 50 percent higher in HC area relative to the SH zone. Likewise, Nigeria, Ghana and Senegal have poverty rates in the same range as 16 Togo and Benin • By contrast, the poverty rate GDP. biHUS$ GOP pet capita uss Populatioo. min pm, in the SH zone is five times higher than that of Source: WDI 2000 and authol'll calculations the RC region. Poverty and per capita income trends reflect the fact that the subregional economy is predominantly agriculture-based and natural resource dependent, most of which is concentrated in the humid coastal area. 14 These are composite index of human development. HDI measures average achievements in basic development, combining (i) PPP-US$ per capita income, (ii) life expectancy and (iii) adult literacy. HPI is a multidimensional indictor of poverty, that is deprivation in the four basic dimensions of human life, namely a long and healthy life, knowledge, economic provisioning and social inclusion. GDI is similar to the HPI, except that in accounts for ~ender disparities. 5 These are - from the bottom and up - Sierra Leone, Niger, Burkina Faso, Guinea-Bissau, and Mali (UNDP Human Development report 2000). 16 Cross-country comparison of poverty incidence is tricky, because Sllch incidences are determined from poverty lines that still are country-specific. 14 19. This imbalance in natural conditions has important ramifications for future trends in population, income and poverty in the subregion. Most likely, in the absence of an organized integration process, the persistence of important "opportunity-gap" and "income gap" between the two broad areas will continue to cause vast migration from "north" to "south,,1?, with far reaching consequences for poverty reduction policies and social harmony across the entire subregion. With this background, deeper integration involving free movement of labor and capital would help in three important ways. First, it would provide an adequate pool of resources to high growth areas, implying, in return, significant flows of remittances back to poorer areas. Second, the gains in global competitiveness which would result from enhanced scale and competition on the broader subregional market would invite foreign investment and open-up new economic opportunities, which would benefit outlying regions, especially as cost of living rise and key factors such as land become more expensive in urban coastal areas. Third and most importantly, an organized integration would provide the legal framework (residency rights, work permits, social protection, etc.) for an orderly migration process and thus, a more harmonious "integration of the peopes" of West Africa. As this was the case for NAFTA, EU and SADC, labor migration and its many economic, political and social ramifications constitute one of the most important rationales for enhanced integration in West Africa. 20. Mean income and degree of economic Figure 10: diversification also point to another GNP per capita by Regional Gronp, (U8$, 1999) important feature of the subregion with 100"10 implication for the pace and modalities of integration. Despite Nigeria's sheer size, there is no one country that stands out as 75% a subregional "magnet" (or pulling integration in the subregion. As Figure 10 50% indicates, most regional blocks are driven by a clear "pole" toward which other 25% economies tend to converge. Regional poles are typically significantly more 0"10 advanced countries and diversified NAFfA EU SADC WA economies relative to otrer member countries in the regional grouping. This is Source: WDI 2000 and authors calculations for example the case for the US and Canada in NAFTA, Germany-France in EU, and to a lesser extent, South Africa in SADC. "Polar" countries would also commonly stand as "role models" in such areas as political and value systems and institutional maturity, which induces "imitation" from the peripheral countries, leading to ''upward'' political as well as economic convergence as integration progresses. The situation is vastly different in West Africa and quite reminiscent of those of the Andean Pact and the Central American Common MarketS. For example, Nigeria is a regional "giant" by its sheer size and resource base; but it is hardly a subregional "magnet" in any economic, political or "managerial" terms. Nigeria alone accounts for 54 percent of the population and 53 percent of its GDP in 1999. Still, its per 17 For more on these trends, see the comprehensive work by Jean-Marie Cour and Serge Snrech: "Preparing for the Future, a Vision of West Africa in the Year 2020". Club Sahel, OECD, 1998. 18 The Andean Pact (1969, revised in 1991) includes Bolivia, Columbia, Ecuador, Peru and Venezuela. The Central American Common Market (CACM, 1960, revised in 1993) includes El Salvador, Guatemala, Honduras, Nicaragua, and Costa Rica (who joined the CACM in 1962). 15 capita income is roughly equal to the subregional median (US$300-330), and its economy is 19 no more diversified than those of Senegal, Ghana or Cote d'Ivoire • Likewise, Nigeria and Cote d'Ivoire may have a head start in resources; but they can hardly be regarded as consistent showcases of democracy, political stability, sound governance and good economic management. Also, long-term trends indicate that nearly all countries of the subregion are confined to a rather low "steady-state" per capita income growth rate in the range of 1-2 percent, confmning that there is no true stands-out or "fast/front-runner" in the subregion. This means that integration in West Africa truly is a "south-south" affair, where no one country can combine the "might" and the "magnetism" needed to pull it forward. One important implication is that the benefits of integration - although significant in aggregate terms - may seem diluted to individual countries, and that capacity to sanction non-compliance may be limited. As a result, the cost of exit from integration arrangements may be low, which in turn would raise the risk of timid implementation of protocols and outright policy reversals by member countries. In such a context, a more pragmatic approach is needed for effectively advancing integration. This is discussed later in Section IIA, which suggests a few guiding principles for successful integration in West Africa. 21. Demography: Population and migration trends reinforce Figure 11: the above features. The average Share of Foreigner Workers from West Africa (%) annual population growth rate is among the highest in the world and very similar across countries 20 (2.8 percent per year over the past two decades). Countries of the subregion also share two 10 other important common demographic features. One is the o LIJ w a: z relative youth of the population, wa: w Z ... - z ~ LIJ 5 z m the other the rapid pace of (!) 8~Cl urbanization. Nearly 50 percent of the population is 14 years old Source: ECOWAS Data and Authors or younger in all countries, and indiscriminately across the sub-region, urban population has grown nearly twice (5 percent per year) as fast as the total population, and at about the same rate as real GDP. At such a rapid growth rate, urban population will double in less than 15 years, with major implications for 2o employment, poverty and social policies • Confnming previous trends, average UIbanization rate is twice as high in coastal areas compared to landlocked areas (roughly 41 against 22 percent), a reflection of rapid agglomeration in coastal cities. 19 As an indication, although Nigeria has a higher industry share of GDP (41 percent, including mining), actual manufacturing share of GDP is lower in Nigeria (about 7 percent) than in Cote d'Ivoire (20 percent), Senegal (15 ~ercent) and Ghana (8 percent). .' o However, the rate of urbanization still remains low compared to other low-income regtons of the world, which contributes to the high cost of infrastructure service delivery throughout the area. 16 22. This is also confinned by intra-regional labor migration trends. Although still sparse, the available data on labor force composition and migration indicate a high degree of inter penetration of labor force throughout the subregion, with a natural tendency for clustering in coastal areas. However, a closer analysis reveals that patterns of migration are more complex and go beyond the CHiSH dimension. This is because intra-region migration is only partly explained by differences in countries' economic fortunes. It is also the result of political instabilities and conflicts. The most interesting fact in this instance is that labor mobility cuts across the traditional linguistic divide (Francophone/Anglophone) and also blurs the Coastal 21 Sahelian line • This is a reflection of another important trait of the subregion, namely that borders have always and will continue to remain notoriously porous for goods, people as well as capital. 23. As a matter of fact, the peoples of West Africa have traveled and traded across the region for centuries and continue to do so. Coastal countries harbor large groups of immigrant workers from the Sahelian countries: until recently, more than 25% of the labor force, mainly in plantations, in Cote d'Ivoire, nearly 10% in Guinea, and a large number were from other West African countries. There are also large numbers, though necessarily a smaller proportion, in Nigeria. In fact, every coastal country contains significant communities of people from the Sudan-Sahelian zone, especially in the large urban areas of Abidjan, Accra, Dakar or Lagos. These historical movements of people and goods are regional integration by the people, and are deeply ingrained in the regional cultures. 24. Meanwhile, there is also ample evidence suggesting that immigrant workers throughout the subregion still face enonnous difficulties to become fully integrated into the country of immigration. Nigeria's expulsion of Ghanaian workers in 1984 and the late resurgence of xenophobic attitudes and discourses in Cote d'Ivoire are only few indications of these latent problems in the subregion, and the need for an organized labor market integration scheme. Those difficulties not withstanding, the history of cross-country labor movement in West Africa indicates that people's (mis)fortunes have been and will remain intertwined to such an extent that no single country will ever be able to unilaterally eradicate poverty while the rest of the "neighborhood" still simmers in economic deprivations. This also indicates that poverty - much like prosperity - does spillover, and that both have important "neighborhood dimensions" and "common goods" features. Consequently, integrating the subregional labor market would not only benefit the regional economy, spread growth and reduce poverty across the entire area, but it will also considerably facilitate the emergence of an integrated and multi-ethnic community of West African peoples. 21 For example, in relative terms, there are roughly as many Ghanaians and Nigerians in Cote d'Ivoire as Guineans and Malians, and nearly as many Senegalese as Malians. 17 D. High Costs of Doing Business in the Subregion. 25. The high cost of doing business is another striking feature of the subregion. This is partly Figure 12: the result of previously described ills of the Cost of Electricity by Region (USS/kwh) .1' ,.------______-..., SUbregion (low income, geography, demogra phy, conflicts, etc), but also the reflection of ... insufficient competition and scale. Table 7 and .1' Figure 11_1222 shows various production cost .,. items for countries of the subregion relative to I~ comparable benchmarks around the world. In many cost categories, the subregional average is at least twice as high as for Asian countries (5 times for unit labor cost, 2times for electricity, 2 times for diesel, 4 times for local telephone calls, 2 times for road and 2 times for Source: WDI 2000 and authors calculations import freight). Table 8: West Africa, Selected Production Cost Items, 1999 PrImary Facto... FIscaIIty Infrastructure Services Capital labor Phone FJxed lin, Fix"" line T!'!!!Jsport Cos! Euromoney Taxescn Rea! Average coonlry Real Minimum Corporate Av. Cost Av. Cost call Road oost AIr oost to Taxeaon Cost 0 I Average Cost CAldR- Lendlng Income local call to the US IIV. 1heUS Wages Imports % EIecIrk;fty of Diesel worthiness Rate % (PPP Gross US$/3mns US$/3rnns US$ITI 22 The figures comprise a series of box plots. A box plot is a convenient tool for visualizing the distribution of series. It shows the median value (bold horizontal line); the painted area (red) indicates the proportion of points falling within the inter-quartile range (IQR, the lower quartile, 25, and the upper quartile, 75), that is 50 percent of the distribution. The two tails represent the "extreme points", which are 1.50 IQR around the median. "Outliers" are points outside the tails. 18 26. For example, the low credit rating (only 60 percent of India's) reflects the fact that Figure 13: investors regard the area as among the riskiest Comparison of International Phone Prices in the world. As Collier (1999) noted, some of this risk is intrinsic to small commodity dependent economies, some a corollary to trade j . barriers and high transport cost; but much of it « is directly political and reflects policy uncertainty. Transaction costs are high because of weak judicial system that hinders contract i 'J...-..,_="",,~. -"'!'".'_~~"~~."._~,~<-~:O=_~t.m---:O~ECO~ enforcement; information costs are high because of deficient telephone systems, Source: WDI 2000 and authors calculati01lll restricted press and secretive information diffusion practices by governments. Likewise, the cost of power is prohibitive in the subregion, and most paradoxically in countries with abundant sources of energy such as Nigeria, because of power shortages stemming from structural problems. Meanwhile, potential sources of lo~ cost energy and water resources (river basin in Guinea, flared gas in Nigeria) remain untapped because of lack of effective subregional cooperatio~3 . 27. A closer analysis of the data also suggests that competition and Figure 14: Low Income Countries, market size matter, especially in Electricity prices and scale, 1999 infrastructure service costs, and .12T"'""------, also in financial and labor mrukets. In electricity for example, market .'1 size appears particularly important, .10 whereas in telecom, financial services and labor, the interaction of scale and competition appears determinant. By implication, en hanced market integration for factors as well as infrastructure services would signifICantly cona <2000 2000<00"8<4500 ••00>4600 contribute to cost reduction in the 8ectrkiIy ~ II mIions dKwt-Vyaar subregion. Likewise, enhanced Source: WDI 2000 and authors calculations cooperation for the development of energy resources (ex. river basins) and energy trade (power pool) would increase supply capacity, contributing to lower production costs and improved competitiveness of the subregion. 23 Most disturbing is the enormous amount of energy wasted though gas flaring, especially in West Africa. And world-class low-cost sources of hydropower have not been exploited because of the difficulties, rivalries, and uncertainties attached to producing energy in one country for consumption in another, often with transmission across a third (such as between Cote d'Ivoire, Ghana and Togo.). (Can Africa Claim the 21st Century, p 141). 19 28. Infectious Diseases are also another cause of Figure IS: the high risk and high West Mrica, HIV infection (% of pop. Aged 15-49), 1999 cost stigma attached to the subregion. Although incidence of HN is on 10 8:5 7.2 average lower than in 8 6 4.4 central and southern Africa, it varies considerably among countries of the subregion, with Niger at the lower end with less than 2% and Cote Source: WDI 2000 and authors calculations d'Ivoire the higher end with over 10%. Many studies have estimated that HIVIAIDS may reduce life expectancy in Africa by as much as 10 years in the future, and incapacitate 2-4 percent of the potential workforce. One direct consequence of these developments is an increase in the unit cots of labor, which would reduce global competitiveness and thus hinder quality growth. Another consequence is a rise in the age-based dependency ratio, even with lower fertility rate, implying lower saving rates and higher cost of capitaf4. 29. Likewise, a growing body of empirical work, including burden of disease analyses, has 25 found that malaria may have inflicted significant growth-retarding effects in the region • The even more alarming fact is that most of these costs are projected to rise in the future, which would further increase the risk of investing in the subregion. Infectious diseases are important regional "commons ", and the especially high incidence in the subregion may partly be attributed to failures in national policies as well as insufficient cross-border cooperation. Therifore, enhanced subregional policy coordination in those areas could significantly help reduce the incidence of infectious diseases, reduce their debilitating impact on the workforce, and thus reverse the potential trends toward higher factor cost in the subregional economy. 30. In summary, the region has a number of distinguishing features - including excessive fragmentation, fragile social and political conditions, widespread poverty, infectious diseases, etc. These factors not only raise considerably the cost of doing business in the subregion, thus accounting for a significant part of its "growth-slack", but they also constitute important obstacles to closer ties among countries. As a consequence, regional integration in West Africa is undoubtedly a process that faces "high risks and high transaction costs". At the same time, many of these negatives can be overcome precisely through enhance cross-border cooperation and in some cases deeper integration of the subregional space. Because the negatives are large, the potential gains from overcoming them are also very large, which would make subregional integration a worthwhile endeavor. The next section takes stock at past and current such endeavors in West Africa and analyses the institutions and policies behind them. 24 Bloom & Sachs, 1999; Also, Elbadawi and Mwenga, 2000. 25 D. Sheppard et al (1998) estimated that the annual economic burden of Malaria in Africa was about 0.6 percent of GDP in 1995 for Africa. Also, McCarthy, Wolf and Wu (2000) have reached a similar conclusion suggesting a growth reduction impact of .55 percent on average for SSA. 20 1.2. Key Trends Toward Integration in West Mrica A. In National Reforms and Subregional Cooperation 31. The subregion has seen sea changes in economic and social policies over the past two decades. Most countries have abandoned the import substitution industrialization strategies of the seventies, the legacy of which includes autarkic trade regimes, overvalued exchange rates, deficient infrastructure provided by cash-trapped state monopolies, and lackluster growth. With varying speed and consistency, countries have implemented national reforms programs, including macroeconomic stabilization, privatization of state monopolies, trade liberalization and regulatory and judicial reforms. Invariably, the aim is to strengthen the private sector and the market as the main instruments for economic diversification and export-led growth. 32. Although still tenuous and with varying degree of success, most countries have started to reap the fruit of these efforts. Especially during the 1995-2000 period, average GDP growth has remained relatively strong at around 5 percent in most countries, deficits have been curtailed and macroeconomic stability significantly improved. Trade liberalization has also progressed across the subregion, with simple effective average tariJI6leveis cut from the 25-30 percent range (1996) to around 12-15 percent throughout the subregion. Privatization and market liberalization have also touched the infrastructure service sector, resulting in marked improvement in access, quality, and costs, especially in telecommunications. 33. These transformations have also provided a new impetus to regionalism while simultaneously transforming its nature. Past schemes were motivated partly by the political dream of African Unity, but also as a means for providing sufficient scale to import substitution industrialization policies. The inward-lookin strategy failed for the same reasons 2 as the underlying national import-substitution policies f: (i) national markets that were too small and too poor; (ii) high input costs adversely affecting transformation and export, causing foreign exchange shortages and overvalued currencies; (iii) domestic monopolies and trade protection that gave birth to powerful rent-seeking and "nationalistic" lobbies, biased and organized against regional as well as global trade; (iv) equally nationalistic gO\emments with spoken interest in regional cooperation, token support to regional organizations, and many broken commitments to, and implementation lapses of, regional protocols; (v) excessive emphasis on joint multi-country public investments (8 la Air Afrique) - the multicountry equivalent of national monopolies - as opposed to creating a truly unified markets for private operators. 34. As countries progressively switched from import-substitution to open-door policies since the early 1980s, they also sought tighter sub-regional cooperation and policy coordination as a means for confronting the challenges of globalization. The impetus came in part as a response 26 The simple effective average tariff rate is the simple average of all statutory tariff lines for a given country. A trade-weighted tariff rate is obtained as the weighted average of statutory tariff rates; the weight is the import share of each product category . 27 See Oyejide, Elbadawi and Yeo, 1999. 21 to a worldwide trend towards the constitution of large regional trade and economic blocks in 28 the 1990s (NAFTA, EU, ESEAN), and the revamping of the GATTIWT0 • Multilateral trade and reciprocal economic cooperation arrangements are increasingly discussed within this new framework 29 • Thus, countries of the region also felt the need for tighter cooperation in order to increase their weight and visibility, and to participate in setting the agenda for multilateral negotiations in the new global context. At the broad sub-continental level, the new trends has lately translated into the reaffirmation of the goal of African Unity as enunciated in the 1991 OAU Treaty Establishing the African Economic Community (Abuja, 1991), and reinforced by the recent decision of African Heads of States to create an African Union (Lusaka, July 200 1), for which sub-regional integration arrangements would constitute building blocks. West Africa has also experienced a renewed quest for "closer ties" among countries and "deeper integration" of economies, which can be seen in the recent evolution of the main subregional institutions and a renewed political willingness to push forward the integration policy agenda. B. In Regional Integration Arrangements 35. There is no question that in the past few years, the two main regional institutions, namely the Economic Community of West African States - ECOWAS, and the Union Economique et Monetaire Ouest Africaine UEMOA, are experiencing a relative "renaissance". ECOWAS was established in 1975 (see Box 5), and then significantly revised in 1993 in order to accelerate the pace of integration in West Africa. The original inspiration is to be found in the philosophy of Pan-africanism of early African independence leaders. Nigeria, together with Ghana, was a central force in its creation. The ECOWAS has both an economic and a political-diplomatic mandate, and has been more effective in the latter than in the former. The Union Economique et Monetaire Ouest Africaine - UEMOA, contains eight of the ECOWAS countries. UEMOA, created in 1994 in the aftermath of the currency devaluation, is an outgrowth of the West African Monetary Union (UMOA Union Monetaire Ouest Africaine) - formally established in 1962 but predated by colonial structures, and a successor to the CEAO (Communaute Economique de Z'Afrique de Z'Ouest). It also has historical and economic links to Europe, principally by virtue of sharing a common currency belonging to the Franc zone (the CFA Francs), with convertibility guaranteed by the French treasury. The UEMOA institutions are closely patterned along the lines of the European Union. 28 For more on these trends, see the recent World Bank Policy Research Report: "Trade Blocs", World Bank, 2000. 29 For example, Reciprocal Economic Partnership Arrangements (REPA) within the new Fiji framework has now replaced the old LOME/ACP Convention as the basis for multilateral cooperation with the EU. Lately, South Africa successfully used its weigh as a leader and a partner in SADC as bargaining tool to negotiate a favorable FTA with the EU. 22 Figure 16: West and Central Mrica, Overlapping Regional Arrangements MANU RIVER Ca, • .... rd_ Gambia UNION Gh.na NI".,I. UEMOA: Union Economique et Monetaire Ouest Africaine; ECOWAS: Economic Connnunity of West Africa; OHADA: Organisation de 1" Hamonisation du Droit des AffiUres en Afrique CILSS: Comite Inter-Etats de Lutte contre la Secheres:se dans Ie Sahel Source: Authors 36. The main reasons for the differences between the two institutions and indeed for their separate existence so far, are two. One is the political, institutional, cultural, economic, and monetary links of the UEMOA countries with France. The same linkages have not existed between the other ECOWAS countries and their former colonial powers. The second is the checkered history of Nigeria, by far the biggest partner in both population and economic power, which effectively deprived ECOWAS of what should have reen its "natural" leader in economic integration (although Nigeria has underwritten most ECO WAS peacekeeping efforts). It is apparent that Nigeria's size coupled with its relative political instability has inspired a sense of hesitation on the part of other West African countries, including in their business communities. 30 37. However, major recent changes have reenergized ECOWAS and brightened the outlook for advanced subregional integration. Turning points have been Nigeria's return to democracy following elections in 1999 and President Obasanjo's far-sighted speech to the December 1999 ECOWAS Heads of State meeting in Lome, in which he offered a pragmatic, "two track" approach to West African integration. This included as central objectives the creation of an effective, fast-track free trade zone around Nigeria as a step toward the generalization of the UEMOA Customs Union to all of ECOW AS by 2002, and a second monetary union of non UEMOA countries that would subsequently merge with the CFA zone to create a single monetary union by 2003/4. On the heels of this opening, the relationship between the two institutions has been steadily strengthened through numerous meetings at the technical level 30 The Conseil de ['Entente was set up by Cote d'Ivoire in 1959 and also includes Benin. Burkina Faso, Niger, and Togo, as a francophone counterweight to the growing power of Nigeria. 23 between the Secretariat and the Commission, meetings of central bank governors, and swnmits of Heads of State. President Konare of Mali, elected President of both ECOWAS and UEMOA in 2000 and re-elected in 2001, has provided needed credibility and drive in bringing the two groups closer together. 38. Besides the two main regional institutions, there are a good number of other regional entities and arrangements. They are the results of a vast array of cooperative arrangements adopted by countries over the years with a more limited focus, with differing organizational structure, power and level of activity, and generally covering only a subset of ECOWAS countries that have a special interest in the issue. Some are purely inter-institutional agreements such as the mutual recognition of standards and certificates (such as educational degrees), or various forms of cooperation among national institutes such as the African Consortium for Economic Research, and some may be purely private, such as the West Africa Enterprise Network. These limited cooperative arrangements can sometimes culminate in full fledged, sector-specific regional institutions, as for example the West African Health Organization which merges a previous Anglophone and a francophone institution (and serves now as the health unit of the ECOW AS Secretariat). 39. Other Jegional institutions have been created to manage a specific, time-bound activity, such as the Onchocerciasis eradication program, or to manage certain activities shared by neighboring countries, such as the Senegal River Valley Authority (OMVS - Organisation pour la Mise en Valeur du Fleuve Senegal) - comprising Mali, Mauritania and Senegal to develop hydroelectric and irrigation potential. Another active institution is the CILSS - Comite inter-Etats de Lutte contre la Secheresse - with a sister organization housed at the OECD in Paris, the Club du Sahel, created in the wake of the severe Sahelian drought in the early 1970s as a way of pooling resources to deal with a problem affecting several countries. The Club du Sahel and its various regional units ha\e also lately strived to redefme themselves in order to play a larger role in the regional integration process. There are also periodic inter-state conferences at a ministerial level to discuss issues and policies of common interest, for example, Confereme of Ministers of agriculture in West and Central Africa. 24 C. In Integration Policies 40. With regards to integration policies, the subregion has also seen important changes at least in relative emphasis if not necessarily in policy content. While still adhering to the long-term goal of African Unity, the post 1993 ECOWAS and the UEMOA have shifted emphasis in favor of more immediate and practical objectives regarding growth, stability and poverty reduction; regarding the creation of "a common market for goods, services and factors" as well as for the convergence of macroeconomic policies and coordination of sector policies. One difference concerns "increased international competitiveness within open markets", which features in the UEMOA treaty but not the pre-1993 ECOWAS treaty. However, throughout the region the objective of openness and integration into the world economy has indeed become the official word. The ECOWAS, and especially the UEMOA, have been following a reasonably well-structured program to ~en cooperation and integration, though concrete actions by countries often lag behind ambitious fonnal multicountry commitments, and many objectives have indefinite horizons. 41. Broadly speaking, the first phase has focused on trade integration. Monetary integration actually preceded this phase in UEMOA but will follow it in ECOWAS, although an important interim step will be to deepen financial sector integration. In parallel, the Region has been pursuing well-defined and phased integration efforts in key sectors where cross-border externalities are significant, notably air transport, energy, and more recently - telecommunication. Within UEMOA especially, integration efforts also cover several transversal issues, including public finances, investment policies and competition. By contrast, in the ECOWAS, attention has focused more on conflict resolution, and on facilitating intra regional trade, transport and labor movement (elimination of visa requirement for intra regional travels, and a common passport project, for citizens of West African States). 42. Goods Markets. Although it is still too early to appreciate their real impacts, key steps have been taken in recent years by both institutions to spur trade integration in the subregion. In particular, UEMOA has completed, as of January 1,2000, the implementation of a Common External Tariff (CET), thus formally establishing a customs union on top of the common monetary zone. At that date, all official barriers among the eight member countries were to be eliminated for goods originating in the Union (as defined as raw materials and handicrafts, plus processed goods meeting rules of origin criteria 31) - although some barriers based on norms and health concerns reportedly still exist. Simultaneously, a four rate common external tariff (eET) became effective, with a statutory structure of 0 % (medicines and books), 5% (largely capital goods and raw materials), 10% (intended to cover intermediate goods but including capital goods), and 20% (in principle limited b finished consumption goods but including many goods from other categories). 31 According to UEMOA "rule of origin", the domestic or subregional content of a given product must exceed"'''' percent of the total value of that product in orner to qualify for the 0 percent tax rate for intra-regional trade. "Domestic content" (misleadingly referred to as "local value-added") means total value net of all imported inputs. ECOWAS has a similar rule, except that the threshold is. 25 43. Specific UEMOA "accompanying measures" in the fonn of surtaxes and other indirect tariff supplements can be applied individually by member countries to imports directly competing with selected "sensitive" domestic activities (mainly manufactures) on a declining basis over 4 years. There still are several national-level statutory or ad hoc duty exemptions on imports, though efforts are being made to inventory and to limit these. On the whole, the degree of nominal protection is on average lower than at the creation ofUEMOA (around 12% vs. 26% in 1996). To facilitate the elimination of internal trade barriers, UEMOA has a functioning compensation scheme for foregone customs receipts on intra-UEMOA trade, financed by a 1 percent levy on imports from outside the zone. Efforts are now underway for hannonization of fiscal and investment policies. 44. At the same time, following a lO-year transitional period, the ECOWAS Free Trade Area officially entered into effect in 2000. But its application remains patchy, in part because the process of licensing products meeting the rules of origin criteria (similar to those of the UEMOA) remains cumbersome and the original fiscal compensation mechanism was poorly designed and under financed. The Nigerian ''fast track" free trade area is meant to correct deficiencies in the ECOWAS program, but initial results after the first year are unspectacular. 45. The other ECOWAS countries have a variety of tariff levels and structures vis-a.-vis the rest of the world, the rates of which (if not the classification of goods into these rates) are being progressively aligned with the UEMOA external tariff. While Ghana now has a tariff structure close to that of the UEMOA (though with a substantially different classification and many more exemptions), Nigeria is lagging in reforming its trade regime and still has higher average and more dispersed tariffs, as well as other restrictions than other countries. In the entire zone, fonnal export taxes have virtually disappeared (except for cocoa where it may be justified in tenns of "optimal" taxation, and on forestry, where it might be justified envirorunentally). However, implicit taxation of some exports through state monopolies persists, particularly in the case of cotton in the UEMOA zone. West African Heads of State have decided to extend the UEMOA CET to all 15 ECOWAS countries and simultaneously dismantle all internal barriers, while adopting common rules of origin and relying on the same system of fiscal compensation for tariff losses on internal trade. Work is proceeding to translate this agreement in principle into action. 46. Infrastructure services markets. Integration of infrastructure services - transport, power, telecommunications - is being considered sector by sector, by one or both of the two regional institutions and, in the case of air transport, within a broader African framework (following the 2000 Yamoussoukro Decision, which calls for the progressive liberalizati:m of air transport services throughout the continent). A number of trans-border power projects, for electricity transmission and natural gas transport, principally at the initiative of the ECOWAS Secretariat, are at the design stage, as are two proposed lmmonization programs for telecommunications, together with a view to establishing a harmonized, if not common, regulatory envirorunent. 47. Financial markets. Current payments as well as capital movements are free within the CF AF zone though not always easy in practice: the BCEAO is currently in the process of modernizing its payments systems. Payments across currency zones via fonnal channels are still extremely difficult and lengthy, reflecting differences in banking systems and practices and extremely weak currency clearing arrangements. The West African Clearing House established years ago by ECOWAS is virtually defunct because governments failed to honor their obligations to provide foreign exchange; these problems will need to be solved if the new 26 West Africa Monetary Institute, established in 2000 to support the second monetary zone, is to succeed. One ad hoc solution was considered to be ECOWAS travelers checks, introduced in 1999, but their usage appears to be very narrow. At the same time, the creation of ECOBANK in the early 1990s with branches across the currency divides, has demonstrated the potential for greater financial integration by the private sector, even within the current poor policy environment. ECOBANK is probably the most efficient institution for money transfers across the sub-region. 48. The region also counts 3 separate stock exchanges (in Abidjan, Accra and Lagos), with no cross-listings and no formal correspondence among operating systems, reflecting poor telecommunications and financial clearing systems as well as the absence of regional policies to bring it about. There are also two important subregional lending institutions, namely the BOAD (UEMOA) and the ECOWAS Fund. The BOAD is a credit-worthy institution that has proven quite capable of raising funds on the local market to support important lending activities. It also administers a Structural Fund set up in 1998 by the UEMOA Commission for financing country-level development activities in the poorest zones and for subregional "integrating" projects. The ECOWAS Funds is also set up to help member countries fmance long-term development projects and to provide guarantees for foreign investment. Both the BOAD and the ECOWAS Fund are searching to become increasingly private-sector oriented with more reliance on commercially generated resources. 49. Labor markets. Migrations within the region have been a feature for centuries, and the regional treaties enshrine the principles of the free movement of persons and right of residence in any of the ECOWAS countries for citizens from other member countries. Until now, only Benin is known to have issued this passport. There are no visa requirements for ECOWAS citizens to travel within the zone. An ECOWAS passport formally exists but has not yet been issued by member countries. And lately, as a means for encouraging tourism, the countries of the former Conseil de I 'Entente have introduced a unique visa requirement system, which would allow foreigners to travel in member countries with only one entry visa. Meanwhile, episodes of xenophobia and recrimination in parts of the region have led to the return, under duress, of large number of immigrant workers at various times in the past most often during periods of economic decline or political unrest, most recently from Cote d'Ivoire, in 2000. This, besides being traumatic for all those concerned, has damaged one of the pillars of a true regional integration and what may be the most effective means of reducing inequalities among countries. 50. Monetary and excha~e rate policy. Different monetary regimes are what separate most visibly the economies of UEMOA and each of the other member countries of ECOWAS. The UEMOA is an extension of pre-existing monetary union, in which a common central bank - the BCEAO-has always been responsible for monetary policy within member countries. Its main objective is to prevent the rate of inflation in the Union from deviating significantly from the rate prevailing in the Euro zone, to protect the fixed peg with the Euro. The primary instrument has been strict limits on government borrowing from the central bank, which are to be phased out entirely by the end of 200 1, although several countries continue to have sizeable overdrafts (and have used contingent liabilities to the parastatal and banking sectors to circumvent the limits in the past). On balance the policy has been successful - inflation is historically in single digits and was around 5.0 % in 2000. However, there is also evidence that this may have contributed to a significant real exchange rate appreciation especially during the 27 1980-93 period, which may have contributed to the sluggish export and real growth 32 performance during that period • The 1994 currency devaluation did correct much of the misalignment for a while. But the substantial depreciation of the currencies of important competitors in the aftermath of the 1997 Asian crisis has significantly gnawed at much of the gain ever since. This is indicative of the difficulties of maintaining a competitive alignment of a pegged currency, especially in the face of considerable terms of trade fluctuations and "competitive devaluation/depreciation" policies pursued by competitors. 51. In contrast, each of the six other member countries of ECOWAS has maintained its own independert monetary system. 33 Historically, one main issue has been the nominal instability of the Ghanaian Cedi and even more so of the Nigerian Naira against the CF A franc as a result of much higher inflation rates. In both Ghana and Nigeria, monetary policy has essentially accommodated expansionist fiscal policies, with the result that inflation has been higher and more variable than in the CFA countries, averaging some 20-30 percent a year. Table 9: West Africa, Indicators of Macroeconomic Convergence Inflation « 3 'Yo) Primary II_I balance I tax revenue ( > 15 percent) 1993 1994 1995 1996 1997 1998 1999 1993 1994 1995 1996 1997 1998 UEMOA 1.1 29 12.5 4.4 4.1 3.9 2.2 UEMOA -10.5 7.6 19.1 26 21.5 20A Ghana .. 24.9 59.5 46.6 27.9 19.3 12.4 Ghana ...... -21 NigeI1a 61.3 76.8 51.6 14.3 10.3 11.9 9.5 Nigeria 162 8 151 151 63 -23 Illflation and GOP growth rate. 1998 Pnmaryfiecal balance (% tax revenue). 1998 Source: World Bank and Authors 32 For more on the extent of real exchange rate misalignment in CFA-Franc countries, see S. Devarajan, 1996, Hadjimichael and Galy, 1997, and L. Hinkle, 1998. In particular, Devarajan estimated that on the eve of the 1994 devaluation, the CFA was overvalued - relative to the "equilibrium real exchange rate" - by as much as 31 percent. . . 33 However, Cape Verde has pegged its currency to the Portuguese Escudo, and thereby to the Euro, and Llbena continues to use the US dollar. 28 52. Convergence of Macroeconomic policies. Both the UEMOA Commission and the ECOW AS Secretariat have set defined macroeconomic management convergence criteria relating principally to fiscal deficits, inflation, central bank financing of government, public debt, foreign reserves, and a number of intermediate secondary targets s~h as the ratio of wages and salaries in the budget and the ratio of public investment notionally financed by national resources. Compared to ECOW AS criteria, the quantitative targets are rather more demanding under the UEMOA Stability Pact, the Commissions mutual surveillance system functions better, and its member countries are closer to achieving sound policy convergence. The imperative of macroeconomic stability (low inflation) is indeed more stringent in the UEMOA because of the institutionally fixed nominal parity of the CF A vis-a-vis the Euro. At the same time. the UEMOA Commission, the ECOWAS Executive Secretariat, and the various central banks are working to increase their cooperation and to align macroeconomic policy convergence criteria. Table 10: UEMOA, Macroeconomic Convergence, 1994-1999 1994 1995 1996 1997 1998 1999 2000 Basic fiscal balance/GDP 1 (>=0%) {In Eercent} Benin -1.0 -0.8 1.4 1.5 3.S 2.9 2.3 Burkina Faso -34.8 8.6 0.6 -0.5 -0.5 -0.7 -1.6 Cote d'Ivoire -4.2 -1.2 O.S 0.2 -0.9 -1.7 -0.2 Guinea Bissau -2.8 -2.8 -5.3 -14.4 -16.3 -9.6 -7.6 Mali -2.8 0.1 2.2 0.6 1.3 0.1 -0.7 Niger -3.4 -3.7 -1.7 -3 -3.2 -5.6 -2.5 Senegal -3.1 -0.1 1.7 2.7 2.6 1.7 1.2 Togo -7.5 -4.3 -2.5 -1 -4.8 -1.5 -3.6 UEMOA -6.6 -0.3 0.6 0.3 -0.2 -0.8 -0.3 Average injkdion «=3%) {In Eercentl Benin 38.5 14.5 4.9 3.8 5.8 0.3 4.2 Burkina Faso 24.7 7.8 6.1 2.3 5.0 -1.1 .0.2 Cote d'Ivoire 26.0 14.3 2.7 4.2 4.5 0.7 2.S Guinea Bissau 15.2 45.1 50.9 49.1 8.0 -2.1 8.4 Mali 24.8 12.4 6.5 .0.7 4.1 -1.2 .0.7 Niger 24.8 11.2 5.3 2.9 4.5 2.9 2.9 Senegal 32.0 8.1 2.8 1.7 2.4 0.8 0.7 Togo 48.5 6.4 2.S 5.5 -1.4 4.5 -2oS UEMOA 28.8 12.0 4.3 3.6 4.0 0.7 1.6 Source: IMF 53. Business Environment. Both treaties purport to put the private sector at the center of the integration process. The regional organizations have launched important initiatives to improve a "business environment" which is still generally viewed as problematic. One is tax harmonization. Indirect taxation harmonization, excluding petroleum products, is nearly 29 complete in the UEMO A with a VAT of 17-18 percent in all countries on most products; excise tax rates are more variable~ but limited to an agreed list of products~ with no discrimination between domestic and imported products (mainly tobacco~ spirits). Nigeria has a flat 5 percent VAT and Ghana has just introduced a VAT with a basic rate of 12.5 percent. But there has been no work program on direct taxes (the corporate income tax is typically high~ in the range of 30-35 percent), or on working out tax sharing armngements when a business spans more than one country. Taxation of financial instruments~ even within UEMOA and its common capital market~ remains variable among countries. Finally, even where tax harmonization may have progressed, it is undercut by the continued prevalence of exonerations under national investment codes and by generally poor and sometimes corrupt tax administration. 54. Differences in the region stem principally from the two legal traditions inherited by the Anglophone, francophone, and lusophone countries respectively. The UEMOA countries have agreed to a set of identical business laws under the treaty obligations of OHADA - (Organisation pour I'Harmonisation du Droit des Affaires) - a progmm for francophone Africa supported by donors, although the new codes have not yet been fully translated into national legislations. Meanwhile, the ECOWAS Secretariat is considering how the OHADA framework might be used to harmonize business law in the other ECOWAS countries. 55. A common investment code has been dmfted by the UEMOA Commission with a view to establishing a secure environment, equally and automatically applicable to all domestic and foreign private businesses throughout the region, with few (and declining) special tax privileges, but there is still a lively debate among member states over the level and form of fiscal incentives and eligible investors. 34 The ECOWAS Secretariat has also started work and consultations on common investment code. The prospects for adoption a simple, regional code fully consistent with customs and tax laws remain uncertain. 56. Draft rules of competition inspired from those in the EU are currently under considemtion by the UEMOA authorities. Some basic issues remain to be sorted out, however, including the extent to which the proposed common rules and institutions would replace all national rules and structures, the applicability of the rules to non-con:petitive actions by governments, and the consistency between the general competition framework and sector-specific regulations. ECOWAS has scarcely begun to address the issue of competition, outside of specific sectors, such as air transport and telecommunications. An outstanding issue, for UEMOA as well as ECOWAS, is the need to promote foreign competition as an indispensable complement and a catalyst for intra-regional competition. As argued before, low external tariff is necessary for foreign import to keep the regional market competitive and prevent it from becoming "captive" to a few large companies. Likewise, promoting foreign competition, including in the service sector, is the sure means for facilitating entry by new competitors, injecting new technology and keeping the subregional market open, dynamic and efficient. 35 57. Commodity Producing Sectors: Agriculture and Industry. While the two main regional organizations have been established on the premise that regional integmtion is inherently and 34 The Bank and the Fund have argued to limit fis cal incentives to accelerated depreciation, which could be administered by the fiscal authorities and would automatically phase out. There remains, however, a preference for specific fiscal exemptions, on customs duties, VAT, and income. 35 In this respect, there still are alarming tendencies, including from within ECOWAS, in favor of arrangements that would limit subregional as well as global competition, for example in coastal shipping. 30 largely a multisectoral activity, requiring strategies that are by nature transversal, reaching across sectors, consistent with the objective of creating a unified economic space, or common market, they both retain a focus on productive sectors as well. Their challenge is to define the public role in promoting regional integration in such sectors. Because most agricultural and industrial production activities are private, strategies to integrate production itself are the initiative and the responsibility of the private sector, not governments or regional organizations. 36 Both UEMOA and ECOWAS are formulating regional integration policies touching on the production of agriCUltural and industrial goods (for example, the lJEMOA Commission has drafted a Common Industrial Policy and a Common Agricultural Policy). Past sectoral policies were the subregional extension of national production planning policies that heavily relied on administrative means rather than on the free market. They consisted in "Common Programs" attempting to allocate production targets and concomitant investment on regional basis. By contrast, the new sectoral approach focuses on cooperative arrangements and exchange of information among countries and regional organizations. They seek rather to strengthen cooperation among national agencies that affect productive activities (e.g., agricultural research, seeds certification, industrial norms and testing). 58. Natural resources: Integrated Water Management. After several years of little activity following the Rio de Janeiro Conference on Environment and Development, West African governments have revived cooperative activities among riparian countries regarding conservation and management of river basins (the Niger and Senegal rivers being by far the most important) and other water resources (notably lake Chad) in the region. They formed the West African Conference on Integrated Water Resources Management (16 countries) in Ouagadougou in March 1998, and a Ministerial Follo'W-up Committee held its first meeting in March 2000 with support from Denmark. In association with CILSS, ECOWAS, UEMOA and several existing river basin organizations, they have formulated a 4-year, $25 million West Africa Water Vision and a Regional Action Plan, covering national integrated water management programs; water resource reconstruction programs in countries damaged by wars; education and awareness campaigns; an institutional structure for monitoring and coordinating; a framework for re-vitalizing collaboration and convergence armng riparian states and river basin bodies ; and the establishment of various water development funds. 59. Poverty reduction and structural funds. Poverty reduction is implicit in the primary objective of raising standards of living in the region, as stated in the treaties. Conscious of the need to go beyond expressions of desire, the political authorities have initiated discussions toward articulating a "regional poverty reduction strategy" building on the national Poverty Reduction Strategy PaRers (PRSPs) that several member countries have prepared or are in the process of preparing. 7 This idea was broached originally at a seminar sponsored by the 36 The challenge can be illustrated by the cotton sector. West Africa produces some 15% of world cotton, and a consolidated West Africa Cotton Basin would be of major interest to international investors. But as production is currently fragmented among several countries each of which has specific national policies regulating cotton production and marketing and generally reserved entirely to monopsonistic parastatals, the private sector cannot effectively take a West African approach - which limits its attractiveness to major investors. 37 This work would obviously build on ongoing work on national PRSPs; in West Africa, the status is as follows: two full PRSPs (Burkina Faso and Mauritania), eight interim PRSPs (Benin, the Gambia, Ghana, Guinea, Guinea. Bissau, Mali, Niger, and Senegal), and ongoing work expected to lead to an interim PRSP in the coming months in Cote d'Ivoire, Nigeria, and Sierra Leone. For the remaining countries (Cape Verde, Liberia, and Togo) work on even an interim PRSP has barely begun. 31 BCEAO in July 2000 and was generally supported at the Bamako workshop of March 2001 (see details in Annex **). At the same time, a cautionary note was voiced by several regional participants regarding the complexity and cost of such a regional initiative in light of the experience gained by individual countries. In particular, an essential ingredient of a PRSP is the active participation of civil society in its formulation. It was noted that this highly desirable feature would have to be adapted to a process involving fifteen countries. The Commission and the Secretariat will cooperate in moving the West Africa PRSP process forward, and for which they are seeking support from the donor community. A key issue, recognized by all, is that of migrant labor, which is important not only for the business environment but for poverty reduction as well, and regional authorities intend to discuss it during 2001. 60. Both institutions recognize that significant inequalities in income among member countries constitute a barrier to deeper integration, and the problem especially manifests itself in the gap between landlocked Sahelian comtries and the relatively better endowed humid coastal regions, although the poverty incidence is high in all countries and the inequalities within countries are more than across countries. Thus, both institutions have established "structural funds" to promote "balanced regional development." The UEMOA fund has been carefully designed and is well-financed (over $30 million as of early 2001, all from a share of the UEMOA community import levy (PCS Preievement Communautaire de Solidarite), although no poverty reduction activities have yet been financed. The ECOWAS Fund has already committed $114 million to poverty reduction activities and strategy formulation. 61. In Summary. Much has been accomplished toward the regional integration of West Africa since 1975 and particularly since the early 1990s. Governments have reaffirmed their political commitments, with the largest country in the region improving its economic management and renewing its leadership. Regional organizations have strengthened both their capacities and their role as the leaders in the movement; a customs union covering a third of the trade within ECOWAS is officially in place and beginning to function; legal and regulatory texts are at various stages of completion with a view to creating a more favorable business environment; several segments of the private sector are taking a more active stance in favor of integration and representatives of civil society now begin to have a "voice" in the debate. 32 Box I: ECOWAS, Economic Community of West Mrican States Background ECOWAS comprises the 15 countries of West ECOWAS Selected Eeonomi.e Indicators Africa: Benin, Burkina Faso, Cape Verde, Gambia, Ghana, Guinea, Guinea Bissau, Cote d'Ivoire, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo. Pecently Mauritania left ECOWAS to Population (mil,) favor its membership in the Arab Maghreb Union Population 9rowth (%) .. (AMU). The ECOWAS treaty was adopted in May GDP (US$ bill 1975, and revised in 1993 to accelerate the pace of GNPpeitcapita(US$j integration in West Africa. It envisaged: the creation GDPOroWth (ll~) of a common market among member countries with Fiscal DeficiflGDP(ll/il) a phased reduction of tariffs and non-tariff barriers Inflation (CPI, %) 9.9 3.6 on products of community origin until their Export Growth (llA.) 3.4 4.5 complete elimination; the establishment of a common external tariff; fiscal and monetary harmonization; the creation of a single monetary zone and close cooperation in all areas of economic activity. Key Institutions The institutions of the ECOWAS comprise: The ECOWASS.~SodaIlnjJica" Conference of Heads of State and Government; the (1afe$ty_.Uilable~t99?) .••.. Community Parliament; the Court of Justice; the ; -"", < ,,1',-,, "<' ':',: :",',:: ' Economic and Social Council; the Council of Ministers; tJ~.pqp~·(%~f~~~POP.)· the Executive Secretariat; the Fund for Co-operation, Li~~1e~) Compensation and Development; the West African 6tos$.~ ~llment~AY)n •..• ·.·····.81 Monetary Agency; the West African Women Association; ·F~eprinlallenmlIment,r... ! ...... 70 and the West African Health Community. :Infant . (per l ..OOI.n~birIhs) " 91 o· . ..'48 • The Executive Secretariat, the key administrative ,~)'i 33 Box 2: UEMOA, west African Economic and Monetary Union Background UEMOA Selected Economie Indieaton UEMOA is an economic and monetary union, formally created in January 1994, but based on the pre-existing West Africa Monetary Union of the CF A franc zone, with eight members (Benin, Burkina-Faso, Cote d'Ivoire, Mali, Niger, Senegal, Togo, and Guinea-Bissau which joined in May 1997). Member Population (mil.) countries share a common central bank - Banque Centrale des Population Growth rAl) 2.S Etats de I'Afrique de 1'000st - BCEAO and a currency GDP(USSbU.) '1,7.2 25.0 28.0 guaranteed at fixed parity to the Euro through an overdraft GNP per capita (USS) 470 389 395 arrangement with the French Treasury coupled with stringent GDP Growth, (010) 0;4'· 4;8 zone-wide fiscal and monetary rules. 3.5 Fiscal DeficitlGDP(%) -6.5 -2.7 -2;6 Inflation (CPt %) 0.5 9.0 2.7 Export Growth (%) -0:4. 6.3 4.7 Key Institutions • Patterned after the European Union, the Commission, located in Ouagadougou, is the executive body. It has a President, the highest Authority, and 8 commissioners representing their respective countries, and with sectoral/functional responsibilities. The commission is financed by a share of the one percent levy on all imports into UEMOA. It is spearheading efforts to establish a customs union, harmonize investment incentives, public financial management procedures, and taxation, and monitor key macroeconomic convergence criteria - including fiscal deficits, inflation, public sector wages, and government arrears. • UEMOA institutions also include a Court of Justice, a General Accounting Office, regional Chamber of Commerce, and, eventually, a Parliament. None of these is fully functioning. A Regional Banking Commission has been operating for several years, a Securities Exchange Commission has been established and the regional Stock Exchange opened in 1998 (in Abidjan). The BOAD (Banque Ouest Africaine de Developpement) is considered as an independent, specialized institution under the UEMOA treaty. 34 II. Conceptual Framework and Guidelines for Accelerating Integration in West Mrica 62. The preceding analysis indicates that despite the failure of past schemes~ and serious obstacles on the way, there may be compelling practical economic reasons for enhanced cooperation and integration in West Africa. There are also palpable signs of a renewed political commitment to subregional integration from governments and private operators alike throughout the subregion. 63. In summary, the case for accelerated subregional integration in West Africa rests basically on four arguments. • First, the imperative to make economies more competitive and capable ofparticipating in globalization. Regional integration can provide economies of scale and increased competition on a larger and open subregional space. This can be achieved by integrating goods markets and factor markets, including traditionally non-trade activities such as infrastructure services (transports~ energy and telecommunications). • Second, the imperative to make policy more "open ", consistent and credible, and thus attractive to investors across the subregion. Regional integration could help achieve this by providing joint commitments acting as lock-in mechanisms and agencies of restraints against unsound and inconsistent policies. This would improve macroeconomic convergence and stability, and strengthen national liberalization programs. • Third, the need to deal more effectively and humanely with labor migration issues. Regional integration would provide the framework for developing an effective supply of a high quality labor force~ and facilitating its movement throughout the subregion. This would assure adequate labor supply in "growth-poles", while also allowing the fruit of growth to be redistributed throughout the subregion, thus helping reduce poverty in the whole of West Africa. • Fourth, the imperative to deal more effectively with "common causes" and cross-border issues. Enhanced regional integration may provide government as well as private operators an important networking device. This would improve capacity to deal more effectively with common issues - shared resources, security, health -, to increase visibility and bargaining power in world forums, for example in negotiations with the EU, WTO as well as multilateral organizations. 64. Clearly, West Africa is not a confederation, but a vast constellation of fragmented and sovereign states. Furthennore, as said before, the subregion does not have a real economic magnet, with sufficient resources, leadership and self-motivation to steer integration forward. And it is a common fact in multicountry work that the risk of frictions and inconsistencies between national programs and subregional activities increases rapidly with the number of participating countries, disparities in conditions~ degree of fragmentation and scope of activities. These factors make West Africa an especially challenging area for multicountry work~ although, as argued earlier, the benefit may be comparably substantial. Therefore, maximizing net gains would require a carefully crafted regional integration strategy, built on some solid theoretical as well as empirical underpinnings. It would also require a clear vision and guidelines, criteria for setting priorities and modalities for developing a productive and 35 mutually supportive web of interactions between national governments and subregional insti tutions. 65. The following subsections address these various issues. Section 2.1 draws a few lessons from the theoretical and the empirical literature in order to strengthen the case for an effective "south-south" integration in the context of West Africa. It also provides a typology of subregional goods; it defmes criteria for differentiating regional from national activities, and it discusses different schemes of cooperation and integration, depending on the issues at hand. 11.1. Rationales for "Deepening" Integration in West Africa: Some Theoretical Insights 66. There has been an abundant literature dealing with the effectiveness of "trade blocs", regional trade arrangements (RTAs) or regional integration agreements (RIAs), especially in the context of globalization. 38 Many advocates of global trade have argued against regional integration because of concerns that countries may use such arrangements to collectively retreat from, rather than embrace globalization. This view is widespread in the traditional trade literature, and many authors are suspicious of any forms of regional integration arrangements, be it among rich countries ("north-north"), poor countries ("south-south") or between north and south. They advocate Most-Favored-Nation (MFN) type of unilateral trade liberalization and "global openness" as means for countries to spur investment and growth, and for the less developed countries to catch-up with the more advanced economies. 67. Increasingly however, there is a rapidly growing body of analytical works that provide valuable insights into how regional integration may in fact help globalization, especially in the case of poor and fragmented economies such as in West Africa. Regional groupings, it is argued, could provide important ''traditional'' as well as ''non-traditional gains", essentially by developing a broad and competitive "practice" and "playing" field for countries to reduce risks and costs, to gain visibility from foreign investors, to attract technology and to more effectively compete in the global economy.39 In that sense, regionalism may constitute an important "stepping-stone" rather than a "stumbling block" toward globalization. 68. This paper espouses the latter view, although not denying the possibility of some degree of trade diversion in the process of market integration. The main argument is that intra-regional trade has remained especially low in West Africa, not necessarily because of tariff barriers, but because of poverty, fragmentation, high infrastructure and trade costs and low degree of economic diversification. In other words, intra-regional trade is just as underdeveloped as the economy itself, and essentially for the same structural reasons. Consequently, unless and until these fundamental structural problems are addressed, trade integration alone would yield little gain. By the same token, the low elasticity of substitution between domestic and foreign goods - such as intermediate and capital goods, the result of low degree of industrialization, implies that trade diversion - should it occur - would also be limited. By contrast, ''deeper'' factor and infrastrncture market integration would significantly contribute to reducing costs, and thus making countries more competitive in the global economy, which in turn nny spur global trade, investment and export-led growth. In the following subsections, we briefly review the 38 For more on this, see the comprehensive study: "Trade Blocs", The World Bank, Policy Research, 2000. 39 See for example Fernandez, Raquel, 1997: "Returns to Regionalism: An evaluation of Nontraditional Gains from Regional Trade Agreements", Policy Research Working Paper, No. 1816. The World Bank. 36 potential gains from accelerated regional integration, from the perspectives of overcoming the fragmentation and the marginalization of West Africa and fastening its integration into the global economy. A. Possible "Traditional Gains" from Accelerated Integration in West Mrica 69. Capturing cross-border externalities. This is a common rationale for structured multicountry cooperation arrangements. As discussed later in Section n.2, a large number of goods and activities in West Africa have the distinguishing features of "regional public goods". This is the case for ''regional commons" that know no national borders such as vector born diseases (e.g. Onchocercosis) and contagious diseases (e.g. HIV/AlDS and Malaria). But beyond those pure forms, they are a substantial number of trans-boundary resources such as river basins, or national goods or "bads" with significant spillover effects such as national conflicts. In essence, many of the above externalities arise as a "scale issue": the smaller and the more fragmented the space, the more likely it is that a good number of otherwise ''national'' goods may generate cross-border externalities and thus become "sooregional goods". 70. Capturing such externalities is a primary reason for enhanced cooperation among countries. As explained later, this may not necessarily require "deep" or "broad" integration arrangements. Enhanced cooperation may suffice, for example in the form of more or less formalized and regular encounters among neighbors for nurturing "good neighborhood" and dealing with cross-border issues (for example labor migration and environment). In certain cases, a more structured policy coordination may be needed, as in the case of infectious diseases; and an "integrated" scheme may be needed in other cases, especially when joint development is needed, such as for a common infrastructure, an authority for managing a river basin or a common defense strategy. But as the number of such "goods" and stakeholders rises, as in the case of small and fragmented states, a more structured and integrated framework may prove more effective than a proliferation of ad-hoc "project-by-project" cooperation arrangements. This could very well apply to the conditions of West Africa. 71. Trade creation or trade diversion Traditional trade theory does not appear to lend much support to accelerated integration in a "south-south" context such as West Africa. This is essentially became of the low level of intra-regional trade and industrial diversification, the high "administrative cost", and hence the low overall return to integration. Orthodox trade theory would suggest a strong possibility of ''trade diversion" rather than "trade creation" in such a context, and thus the possibility of divergence rather than convergence over time among countries. Moreover, divergence in "south-south" arrangements could actually translate into absolute impoverishment - (also known as "fallback'') - for the poorest partners. By contrast, it is argued, "nortirnorth" arrangements such as ED or ''mid-north'' arrangements such as NAFTA would most likely accelerate convergence, thanks to relatively more rapid growth of incomes in the ''peripheral countries" (a jilenomenon known as "catching-up", such as Spain, Portugal and Ireland have lately experienced in ED). 72. However, these propositions need further scrutiny, especially within the context of the more open form of regionalism. First, some degree of trade diversbn may occur, but 37 essentially in the case of old import-substitution-based trade arrangements,40 where countries typically raise external tariff level as a means to shield local industries from external competition. As a matter of fact, many empirical works that appear to lend support to the "divergence hypothesis" were essentially based on a static "gravity model" approach applied to old arrangements, most of which date back to the colonial years or, in the specific case of West Africa, to pre-1993 period. This is for example the case for the widely studies East and West Pakistan experience of 1947-70, which led East Pakistan to break free from West Pakistan and to become Bangladesh (Islam, 1981). 73. Another extensively quoted case is the old "East African Community" among Kenya, Uganda and Tanzania (1967-77), which collapsed in 1977, because of increased divergence in favor of Kenyan industries and related disputes over transfers and compensations (Venables 1999). The case studies of the pre-1993 ECOWAS and the CEAO based on the gravity models (Foroutan 1993) also suffer from similar important shortcomings; the key fact is that such arrangements had not been seriously implemented by member countries, and therefore could not in any significant way account for trade creation or diversion during the period covered by the investigations. 74. Second, a large body of analytical work using an alternative methodology (fhe computable general equilibrium - CGE modeling approach) has tended to yield consistently different results from the previous econometrics approach. One important reason for the difference is that the "CGB-modeling approach" provides a more flexible and effective framework for simulating dynamic gains from trade and integration (economies of scale, learning by doing, FDI and the acquisition of new technology, etc.) than the mostly static "econometric approach" based on the gravity model. Almost invariably, studies based on the "modeling" approach have concluded that RIAs, especially combined with lower external tariffs, tend to enhance welfare, the extent of the gain depending on initial conditions, potentials for economies of scale, as well 41 as the value of key parameters such as trade elasticities ofsubstitution • 75. Third, and precisely because of inadeqmte intra-regional production capacity for essential imports such as machinery and intermediary inputs, and hence a relatively low elasticity of substitution between import and domestic production, trade diversion - should it occur at all may not be that substantial after all in a "south-south" arrangements. Fourth, to the extent that they may accelerate the pace of global tariff reduction relative to the coun1ry-by-country approach, and thus reduce the risk of trade diversion, RIAs would prove welfare enhancing overall. For example, it could be argued that UEMOA may have accelerated the pace of overall external tariff reduction for member countries relative to what individual countries would have accomplished otherwise. And this may also have played a role in accelerating the pace of tariff 40 It has been a long held view in trade and integration theory (J. Viner, 1950) that the move to free trade between partners who maintain high tariffs vis -a-vis the rest of the world may result in trade diversion and welfare loss for the subregion. And, when concluded between geographic neighbors that are typically engaged in sizable volume of trade, Regional Trade Arrangements - RTAs, would often result not so much in welfare losses from trade diversion but rather in substantial tariff revenue losses, with important distributional consequences (Krugman, 1991). 41 See "Trade Blocs.", p. 50 for a concise discussion of this. Also see the original work by Rutherford et al (1999). Although most of these works have centered around "south-north" arrangements (between ED and northern African countries), the basic arguments relative to scales and elasticity of substitution hold even in the context of "south-south" agreements, especially when external tariffs are lower as a results ofRIAs. 38 reduction, at least in Ghana, since trade refonn has still been proceeding at a snail pace in Nigeria. 42 76. There are two important lessons from the above discussions. 2!!£. is that the evidence in support of the ''trade diversion" and the "divergence" hypothesis may not stand up to scrutiny on its own in the current context of West Africa. Further analytical works would be required in order to investigate the welfare impact of the newer and more open brand of regionalism. Such analytical work may be essentially "counterfactual" and based on dynamic CGE-modeling techniques rather than on the traditional gravity approach. This is because RIAs such as UEMOA, post-1993 ECOWAS as well as SADC and COMESA have been "seriously" implemented by member countries only since a recent date. Therefore, because of lack 'of sufficient data points for the post-arrangement period, the econometric analysis is likely to give only ambiguous and very questionable results. 77. The second lesson is that, as discussed in the next section, the dynamic gains related to scale, cost reduction and productivity growth from regional integration are probably much larger than the static gains/losses from trade in the context of the low- income and highly fragmented economies of West Africa. This also suggests that, although much emphasis has been placed on trade integration in the subregion in the agenda of the two RIAs, it is most likely that much of the immediate gains from regional integration may not be coming from expanded trade of goods after all, but rather reduced cost, enhanced competitiveness and expanded production for export; that is "trade creation", but most likely through global export. This causal chain from integration to cost reduction, export and growth would also call for a dynamic rather than a static modeling approach. We now turns to the analysis of those "dynamic gains" from integration. 78. Increased returns to scale and enhanced competition. This may be the most significant gain from accelerated integration to the subregion. As often argued in the literature, in fragmented, and hence tiny markets, there may be a trade-off between scale and competition. The smaller markets tend to breed monopolies partly as means for capturing externalities, especially economies of scale. This has precisely been the argument behind "natural monopolies" in such areas as fixed line telecommunication system and other infrastructure services, although it has also been evoked to justify non-competitive structures in many iIKlustries and services, especially in poor countries. The extent to which "smallness" breeds "monopolies" depends on the state of the technology as well as on policies that determines the degree of "openness" and competitiveness of the environment, including fonnal and infonnal barriers to entry for new operators. 79. By unifying and enlarging markets, regional integration arrangements may remove this ''trade-off' and create conditions where scale and competition are mutually reinforcing. On the larger and liberalized playing field, finns may deploy optimal capacity - technology and size, make economies of scale, and thus improve productive efficiency. At the same time, the 42 There is no consensus in the literature as to whether or not RIAs tend to increase tariff or accelerate the pace of tariff reduction. The evidence suggests that for old "closed" models, RIAS indeed tend to raise tariff whereas the newer and more open form of regionalism tends to provide a joint-commitment mechanism for accelerating the pace of reforms and tariff reduction. This seems to have been the case for UEMOA countries. In the absence of the CET arrangements, it is most likely that the speed and the depth of tariff reduction and trade policy reform by individual countries would have been far less, as exemplified by Guinea and Nigeria. 39 greater competition will also induce fIrms to continuously adapt technology and capacity, to adopt an optimal location strategy within the subregion, to reduce internal inefficiencies and to undertake aggressive commercial policies - cutting prices and expanding sales and support services. Hence, the overall result of expanded scale and enhanced competition would be more adequate capacities, quality output and services, lower costs and enhanced competitiveness of the entire subregional space. 80. Undoubtedly, the "scale and competition" argument is the most compelling in the context of West Africa. Expanding markets would allow fInns in various sectors to deploy efficient technology and to reduce costs. Meanwhile, increased competition would lead to the rationalization of production systems and the removal of old and inefficient plants. An essential condition for these gains to be maximized is that the subregional space remains open to external trade and friendly to foreign investment. Keeping external tariffs low while integrating the subregional market would increase competition from global import, discourage UtariJ!-jumping" and "neo-colonial" foreign investments and facilitate injection of new technologies. By contrast, failure to keep tariff low would make the subregional market "captive" to a few countries that may have a head start because of natural conditions or colonial legacy. Those countries would then dominate the market with products with low quality but high cost relative to external supply, which would entail a net loss in welfare for consumers within the subregion. This "protectionist" attitude is reflected in Cote d'Ivoire and Senegal's efforts to distort product classifIcation in favor of high tariffs for goods which they supply. Clearly, such attitude from the two leading countries not only runs counter to the spirit of integration, rut more importantly, it limits the scope for dynamic gains from scale and competition for the subregion as a whole. 81. "Trade creation" in the area of infrastructure services. The "scale and competition" argument is even more pertinent for infrastructure services, a sector that has traditionally been "non-traded", although cross-border exchanges have happened occasionally, especially in energy. Much has been said earlier about the high cost of doing business in the subregion, part of it due to defIcient and costly infrastructure services. Natural conditions, such as being landlocked may have contributed to this. But, as noted before, policies and market size are as important in accounting for high infrastructure service costs in the subregion. For example, with modem technology, "landlockedness" cannot explain the high cost of telecommunications in many countries of the subregion. Nor could it fully explain the high cost of air transport services. As a case in point, Mali shares about the same natural conditions as Burkina Faso. Yet, even adjusted for differences in fIscal policies, energy, transport and telecommunication costs are much higher in Burkina Faso than in Mali. The experience of Senegal and Cote d'Ivoire also indicate that signifIcant improvements :in supply, quality and cost in infrastructure services can be achieved through market refonns, including privatization and liberalization. This is especially true in telecommunication, where recent wireless technology has considerably shattered the rationaE for ''natural monopolies". 40 Box 3: Competition as a Driving Force in Telecommunications New technology has put an end to the telecommunications natural monopoly era In the conventional wired network (based on buried copper wire), the marginal cost of each new subscriber declined as the number of subscriber increased. As a result, the best way to manage this natural monopoly was to set up a local monopoly company with regulated prices. With the advent of new wireless technology, size no longer beings any cost advantage. This has deep implications in term of market structure. The best way to deliver service shifts drastically from a single utility to a world of competing providers of telecommunications. Hence, structural reforms should aim at providing as much potential for competition as possible. The end of the "scale effect" coupled with the sharp fall in costs l (Cf. figure below) have relevant implications for African countries since it implies that there is room for competition in countries with very low per capita incomes and/or very low population densities. Ji'igqre : Buried C ArnsII.Mno 0001 (US$) 1200 1000 600 1 1 0~----__--~----~---- ~ ------=~-----__----~--__4 0.1 0.8 1 10 100 1000 _O(1iloo per_'*"'-! (IQg_) How to best enhance competition in the telecommunications regional market? A fully liberalized telecommunications market within ECOWAS. The best way to enhance competition in the telecommunication in West Africa is to create a regional market. A first step would be for countries to harmonize regulatory frameworks. Then, market should be opened to new entry early in reform. Fostering competition means action on several fronts (i) Rules ofestablishment should be standardized so that when an operator gets the right to establish in one member state, it should be allowed to operate in the entire sub-region. (ii) Rules for interconnection: True competition implies that new operators should be able to reach and be reached by customers of the existing operator and to use parts of existing networks under reasonable technical and price terms rather than building complete new facilities. The principles for interconnection obligation should be clearly defined. (iii) Clear rules and processes should apply to the regulatory jUnction. For example process and timetable for a regulatory decision should be well established for managing conflicting demands on the radio spectnun, and resolving interconnection. (iv) Enhance credibility and stability of reforms: Operators and investors will be attracted if they believe that policies, rules and procedures will survive political changes. Undertaking international commitments or tying oneself to a regional regulatory capacity which adopt open regulatory processes help act as an agency of restraint and comfort countries credibility I • 41 Box 4: An Assessment of Competition in Telecoms among Developing Countries Introducing competition in the telecommunications market results in the provision of more, better, new and less costly services to consumers. A recent study showed that among developing COtmtries with private sector participation in telecommtmications, competitive market structures are slowly emerging. This is particularly true for mobile service. Competition in the mobile sector directly pushes down the price of cellular services tariffs but also indirectly induces the incumbent fixed-line operators to lower prices, introduces new services and increases productivity. Number of Private sedor Level of Competition Impact of countries with participation Competition Mobile Services 94 28 : 3 to 6 operators Push down tariffs 38 : duopoly market Expand networks Long Distance 42 12 : some competition mnging from Significant tariff • Unrestricted entry: Mexico, Chile cuts • Managed Competition: Malaysia, Rep of Korea Duopoly: Brazil, Ghana Local Services 55 15: some competition mnging from • Free entry: Mexico, Chile ... • Controlled competition : Malaysia, Sri Lanka Tmnsitional duopolies: Brazil, Ghana, India In Sub-Saharan Africa, private participation is still small but reflects significant advances in opening the mobile market - and in some countries the entire sector to the private sector. In Ghana, for example, as the Ghana Telecom was successfully privatized, a license was awarded for a second full-service national operator and three other cellular companies were in place. In Cote d'Ivoire, the telecommunications sector is divided into three regimes according to the degree of competition permitted, (i) monopoly networks and services (concession for Cote d'Ivoire Telecom with a period of exclusivity of seven years), (ii) a regime of regulated competition for mobile, providers (Comstar (95), Telecel (95) and Ivoiris (96) and public payphone operators (Publicorn, Camitel and Sogequip) and (iii) a regime of open competition for internet service providers. Several Sub-Saharan African countries (Madagascar, Tanzania, Botswana, Uganda ...) have also introduced a second GSM operator. 82. But although non-negligible compared to pre-reform conditions, the gains from national market liberalization are obviously bound by the small size of the market. Adding a regional dimension, which would expand scale and competition, would maximize those gains and bring needed depth to the market. In other words, integrating infrastructure services in a unified and competitive subregional market - would significantly increase capacity, reduce cost and improve quality, thanks to economies of scale and enhanced competition. The outcomes would be cost reduction and gains in global competitiveness, but also a significant "trade creation" in services, the result of intensified intra-regional exchange as well as international ''trade'' as in the case of telecommunication services. 83. Trade creation through export-led growth. Much of the argument on ''trade creation/trade diversion" and "convergence/divergence" has centered around the possibilities 42 of substitution between global import and local production for subregional export. But the gains from regional integration may be more substantial from the dynamic chain linking integration and growth through scale and competition, cost reduction, production and global export. By lowering production costs - including labor, capital, infrastructure services, etc. - thanks to improved scale and competition, RIAs may also enable companies to become more competitive on the global market. This would lead to expansion in high value-added production activities, and increase in export to the world market. More importantly, by facilitating labor migration toward "high-growth" poles within the subregion, RIAs would provide adequate labor supply, thus help reduce unit labor cost and spur growth. By the same token, the freer labor and capital movements would allow the fruits of growth to spread across borders, thus contributing to poverty reduction in the subregion. 84. Fostering Foreign Investment. Regional blocks may be an effective means for enhancing credibility and visibility, and thus attracting foreign direct investment (FDI) both from within and outside the area. This could be the result of (i) market enlargement (particularly for "lumpy" investment that might only be viable beyond a certain size), and (ii) rationalization of production facilities. Enlarging and liberalizing the West African market will certainly increase visibility and foster foreign direct investment. As an illustration of this, there is an important foreign investment project in cotton ginning in Cote d'Ivoire, as some investors appear to be positioning themselves for an opening of the West Africa market in seed cotton. Here again, it appears that national monopolies - which have become illegal under UEMOA charter - have so far successfully lobbied to block the project. 85. The important point is that integration could lead to productivity-enhancing foreign investment only if the overall external tariff remains low enough to discourage low productivity "tariff-jumping" investment. Likewise, other barriers to foreign competition must be removed in order to avoid providing unfair advantages to old neocolonial structures which undoubtedly have a head-start over other international competitors. For example international bidding practices, especially with regard to privatization of states enterprises or for large multicountry investment projects will have to become more transparent and competitive worldwide in order to facilitate entry by new operators and avoid that the larger and more lucrative subregional market become captive to a few well-entrenched and well-connected companies. This issue is addressed later in the discussion of subregional competition policy. B. Non traditional "Gains" from Accelerated Integration in West Africa. 86. The new literature on integration lends even stronger support to "deeper" integration in West Africa, in addition to the "scale and competition" argument discussed above. As in the previous case, most of the non-traditional gains have to do with lower trade and transaction costs, which in turn increases global competitiveness and spurs quality growth. The literature identifies several such "non-traditional gains" which would especially apply to the conditions of West Africa. 87. "Lock-in" to domestic reforms and signaling consistency in policy course. Undeniably, countries of the subregion have suffered from an important "credibility gap". This is because of lack of consistency in reform policy, too frequent policy reversals and/or lukewarm 43 implementation of agreed programs. For example, Nigeria has reversed exchange rate policies half a dozen times between 1986 and 1994 (Moser et aI, IMF, 1997). Although most countries of francophone West-Africa have embraced national reform policies during the early 1980s, it took nearly 14 years before they could agree to adjust nominal exchange rates (1994) despite ample evidence of severe real exchange rate appreciation and loss of competitiveness and contraction of output in the face of terms-of: trade shocks. Likewise, privatizationlliberalization programs were adopted during the early 1980s in countries such as Cote d'Ivoire, Ghana and Nigeria. Yet they were forcefully implemented in Cote d'Ivoire only after the 1994 period; and until a recent date, Ghana still has not completed liberalization of the key cocoa sector, and Nigeria has yet to seriously get its program on track.. 88. Inconsistency and policy reversals are partly a reflection of problems of governance and political instability, and also the manifestation of unsustainable policies or insufficient flexibility, esPecially in the face of frequent shocks due to natural hazards as well as terms of trade fluctuations. Whatever the case, countries' national reform programs would lack effectiveness if private operators don't "buy" into the stated policies and don't believe in its sustainability. Entering a regional arrangement could then serve as a means for governments to show commitment to "pro-growth" and "open-door" policies.43 This in turn could favorably alter private operators' expectations and win over foreign investors as well as the goodwill of the donor community. 89. Obviously, such arrangements would work best as a commitment mechanism for trade policy, because of built-in reciprocity. But they can also serve to lock countries into broader economic and political reforms, provided that those policy goals and rules are clearly stipulated within the agreement, and that, especially during times of difficulties, the incentives are favorable for countries to stay in rather than exit from the arrangement. For example, countries may choose membership in regional blocks as a means for signaling inclination (liberal versus protectionist, a good example being APEC), or reassuring investors of a commitment to a policy course, including macroeconomic stability. One such "credibility enhancing" device is the adoption of various forms of fixed peg exchange rate regimes, such as the Euro-based CFA-francs monetary zone, or the currency-board arrangements -CBAs - of Hong-Kong, Singapore, Djibouti, Malaysia, and until recently, Argentina.44 The critical issue in these various "lock-in" arrangements is the trade-off between "credibility" and "flexibility", both of which are essential for maintaining competitiveness in a rapidly changing world, especially for small and less developed countries. 90. Lock in and signaling commitment are important arguments in favor of accelerated integration in West Africa. Regional integration may be an important tool for countries to signal joint commitment to a reform agenda, such as in market liberalization and 43 The literature identifies two necessary conditions for RT A to serve as a commitment mechanism. One is that the benefit of continued membership is greater than the immediate gains of exit and the value of policy reversal. The other is that the punishment threat remains credible. 44 Currency Board Arrangements (CBAs) have undergone a revival during the past decade. CBAs have been introduced in Argentina, Estonia and Lithuania, and other countries such as Bosnia and Herzegovina and Bulgaria are in the process of establishing their own. For more on this, see the IMF Occasional Paper No 151. August 1997. 44 macroeconomic stabilization However, the low level of trade and of cross-border investment in West Africa also implies relatively low penalty for exit or policy reversal. Consequently, the effectiveness of RIA as lock-in device may be limited, unless such arrangements are directly or indirectly "secured" by an external power, such as in the case of the CFA- zone. 91. One area where lock-in may be most useful to the subregion is in the political domain. Much has already been said about the high cost of national conflicts, the results of lack of democracy, poor governance as well as the fact that many "nation-states" in the area are still at an "infant" stage. In light of this, building a commitment to democracy, political and economic "openness" into existing RIAs such as ECOW AS and UEMOA may be one important way to encourage and to consolidate the democratic process throughout the region. The EU, NAFTA and MERCOSUR are well-known examples where an explicit "commitment to democracy" and to the pursuit of "political convergence" have been explicit components of the integration charter. 92. Insurance. Regional arrangements could also be seen as providing insurance to member countries against future hazards (macroeconomic instability, terms of trade shocks, trade war, resurgence of protectionism in developed countries, etc.). A case in point is when countries face asymmetric terms-of-trade shocks. For example in the advent of a positive pree development for oil, Nigeria could use part of the "windfall" to help the other countries of ECOWAS bear the cost of such shock. The prevalent fact however, is that many countries of the subregion produce the same main export commodities, such as cocoa (Cote d'Ivoire and Ghana), cotton (Mali, Burkina Faso, etc.), gold (Mali, Burkina Faso, Ghana), or commodities the prices of which tend to be highly and positively correlated. In this situation, countries of the subregion could benefit from a more effective sectoral policy coordination. This could take the form of an "entente" to regulate supply and increase market power as for example in the case 45 of cocoa for Cote d'Ivoire and Ghana • It could also involve harmonizing prices so as to prevent cross-border smuggling, as this has often happened between Cote d'Ivoire and Ghana (cocoa), and Mali and its neighbors (gold). But the fact is that production cost may be different among countries (as in the case of gold), and exchange rate movements significant - as between the Cedi and the CFA-Francs, which would compound the difficulties of subregional sectoral policy harmonization. 93. Coordination and bargaining power. Within Regional arrangements, coordination may be easier than through multilateral agreements. This is because negotiation rules accustom countries to a give-and-take approach, which makes tradeoffs between different policy areas possible. As a result, countries could gain more visibility and collective bargaining power in multilateral negotiations (e.g. WTO). The collective bargaining power argument is especially relevant for the poor and fractioned countries of West Africa. It may help countries to develop a common position, and to bargain as one bloc vis-a-vis external partners and other trading blocs, rather than on a country by country basis. 45 Theory suggests that for a country that has the lion share of world market for a particular commodity, policies such as export taxes for regulating supply and demand may be welfare enhancing. In the same spirit, a strategy of "collusion" by key suppliers such as Cote d'Ivoire and Ghana for cocoa - may prove in their best interest in the long run. This is the rationale advanced by Stiglitz in support of closer cooperation between those two countries for the cocoa sector. 45 94. Security. Entering regional arrangements may also be a means for increasing intra-regional trade and investment and linking countries in a web of positive interactions and interdependency. This is likely to build trust, raise the opportunity cost of war, and hence 46 reduce the risk of conflicts among member countries • However, tension may also occur should regional integration lead to increased divergence rather than convergence by encouraging concentration of ildustry in a few countries. On the other hand, by developing a culture of cooperation and mechanisms for countries to address issues of common interest, regional arrangements may actually build trust and significantly improve intra-regional security, thus lowering the risk of conflicts. Cooperation may even extend to "common defense" or mutual military assistance, hence increasing global security. 95. The security argument may well apply to West Africa. One important achievement of ECOWAS has precisely been its intervention in war-tom Liberia and Sierra-Leone (the Nigeria/Ghana led ECOMOG intervention unit). Undoubtedly, this has helped bring some form of order, at least in Liberia. But the fact that many regimes in West Africa have remained undemocratic over the past decades, and the deep rooted mistrust of military dictatorships by the people as well as among countries reduces the effectiveness of regional arrangements as a security umbrella. II.2. Characterizing Subregional Goods and Activities. 96. Broadly fPeaking, regional activities are "collective" - multicountry - actions that seek to enhance the supply of subregional public goods (SPGs). There are two important distinguishing features of such goods: (i) benefits/costs inevitably spill over, wholly or partly, across two or more countries of the subregion; and (ii) precisely because of that and the inherent difficulties in using market mechanisms to efficiently price and "allocate" those benefits, subregional supply will typically be inadequate, with too little of the "goods" and too much ofthe "bads". For example, too little of basic research on tropical agriculture, or tropical diseases. Hence, the need for a concerted "multicountry" policies and actions (''subregional public policies ") - which would typically require the joint-commitment and the involvement of several countries of the subregion, directly or by delegation to a common authority. 97. In essence, "subregional public policies" are the multicountry analogs of textbook (national) 'Public policies" that seek to correct market failures, including non-existence and incompleteness. In that sense, it is helpful to think of most regional activities as concerted efforts to develop and expand "markets" across national borders, and to make the subregion ratlEr than individual countries the "relevant" unit for policy and welfare concerns. This is certainly the case for market integration activities, which constitute the pillar of the regional agenda in West Africa. 46 Polachek (1992,96) found that a doubling of trade between two countries lowers the risk of conflict between them by around 17%. However, this may not hold in the case of Africa because most of the conflicts there are ethnic based and intra national although with significant spill over. 46 - Box 5: National and Global Public Goods. The end of the Cold War raised hopes for a lasting peace and a peace dividend; instead, civil strife, conflicts, and even genocide have again scarred the landscape. Meanwhile, poverty and the continuing rise in global inequity, place a continued strain on the global social fabric. Crises are costly. They cause human suffering, strain the environment and are extremely inefficient - a waste of investments and a drain on future resources for development. These facts are well known, they have engendered a growing literature on how to ensure more sustainable growth and human development. To understand better the roots of global crisis, whether loud (financial crashes) or silent (poverty), one may look at today's policy challenges through the lens of Global Public Goods (GPG). First, what is a Public Good? It is well established that, except for cases of "market failure", the market place is the most efficient way of producing private goods. But the market relies on a set of goods that it cannot itself provide, such as property rights, predictability, safety, nomenclature, and so on. In addition, people need certain ''public'' services, whether or not they engage in market transactions - peace, law and order are cases in point. Such goods/services are known as "public goods". Public goods are recognized as having benefits that cannot easily be confmed to a single "buyer", and "start-up" cost that is typically too high for a single "buyer" to bear, while the marginal cost of accommodating an extra ''user'' is negligible.. Consequently, for individual actors, the most rational strategy is to let other provide the good, and then to enjoy it free of charge, the so-called "ftee rider problem". As a result, and in the absence of a "collective action", such goods tend to be undersupplied (01 the "bads" oversupplied). In technical economic terms, public goods are characterized by the existence of large externalities in two ways. The first is "nonrivalry in consumption", meaning that the benefit of the good can be enjoyed by more than one person simultaneously and that the cost of accommodating additional consumers is zero. The second is "nonexcludability", meaning that none can be barred from consuming the good, i.e. a person can enjoy the benefits of a good whether or not there has been payment for its use. Defense, clean environment, some public health services, weather forecasting, etc. are examples of what is known as "pure public goods". Beyond the "pure forms", there are also many cases where consumption is rival and exclusion is possible, but where some of the benefit or costs accrue to or are born by other individuals or society as a whole. Such goods, with large externalities in production or consumption are referred to as "coUective or mixed goods". They include education, vaccination, waste disposal, public transportation, etc. In those cases, private benefits or costs will typically differ from social benefits or costs, which makes the private market pricing mechanism inefficient and requires government intervention in provision, production and/or regulation. A similar case of inefficiency of the market pricing system arises when there are economies ofscale, meaning continuously decreasing average cost of production. This implies that (i) the larger the scale of activity, the more cost-effective for society as a whole (hence the emergence of "natural monopoly"), the marginal cost is below 1he average cost, and (iii) thus a free market pricing (at marginal cost) would entail losses to producer, and thus inefficiency. Another case is that of social insurance where problems of moral hazard and adverse selection engender market imperfections, requiring again government intervention. With globalization, there has been a significant rise in "Global Public Goods", as many of the externalities are now born by people in other countries, and also that many issues although affecting the fate of each mtion _ are now beyond the grasp of a single nation (such as world peace, conflicts, global warming, financial stability, infectious diseases, etc.). What makes them "global" as opposed to "national" is that benefits "spillover" across national borders, generations and population groups. The main difficulty in efficiently supplying GPG arises from the fact that, while externalities have become more and more global in reach, the nation-state has remained the main decision and policy-making agent. ~: (1). IngeKaul, Isabelle Grunberg, Marc Stem (eds). Global Public Goods. Oxford, 1999. (2). Ke-¥oungChu and Richard Hemming (eds). Public Expenditure Handbook. IMF, 1991. (3) Ravi Kanbur, Todd Sandler and Kevin Morrison. The future or Development Assistan::e: Common Pools and International Public Goods. Overseas development Council, Policy Essay No 25. John Hopkins, 1999. 47 98. Compared to "Global Public Goods" (GPGs) or International Public Goods (IPGs) (see Box 5), Slbregional public goods (SPGs) could be regarded as "impure" forms where, to various degrees, the subregion - rather than the entire world - is the area where benefits and costs are especially concentrated. Sticking with the analogy of national public goods and related public policy, it may be useful to group subregional goods into four principal and broad classes, as often done in classical textbooks: (i) the "pure subregional public goods ", (ii) the national goods/activities with cross-border externalities, (iii) the cases of "increasing return to scale ", and (iv) those evolving around credibility, risk and uncertainty4 . 99. Pure subregional "commons". This class includes truly common goodslbads that have the distinct characteristics of "pure public goods", that is where consumption cannot easily be confmed to a single country.48 Examples of this include mostly "public bads" such as vector born diseases (as Onchocerciasis) and other infectious diseases such as Malaria. Wherever they may "originate" from, these goodslbads know no national boundaries, so that containment effort from one country may be ineffective if others don't join. Communicable diseases that are transmitted through human conduct (such as mY/AIDS) may also fall in this class of "commons"; but only to a degree because, baring cases of "accidents", an individual can still decide to "exclude" himlherself from "exposure" by avoiding well-established high-risk conduct. Likewise, countries can also reduce the incidence of such diseases by unilaterally adopting appropriate public health policies, although a coordinated multicountry approach would certainly make national policies more effective. 100. National goods with cross-border externalities: These goods are essentially country based but with benefits or costs that do spillover to other countries. In the absence of a cooperative scheme, a particular country may not reap the full benefit or bear the full cost of production, and thus would not factor such benefit or cost in supply decision. Consequently, supply would typically be sub-optimal, with again, too few of the "goods" and too much of the ''bads''. Examples of this second class include water resources, environmental degradation (due for example to the construction of a dam), desertification in the sahelian zone (due in part to deforestation in the coastal areas), and national conflicts that are the result of actions by specific groups within countries, but with consequences that transcend borders. Highly specialized education, basic research and development applied to sub-regional issues (desertification, deforestation, tropical agriculture, tropical diseases, etc) are another type of this class of goods. But because possible "external benefits" would not be fathomed into 41 In traditional public sector economics, these are the main cases of market failure, which provides the rationale for government intervention and collective actions. The complete list includes: (i) Public goods, (ii) externalities, (iii) Increasing return to scale, (iv) risk and uncertainty, (v) and income distribution/poverty. See for example R. Boadway (1979) andJ. Stiglitz (1989). 48 In technical terms, pure public goods are characterized by "non-rivalness" in consumption and "non excludability". ''Non-rivalness'' means that consumption by one individual country does not affect availability to others (unless there is "congestion", a case of "impure public good"); and "non-excludability" means that it is nearly impossible or very costly - to exclude anyone from "consumption". Note that even if exclusion were feasible, it would still be socially inefficient because of "non-rivalness": Extending benefit to an additional consumer enhances his/her welfare without adversely impacting on others', and would thus always constitute a "Pareto improvement". As a consequence, for an individual actor or country, it is often the best and most rational strategy to let others bear the cost of providing the good, and then enjoy it, free of charge. A familiar case of "free- riding." 48 country's decision, capacity would be sub-optimal for the subregion as a whole. Moreover, for the "producer" country itself, the small size of the national market is inadequate to support an optimal scale of activity, which means added cost to the country and potential for economies of scale through multicountry cooperation. Because of the scale argument, the last few cases (highly specialized education and R&D), could as well be classified in the next group of activities. 101. Goods/services with increasing return to scale. These are essentially national goods/services, but where small market size due to poverty and fragmentation reduces the scope for competition and economies of scale, thus hindering efficient supply. By implication, and provided it is also open, the larger subregional market would increase scale as well as competition, and hence reduce cost and enhance supply. Many goods/services in this class have been traditionally supplied by "natural monopolies", and they have known little or no subregional trade in the past. However, with current technology and national market liberalization, sub-regional trade has become possible and market integration is therefore likely to boost efficiency and overall supply. 102. Infrastructure services fall into this class of subregional goods/services; so do financial services. In most cases - such as in air-transport and fmancial markets, competition and scale mutually reinforce one another. Those services would typically be supplied by multinational corporations, and most effectively on a larger sub-regional market, which enhances competition while also allowing finns to operate with efficient scale and technology. Another case is where competition is the overridingfactor and market size mostly a means for fostering competition. This is the case for telecommunication and at least for the low to medium skill labor market. The opposite case is when scale is the predominant factor, such as in power pooling. The broader the space and the more complementary the sources (ex: hydro and thennal), the more reliable and cost-effective supply. 103. Credibility-enhancing activities: These are activities that are essential for enhancing credibility, reducing country risks and increasing countries ability to benefit from global public and private goods, including foreign investment and foreign aid. A more intangible but equally important benefit is increased bargaining power and ability to strike favorable deals in world affairs. Common macroeconomic policies (monetary, fiscal), open trade and investment policies, good governance, private-sector-friendly regulatory and legal refonns are example of this class of activities. 104. Typically, countries would embark on such activities individually; but consistency and credibility are essential for maximum effectiveness. For examples, tiny African countries such as Mauritius and Tunisia have been quite effective in developing a "positive image" worldwide. Consequently, they have more readily benefited from "external goodwill" and attracted external private and public resources at favorable conditions. But many other countries of the subcontinent still suffer from an important "credibility gap" because of their past behavior. In this instance, "pooling", "lock-ins" and ')oint-commitmenf' may be credibility enhancing activities that can help reduce country risks. 49 105. In this instance, the core issue is not so much about size or scale. but about "credibility" and "predictability" of countries. and risks from the perspectives of private operators and foreign investors. For example, relative to Benin. Nigeria obviously has size, but much less "credibility" and "predictability". As discussed earlier, lock-ins can take many forms. from simple multilateral arrangements (as in individual countries' membership to WTO or participation to IMF-stabilization program) to 'Joint-commitment", including ''bloc commitment" backed by various types of "external anchor/mentor" (as in flXed peg exchange rate policy, or "North-South" partnership arrangements such as EU with fonner ACP countries, etc.). 50 Table 11: Depth of Regional Inteeratlon TYPES OF GAIN! SUBSTANCE AREAS DEPTH OF INTEGRATION ... COOPERATlON HARMONIZATION INTEGRATION (Common ProjMts) (Common RulM, SWldanla) (Common Mama, GOVERNANCE Spill over Conflicts Medlanisms for CQI1fllct Common Defense Of NA TO-style prevention, management integrated military force under a unified and and resolution command Externalities NAlURAL RESSOURCES WeIIM joint implementation, Dispute resoIutlon mechenlsms River basin management authority as monitoring of water use, OMVS control pollution , Environment HUMAN RESOURCES Health Infectious disease (river Population PolIcies Integrated approach to vector·born blindness, AIDS, Malaria) : disease control, a8 in OCP R&D, surveillance and early warning mechsnisms, knowledge and best- practice acllvlties Education Cooperation In R&D, Mutual recognition of diploma., Common Institutions such as CESAG, exchange programs, etc. Common accreditation of achools PTel,aic, Capacity bulidlng River Basin Agencies Customs cocperation (computari&ed BCEAO, Regional Stock Exchanga, custom data procassing syst), trada BOAD cooperation ~anagemant sys!em) WTO negotiations Networ1 MARKETS Seale and Goods Market Trade faciitation, Free Trade Anse, Quality Control (food. seeds ... ) Customs Unions, Competition Standardized custom documents Surveillance of commercial poiciss Services Market (infrastructures) l!:m!I!!!1. ROIJd Road Mastar Pisn, Sub f6!P0nal [)eajgnated Interstate Highways Networ1< standard, no POOl for malnlanaoce 8M Transit Documenta Uberalizallon aCRlSS the '-rd (caboIage, freight services) Commit- Air Common regulatory agencies, security ment and safely, licensing rules; Common RltHways alrllnee: Air-Afrique. ECOAlR.. TeI_ Frequency menagemant, Single sub-f8glonal malkat (Common Harmonization of standards regulatory agency, rules of establishment, rules of competition .•. ) ~ EiectrlciIy Power Pool, Gasplpeline. Factors Mar'ket Lllbor Free movement of labor. especially high end professional labor services Financial Maricat Payment system, AlgiCXl8I stock exchange, CfOSS country branches for LIIgaI~ Business Law Loek Joint MACRO POUCIES in FI.oal Harmonization of Indirect taxes, FISCal federalism and Inlarstete transfers Investment regimes. petroleum tax re9me ~ Cooperation in monetary lnt Source: Authors 51 11.3. Qualifying Depth of Regional Integration 106. Important differences in the nature of subregional goods and related regional activities imply that different nulticountry collaboration schemes may be needed, depending on the scope and the potential gains. Multicountry collaboration schemes may vary in form and depth, from simple cooperation involving little or no loss of sovereignty, to deep integration requiring a delegation of authority to supranational agencies in specific areas. For example, on one end of the spectrum, a well-organized cooperation scheme may suffice for countries to partner for joint investment projects, to coordinate strategies for fighting infectious diseases and to present a common front in multilateral negotiations. 107. At the other end, a deeper integration scheme may be needed for expanding goods, factor and service markets beyond borders so that the economies of the subregion may reap the full benefits of openness, scale and competition. Such a scheme would require that countries delegate policy-making authority to a subregional body, or that national policies be 49 coordinatedlharmonized within an agreed subregional framework • We may define the "depth" of regional cooperation as a combination of "scope of activities" (from discrete projects to programs, policies and institutions), and accepted "loss of sovereignty" (from foll country control to foll delegation to a supranational entity). 108. Cooperation. This may be the weakest and mostly "single-issue-based" arrangement. Countries may cooperate for a joint development project. They may also do so for facilitating exchange of information and best practices. Countries can also cooperate "a la G7" on specific issues, such as on monetary and exchange rate policy matters when needed. They retain full control and if needed, they may opt-out of the arrangement with 'relative ease. Except for narrow issues calling for joint development, cooperation signals the lowest level of multilateral commitment. It may be most effective for addressing many common causes that require regular exchange and consultation, "pooling" of resources and capacity building, but no supranational body. For example, exchange of best-practices in sectoral policy areas, governance and policy management; or concerted effort to present a "common front" in important external relations, etc. Specific sub-regional initiatives can also be domains for multicountry cooperation (ex: attacking mv, Malaria, Conflict Prevention and Resolution mechanisms). 109. Harmonization/coordination: They imply a higher degree of commitment and a more formalized structure of multicountry cooperation, and hence they provide more effective "locks-in" as compared to simple cooperation. Typically, harmonization is intended to address heterogeneity in rules standards and inconsistency in policy content. Coordination is used to solve time-consistency issues and minimize frictions in policy implementation. Harmonization may best apply to tax policy, trade policy (tariff and trade facilitation), as well as legal (business law) and regulatory framework (standards, rules and procedure for licensing, etc). 49 For example, because they share a common currency, UEMOA countries have delegated monetary policy to the BCEAO, the common central bank, and trade policy is being progressively discussed through the hospices of the UEMOA Commission. Meanwhile, other areas of macroeconomic policies - fiscal, legal and competition - are being the subjects of enhanced coordination and harmonization. 52 Although it implies a higher degree of joint commitment, hannonization doesn't necessarily mean joint-administration or a supra-national entity. For example, countries may harmonize tariff and tax policies, and agree to use a common legal framework, but still retain national custom, fiscal and judicial administrations to that effect. 110. Integration. This implies a higher degree of lock-in and loss of sovereignty, and also tends to apply to a broader scope, although it could as well be limited to a specific market or policy area, such as in the case ofa NATO-style common defense strategy. In economic areas, "integration" typically implies more united markets for goods (FTA and custom unions), factors (common markets), and also a common currency zone such as in the European Union. A deepest form of integration is a federated union such as the United-States, which includes political as well as economic integration, including in infrastructure-related services (telecom, air-transport). Typically, high degree of economic interactions - trade, investment ... - would make integration more cost effective as opposed to simple hannonizationicoordination, as the opportunity cost of exit rises. 111. Also, the scope of integration and the concomitant complexity call for countries to relinquish sovereignty to a supra-national agency, the purest form being a federal government, as in the United-States. Although integration typically would apply to a broader scope of activities, it can also be restricted to an individual project. For example, many "joint investment projects" require - albeit in a narrow sense, delegation of authority to a common and autonomous entity. Examples are common subregional institutions of high or specialized education, and authorities for managing river basins. A power-pool and a ga:apipeline would also qualify as integrated projects. D.4. Guiding Principles for Accelerating Regional Integration in West Africa 112. Whatever the scheme, a successful integration strategy must be guided by a number of principles, which would assure that the subregional and the national programs are compatible and mutually reinforcing. Underpinning all these principles is the vision of creating an Open and Unified Regional Economic Space (ODRES) for the benefits of the people of West Africa, while taking into account countries conditions and political realities. The first and most important principle ("Open-Regionalism"), seeks to insure that the subregional strategy is bred in the same philosophical paradigm that guides national reform programs. Accordingly, the regional strategy should be regarded as a natural extension of the free-market and private sector-centered reforms agenda from individual nations to the subregion as a whole. A corollary principle is that the ''private sector and civil society" must be the main stakeholder and beneficiaries of integration. One other principle - "Subsidiarity", provides guidelines for dividing responsibilities between countries and regional organizations for implementing the subregional agenda. The last principle ("Pragmatism and Progressivity") indicates how, given differences in countries conditions, integration may proceed realistically so as to build on demonstration cases and minimize the likelihood and frequency of policy reversals. 53 113. Open Regionalismso : This is by far the most central principle for assuring comistency and complementarity between national refonn programs and the subregional agenda. Accordingly, subregional programs must be bred in the same (a) outward-oriented, (b) (ree market driven and (c) private sector-led development philosophy that has constituted the heart ofnational reform programs, especially since the 1980s. As argued before, it is precisely the need to reinforce these programs that has led to the current resurgence of regionalism worldwide. Broadly speaking, open regionalism would :rrean coordinated integration into - rather than collective retreat from - the world economy for countries of the subregion. 114. First, this implies Outward-orientation, meaning that subregional policies must contribute to lowering and eliminating obstacles to global trade and investment, including tariff and non-tariff barriers. Experience worldwide indicates that economic diversification and expansion of non-traditional exports to the rest of the world remain the best - if not the only - strategies for accelerated growth in the subregion. High levels of protectionism not only raise costs for both producers and consumers, they systematicall~ discourage investment in export-oriented activities and inhibit economic transfonnation 1. Thus, lower and more unifonn tariffs, the total elimination of non-tariff barriers and concomitant refonns of domestic taxation must remain in the menu of regional programs. This point can hardly be overstated because unless outward-orientation is a built-in explicit goal of the integration process, many historical regional arrangements may have the tendency of raising rather than lowering external tariffs. This may partly be the results of the consensual internal decision making process, or a by-product of increased power of lobbies, which the constitution of large regional blocs 52 typically encourages . 115. (b) Second, it implies a free-market-driven integration process. meaning that governments must not develop national monopolies or multinational monopolies. National monopolies constitute restraints on competition, free trade and investment; and the thrust of national refonn programs is, among other things, to eliminate them. But as the market expands beyond national boundaries as part of the integration process, the subregion must guard against the appearance of subregional monopolies, which the larger scale does not necessarily prevent 50 "Open Regionalism" originates from APEC. The idea is that member states liberalize intra-bloc trade while at the same time lowering external trade barriers on imports from the rest of 1he world. This is a sort of "Concerted tfnilateralism" whereby regionalism becomes a means for accelerating joint liberalization of trade and investment. Here, we are using the concept to mean a region-wide free market economy that is also opened to the outside world. 5! Collier and Gunning (1997), and Sachs and Warner (1997) have shown that "trade restrictions reduce growth and that they have done so more catastrophically in Africa than in any other region", partly because of higher trade barriers, but also because of tinier markets. A typical estimate of growth reduction due to "lack of openness to trade" is 0.4 percent (Easterly and Levine, 1997), although some estimates - including the effects of poor access to sea and Dutch diseases - are as high as 1.2 percent (Sachs and Warner, 1997). 52 For example, Winters (1994) shows that, in a Custom Union where each member country has an interest in raising protection in one sector and reducing it in all others, the consensual internal decision process may lead to a classic "prisoners" dilemma outcome with high protection in all sectors, even though each member country would be better off with low protection in all sectors. Protectionism may also arise as the result of increased power of lobbies, as the larger !l:ale of activities may also increase stakes and hence raises the opportunity value of lobbying. For example, the number oflobbying organizations in Brussels grew from 300 in 1970 to 3000 in 1990. And by 1998, there were 13,000 professional lobbyists in Brussels, nearly one for every EU Commission staff member. (For a detailed discussion of these points, see "Trade Blocs", World Bank Policy Research Report, World Bank, 2000). 54 and may even make more lucrative. Instead, countries must cooperate to expand markets and competition across borders. This is obviously the very idea of a common market. But this must go beyond traditional goods market integration (FTA, custom unions, etc), and extend to infrastructure services, which have traditionally remained the domain of national monopolies and which are now the targets of national privatization and liberalization programs. 116. Private Sector and Civil Society as the Main Stakeholders. This second principle is implied by the very idea of free market and ''people-centered'' integration process. Ultimately, integration is for the benefit of the people of West Africa. This means that integration should see the private sector and civil society as the principal stakeholders, both as the main engine of integration as well as the primary beneficiaries of its fruits. Enhanced production and trade of goods and services are dependent on improved performance of private firms and farms, and private operators and consumers will be the main beneficiaries of larger markets and investment opportunities. Therefore, regional integration should seek to enhance the scope for cross-border private sector activity, implying, priority to creating and sustaining a unified, open economic space within West Africa with competitive regional markets. 117. Assuring that the private sector takes up more responsibility for advancing the agenda on regional integration requires two concurrent efforts. The first is to work with official institutions to create the opportunities for private sector representatives to be more involved in regional integration activities, beyond consultation. The second is for the private sector itself to organize to be able to take up these responsibilities. The role of the private sector goes beyond taking advantage of new business opportunities that regional integration may throw up; it must lobby to help create these new opportunities and governments, regional institutions as well as the donor community must work to strengthen such private sector groups. 118. Subsidiarity and Coherence of National Programs. The second important principle is subsidiarity, a term made popular by the European Union. Subsidiarity simply means that regional institutions should be responsible on(v for those activities that, in essence, can be more effectively handled at the subregional level rather than the national. This means that regional organizations will limit themselves to activities that require a joint approach because of cross-border externalities, which countries themselves cannot independently do as effectively, recognizing that the demarcation between what should be best done nationally or regionally will shift over time. In return, government must also be selective and parsimonious in creating subregional organizations, and supportive of the activities for which they have been granted a clear mandate. Government must also assure that national programs are well aligned with the agreed subregional agenda. 119. Respecting subsidiarity is important to avoid overloading administrative resources and overlapping regional institutions. It insures that the integration process does not become a drain on an already scarce subregional administrative capacity and resources, and that there is sufficient commitment and trust so that the key subregional agencies will be given the authority and the means to implement the subregional agenda. If trese conditions are not respected, the subregional effort loses credibility, which in turn risks undermining future integration efforts. The lack of parsimony from governments and the resulting proliferation and overlapping of regional activities also mean lack of specialization by regional entities, which increases the risks of inconsistencies between national programs and subregional activities, and frictions among the regional organizations themselves. 55 120. Pragmatism and Progressivity. Accelerated integration means, fUndamentally, credible integration, built on pragmatic, gradual steps that reinforce trust and commitment, and make the process self-supportive. It is certainly valuable to have a clear vision of what regional integration should ultimately mean il West Africa - whether a free trade area, a custom union or a United-States of West Africa. But experience here and elsewhere also strongly suggests that it would be wise to move forward in a pragmatic, gradual fashion, by building blocs and with timetables and targets that are credible and realistic. Declarations that are not achieved lead to missed targets, frustrations, and disappointments and, in the end, reversals. There again, the challenge is poised by the very issue integration is sought to address, namely the diversity, in about every geographic, linguistic, political and economic sense, of countries of the subregion. In this context, a strategy combining variable geometry (or sequencing integration in geographic space, allowing subset of countries to move faster and deeper in certain areas), and variable scope53 (seizing opportunity to advance integration in areas where conditions are propitious), is probably the most appropriate and effective for current West Africa. Progressivity provides low risk opportunities to build experience and mutual trust, which are essential for integration to move forward, broader in scope and deeper over time. 121. One other important facet of pragmatism and progressivity is 'bpen membership'C\ meaning that regional arrangements must remain open to new membership from countries of the subregion. A core group of countries may get on board; but they must keep the door open for other neighbors to join if and when they meet explicitly set criteria. This would imply that countrie s such Cameroon may at some point in time be allowed to join the union, provided it meets certain criteria and is willing to abide by union rules. Likewise, in principle, although politically unrealistic, open membership by UEMOA may provide a venue for other countries of West Africa to join the union. Open membership is another implication of the very idea of progressively building an Open and Unified Economic Space. 122. "Common Markets" or "Common Investments". Naturally, the emphasis placed on the development of an open and unified subregional economic space and on private-sector participation in large and "integrating" investment projects also implies less emphasis on "common infrastructure investment projects". As explained later (Section 3), this principle applies not only to subregional capacity development in such areas as Education and Health, but more importantly to key infrastructures such as roads, telecommunication and energy. As much as possible, private operators with or without country involvement, must be the primary stakeholders. Government efforts at the national as well as the subregional levels must concentrate on creating a competitive and unified subregional market environment, which would allow for adequate scale and competition, and thus economic efficiency. 53 For example, assuming that a shared goal is a Custom Union for ECOWAS, variable &eomet[y would imply that blocks of countries (say UEMOA, Nigeria-Ghana tandem) may move forward at different pace. variable scope implies that countries all or by blocks may decide to unify the air-transport, the telecommunication or the energy markets, or integrate the currency system and monetary policy, etc. 54 "Open membership" also known as "Open Access" means that any country willing to abide by the union's rules may join. An example of Open Access with light requirements is the Eastern and Southern Africa Cross-border Initiative (CBIIRIFF). The EU provides an example of restricted access, as acquiring full membership is a rather tortuous and difficult process as the UK has experienced and as Turkey is experiencing. 56 123. There are however two special cases in infrastructure investment where 'Joint" or "coordinated" development may still be needed. One is the case of a "lumpy" investment when a multicountry approach is indispensable to realizing the investment, such as the Gas Pipeline from Nigeria to Ghana or from Chad to Cameroon. By nature, such investment cannot be functional if only partially realized, that is if only some countries would "do their parts" while others would not Another case is when the scheme requires a subregionally coordinated national investment programs, as with an electric power pool, and to a lesser extent, a subregional highway network. In this case, although each country may still benefit from realizing its own "portion" of the subregional "network", such benefit would be considerably limited if its neighbors do not. 124. In the first case, (true multicountry investment project), the private sector is often willing and capable of financing most of such investment, provided trere is a satisfactory framework of harmonized policies and commitments from countries involved. Government policies would therefore seek to provide such commitments, with the objective of providing appropriate guarantees for reducing country risk (e.g. "cross-conditionality" schemes). This scheme is typically the case of most pipeline projects, and to an extent for River Basin Initiatives. In the other case (coordinated national investment programs), government must commit to realizing the national portion of the subregional project, both in term of actual investment as well as maintenance. A power pool and a subregional highway network are two examples of national infrastructure development requiring a subregional coordination. In both cases, investments are essentially national and would still remain in the patrimony and under the responsibility of national governments. Still, as integration progresses, increasing the degree of interdependency, countries may fmd it opportune to set aside a subregional bud~t that would assure adequate capacity. A good example is the system of interstate highways in the United-States, which are financed and maintained by the federal government as opposed to the individual states. 57 58 Ill. Strategic Areas for Accelerating Integration in West Africa 125. Unlike in the country context, there is no agreed upon overall strategy for accelerating integration in West Africa, nor is there a unique organization to which all countries have given a clear mandate for elaborating and implementing such a strategy. What is available is a collection of national programs, cross-border initiatives, multicountry development projects, as well as two broad regional integration arrangements, namely UEMOA and ECOWAS. Consequently, the first order of business is to articulate a common vision and an agenda in accordance with the above principles and in a participatory manner, involving governments, private operators, regional organizations, and multilateral institutions. A World Bank task force has consulted with these various entities for that purpose. And from these discussions and consultations, a number of focus areas have clearly emerged, which would constitute the core of an evolving subregional strategy for West Africa. We discuss these "strategic areas" in the following subsections. For operational purpose, we have grouped these focus areas in accordance with the "four groups of issues with cumulative interactions" which were suggested as the pillars of a 21 st century African development strate~5. This approach is meant to highlight the complementarity between national programs and subregional strategy as yet another chain of ''virtuous circles" which could foster economic transformation and accelerate broad-based development in West Africa. Ill.I. Improving (;()vernance and Preventing ConOicts: Peace and Security 126. The importance of peace and security in the region cannot be overstated In fact, national peace and security are the most important preconditions for a successful integration in West Africa. In return, integration may also help resolve conflicts, build trust and enhance security. As discussed before, national conOicts have inflicted a severe burden to the sub region in recent years. Besides "hot conflicts", non-democratic processes for power-sharing (autocratic civilian regimes, rigged elections, military coups, etc), have also taken their toll in the form of political and economic instability, and thus high country risk. Poor governance is another trait of the subregion, with direct relation to conflict and democracy 6 • Governance affects public choices, the efficiency of public infrastructure and administrative services, and the quality of government policies that frame the general business environment, national as well as subregional and international. Poor governance, conflicts and the resulting political and economic instability are the root causes of frequent policy reversals and the high country risk in Africa as perceived by investors. Consequently, improving governance and preventing conOicts would reverse these trends, and thus qualify as important subregional goods. 55 As indicated before, the WOlid Bank study on how Africa could "Claim the 21 st Century" suggests that African countries may simultaneously "focus development effort on four groups of issues with strong cumulative interactions". These includes: (i) improving governance and resolving conflicts; (if) investing in people; (iii) Increasing competitiveness and diversifying the economies; (iv) strengthening partnership, reducing aid dependence and debt. 56 Governance may be more of a national than a subregional good, were it not for its relation to conflicts. For example, Collier and Hoeffier (1999) have argued that beyond a certain threshold, poor governance and corruption would lead to the advent of hot conflicts. 59 127. Critical as that may be, the question remains as to how to effectively improve governance and prevent conflicts; and what can be more effectively done at the subregional rather than the national level. There is little disagreement that the solution to both poor governance and conflicts lies in promoting democracy, a stronger civil society and a free market economic system. Promoting democracy includes facilitating the emergence of political pluralism, fostering a diversified civil society and an autonomous public opinion that can demand quality public services, transparency, and be an effective watchdog for government actions. Empowering the private sector by strengthening free markets institutions also provides an important counterweight to government and contributes to improving governance. Both provide the checks and balances that are necessary for forcing governments to be responsive and to justify their actions to the popUlations, and to make socially efficient policy decisions and public choices. 128. However, the above activities are in essence political, which countries typically regard as part of their "national prerogatives" and are therefore disinclined to delegate althority to supranational agencies. By implication and invoking the subsidiarity principle, improving governance and democracy and preventing conflict will essentially remain the primary responsibility of countries and an important component of national re:fDrm programs across the regIOn. 129. This being the case, there still are three important areas where enhancing cooperation and fostering some form of "political convergence" would help the subregion in reducing the risks of conflicts. (i) The first and most important in the long run is to explicitly add a joint commitment to democracy and rights into the charter of existing regional organizations such as UEMOA and ECOWAS. This would provide a "constitutional lock-in" mechanism which would prevent "hof' political conflicts, foster stability and lower political risks. 57 130. (ii) Another device is Conflict Resolution and Conflict Prevention mechanisms. Many such institutions have exited in most of Africa over the past three decades, especially within the OAU framework. But most are "government to government" networks that are predominantly built upon the principle of "non-inteiference" and state right rather than broad human and democratic rights. This has limited the capacity of these institutions to deal with natDnal conflicts, which has caused the most harm to the subcontinent. It is only lately that core principles of human rights - including for women, children, etc. - and democracy are being progressively enshrined in the foundations of key subregional political institutions and conflict resolution mechanisms in most of Africa. 131. (iii) A third device is a truly unified and unrestricted market of information (media, polling activities, etc.) which could encomage the production and the free flow of information throughout the subregion. Among other things, it would facilitate networking among non- 57 MERCOSUR provides a good example of this (as reported in "Trade Blocs", p.24). It puts the then informal democracy rule into practice in April 1996 when the commander of the Paraguays armed forces was contemplating a military coup. The bloc's four presidents (with backing from the United States and the Organization of American States) reportedly quashed the rumored coup with a strong joint statement that democracy was a condition of membership in the bloc. Two months later, MERCOSUR amended its charter to formally exclude any country that "abandons the full exercise of republican institutions". (Presidential Declaration on the Democratic Commitment in MERCOSUR, San Luis, Argentina, June 25,1996). 60 governmental advocacy groups (human rights, women, transparency, consumers, etc.), and help the subregion to develop a true culture ofright and openness, and a large public opinion in favor of best democratic practices 58 • ID.2. Investing in People: Human Resources and Capacity 132. Investing in people is essential for attracting foreign investment, absorbing advanced technology, and thus diversifying economies and accelerating growth. This is even more important in the knowledge-based economies of the 2pt century. Human resource development also constitutes the main policy instrument for a redistributive and poverty reducing economic growth. Therefore, to effectively compete in the 21 st century global economy, Africa would need to develop a human resource-based rather than a natural resource dependent economy. 133. Human capital development is primarily the responsibility of countries and a pivotal component of countries' natioml "endogenous" growth and poverty reduction strategies. However, there are two important cases of externalities that would make coun1:ry-by-country programs ineffective, and thus require a coordinated action. (i) One is the case of contagious diseases such as HIVI AIDS and Malaria, and vector bom-diseases such as Onchocerciasis. They know no national borders and, unless confronted in a coordinated fashion, one country's negligence may entirely annihilate another country's efforts. (n) The other case concerns Education. Human capital and endogenous growth theories suggest that investment in human capital - especially in higher and specialized education - may yield non-decreasing returns to scale; and with improved labor mobility, such investment is the source of important cross border external economies. Consequently, in the context of the small and fragmented West African states, these activities would qualify as national endeavors with subregional externalities 59. Therefore, they constitute an important focl.E area for subregional cooperation. 58 For example, a truly unified and free market for information could be promoted, involving the private sector and NGOs, and producing and divulging cross-country comparative analyses, polls and various statistical indicators. This would serve as a means for integrating all markets, but also for promoting a community of people, with shared core values and aspiration across the subregion. Ultimately, integration also means homogenization of political regimes, institutions and practices, or else, the risk of political instability and policy reversals will remain high and will continue to hinder the economic integration process. This rejoins the idea of "Using statistics to create a culture of accountability for realizing human rights - and to break down barriers of disbelief and push for changes in policy and behavior" across the subregion (Human Development Report, UNDP, 2000). 59 This is an illllortant insights provided by the new endogenous growth literature. It suggests that investment in human capital has increasing returns to scale, as this is also the case for infrastructure. This would explain the so called "conditional convergence" hypothesis, namely that a country's growth rate may converge to a steady-state level, at a faster pace for lower per capita income level, but that the steady-state level itself may be lower or higher ~epending on "an array of choices and environmental variables" (Barm, 1997), including human resources, infrastructure, demography, openness, "business climate", etc. (See Romer 1986, Barro and Sala-i-Martin 1995, etc.). 61 A. In Health: Communicable - Diseases 134. Infectious diseases that are vector-born or transmissible through human conduct are subregional "bads" par excellence. Countries cannot individually isolate themselves from such epidemics. Consequently, coordinated programs or, in some cases an integrated approach, may be required for containment, cure and prevention. The question is how responsibilities should be divided among national programs, subregional and international activities6o. 135. Clearly, vector-born diseases require a truly "integrated" approach; and this is better handled via individual initiatives. Likewise, R&D that may lead to prevention, cure and eventual eradication (vaccines, drugs, etc) of contagious diseases also qualify as subregional or international goods. But, in many instances (ex. HIVI AIDS), important initiatives are well underway in advanced countries, which are far better financed and manned than the subregion could ever afford to match. In those cases, the issue for countries of the subregion is how to effectively lobby the international community, especia1ly the advanced countries for adequate support to R&D activities, and to design effective programs for allowing their populations to benefit from the fruit of these endeavors. A successful case in point is the Bank initiated and supported Africa Onchocerciasis Control Program (OCP)61. A similar regional approach is being used to control other endemic diseases especially affecting the region. ACTA/rica (HIV/AIDS) and Roll-Back Malaria are two other important such initiatives for the subcontinent. 136. Besides the knowledge-intensive activities above, there are a number of much lighter and cost-effective concerted actions for countries of the region. One is the revelopment of surveillance and early warning mechanisms. This would help to rapidly spot and contain epidemics before they spread to crisis proportion throughout the subregion. The OCP is considering one such initiative and the UEMOA Human Resource Commission has indicated a similar intent Another area where light cooperation schemes may help is in in/ormation sharing, awareness campaigns and best-practice exchange activities, which regional entities and governments can effectively spearhead 62. As mentioned earlier, the subregion has recently seen important developments in this respect. The two main sub-regional health agencies (The West African Health Community and the "Organisation de Cooperation Contre les Grandes Epidemies") have merged into a West Africa Health Organization (WAHO). This should 60 Oncho is clearly a case requiring an integrated approach. But in the case of Malaria, medicatims are available for prevention and cure, and they are essentially private goods. R&D for the eradication of Malaria would qualify as a true regional goods and could be the focus of regional activities. 61 They are a number of reasons to this: The impact of the disease was dramatic and debilitating; it was circumscribed to West Africa (actually the Sahelian area) and hitting the poorest; disease transmitter was well localized and containable; and most of all, powerful and resourceful people around the world (McNamara among others) and international institutions (the World Bank) made it their plight and fight. This provides both the resources, resolve, hence the glue to make the project work. Also, effective ownership was insured, with an efficient communication and delivery system established at the ground level, involving the official country-based public health administrators and village-based communication and delivery systems. 62 For example, Senegal has had a record of effectively containing the spread a mv through public policy essentially. As a result, the rate ofIDV infection is only around 2 percent as opposed to 10 percent for Cote d'Ivoire and 7-8 percent for Burkina Faso and Togo according to most recent data. Through organized exchanges, other countries of the region could learn from the Senegalese experience. 62 facilitate cooperation and policy coordination on various infectious diseases and health policy issues among countries 63 • B. In Education: High-Education and Capacity Building 137. The subregion is characterized by an unusually high illiteracy rate (45 percent) and low primary and secondary school enrollment rates (68 and 19 percent respectively). This has contributed to the low level of the human capital stock, the low productivity of labor, and 64 hence, the high unit labor cost • In which specific areas could a subregional approach help? The general answer is in facilitating the emergence of a truly subregional labor market. For this, an important distinction needs to be drawn between the low/medium-skilled labor (non educated to secondary level) and the high-end labor force (highly-educated or specialized). In one case, the central question is free movement across the subregion, including residency rights, work permits, etc. In the latter case however, there is an issue of effective supply as well as one of free movement within the subregion. 138. Unskilled labor. Basic education will remain an essential component of national human resource development programs. Still, a subregional approach would help in two important ways. First, countries will continue to face common problems such as how to improve basic education (curriculum, standards and methods, organization, etc), or how to facilitate access to targets groups that the free markets may fail to reach (ex. the poor, rural areas, girls, etc.). Because all countries are facing the same problem and would therefore benefit from finding effective solutions, such "know-how" has potential externalities and constitutes a subregional good. Therefore, mhanced cooperation, "best practice" and knowledge exchange programs, and perhaps encouraging R&D in those areas would help spur innovations and facilitate their diffusion throughout the entire subregion. Second, there is the truly subregional issue of the right of foreigners to work :i:I neighboring countries. This is a question of migration and labor market integration, which is discussed later as a critical component of the building of a common economic space in West Africa (Section C.2.). 63 For example, the new organization could network with specialized initiatives such as OCP and ACTAfrica in order to facilitate best practice exchange. Note that ECOWAS as well as UEMOA have human resource divisions of their own. This goes against the principle of subsidiarity and parsimony advocated earlier, and may lead to duplication of initiatives at the expense of more targeted and effective actions. 64 ~or example, Sacerdoti et al (1998) have estimated that the effective stock of human capital has roughly the eqUIvalent of 112 year of schooling in Burkina Faso, 2 years in Cote d'Ivoire and three in Ghana. 63 139. High-skilled labor. The subregion faces a problem of effective supply and one of free labor movement, which would allow qualified workers to move to areas where demand is highest. There are therefore two important subregional activities that would complement and strengthen national programs: (i) developing an adequate subregional capacity, and (ii) facilitating movement across borders. With regard to capacity development, the subregion has seen numerous experiences of joint-development projects, including the creation of common 65 subregional institutions of higher education • The rationale for these programs is a mismatch between national endeavors and subregional needs. The general fear is that uncoordinated country programs would lead to excess capacity, lack of specialization and waste in some areas (ex. general university education), while important deficits still prevail in others (highly specialized and costly research and training programs). 140. However, the record indicates that, with few exceptions, the performance of these subregional education facilities has been mediocre at best. Managing and expanding facilities that are common to several poor countries have proven to be a daunting task. Many such projects have languished since their creation, and many have survived the development stage only thanks essentially to external support. The fact is that countries tend to invest more in institutions, which they own, rather than in "common" facilities. As an indication of that, the subregion comprises a good number of respected national schools that are already serving the subregional market. For example, in business administration, the Lagos School of Business (Nigeria) and the ESCAE of Yamoussoukro (Cote d'Ivoire); in engineering, the Kumassi School of Engineering (Ghana) and the Yamoussoukro "ENSTPIINSET", etc. 141. The important lesson is that an effective capacity development strategy for higlrskilled labor need not require common subregional institutions, but rather national and private sector initiatives with the regional market as a demand base. For example, developing a high quality graduate management programs - such as in the CESAG project needs not be a subregional activity. Local, external, public or private universities are well capable of developing such programs across the subregion. Provided they meet certain quality and accreditation standards, such institutions and programs may be designated as subregional Best (Centers of Excellence), and further enticed to develop important new programs, such as in the management of information technology, utility regulation, macroeconomic policy management, etc. What is therefore needed is to create a competitive process region-wise whereby institutions could bid for special projects and programs in higher education, and scholarships funds for qualified students to access such programs. 65 Exemples of specialized subregional institutions of higher education in francophone West Africa include the CESAG (Dakar, Senegal), «Ecole Africaine de la Meteorologie et de I'Aviation Civile» (EAMAC, Niamey, Niger),« Centre Africain des Applications Meteorologiques pour Ie Developpement» (ACMAD, Niamey, Niger), «Ecole Superieure Inter Africaine d'Electricite» (BSIAE, Bingerville, Cote d'Ivoire), «Ecole Inter Etat d'Ingenieur de I'Equipement Rural» (BIElER, Bobo Dioulasso, Burkina Faso), «Ecole Superieure Multinationale des Telecommunications» (BSMT, Dakar, Senegal), and « Ecole Africaine des Metiers de [,Architecture et de I'Urbanisme» (EAMAU, Lome, Togo). For more on subregional institutions of higher education, see the website 64 142. There is also the case of highly specialized programs and institutions that are essential for the subregion but not lucrative enough to attract the private sector, a typical case of "market failure" or "incompleteness" (such as R&D applied to subregional issues, in agriculture, health, education, etc.). These are subregional public goods by excellence and a coordinated or a joint-production approach would be required, which would assure adequate subregional supply while at the same time avoiding costly duplication of capacities. Joint production, or structured cooperation among key subregional institutions (especially for R&D) may be combined with merit-based scholarships as the most effective means for providing efficient supply and facilitating access to students from within the subregion. 143. The development of a common doctoral program for universities of the subregion may fall in this class of activities. A good and promising example of this is the rapidly expanding Programme de Troisieme Cycle Inter-Universitaire (PTC/) in West and Central Africa (Ouagadougou, Burkina Faso), which is supported by the African Capacity Building Foundation (ACBF, Harare, Zimbabwe). They are indications that this initiative, which has so far been confined to Economics, may soon expand to other areas such as Management, and could evolve into a true Ph.D-style doctoral program for the whole of West and Central Africa. The Anglophone counterpart appears even more advanced in this respect. 144. In support of all of the above schemes, and more generally to facilitate the integration of the labor market, attention should be devoted to creating a more homogeneous education system across the subregion. As in the case of goods and other services, this would mean harmonizing quality standards, including curriculum, degree requirements, accreditation norms, etc. A sort of subregional High Authority for Education may be needed to this end, which could develop an effective accreditation scheme, provide regular ranking of institutions, and develop an information base that would allow consumers to choose the best education services in the subregion. In.3. Building a Common Subregional Economic Space 145. There is no arguing that a more intensive agriculture and a diversified economy in favor of high-valued manufacturing and services hold the best prospects for sustained and broad- . based growth for the subcontinent. Most of the policies needed to this end are standard components of national reform programs. These include nacroeconomic stabilization, trade and investment, market liberalization, privatization and competition policies, legal and regulatory reforms, infrastructure and human resource development. As stressed before, the prime objective of accelerated integration is to reinforce these policies by building a common and business-friendly subregional economic space, which would provide suffiCient scale and competition to reduce cost, attract foreign investment, absorb new technology, and thus intensify economic diversification and growth. Cost reduction has several dimensions, implying different subregional policy focus areas, some of which we have already discussed (i) Country risk reduction requires harmonized - hence more credible - macroeconomic policies; (ii) reducing infrastructure service costs requires scale, competition and private sector participation policies, hence an integrated service market; (iii) reducing transaction and information costs need harmonization of the legal and regulatory environment; and reducing 65 labor and capital costs would require integrating labor and financial markets «iv) and (v». These pillars are described in the next subsections. A. Harmonizing Macroeconomic Policies. 146. Macroeconomic stability is indispensable for sustainable ani credible national reform programs, hence an important prerequisite for a successful economic integration. Convergence of these policies is essential to assure the sound macroeconomic management and price stability that underpins successful development. In fact, sub regional commitment to a given policy stance enhances the credibility that governments will respect these policies. This reduces the risk to investors and contributes to lowering costs. 147. The sub region is already gaining valuable experience in this effort through the UEMOA Multilateral Surveillance program and Stability Pact. Especially since the 1994 currency devaluation, UEMOA countries have made significant progress towards macroeconomic convergence. As an indication, the average inflation tate has come down to around 3 percent (1998-2000), with far less variability than during the pre-devaluation 66 period • By contrast, in Ghana and Nigeria, despite marked improvement in the past 5 years, inflation rates have remained much higher, and most of all, highly volatile (Cf Fig 17). These trends are indicative of a still tenuous degree of macroeconomic stability, and an indication that efforts should continue at the subregional level to help accelerate macroeconomic convergence. Figure 17: West Africa, Real GDP Growth in UEMOA and non UEMOA Countries, 1983-99 14r------. 12 10 a Countries Counbies -" adj . UEMOA Source: WDI 2000 and authors calculations Note: 1994-95 excluded because VI currency ustment m . Note: Horizontal lines indicate minimum, maximum, and medan rates of GDP growth dming period. Dark area contains the proportion of points falling between the first (25%) and third (75%) quartiles, i.e. within the so-called "inter-quartile range" (lQR). Points outside are outliers. The more COI11p3Ct the IQR box, the lower the variance of the distribution. 66 146. Recent developments are encouraging in this area. Drawing on the WEAMU experience, ECOWAS has recently adopted a set of macroeconomic convergence criteria of its own in order to build the fOillldations for a possible single monetary zone. Meanwhile, as said before, the ECOWAS heads of states have encouraged the creation of a second monetary zone by 2003 led by Nigeria and Ghana, which would merge with UEMOA to form a single ECOWAS common currency area by 2004. UEMOA and ECOWAS are now intensifying consultation in order to harmonize convergence criteria, accounting standards, statistical methods and indicators. They are also working on developing common institutions and working procedures with member states for facilitating multilateral surveillance 67 • These developments certainly signify joint commitment to macroeconomic stability and could significantly help improve credibility and reduce risk in the subregion, even in the absence of a viable second monetary zone or a unified West African currency zone. Figure 18: West Mrica, Inflation in UEMOA and non UEMOA countries, 1983-99 90'~------~ ~Ir------, : 85 75 80 70 75 65 70 60 65 55 50 60 45 55 50 40 45 ~ 35 ~ 30 40 as ~ 2~ ;; 30 E ~; .!!. 10 ~ ~~ 5 5 E 15 ..!. 10 0 ! § 5 .5 -~ : ~ .5 .10,L-____T- ____~------~--~ Countries , " " Note: 1994-95 excluded because of currency adjustment in UEMOA. Note: Horizontal lines indicate minimum, maximum, and median rates of inflation during period. Dark area contains the proportion of points falling between the first (25%) and third (75%) quartiles, i.e. within the so-called "inter-quartile range" (IQR). Points outside are outliers. The more compact the IQR box, the lower the variance ofthe distribution. Source: WDI 2000 and authors calculations 66 The key factor is fiscal policy and the BCEAO deficit-financing rule that precludes uncontrolled central bank fmancing of government deficit. But that rule is precisely an important piece of the "integrated" monetary and concomitant fiscal policy implied by union membership. 67 The Conference of Ministers for UEMOA and ECOWAS has met in Bamako, January 28-29, and adopted a resolution providing the framework for regular consultations between the two organizations. The objective is to "accelerate the process of economic integration in West Africa". During a follow-up meeting (March 30-31, 2000), the UEMOA Commission and the ECOWAS Secretariat have started technical discussions on how to harmonize convergence criteria and accounting and statistical methods. They have also discussed how to intensify consultation in order to develop common multilateral surveillance institutions at the national level. This may mean merging the UEMOA apparatus (especially the CNPE) with those of ECOWAS (the National Coordination Committees, which have not been operational as of now). 67 B. Integrating Markets 147. Market integration is central to the emerging subregional strategy, primarily as an instrument for cost reduction and global competitiveness. It provides the most effective means for achieving economies of scale, improving competition and specialization, and injecting new and more cost-effective technology into productive structures across the subregion. Market integration constitutes the natural extension of national liberalization efforts and the effective conduit to globalization. UnifYing markets across borders is by essence a truly "regional" activity. It requires that countries commit and act jointly, and ultimately surrender national autonomy to a supra-national regulatory agency. As noted before, many regional activities of the past two decades have evolved around individual initiatives or common investment projects. One important exception is the UEMOA integration program since 1996, which has centered around the building of a common economic space and concomitant harmonization of economic polices. This approach should serve as a model for the whole of West Africa: Emphasis has to be placed on the common markets and the related market institution building activities and investment projects. Market integration must cover not only goods - as this is the case in an essentially trade integration approach - but also factors as well as services, including infrastructure, financial, insurance, accounting, trade-related, etc. a traditionally non-traded sector. 148. Market integration activities can be sub-divided into three components:, (i) sector specific work (good, services and factor markets); (ii) supporting physical infrastructure; and (iii) cross-.cutting activities that contribute to improving the overall business environment (business environment, legal and regulatory reforms, competition policies, investment codes, etc.) B2. Merchandise Trade and Commercial Policy 68 149. There is no denying that the subregion has made considerable progress in the past few years toward trade integration and the harmonizing commercial policies. Although it still is too early to assess its real impact, the simple average tariff level in UEMOA has been reduced from around 23 percent (1996) to about 12 percent (1999). But temporary surcharges (TOP and Tel) designed to protect "sensitive" activities, and protectionist product classification may still have kept the mean trade-weighted tariff well above the simple average. Recent efforts in Ghana and Nigeria have also gone in the direction of a lowering average external tariff. Ghana's mean tariff has come down to around 13 percent, although it too, would appear to indulge in "protectionisf' practices in terms of products classification. 68 Attempting an overall assessment of trade policies, comparing the positions before and after the common tariff is applied in ECOWAS, would be premature at this time. It is hoped that this will be possible in FY02 to cover at meaningful number of member c.ountries. Such an evaluation for a sample of African countries including six members of ECOWAS is being completed as a research project at the Bank for the period 1996-98. This assessment focuses on the three main effects of trade restrictions (tariffs, NTBs, exchange controls, exemptions, import and export monopolies): distortions in resource allocation, welfare impact on consumers, fiscal Tevenue volatility. 68 ISO. All together, while the region has made significant strides toward creating a Customs Union, there remain, not surprisingly in light of experience elsewhere, significant gaps, obstacles, and issues. The full agenda to make the regional customs union effective - and welfare enhancing - comprises five complementary components. 151. The first of trese is the need to rationalize and apply the UEMOA tariff. Main problems concern the variable application of the agreed tariff measures even in UEMOA countries, the persistence - at the national level - of various exonerations as well as special transitional surcharges, and the poor categorization of products into tariff rate categories. 152. The second is the merger of the UEMOA Customs Union into a larger ECOWAS Customs Union, given that the non-UEMOA countries have yet to implement the Free Trade Area that officially should have been fully in place in 2000. Given the difficulties encountered to reach (tenuous) agreement on the common external tariff between the eight UEMOA countries, its extension to six other countries, which in addition do not have an extensive experience of cooperating on these matters and also start from vastly different positions, cannot be a simple matter. It involves several specific actions besides rationalizing the UEMOA tariff as just indicated: (i) aligning product classification; (ii) phasing out all or most remaining NTBs as well as exemptions; (iii) eliminating all intra- union barriers; and (iv) making rules of origin and customs valuation methods unifonn. 153. The third issue is the need to agree on a calendar for continuing to reduce the average level of tariffs, narrow their dispersion and move toward a single, low and uniform !!!!!!.. While UEMOA rates are lower, in general, than those in the rest of Africa, they still are higher than the world average, new community-wide levies haw raised them recently, and, in any case, they remain high enough to reduce the competitiveness of exporters and to feed demands for special exemptions. One alternative would be for all ECOWAS countries to move toward a uniform rate - as in Chile. This would vastly simplify customs administration, eliminate virtually all issues over categorization, and may prove even more effective in raising revenues while reducing distortions. A unifonn tariff structure also makes it much easier for countries to lower owrall external tariff level, and hence to improve global competitiveness. It also constitutes a much stronger and more visible means for countries to signal joint commitment to open trade regime while also building a unified regional market. 154. Admittedly, mmy countries still favor a multiple rate external tariff structure, partly because of protectionist inclinations, but also because such a move would appear more "gradual" and thus more "feasible politically". At the same time, one could also argue that tre merger of UEMOA and non-UEMOA countries into an ECOWAS Custom Union is precisely the critical time and the golden opportunity for envisioning, designing and starting implementation of a bolder, much simpler and more efficient unifonn tariff scheme for tre subregion as a whole. And indicated by the intra UEMOA debates and tensions relative to product classification, a joint move by all countries toward a unifonn rate, with set calendar, may prove easier to accomplish than the generalization of the UEMOA-type multiple rate tariff regime to all ECOWAS countries. For example, a 10% unifonn rate, with little to no exemptions, may be a reasonable target for the subregion. This would balance the need for maintaining global competitiveness with that of preserving tariff revenue and improving custom administration. Investors could "live" with such a unifonn tariff level; various lobbying groups would no longer be able to seek various fonns of especial "favors", and countries will 69 no longer have a "loophole" allowing for distorted and protectionist product classification. This issue should be the subject of further analytical work, which would evaluate the relative merit of a single tariff rate and then help devise a bold strategy for rapidly moving in that direction. 155. Fourth, it would be highly desirable to try and improve on the existing measures to facilitate exports.69 Such measures exist on paper in most member countries: VAT or other indirect tax exemption or refund on imported inputs used in exportables; temporary admission, free trade zones (FTZ), free trade status for individual firms etc. In most cases these schemes do not work at all, or are very slow and cumbersome, or are abused. No scheme is bad or good in itself, and some work well in some countries, while apparently not in a single one in West Africa. Their effectiveness is a question of general administrative efficiency and governance. Computerization does help, but it does not solve the problems - which are an important item under the "high transactions costs" issue. In reviewing these measures, the regional institutions and governments (i) could benefit from comparing experiences within ECOWAS and in other countries, and (ii) should ensure harmonization across countries to avoid the possibility of unfair competition, for example if one or more countries legally or factually permit FTZs to sell duty free goods on the regional market. 156. Fifth, an increased attention should be devoted to unrecorded cross-border trade and NTBs. Many studies on cross-border trade for countries of the subregion indicate that such exchanges are far more intense than ever reported in official statistics. This is partly the result of the "informal" nature of those transactions, which itself is partly due to tariffs and nOIrtariff barriers (NTBs) and deficiencies in the monitoring and recording systems. For example, in a study on cross-border trade between Nigeria and its neighbors, Bio G. Soule and Cyril Obi (LARES, 2000) estimated that "informal" export from Nigeria to Benin alone was in the range of 152 to 198 millions US dollars in 1998. This would represent anywhere from 37 to 48 percent of Nigeria's total formal export (412.6 millions US dollars) to West Africa for the same year. They also estimated that total Nigeria's informal export to West Africa was in the range of 1.5 to 1.9 billions US dollars in 1998, which is 3 to 4 times higher than the formal export of Nigeria to the sub region. These trends are especially true in the case of oiL For example, the authors estimated that unrecorded oil export to Niger amounted to 35 percent of the country's total needs in 1996, and 35 percent of total sales of petroleum products in Benin (2000). 157. Therefore, more information gathering and analytical works would be needed to appreciate the real scope and understand the reasons and the specifics of these transactions. Then, and most likely within the sub regional framework, appropriate measures could be taken so as to encourage those exchanges to surface, and allow operators to benefit from support services, such as banking and "marketing". This would also positively affect government revenue as well as private sector income and thus, poverty reduction effort throughout the sub region. 69 This does not refer 'incentives' in the sense too often understood in the region of tax exemptions (as they feature for example in several 'investment codes') which amounts to breaches of the common tax or customs law. Besides the general rule that exports should not be taxed (with rare exceptions noted earlier), incentives here is understood to mean all measures that put exporters on an even keel with exporters in other parts of the world. 70 Box 6: • Trade Links Between Nigeria and Its Neighbors Nigeria's Predominance. Nigeria dominates the West African subregion. It accounts for 47 percent of the region's aggregate GDP and 60 percent of its consumers. Asymmetric Trade Links. Within the region, Nigeria is the main partner of most West African countries. Ivory Coast is the fIrst trade partner of Nigeria in Africa. Nigeria accounts for more than 20 percent of the volume of products sell in the Port Autonome d' Abidjan. In terms of trade flows, Nigeria is the second trade partner ofNiger.(1) 14 percent of its imports originated from Nigeria over the period 1980-1999. However, these trade flows represent an insignifIcant part of Nigeria's external trade. Exports of the region are estimated at 5 percent of Nigeria's total exports. Diversified Trade. Imports from Nigeria are diversifIed. Major imports include primary goods and intermediate inputs such as hydrocarbon, capital equipment and fertilizers. Hydrocarbon products accounted for 99 percent and 80 percent of Nigeria's exports to Ivory Coast and Ghana, respectively. Oil products are main exports of Cote d'Ivoire to Nigeria. Kola nut, aluminum products, salt, cloth, dried fIsh and oil products are Ghana's major exports to Nigeria. Energy products from Niger accounted for 42 percent of total imports from Nigeria over the period 1980-1999. Exports to Nigeria accounted for 20 percent of Niger's total imports. Livestock account for 44 percent of total recorded exports. Re-exportations are also an important component of trade between Niger and Nigeria. Cigarettes and textile are the main products re-exported to Nigeria. Informal Trade. Informal trade is a widespread phenomenon within the region. It concerned a variety of manufactured products locally made or imported from Asian countries and Europe: Italy and Turkey. According to LARES(2) estimates, informal imports of Benin from Nigeria reached 198 million of US$ in 1998. Informal imports of Benin, Cameroon, Niger, and Chad from Nigeria amounted to about US$I.2 billion in 1998. Nigeria is the main supplier of the region in food products and food grains. Niger and Chad are the main importers. For Niger, millet and maize are major informal imports. These represent 100,000 and 200,000 tons, i.e. lO to 20 billion of CFA Franc, respectively. For Benin, major imports are: tomatoes, potatoes and citrus fruit. Nigeria's imports from ECOWAS' countries are dominated by primary commodities and livestock. Livestock trade between Niger and Nigeria increased by more than 60 percent between 1997 and 1998. Re exportation is also a part of this informal trade. It is estimated that more than 75 percent of products at the Port of Cotonou (Benin) are re-exported to Nigeria for more than CF AF 80 billion per year. Fiscal Impact of Informal on Trade. Informal exports of oil from Nigeria were estimated to 150,000 barrels fer day in 1994. Benin's imports of oil products from Nigeria amounted to 300,000 liters per day. (3 About 30 to 40 percent of Benin, Niger and Cameroon demand of oil are met by informal imports from Nigeria. While consumers benefIt from a lower market price, informal imports have differential impact on government revenue depending on the degree of dependence on import duties. In Cameroon, revenue losses were estimated to CF A 4.5 billion in 1995196 while in Niger fIscal gains amounted to CFA3.75 billion in 1997. lFrance is the first trade partner of Niger. 2LARES : Laboratoire d'Analyse et de Recherches Economiques et Sociales. 3Marches Tropicaux. November 24, 1995. 71 158. Six, and clearly related to the above, there should Ix! increased focus on informal ba"iers as the major impediments to trade, especially internally. Scattered but consistent evidence suggests that monopolistic practices, non-competitive government procurement systems, bureaucratic hassle, corruption in cus toms, slow port operations, wastage and theft at ports and airports, poor storage conditions, harassment by police and others' at innumerable impediments to trade in general, and intra-regional exchange in particular. Also, inter-country payments difficulties increase the costs of intra-regional and international trade more than tariffs do. A "second trade liberalization agenda" is being developed in order to address those "behind the border constraints". 159. The program formed by these six sets of actions is a tall order and is better approached pragmatically. It is probable that not all countries will move in unison. The credibility of the future ECOW AS customs union will nonetheless hinge on how promptly and how vigorously the govemments and the regional institutions will collectively undertake its implementation. B.3. Infrastructure Services for a Unified Markets 160. Effective supply of infrastructure services is key to reducing transaction costs, and thus diversifying economies and "deepening" growth throughout the subregion. Traditionally, infrastructure services have been supplied by national monopolies and large subregional joint investment projects. But modern technology and national reforms have spurred competition and private sector participation in providing infrastructure services. In particular, the relatively secure and rising demand (along with population and income) has made infrastructure investment one of the most popular entry points for foreign investors, and privatization and national market liberalization programs are allowing countries to benefit from these vast technological and structural changes. 161. Regional integration can accelerate that process and contribute to reducing the high cost of transport, telecommunications and energy services by expanding their market and their scale of operation and by establishing a more competitively oriented regional regulatory framework. Indeed a network of efficient infrastructure services - not just physical infrastructures - is the material foundation of an open, unified, regional market. 162. In road transport, integration would mean (i) facilitation of road transport services within countries and across borders, and (ii) coordination of national road construction and road maintenance programs in accordance with national as well as subregional needs. The first priority is to assure that transport services function effectively and competitively across borders. This will require additional attention to issues like liberalizing restrictive freight sharing arrangements, measures to assure fair competition (common carrier provisions), improved interface between truckers and other modes of transport, and elimination of all but essential official roadblocks while instituting surveillance systems to monitor bribes and unofficial roadblocks. The second priority is for countries to complete investment in and to improve the maintenance of their national portion of the designated West Africa interstate road network (as defined, for example, by the ECOW AS Road Master Plan), preferably according to regionally defmed service standards. 72 163. The regional road program can be supported via country-based fmancing of national road construction and maintenance programs, for example by providing incentives for countries to give priority to the national portion of designated subregional highways. More analytical work will be needed on the functioning of regional road transport services and for building capacity in regional bodies to coordinate national investment programs and assure adequate maintenance for interstate roads and harmonize transport policies and regulations. In the much longer term. it would make sense to develop regional mechanisms for interstate road fmancing - both investment and maintenance, such as the creation a West Africa Road Fund. 164. In air transport, integration means an "open regional sky". The recent signing by twenty-three West and Central African countries of the Memorandum of understanding for the implementation of Yamoussoukro II Decision is a bold step in that direction. Meanwhile, some individual countries have accelerated liberalization of their national air space and, in some cases, privatized national public airlines. This should put much needed pressure on remaining national and 'regional air transport mmopolies and cartels. In this regard, the recent take-over of both Air Enrique and Air Ivories by Air France (which then has a lion share in passenger, freight and ground services in the subregion) constitutes a setback for the process of creating a more "open and competitive regional sky". 73 Box 7: The Yamoussoukro Deeision: The Liberalization of Access to Air Transport Markets in Africa Definition and Objectives. The Yamoussoukro Decision is an initiative for the gradual liberalization of scheduled and non-scheduled intra-Africa air transport services. The Yamoussoukro Decision was signed in November 1999 and endorsed by the Heads of State and Governments at the OAU Summit in Lome (Togo) in July 2000. The Decision became effective on 12 August 2000. The aim is to establish arrangements for the gradual liberalization of both scheduled and non-scheduled intra-Africa air transport services. The Decision takes precedence over all multilateral and bilateral agreements affecting air transport services between and within signatory States. Granting of Rights and Designation. Article 3 of the Yamoussoukro Decision stipulates that State Parties grant to each other the free exercise of the rights of the first, second, third, fourth and fifth freedoms 1 of the air on scheduled and non scheduled passenger, cargo and/or mail flights performed by an Eligible Airline to/from their respective territories. However, a State Party may limit its commitment in respect to fifth freedom rights for a period no longer than two years. A State Party has the right to designate at least one airline to operate the intra-Africa air transport services (Article 6). It may also designate an Eligible Airline from another State Party to operate air services on its behalf. It can also designate an eligible African multinational airline in which it is a stakeholder and this airline shall be accepted by the other State Parties. EUgibiHty Criteria (Artide 6.9). To be eligible, an airline should: (a) be legally established in accordance with the regulations applicable in a State Party to this Decision; (b) have its headquarters, central administration and principal place of business physically located in the State concerned; (c) be duly licensed by a State Party as defined in Annex 6 of the Chica8> Convention; (d) fully own or have a long-term lease exceeding six months on an aircraft and have its technical supervision; (e) be adequately insured with regard to passengers, cargo, mail, baggage and third parties in an amount at least equal to the provisions of the International Convention in force; (f) be capable of demonstrating its ability to maintain standards at least equal to those by ICAO and to respond to any query from any State to which it provides air services; (g) be effectively controlled by a State Party. Monitoring Body (Article 9). A Sub-Committee on Air Transport of the Committee on Transport, Communications and Tourism has been established. It will be responsible for the overall supervision, follow-up and implementation of this Decision. An African Air Transport Executing Agency will be established to ensure successful implementation of the Decision. Its responsibilities include: (i)to formulate and enforce appropriate rules and regulations; (ii) to promote healthy competition; and (iii) to ensure that consumer rights are protected. World Bank's Involvement and Implementation Statas. The World Bank supports Western and Central Africa to implement the Yamoussoukro Decision through an IDF grant US$ 300,000. 23 Western and Central African countries (ECOWAS, CEMAC and Mauritania) have signed a Memorandum of Understanding (MOU) to set out the guidelines for: (i) implernenting the libera1ization process; (il) strengthening safety and security in the sector; and (iii) sustaining financing of air transport in West and Central Africa. These countries established a Coordination and Monitoring Committee comprising representatives of the signatory states and an Implementation Committee with a limited number of countries (Mali, Nigeria, Guinea, Congo and Central African Republic). In March 2001 at Bamako (Mali), these two committees were formally established. The Bamako meeting also approved an implementation program comprising four themes: • Updating national legislation and bilateral agreements to comply with the Yarnoussoukro Decision; • Developing an action plan to improve safety and security and develop an appropriate technical regulation mechanism to comply with ICAO standards; • Set up a regional economic regulatory body; and • Review the financing of the sector. Note: 1First freedom traffic right: Right of an eligible airline of one colllllIy to fly over the territory of another COIlIltty (Teclmical Freedom); Second freedom traffic right: Right of an eligible airline of one country to land at an airpon of ~other country for teclmical reason; Third freedom traffic right: Right of an eligible Airline of one State Party to put down, in the temtory of another State Party, passengers, freight and mail taken up in the State Party in which it is licensed; f?urth freed~ traffic ri~t: ~ght of an eligible. Air~e o.f one State Party to take on, in the territory of another State Party, passengers, freight and mall for off.loading m the State Party m which It is licensed; Fifth freedom traffic right: Right of an eligible airline of one State Party to carry passengers, freight and mail between two state Party in which it is licensed Source: Background material prepared by Emmanuel Pinto Moreira based on Economic Commission/or Africa, Decision Relating to the Implementation of the Yamoussoukro Declaration Concerning the Liberalization 0/ Access to Air Transport Markets in Africa, December 1999. 74 165. The region must also do more to strengthen and harmonize air safety oversight and security in order to comply with internationally accepted standards. This will require both additional national investment and capacity building at the level of national civil aviation authorities and the development of regional mechanisms to address issues that will be better dealt with at the regional level. Capacity for the economic regulation of the sector needs also to be built within the region through the establishment of a regional economic regulatory body. This body will play a key role in monitoring the development of the market and anti competitive behavior. Finally the legal and institutional framework needs to be updated to ensure consistency with the Yamoussoukro Decision. 166. In telecommunications, integration means the emergence of a unified and competitive sub-regional telecommunication market rather the mere development of common physical infrastructure projects (as in ECOWAS Telecom-I and ll). Both UEMOA and ECOWAS have contemplated some forms of "common telecommunication policies" for member countries. But again, the new strategy should emphasize a "common market" approach rather than common infrastructure projects approach as in the past. In a first step and with the perspective to establish a fully unified market, member states should agree on a harmonization program covering national policies on technical standards, frequency management and control, establishment rules, interconnection and competition policies - especially at the critical junction when national telecommunications companies are being privatized and the telecommunications market liberalized. In a second phase, it would be possible and desirable given the miniscule size of most national markets - to move to a common regional licensing and regulatory agency for a unified and competitive regional telecommunications market. This means that private operators could settle in any particular country and be allowed to provide services to clients across the subregion without restriction. Important analytical work will be needed to this end, which would help coordinate and harmonize national policies and support the design of a West Africa regulatory structure. 167. In energy, ECOWAS has taken the lead, with support from USAID, to prepare the institutional framework for an interconnected electricity market among utility companies, initially in Nigeria, Benin, Togo, Ghana, Cote d'Ivoire, Niger, Burkina Faso and Mali. 70 ECOWAS member countries have formally committed themselves to the so-called "West Africa Power Pool" project by signing a Framework Agreement (Lome, September 29, 2000), and selecting a Coordinating Committee for steering the project. The program has three components. The first will focus on reinforcing the physical integration of national power grids, (with priority to those links in Nigeria and in Benin-Togo) as well as reforming national market policies and regulatory arrangements. The second will pilot a cooperation model for the functioning of the integrated market, including associated transmission and systems control facilities. And the third will be the full scale functioning of the market, with enhanced long term planning for expansion, and the creation of regional regulatory capacity assuring open access by all operators. A great deal of World bank supported analytical work has been going on, with special emphasis on building capacity within countries, as well as establishing a core 70 These are the Zone A countries identified in the 2000 Memorandwn of Understanding of ECOWAS governments, where nwnerous interconnections already exist. The remaining ECOW AS countries are in Zone B, where interconnections are more embryonic. 75 team at the regional level, to deal with the technical, institutional, regulatory, and legal issues involved. 168. ECOW AS has also been promoting, again with support from USAID and in conjunction with private investors, the installation of an offshore natural gas pipeline from Nigeria to Benin, Togo and Ghana (and eventually to Cote d'Ivoire). The Gas Pipeline Project has now matured considerably and reached the definitional stage. Several countries (Nigeria, Ghana, Togo and Benin) have signed an Inter-Government Agreement (IGA, February 2000) setting the legal and regulatory framework for the project. Meanwhile, Sponsor Countries are formulating and harmonizing national programs for gas market development an:l private sector participation in gas distribution. 169. However, the combination of the Power Pool and the Gas Pipeline projects raises important questions. While the benefits of the pipeline could be large, the economics have yet to be fully demonstrated. Clearly, the current or foreseeable demand for natural gas alone in the countries of the subregion may not justify a massive and lumpy investment such as a gas pipeline, because more cost effective means may be available (road essentially) for small-scale gas distribution. It therefore appears that the main use will be for electricity generation. In that case, a more efficient alternative to a gas pipeline may be to expand Nigeria's capacity to directly generate electricity from natural gas, and then to transport such energy via the power pool to the other countries. The problem in this instance would be the excessive dependency of the subregion on energy supply from Nigeria. But ultimately, integration also means mutually accepted and structured interdependency, with appropriate "lock-ins", which would prevent countries from reneging on their respective obligations. Various forms of cross-conditionalities could be used as part of an effective lock-in and "insurance" scheme against policy reversal, as this was done for the pipeline project from Chad through Cameroon. Future analytical work will be needed to examine these questions in order to help establish an optimal subregional energy strategy. 170. Regional aspects of natural resources management: A GEF grant in the Bank is supporting the preparation of four multi-country water conservation and management projects in West Africa (out of 22 in Sub-Saharan Africa), including a Senegal River Water and Environmental Management program intended to strengthen OMVS capacity. The program is jointly supported by UNDP and the World Bank. Meanwhile, countries of the subregion, especially in coastal areas, and the regional organizations such as the CILSS must be encouraged to vigorously tackle the negative intra-regional externality arising from deforestation of the coastal humid zone. The excessive exploitation of the forest is believed to contribute to drought and desertification in the Soudano-Sahelian zone: in essence the short term gains of the coastal area is purchased, in part, at the longer term expense of the poorer hinterland. Deeper regional integration can help establish a framework for a more equitable solution to this issue, provided it is put high on the agenda. 76 B.4 Integrating Key Factor Markets and Improving the Business Environment 171. Financial Markets: A regionally integrated financial sector would offer investors a wider choice of profitable opportunities and financing options - thus, increasing returns on equity, reducing the cost of capital for entreprereurs, and helping attract foreign investment and avoid, reduce, or reverse capital flight. In addition, it would make it easier for fmancial institutions to operate across countries, reducing exposure and mitigating the risks of dealing with separate, small commodity dependent economies and would facilitate intra-regional payments. While a monetary union makes it easier for a unified fmancial market to develop, private banks with branches across the "monetary divide" in the region can go some distance in facilitating cross border activities of private operators, as is demonstrated the success of ECOBANK. 172. Fundamental to an integrated financial market is a functioning intra-regional payments system among banks and clearing system among currencies, and govennnents will need to harmonize policies, respect commitments regarding currency clearing arrangements, bank supervision and prudential regulation. Eventually, the creation of a regional financial supervisory bodies might be a cost-effective proposition given the small size of national financial sectors but this will have to begin with substantial work on harmonizing national supervisory arrangements. Here, the subregion can take valuable lesson from the BCEAO experience, including its Banking Commission and Securities Exchange Commission 173. The national stock exchanges of Lagos, the largest, Abidjan and Accra - are very small and in several degrees deficient essentially because low volume and high cost of transactions remain a handicap on liquidity and profitability. Both the BOAD and the ECOWAS Fund have critical roles to play in stimulating and supporting the emergence of sub-regional financial instruments, including syndicated long-term fmancing, mortgage markets, multi-country leasing companies, and various guarantees schemes. A recent review by IFC identifies a number of areas where action is needed to develop the debt market of the UEMOA, which also applies to ECOWAS as a whole. Among the main issues is the pressing need to harmonize the taxation offinancial products, an agreement signed in 1966 by UEMOA countries but not yet fully implemented, even though it is part of the already well advanced indirect tax harmonization agenda of the Union. 174. The insurance sector is another area, which would benefit from subregional integration thanks to risks reduction as well as scale and competition effects. They are several factors hindering expansion of assurance services across border, as this has been the case of ECOBANK, BOA, etc. One is the absence of a regulatory institution that can effectively monitor compliance with established prudential rules. Another obstacle is the fact that national operators and governments are especially adverse to cross-border activities by national insurance companies. For example the Senegalese government has lately denied permission for the otherwise financially sound national insurance company - AGS (Assurances Generales du Senegal - to extended activities in Cote d'Ivoire (Economica, December 2001, p.98). The subregion should move to facilitate such activities, which would bring scale and competition to the sector, and also increase supply of insurance products (such as life and medical insurances, etc.). 77 175. Labor markets: An integrated labor market is essential if the subregion is to reap the full benefit of accelerated integration. There are three reasons why labor market integration should be given a top priority in the subregion. (i) The fIrst, discussed earlier, has to do with the benefit of "agglomeration". As economies are entering the global competition, it becomes crucial for high-growth "poles" in the subregion to enjoy the benefit of adequate labor supply. Or else, bottlenecks may soon appear, which would raise labor cost and hinder efficiency. (ii) The second is that, with or without formal integration, the aforementioned trend in ''integration by the people" will continue to be an important feature of the subregion, most likely implying unorganized clustering of populations in urban coastal areas. An organized subregional labor market and migration rules would help manage such a process, and thus reduce the risk of xenophobia and ethnic conflicts. (iii) The third reason is that an organized labor market would provide a key redistribution mechanism whereby those living in the poor regions would be allowed access to the employment and income generated in "high-growth poles", thus helping to reduce poverty across the entire subregion. Because of these potential benefits, integrated labor markets constitute one of the key pillars ofthe subregional strategy. 176. They are two distinct aspects to labor market integration. One is the facilitation of labor mobility within the subregion; the other an issue of assuring adequate subregional supply of the high-skilled labor force. The latter is a human resource and capacity development issue, which has already been addressed in previous Sections III.2.B. 177. Facilitating labor migration: ECOWAS provides a framework and a process for facilitating an orderly migration throughout the subregion. Although many important issues still remain unresolved, the subregion has fared rather well in this area. Especially, the no visa requirement and the newly introduced ECOWAS passport constitute important steps in favor of enhanced labor mobility. Countries essenmlly have to implement the ECOWAS labor protocol and to make sure their labor laws are in conformity with that framework. The OHADA framework may also be expanded to include a chapter on labor law, and efforts should be devoted to harmonizing labor and business laws between OHADA and those of the other ECOW AS member countries. The essential issue is the harmonization of residency requirements and work permits to migrant workers from neighboring cOWltries. This is not explicitly dealt with in the current ECOWAS arrangements and would need to be the focus of discussions and harmonization. Ideally, a single work permit for all ECOWAS countries would be the easiest and most effective solution. 178. Harmonizing labor and education standards: Facilitating labor movement in order to the business community to recruit skilled as well as unskilled workers from a broader regional market also requires harmonizing education and labor standards. This includes diplomas equivalency, mutual certification as well as freedom of residence and of work across the region. As integration progresses, social policies (benefits and insurances) may also be harmonized across the subregion. 179. Improving the Business Environment.: The above policies are all important elements of a competitive and an enabling environment for the business sector. Beyond those activities, there are other cross-cutting issues such as harmonizing taxation systems, the legal and regulatory framework, investment framework, etc., which are essential for creating an enabling environment for the private sector to drive integration and spur growth. 78 180. The agenda for taxation harmonization is indeed well advanced for indirect taxes but hardly begun (beyond proposals for harmonizing taxes on fmancial income and to harmonize investment tax incentives). The region (primarily UEMOA) is also tackling two other areas of the business environment where regional action is warranted: investment incentives, and competition Harmonizing the framework for private investment incentives :8 dictated by a common external tariff and by other fiscal harmonization, although to date cOWltries appear Wlwilling to abandon their special regimes, despite their commitment to a common tariff, and have not agreed on a UEMOA common investment code or advanced on a similar framework for ECOWAS. But experience has shown that fiscal exemption or tax reduction of traditional investment code adds distortion, complication and administmtive cost to the external tariff structure, and in fact does little to spur investment. The subregion should therefore consider simpler and more effective alternatives, such as accelerated depreciation scheme to encourage new investment. This would mean establishing an investor "charter" that would automatically apply to all' investors and would eliminate fiscal incentives altogether (except perhaps accelerated depreciation). 181. Competition Policy. UEMOA has also sought to establish a common approach to competitWn po/icy, with a view to preventing or correcting anti-competitive behavior within and between countries, and including government actions for example in the area of public sector procurement. Accordingly, companies that are established within the subregion may now be eligible to participate in competitive biddings for public sector works that used to be restricted to national operators. Evidently, some aspects of this policy are contentious - such as the issue of public sector procurement. But as argued all along, the most important gain from integration is "scale and competition" and the resulting effects in terms of cost reduction and enhanced global competitiveness. Therefore, it is essential that the subregional framework be used as much as possible to buttress national competition policies, and thus foster competition in OOout all sectors and across borders within the subregion. This means that ECOWAS will also have to make stride in the direction of a region-wide competition policy in support of the building of an opened and unified subregional market. 182. Regarding the legal framework and working of the judicial systems, the OHADA initiative has been welcomed and, in many ways, may provide a good model for cOWltries to converge toward. While encouraging harmonization, however, it must be noted that uniformity of laws and regulations, is not necessary (or the ED would not have been possible); transparency, equitable application of rules, and effective arbitration by the regional institutions are. m.4. Strengthening Partnership. 183. Enhanced cooperation provides institutionalized solidarity mechanisms that would increase cOWltries' capacity to network and to develop strategies for external relations. There are two ways this could be formalized. One is through formal regional institutions such as BCEAO, the UEMOA Commission and tre ECOWAS Secretariat, which could represent the subregion in multilateral forums. The other is a more informal setting for "best practice exchange and knowledge sharing" among public as well as private sector actors, which would require separate individual initiatives (ex. the West African Enterprise Network). 79 184. Using Regional Entities as Instruments for a Common Effective External Relations. As integration progresses, many "common" policy discussions with multilateral organizations such as the World Bank Group and other donors may occur through the auspices of subregional organizations rather than on a country by country basis. As said before, this has already been happening for monetary policy issues for UEMOA countries with BCEAO, and is now being extended to trade and even fiscal and investment policy matters through the Commission. In time, issues related to foreign aid and external debt management (such as HIPC initiatives) may be handled in a similar fashion. This would provide appropriates lock ins, pint commitments and cross-conditionalities while reducing the administrative cost of managing these programs country by county. Likewise, with a reinforced capacity, subregional bodies may be used to devise a common strategy for dealing with other regional blocks, or negotiating on behalf of a multitude of small countries in important world forums. This would help countries to have their voices heard and their interest protected during key multilateral forums. For example, negotiation with EU in the REPAS framework may take this fonn, as that has already happened for Southern Africa. The same can be done for the WTO. 185. Using Regional Agencies for Facilitating Networking and Best-Practice Exchange. In a more infonnal fashion, regular encounters and exchanges (through seminars, training programs and roundtables) may allow countries and private groups to share experiences, to learn from best practices and to commit to accelerating reforms. A noteworthy case in point is the West Africa Enterprise Network, a private sector initiative that has a promising best practice exchange program. The UEMOA Commission and the ECOWAS Secretariat have also proven quite effective in bringing together government officials and decision-makers for 7l discussing common policy issues • 186. Many areas of national policy may benefit from ''best-practice exchange facilitation", especially privatization and utility regulation as well as macro policies (monetary and fiscal administration). Most importantly, social goods that are difficult to secu:e through market forces (ex: basic education, basic health care, social security, extension of infrastructure services to rural areas) are domains where best-practice exchange programs may be most worthwhile for the sUb-region72. Regional activities should seek to encourage hannonization toward the "sub-regional best". This may be best accomplished by promoting a competitive environment that induces government, suppliers and consumers to search for best practices. For example, a sub-regional consumer guide, ranking perfonnances for providers of education, health, utilities, transport, and grading countries in tenns of governance, democracy, etc, would greatly contribute to creating a competitive environment that would be propitious for broad based human deve lopment. As noted before, this would be a part of an integrated information market within the subregion. 71 This is how the Commission has developed most of its so-called "Common Policy" agenda: Trade policy, macro-convergence, industrial policy, agricultural policy, telecom, health etc. 72 For example, countries may learn from one-another how to best manage public school resources. The Burkina style double-rotation system may significantly help rationalize the use of public school facilities in Cote d'Ivoire. Burkina Faso may learn from Cote d'Ivoire how to design an effective "rural-telephony" system, by combining private and public resources. 80 IV. Conclusion: How Countries and Donors Can Support Integration in West Africa 187. To summarize previous discussions, a successful integration in West Africa essentially means (i) nurturing closer ties among countries and private operators for addressing common issues, (ii) creating an open and unified economic space, (ii) facilitating the emergence of a diversified community of people, and (iv) fostering convergence in values and political systems across the sub region. Moving forward with this bold agenda would require strong commitment and leadership from governments, an active participation from private operators and the civil societies, as well as a concerted and coordinated support from the donor community. 188. As indicated before, West Africa is not a confederation but a mosaic of sovereign countries with vastly different conditions, but also facing similar development challenges as well as truly "regional commons". Many such issues are best handled through national development strategies and programs. But, as argued in this paper, because of important cross border externalities, countries can gains a whole lot from "structured togetherness" and effective "collective actions". In that sense, a subregional strategy would significantly help the effectiveness of national programs and thus accelerate the pace of economic diversification, growth and poverty reduction across the entire subregion. 189. But for the regional activities to effectively reinforce the national programs, the subregional strategy must be in line with the broad goals and means of countries' strategies, namely accelerate growth for poverty reduction relying on the open market and the private sector. In turn, national programs and strategies must also be aligned within the subregional framework, and the various actors - government, private sectors, donors etc. - must interact in ways that simultaneously advance the national as well as the subregional agendas. 190. To this end, it is worth stressing a number of important points. First, regional integration must not be thought of as a new or an alternative development paradigm for the subregion. Rather, it is an instrument for "collective actions" that would help countries to capture externalities and, hence to more effectively achieve the goals of economic transformation, growth and poverty reduction. Second, regional activities must conform to the general philosophy that has inspired country development strategies in the global age, namely the centrality of competitive markets a continuum stretching from the national to the subregional and the global levels - as underpinning an environment favorable to private sector-led growth . .A. Countries' Responsibilities. 191. From the above remarks, it is essential that countries remain the primary focus of regional activities, that they bear responsibility for demanding such activities and formulating a coherent national/subregional policy mix. In a world where countries are the key policy: making and organizational entities, this country- focus regional approach is both necessary and desirable. Experience shows that regional organizations are more likely to be viable where individual members have sound policies and administrative capacity to benefit from sub- 81 regional opportunities. Thus, efforts to strengthen development prospects in individual countries are themselves a necessary precondition for accelerating subregional integration. 192. At the same time, government must also pay due attention to agreed subregional policies when formulating national programs, making important policy and investment choices, and mobilizing external support. Governments are increasingly mindful of that and many have responded by creating "ministries of regional integration" in order to enhance dialogue and discuss cross-border issues. But that is hardly enough, as key decisions and policy choices are made not by "ministries of integration or cooperation", but at other levels, especially in the Ministries of Economy and Finance. Therefore, governments would need to move beyond administrative "gimmicks", and truly imbed subregional agreements in their national agenda while also designing country programs to take advantage of the opportunities of the broader and competitive subregional economy. In essence, countries as well as private operators must work hard to 'Cooperate" where justified - and to "Compete" in the open and unified regional economic space. 193. Finally, as said before, the fTivate sector and the civil society must be involved in formulating the national as well as the regional strategies. For example, private sector representatives - such as Chambers of Commerce - must be important vehicles for integration. Likewise, the civil society has also to support the integration process. Lack of information and open debates on regional initiatives and policies often feeds insecurity and has been one important cause of xenophobic attitudes that have hampered integration efforts in the subregion. B. The Regional Organizations. 194. UEMOA and ECOWAS: Ultimately, ECOWAS should become the principal interlocutor for the subregion as a whole. But until such a time, countries and the donor community will need to maintain a "multi track approach", consistent with the principles of "gradualism" and ''progressivity''. First they need to continue building on what has already been accomplished with the UEMOA Commission, while accelerating the merger between UEMOA and the other ECOWAS countries. This includes among other things regular consultation between the two entities in order to encouraging convergence (in rules, criteria and methods), and work toward the progressive merger of surveillance activities. Second, they need to simultaneously encourage other "integration projects at work" (such as the Nigeria Ghana dual track initiative), as they become credible. Third and most important, sector-level work must be accentuated, such as in air-transport, telecom, etc., but also in health and education. Both t~ UEMOA Commission and the ECOWAS Secretariat must resist temptation to "embrace it all", leaving sector-specific issues to individual initiatives and more specialized agencies. c. Donors' Responsibilities. 195. Assisumce strategies: Carrying forwards the subregional agenda also requires rethinking country assistance strategies and regional integration assistance programs by donor agencies and multilateral organizations. The central question is how to "entice" countries to 82 enhance supply of subregional goods, recognizing the potential benefits, but also the fact that, by their very nature, such activities generate "externalities" which individual countries do not fully capture. 196. A starting place, consistent with the country-focus approach, is the national programs and the country policy dialogue. Donors must build incentives in country programs for subregional activities, and in the policy dialogue, insist that countries abide by their subregional commitments. First and foremost, this implies providing adequate resources to countries to meet agreed subregional obligations and to absorb the cost of integration (e.g. loss revenues from the implementation of a Custom Union, or hannonization of taxation systems, implementation of agreed refonns such as OHADA, etc.) Second, it involves assisting countries to give due priority - when justified - to national investments that do more to link countn"es together, as compared to those which are purely national. Examples are national facilities with large subregional use such as ports, airports, and specialized institutions for higher education and health care. Other cases discussed earlier are national portions of "regionally coordinated infrastructure investment projects", such as "interstate" highways, power lines and interconnections. 197. Here, important contributions may come from the analytical work. For example, standard cost-benefit analysis of government programs and projects typically deals with "fmancial", as well as broad "economic" and "social" net benefits, but only in the "national" framework. Admittedly, benefits and costs become increasingly difficult to quantify as one moves from the "financial" to the "social" approach. Those difficulties notwithstanding, the latter approach has become the main framework for important national investment decisions; and increasingly, the impacts of such investments on key international public goods - such as the environment are being factored into the national CB analysis, and appropriate measures are imbedded in the project so as to induce countries and private operators to "internalize" those costs or benefits. This approach is also becoming standard practice for large multicountry investment projects, as this was recently the case for the oil-pipeline project from Chad to Cameroon. Such a framework should be generalized and extended to national projects with cross-border externalities. But, as argue earlier, the most important rewards from integration are the so-called "dynamic gains", such as scale and competition. Therei>re, the challenge, from the analytical standpoint, will be to design a computational framework (computable models) which would not overlook those potential and dynamics gains stemming from enhanced cooperation and deeper integration. As noted earlier, a dynamic CGE approach could be one answer, along with the "subregionally-conscient CB analysis" of national investment projects. 73 198. Another scheme involves working directly within the framework of "integrated projects" and providing direct support to regiona I entities. For example, most "market 73 For example, CGE models have been used to assess the gains from trade integration for UEMOA countries. But, these were country-specific and not integrated subregional models; and by the authors' own admission, they were essentially static, and thus could not explain much. (See Decaluer at aL 1999). The challenge is to develop country -models with important dynamics, such as economies of scale, distinguis hing human capital from infrastructure capital and others, as key determinant of the production frontier. Such models can then be "integrated" in a multilevel programming exercise in order to provide a framework for analyzing various national or integration programs and projects. 83 integration" activities and related "cross-cutting issues" could be progressively handled at the supranational levels, with groups of countries as opposed to country by country. As said before, this is already done for monetary policy and trade policies in UEMOA (respectively by the BCEAO and the Commission). And the EU has been using this scheme to deal with ''bloc lateral" trade issues (as in the Cotonou Agreement). Direct analytical as well as financial support may re given to regional entities for carrying out such "integrated activities". An important and related activity is institution building in support of market integration, such as regulatory agencies for telecom, a regional safety and security agency for air-transport, etc. Truly common infrastructure development, such as a gas pipeline would also fall into this category. But since these are essentially investments for commercial activities, private sector financing must be thought, and country and donor agencies' involvement required only as part of a risk guarantee scheme. 199. Financinll Instruments. The nature of subregional activities implies low direct financial return to individual countries. Thus, creative fmancing scheme must be developed to support such ~tivities. In accordance with the assistance strategies outlined above, there are two main fmancing instruments, (i) country;.level "lending", and (ii) direct "lending" to an integrating agency. 200. Country-level lending. Since the bulk of the costs and the financing for regional integration is at the country level, donor agencies and multilateral lending institutions could use concessionallending (such as the World Bank IDA credits) for various "integrating". Most of these are likely to be in infrastructure (roads and power). What is critical is that although primarily national, such projects be designed taking into account the subregional and not simply the national need, and that cross-conditionalities be built in the financing scheme so as to facilitate tm joint or sub-regionally coordinated realization of the projects. In some cases, it may make sense to prepare a subregional umbrella credit, with appropriate cross conditionalities, which eligible countries would access to fmance their share of the subregional program, along the lines of the World Bank Africa Multicountry Aids Program. This would also assure coherency across the subregion and simplify the preparation and approval of credits for participating countries. In other cases, separate but parallel and simultaneous country;. level concessional credits may make the most sense, as in the case of the COMESA export guarantee agency. 201. Direct lending to subregional organizations. Direct lending by donor agencies and multilateral institutions to subre~ional organizations is likely to remain limited because of credit-worthiness consideration. ':I A justification for credit-worthiness may be made for concessional credits to the UEMOA Commission and the Executive Secretariat of the ECOWAS as both now receive Sl.bstantial income from earmarked duties on imports from outside their zones. However, as neither institution needs significant financing for its own work, the purpose of such credits would be to support key multicountry efforts, with either the UEMOA Commission or the ECOWAS Executive Secretariat serving as a kind of umbrella executing agency. For example, such credits could be used to finance a subregional 74 For example. the World Bank has made three lines of credit available to the West Africa Development Bank (BOAD) and recently approved project to help the West Africa Central Bank (BCEAO) put a new payments systems in place. But these IDA lending are the exception rather than the rule. 84 scholarship program, in support of centers of excellence, or to finance contributions to a subregional road maintenance fund designed to assure that critical subregional transport links remain in good condition. 202. Lending to multicountry projects. Many of the key subregional productive activities will increasingly be private, and the goal of the subregion is to create a unified economic space where companies can opemte across borders without constraint. Such activities are financially profitable so that private sector lending is possible, provided appropriate guarantee to reduce country risks. The donor and multilateml agencies can help in such situation. Especially, the World Bank Group (IFC) will have an essential role to play by providing loans or acquiring equity in public or private companies involved in subregional activities (such as power producti:m, gas transport and distribution, telecommunications services, transport services). In some cases, private companies may need only risk insumnce, which IDA could potentially provide for risks against the collapse of subregional agreements and the reversal of subregional policies, and which MIGA can provide against political risk. However, as IDA guarantees require a counter guarantee from concerned governments, a key issue is whether a subregional organization can provide the counter guarantee in lieu of individual governments. A similar question arises in the case of MIGA, as no subregional authority is a member of MIGA (and in the case of West Africa, not all countries have yet joined MIGA). 203. Grants. They are an ideal instrument to fmance cross-border and multicountry activities, where the beneficiary may not be credit-worthy and where individual credit agreement with participating governments is administratively burdensome. The EU has provided a substantial amount of resources in this form to support UEMOA work within the PIRfPARCI&II framework. The World Bank has also provided at least one subregional IDF grant (to the UEMOA Commission to monitor trade policy) and seveml more are being requested (agriculture policy harmonization, OHADA). Likewise efforts are underway for seeking two grants from the Private-Public Infrastructure Advisory Facility (PPIAF), one to support the formulation of a subregional telecommunications policy, the other to support the formulation of gas marketing stmtegies and private sector participation in gas distribution in countries involved in the West Africa Gas Pipeline Project (Benin, Ghana, Nigeria and Togo). 204. A Committee of Partners for ECOWAS. As in the case of individual countries (consultative groups, round tables, etc.), the donor community may organize a West Africa Group in support of accelemted integration. A similar initiative exists to assists the UEMOA Commission, which includes the EU, France, the AIDB as well as the World Bank Group. The Donor Group meets periodically with the Commission and acts as a clearing house for analytical work and technical assistance. Such an organized consultative framework should be developed for ECOWAS and a West Africa Group created to assist the Secretariat. This could include the AIDB, the ECA, the Club du Sahel, the EU, the World Bank Group, as well as USAID and France. The Committee will help the Secretariat to formulate the regional strategy, and also act as an advocacy group in support of the agreed subregional agenda. 85 86 ANNEXES 87 A-Boxes Box AI: W AEMU, A Summary of Tariff Reform From From From July 1, 1998 January 1, 1999 January 1, 2000 Non W AEMU Import • External tariff Category 0 Current rate o o Category I Current rate Maximum 5% 5% Category 2 Current rate Maximum 10010 10010 Category 3 Maximum30% Maximum 25 % 20% • Regional tax 0.5% 0.5% 1% • Statistical tax* Curro rate or less Curro rate or less Max. 1% • TDP ( July 1, 1999) Max. 20% Max. 15% • Tel ( November 1999) 10% 10% (TOTAL Max.) [1.5- 46.5 %] [2- 37.5%] Intra-WAEMU tariff • Local agricultural o o o products Approved industrial 60 % preference 80% preference 100% preference products of origin Non.approved -5 percentage points ·5 percentage points industrial products of origin Other products no preference no preference -Regional tax .Statistical tax • TDP (Taxe Degressive de Protection) : The degressive protection tax. Introduced in Burkina-Faso, Cote d'Ivoire and Mali at the maximum rate of 20 %, on a list of 22 products representing 42 lines ( notably edible oil, wheat flour, rice, sugar, milk, cigarettes and matches). It is lowered by 5 points each consecutive year, until its elimination in December 31,2002. TCI (Taxe Compensatoire a l'Importation): The Compensatory import levy, which went into effect in November 1999, covered numerous agricultural, fishing and animal products, totaling 66 tarifflines. Not effective in Cote d']voire and other countries for administrative reasons . • Statistical tax : rates varied from 1 percent to 6 percent. Source : IMF, WAEMU Commission, WBI AFRMacro 4 88 Box A2: The African Growth and Opportunity Ad (AGOA) On May 18, 2000, the "Trade and Development Act of 2000" which included the Africa Growth and Opportunity Act (AGOA) was signed. S Objectives • Expand the Africa's access to the USA markets and improve the ability of African nations to increase growth and ease poverty; • Increase trade between the US and the sub-Saharan Africa; • Expand the US assistance to regional integration efforts in sub-Saharan Africa; • Reduce tariffbarriers and NTB to trade; • Negotiate trade agreements. Eligibility Criteria} Countries are eligible to receive benefits of AGOA if they are determined to have established, or are making continual progress toward establishing the foUowing: • A market based economy (that protect private property rights, incorporates an open-rules-based trading system, and minimize government interference in the economy); • The rule of law and political pluralism (POlitical pluralism, equal protection under the law); • The elimination of barriers to U.S. trade and investment (provision of national treatment and measures to create an environment conducive to domestic and foreign investment, protection of intellectual property, resolution ofbilareral trade and investment); • A system to combat corruption (such as signing and implementing the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions); • Economic policies to reduce poverty (increase the availability of health care and educational opportunities, expand physical infrastructure, etc.); • Protection of human rights and worker rights (the right of association, the right to organize and bargain collectively, etc.); • Elimination of certain chDd labor practices; • Countries must be GSP eligible in order to receive AGOA's trade benefits. But GSP eligibility does not imply AGOA eligibility. The country does not engage in activities that undermine United States national security or foreign policy interests and does not engage in gross violation of internationally recognized human rights or provide support for acts of international terrorism and cooperates in international efforts to eliminate human rights violations and terrorists activities. AGOAll The terms for AGOA II being considered inter alia are the following: • Confirming the duty-free status of knit to shape apparel if this has not been resolved by administrative action in the interim; • Correcting the mistake in the AGOA provision concerning sweaters made of merino wool of 18.5 microns or finer; • Removing from the tariff rate quota (TRQ) apparel made in Africa from African-origin yarnlfabric as a way to de facto increase the size of the TRQ and at the same time provide incentives for use of African yarnlfabric; • Expanding the folkloric and handmade provisions of AGOA to include textiles and apparel made in traditional designs or where handmade elements contribute a significant portion of value; • Modifying the de minimis exception so that it would apply to 7% of either the value or weight of apparel that otherwise is eligible for duty-free; • Creating a new short supply procedure that would permit duty-free access for African yarns and fabrics that are not made in the United States; and • Raising the $1,500 per capita cutoff between LDCs and non-LDCs so that more countries (probably just Botswana and Namibia) would be eligible to use third-country fabric. Source: Background material prepared by Eml1Ulnuel Pinto Moreira 89 Box A3: A fragmented Regional Sky For long, the Western and Central Africa region has been governed by the Yaounde Treaty (1961)1 which conferred a monopoly in much of the region to Air Afrique as well as a restrictive web of bilateral agreements. This rigid regulatory framework has hindered competition, which has resulted in low traffic volume, high price and low quality of services. • A low density market: Air transport in the Western and Central Africa region is characterized by a low density market with a few concentrated pockets of traffic 1. The main carrier Air Afrique, was mainly interested in its long-haul European services (75% of revenue for 45% of passenger traffic) and operated intra-regional traffic primarily as extensions of long haul services. Because of network limitations, national companies can compete only on a limited number of routes. For example, Burkina Faso has not been able to capitalize on the central location of the country to become a regional hub. Table 1: Traffic Concentration - Weekly Seat Departures City I tRegional IIExtra-regional Lagos 7478 15214 iAmne 2082 1254 Abidjan 5109 12838 Nouakchott 1789 1688 Aceta 3740 5352 Banjul 1046 773 Dakar 2683 11020 Freetown 854 737 Conakry 2531 1755 Ndjamena 707 997 Bamako 2457 3391 Niamey 659 1567 Douala 2382 4076 Bangui 360 754 Cotonou 2087 1976 Monrovia 150 100 • A high cost and unreliable quality of services: Both intra-regional and extra -regional tariff remain extremely high compared to other developing countries for a poor service delivery characterized by many delays and stops. Table 2 : Yield Com,., World BeJsllmark Yield 90 Box A4: The Cotonou Agreement The new EU-ACP agreement, the so called Cotonou Agreement follows the 25 years of Lome Conventions. It was signed in Cotonou (Benin) on June 23,2000. Three areas of cooperation have been defined: politics, economics and trade, and finance. Objectives. The Cotonou Agreement seeks to promote and expedite the economic, cultural and social development of the ACP States, with a view to contributing to peace and security and to promoting a stable and democratic political environment (Article I). The ultimate goal of this partnership is to reduce and eventually eradicate poverty through the objectives of sustainable development and gradual integration of the ACP countries into the world economy. Sustainable economic growth, developing the private sector, increasing employment and improving access to productive resources are therefore major objectives of this partnership. To achieve these objectives, an integrated approach taking into account at the same time of the political, economic, social, cultural and environmental aspects of development will guide development strategies that EU will initiate in each ACP country. The agreement also encourages regional and sub-regional integration processes which foster the integration of the ACP countries into the world economy in terms of trade and private investment. Cooperation Strategies Cooperation strategies will focus on four areas: economic development, social and human development, regional cooperation and integration, economic and trade cooperation and some cross-cutting issues (gender, environment and natural resources, and institutional development and capacity building). 1. Economic development. In this area, the partnership will support • Investment and private sector development by creating a favorable environment for private sector investment; and the development of a dynamic, viable and competitive private sector; • Macroeconomic and structural reforms and policies by supporting ACP efforts to implement a) macroeconomic growth and stabilization policies; and b) structural policies designed to reinforce the role of the different actors; • Economic sector development through the support to sustainable policy and institutional refonns and the investments necessary for equitable access to economic activities and productive resources; • Tourism by promoting the development of the tourism industry in ACP countries and sub-regions. 2. Social and Human Development. In this area, cooperation will focus on • Social sector development by supporting ACP States' efforts to develop general and sectoral policies and reforms. • Youth Issues by supporting the establishment of a coherent and comprehensive policy for realizing the potential of youth so that they are better integrated into society. • Cultural development by preserving, promoting cultural values and identities to enable inter-cultural dialogue. 3. Regional Cooperation and Integration. Cooperation will aim at: • developing and strengthening the capacities of regional integration institutions and organizations set up by the ACP States to promote regional cooperation and integration; • fostering participation of Least Developed Countries (LDC) ACP States in the establishment of regional markets and sharing the benefits therefrom; • implementing sectoral refonn policies at regional level; • liberalizing trade and payments; • promoting cross-border investments both foreign and domestic, and other regional or sub-regional economic integration initiatives; and • taking account ofthe effects ofnet transitional costs ofregional integration on budget revenue and balance of payments. C~operation will also address common problems, including: infrastructure particularly transport and communications; the env:rro~~t~ ~ater reso~ce management and eneflQ';. h~th, education and training; research and technological development; regIonal Imtiatlves for disaster preparedness and nutlgation; and other areas, including arms control, actions against drugs, organized crimes, money laundering, bribery and corruption. 91 4. Thematic and Cross-Cutting Issues. Three main issues will be addressed. These include: • Gender issues. The objective will be to help ACP countries strengthen policies and programs that improve, ensure and broaden the equal participation of men and women in all spheres of political, economic, social and cultural life; • Environment and natural resources. In this area, the partnership aim at: (i) mainstreaming environmental sustainability into all aspects of development cooperation and support programs and projects implemented by the various actors; (ii) building and/or strengthening the scientific and technical unit human and institutional capacity for environmental management for all environmental stakeholders; and (iii) supporting specific measures and schemes aimed at addressing critical sustainable management. • Institutional development and capacity building. The partnership will support the efforts of ACP States to develop and strengthen structures, institutions and procedures that help to: (i) promote democracy, human dignity, social justice and pluralism; (ii) promote universal and full respect for and observance and protection of all human rights and fundamental freedoms; (iii) develop and strengtmn the rule of law; and improve access to justice; (iv) ensure transparent and accountable governance and administration in all public institutions. Source: Authors 92 BoxA5: World Trade Organization (WTO) When the international community embarked in the Uruguay ROWld (UR) negotiations, the need to create an institutional structure to oversee the world trading system became increasingly evident. The result was the WTO. Definition and Mission. The WTO is a new international organization that aims to oversee and coordinate the functioning of the multilateral trading system. It provides the institutional and legal fOWldation for the multilateral trading system. It entered into force on January I, 1995. Structure. The WTO is headed by a Ministerial Conference, composed of all WTO members, which meets once every two years. However t is the GmeraI COWlcil that is in charge of the management of the organiza~on. ~ General COWlcil has also two specific tasks: it acts as the Dispute Settlement Body and serves as the Trade Policy Review Body. Basic Functions. The WTO Agreement has five functions (Article III): • To facilitate the implementation, administration and operation and further the objectives of the multilateral and plurilateral trade agreements; • to provide a forum for multilateral and plurilateral trade negotiations; • to settle disputes that may arise between members; • to conduct trade policy reviews; • to cooperate with the World Bank. and the IMF with a view to achieving coherence in global economic policy making. Three constituent elements. 1/ A new set of GATT disciplines. The use of quantitative restrictions (QRs) is in principle prohibited. Developing cOWltries that have a per capita GNP above US$l,OOO is subject to GATT's prohibition on export subsidies. A signatory COWltty to GATT agreement must remove all trade-related investment measures (TRIMs) such as local content requirements that violate GATI' s national treatment principle or its prohibition on QRs. 21 A new General Agreement on Trade in Services (GATS). Under the GATS, nondiscriminatory principles are also extend to measures affecting trade in services. Six types of market access restrictions are prohibited: *the number of service suppliers allowed; *the value of transactions or assets; *the total quantity of service output; *the number of natural persons that may be employed; *the type of legal entity through which a service supplier is permitted to supply a service; *participation of foreign capital in terms of a maximum percentage limit of foreign shareholding or the absolute value 01 foreign investment. Under 1he GATS, each member state negotiates which service sectors will be subject to market access and national treatment disciplines, and what measures will be kept in place for that sector that violate market access. 3/ A new Agreement on Trade-related InteUeetuaJ Property Rights (TRIPs). The TRIPs requires WTO members to protect four types of intellectual property: trademarks (to at least seven years); geographical indications; industrial designs and layout designs of integrated circuits (to at least ten years). WTO and Regional Trade Arrangements: Conftict or Compatibility? The fundamental principle of the GATTIWTO in non-discrimination incorporated in the most-favored-nation (MFN) rule. This rule requires a signatory (member) COWltty to extend to all other contracting parties any advantage, favor, privilege and immunity affecting trade charges that it grants to another contracting party. This principle may at first view contradict the establishment of regional trade arrangements (RTAs) between signatOJ)' coWltries to the GATTIWTO. However, GATTIWTO explicitly allow the creation of RTAs provided that these arrangements respect certain rules. This constitutes the most important exception to the principle of non-discrimination. Article XXIV of GATI IWTO provides a number of rules governing such trade agreements including: • Parties to a RTA must eliminate duties and other restrictive regulations of commerce with respect to "substantially all" trade between the constituents customs territories (paragraph 8). • The level of external protection applied to third coWltries by signatories to an RTA, must not "on the whole" be higher or more restrictive after the formation of the RTA compared to the level prevailing in each of constituent territories prior to the formation of the RTA (paragraph 5). • All RTA agreements are to be promptly reported to the WTO for examination by WTO members, which may make recommendations (paragraph 7). Member States of a RTA must adopt rules that minimize any possible harmful impact of such RT A. 93 B. STATISTICAL ANNEX 94 Table 1 - UEMOA at a glance 11f712000 Low & POVERTY and SOCIAL middle WAEMU Income Development diamond· 1999 Population, mid-year (miNions) 68.3 5,083.8 Ufe expectancy GNP per capita (AIiIllS method, US$) 380 1,240 GNP (AliBS method. US! bllHonsJ 26.2 6.310.8 A_e annual arowth. 1993-99 2.7 1.5 Population (%) GNP Gross Labor force (%) 2.6 1.8 per primal'\' IIIost _I utlmate (latest y..- available, 1993-99} capita enrollment Poverty (% of pop;J/ation ""low n&flon81 poverty line) Urban population (% d total pop;J/&fIon) 33 41 Ufe expectancy at birth (_) 48 65 Infant mortality (Der 1.000 live births) 99 59 Chid malnutrition (% d children under 5) 31 Access 10 safe water Accees 10 safe water (% d population) 55 73 Illiteracy ('Yo ofpop;J/ation _15+) 65 25 -PUEMOA Gross primary enrollment (% of scI!ooh9ae DODU/aIlonJ 63 107 Mala 74 110 --1.Dw & middle income group Female 51 101 KEY ECONOMIC RAnOS and LONG-TERM TREMOS 1979 1989 1998 19ft Economic""'... • GOP (US$ billionlS) 19.3 24.0 27.1 27.3 Grcas domestic investment/GOP 22.8 13.3 18.7 17.9 Trade Exports of goods and sarvicesiGOP 28.7 25,4 32.3 31.9 Gross domestic savinQSIGOP 12.7 8.3 15.4 14.5 Gross national $IlVingslGDP 3.1 12,0 10.8 Current account balance/GOP -7.9 -9.7 -7.1 -6.8 Domestic Investment Interest paymenlslGOP 1.9 2.8 29 27 Savings Total debtlGOP 46.0 106.0 107.1 Total debt service/exports 16.1 27.3 21.6 Present value of debllGDP 80.7 Present value of debt/exports 236.0 Indebtedness 1979-89 1989-99 1998 19ft (average Bnnus} growth) ---UEMOA GOP 1.1 3.1 4.5 3.7 GNP per capita .,2,1 0.6 2.0 1.1 --Low & mldri/a Income group Exports of goode and services 1.9 3.5 2.1 3.4 STRUCTURE of the ECONOMY 1979 1989 1998 19ft Growth oIl~.nd GDP (%) (%ofGDP) :!O Agriculture 32.8 32.3 31.1 30.4 Industry 16.8 19.6 22.6 23.1 :20 Manufadurlncl 8.7 14.0 15.1 15.6 10 Services 50.4 48.0 46.3 46.5 0 Private consumption 71.7 75.9 73.6 73.9 10 Il9 General government consumption 15.7 15.8 11.1 11.6 ~I _GOP Imports of goode and services 38.9 30.4 35,6 35.3 1979-89 1989-99 1998 1999 G.-th of upon. and Importo> (%) (_rage annual growth) Agriculture 1.7 3.1 3.9 2.8 20 Indusirv 3.6 4.4 ao 5.4 Manufacturing 3.3 3.9 9.2 5.8 10 Services 0.2 25 3.3 3,6 Private consumption 1.1 2.6 5.4 3.3 .,., 98 Il9 General Qovernment consumption 1.4 0.8 .(l.3 6.7 Gross domestic Investment -3.7 5.0 13,9 .(l.4 10 Imports of goods and services .(l.9 22 5.1 1.7 -'"ElcpoIts -Imports Gross national product 0.9 3.5 4.8 3.7 Note: 1999 date are preliminary estlmatas. This table was produced from Ihe Development Economics central detabase. WAEMU (West African Economic and Monetarv Union) includes Benin. Burklna Faso, COte dlvoi,e. Guinea-Bissau. Mall, Niaer. Seneaal. and Tago. • Th& diamonds show four key indicators In Ihe country (in bold) compared with its incom&-group average. If data are mlsaing, the diamond will be Incomplete. 95 WAEMU PRICES and GOVERNMENT FINANCE 1979 1989 1988 1999 DomNtJc prlces InftaIIon (%) (%ch8nge) Consumer prices 9.7 0.5 3.0 2.0 Implicit GOP deflator 7.7 1.2 3.1 1.8 Go_t "".nce (% of GDP, Includes ctJf7Ilnt grants) Curren! revanue 17.8 18.1 17.0 91 95 9. 97 98 Current budget balance -5.6 4.4 2.6 $~4$-#MGDP deflator -o-CPI Overall surplus/deficit -10.8 -2.9 -3.9 TRADE 1979 1989 1988 1999 (US$ millions) Import IewhI (USS min.) Total exports (fob) 5,047 7,029 7,143 Manufactures 1,115 1,523 1,644 Totalimports (cif) 5,618 7,694 8,001 Food 99 1,148 1,534 1.488 Fuel and enarg~ 105 734 987 1,141 Capital goods 217 1,154 1,840 1,928 Export price index (1995=1001 61 122 115 Import price index (1995=100) 54 94 97 • Exports .Impof!o Tenns oflrade (1995=100) 112 130 119 BALANCE of PAYMENTS 1979 1989 1988 1999 (US$ millions) Exports of goods and services 5,467 6,167 8.801 8,875 Imports of goods and services 7,455 7.139 9.719 9,676 Resource balance -1.989 -971 -918 -801 Netincoma -835 -1,681 -1,025 -1.004 Nat currant lranstal"S 295 329 14 -63 Current account balance -1,523 -2,324 -1,929 -1,863 Ananclng Items (nat) 1.333 2.839 1,854 1,641 Changes In net reserves 190 -315 75 223 "".mo, Rasarvas Including gold (US$ millions) ConvEll'SiOn rate (DEC, /oca/IUS$) EXTeRNAL DEBT and RESOURCE FLOWS 1979 1989 1988 1999 (US$ 111I11ions) CompcMtlllon of 19118 dIbt (USS mID.) Total debt outstanding and disburaad 8,890 25,443 29,033 2370 950 IBRD ZT2 1,760 950 IDA 382 2,383 6.440 Total debt service 946 1,816 2,012 IBRD 31 277 215 IDA 3 24 85 Composition of net resource flows Official arants 579 un 1.569 1515 0fflcIa1 creditOrs 622 1,015 369 Private aaditors 893 87 -300 Foreign direct Invastmant 188 43 527 PortIQIio equitV 0 0 6 World Bank program Commitments 193 647 638 A-IBRO E-BlIate"'1 Disbursements 150 395 500 9-IDA D-Olhermoltital_ F - PrMaIe Principal repayments 8 139 187 C-IMF G - Short-term Nattta.w 142 257 313 Interest payments 25 162 113 Net lranstars 117 95 199 Nota: This tabla was produced from lhe DeMiIopment Ec:onomics central database. 111712000 UEMOA (Wast African Ec:onomic and Monetary Unton) includes Benin. Burkina Faso. C6te d'lvoIra. Guinea-BiS8IIU, Mali. Niger. S-gal, and Togo. Inflation figures are median valuee. Balance of payments Items excluding exports and imPOr1S are simpla syrns and rnsy not raconciIa. 96 Table 2 - UEMOA Social Indicators Latest sins Ie '1.ear Low & middle 1971).75 1980-85 1993-99 income POPULATION Total population, mid-year (mil/ions) 34.4 46.1 68.3 5,083.8 Growth rate ('Yo annual average) 2.7 3.0 2.7 1.5 Urban population ('Yo of population) 19.8 25.4 33.2 41.1 Total fertility rate (births per woman) 7.1 7.2 6.0 2.9 POVERTY ('Yo of population) National headcount index Urban headcount index Rural head count index INCOME GNP per capita (US$) 290 320 380 1,240 Consumer price index (1995=100) 71 114 139 Food price index (1995=100) INCOMEICONSUMPTION DISTRIBUTION Gini index Lowest quintile ('Yo of income or consumption) Highest quintile ('Yo of income or consumption) SOCIAL INDICATORS Public expenditure Health ('Yo of GDP) 1.6 1.9 Education ('Yo of GNP) 3.0 3.7 3.2 4.1 Social security and welfare ('Yo of GDP) Net primary school enrollment rate ('Yo of age group) Total 38 48 89 Male 47 57 91 Female 29 40 86 Accell$ to Improved water source ('Yo ofpopulation) Total 55 73 Urban 58 82 Rural 54 68 Immunization rate ('Yo under 12 months) Measles 60 83 OPT 57 83 Child malnutrition ('Yo under 5 years) 31 Life expectancy at birth (years) Total 42 46 48 65 Male 40 45 47 63 Female 44 48 49 67 Mortality Infant (per thousand live births) 149 126 99 59 Under 5 (per thousand five births) 296 185 79 Adult (15-59) Male (per 1,000 population) 542 487 473 234 Female (per 1,000 population) 437 401 418 183 Matemal (per 100,000 live births) Births attended by skilled health staff ('Yo) 40 46 This table was produced from the Development Economics central database. 11/812000 WAEMU (West African Economic and Monetary Union) includes Benin, Burkina Faso, COte d'ivolre. Guinea-Bissau, Mall, Niger, Senegal, and Togo. 97 Table 3 - ECOWAS at a glance 1117J'2OOQ Low & POVERTY and SOCIAL middle ECOWAS Income Development dlamond* 1999 Population, mid-year (millions) 229.7 5,063.8 Life expectancy GNP oer caDita (Atlss method. US$J 320 1.240 GNP (Alias method. US$ billions) 73.0 6,310.8 Av""",, annual growth, 1993-99 Population (%) 2.7 1.5 GNP I...abor force (%) 2.7 1.8 Gross per primary Moet ..-nt .stlm'" (latHt year _llabla, 1993-99) capita enroHmenl Poverty (% ofpopulation below nationlill poverty qn.) Urban population (% of IJ:ltBI PDDuiationJ 39 41 Ufe exPeCtancy at birth (years) 52 65 Infant morlalily (per 1,000 live births) 67 59 Child malnutrition (% of children under 5) 31 Access to safe water Access to safe water 1% ofDOtlU/ationJ 46 73 Illiteracy (% ofpopulation age 15+) 45 25 Gross primary enrollment (% of schcoI-ege popu/etion) 81 107 -~ECOWAS Male 91 110 --Lew & middle income group Female 70 101 KEY ECONOMIC RAnos and LONG-TERM TRENDS 1979 1989 1998 1999 GOP (US$ billions) 76.6 59.4 74.6 77.9 20.9 15.5 23.0 20.9 Gross domestic investment/GOP Trade Exports of goods and servicesIGOP 25.8 26.3 32.1 33.2 Gross domestic savingsIGOP 18.5 15.5 17.7 14.9 Gross national savingsIGOP 10.4 13.8 11.9 Current account balance/GOP -0.1 -5.4 -7.9 -8.9 Domestic Interest oavrnantslGOP 1.0 3.6 2.1 2.1 Savings Total debt/GOP 25.3 111.7 102.4 Total debt service/exports 6.5 23.9 16.9 Present value of debt/GOP 74.2 Present value of debt/exports 241.9 Indebtedness 1998 1999 (a_,. annual arowth) GOP 0.9 3.0 3.3 2.5 ~-ECOWAS GNP par capita -2.2 0.6 0.4 0.8 --Low & middle income group Exports of goods and services -1.4 4.6 4.5 -3.6 STRUCTURE of the ECONOMY 1979 1989 1998 1999 Growth of Inveetment inti GDP (%) (%ofGDP) Agriculture n8 33.2 34.2 Industry 25.6 29.9 28.1 Manufacturing 6,7 9.2 9.5 Services 40.3 36.9 37.7 Private consumption 66.5 71.7 70.5 72.5 General government consumption 15.1 12.8 11.8 12.7 Imports of goods and services 28.5 26.3 37.4 39.2 1979-89 1989-99 1998 1999 Growth of.xpotte inti ImpottIt (%) lavertM1eannual arowth) Agriculture 1.8 3.0 2.8 3.5 Industry -0.9 2.7 4.3 4.5 Manufacturing 2.4 2.3 6.9 5.1 1.0 3.1 2.9 1.8 Services o . Private consumption -02 2.2 2.1 4.5 :~ General government oonsumption -1.3 1.8 8.6 12.2 Gross domestic investment -5.4 4.9 4.1 6.7 Imports of goods and sarvicIIE -8.1 3.8 1.5 10.4 ~Export9 _mpoI'III Gross national product 0.8 3.5 3.1 3.4 Note: 1999 data are preliminary eatimates. This table was produced from the Development Economics centrel databa6e. ECOWAS (Economic Community or West Aliican States) includes Benin. Burkina Faso, Cape Verde, COle d'lVOIre, Gambia, Ghana, Guinea, Guinea-Bissau. Ubelia, Meli, Mauritania, Niger, Nigeria, Senegal. Sierra Leone, end Tego. • The diamonds show four key Indicators In the country On bold) compared with its income-group average. If data are missing, the diamond wi" be Inc:crnplete. 98 Economic Community of West African States (ECOWAS) PRICES and GOVERNMENT FINANCE 1979 1989 1999 Inftaflon (%) DomNtJc prices .0 (%change) Consumer prices 11.6 8.7 4.6 3.7 Implicit GOP deftaror 10.2 5.4 4.0 2.8 Govwnment "lIIInce (% of GDP, inciud6s CUfTMt grants) 96 Current revenue 15.1 23.7 24.4 Current budget balance -2.3 8.8 7.6 --GOP deflator Overall SWI3Iusldeficit -9.3 -6.3 TRADE 1979 1989 1998 1999 (US$ millions) Totel exports (fob) 17,186 20.713 22,636 Manufactures 1,155 1,863 1,671 Total imports (elf) 14,780 23,128 25,761 Food 1,737 1,840 3,231 3,319 Fuel end enery~ 723 1,076 1,507 1.839 Capital goods 217 1,594 2,136 2,212 Export price index (1995=100) 68 113 109 Import price index (1995=100) 61 Il9 69 Terms of trade (1995=100) 111 127 122 BALANCE of PAYMENTS 1979 1989 1999 fUS$ millions) Exports of goods and services 25,458 18,725 24,164 26,161 Imports of goods and services 23.853 18,143 28,609 30,917 Resource balance 1,605 583 -4,445 -4,736 Nel income -2,863 -4,781 -4,029 -4,760 Net cwrent transfers 385 968 2,511 2,491 Current account balance -79 -3,177 -5,864 -6,914 Rnancing Items (net) 3,286 4,785 5,788 4,910 Changes in net reserves ·3,207 -1,608 77 2,004 M.mo; Reserves inciuding gold (US$ millions) COfl\iel'Sion rate (DEC, /ocaI/US$) EXTERNAL DEBT and RESOURCE FLOWS 1979 1989 1998 1999 (US$ miI/Ions) Compo.tlion of 1998 debt (USS miD.) Tote! debt ouilltanding and disbursed 19,376 86,315 76,433 IBAD 967 5,018 3,403 11043 IDA 626 4,195 12,035 Tote! debt service 1,736 4,650 4,248 IBAD 125 737 691 IDA 6 36 151 11609 Composition of net resource flows Official orants 786 1.989 2.360 Official creditors 980 2,051 327 Private adon; 2,191 532 ·367 Foreign direct investment 586 1,993 1,688 Portfolio equity o o 22 28153 Wood Bank program Commitments 535 1,707 891 A·16RD E - 6i_ral Disbursements 274 1,109 1,119 6 -IDA D· Other _ ....1 F - Private Principal repayments 39 371 537 C ·IMF G· Short-term Neltlows 236 737 583 Intarest payments 92 404 305 Net transfers 143 334 277 Nol&: ThIs table was produced from the Development Economics central detsbase. 11fll2OOO ECOWAS (Economic Community of Wee! African Stal&s) Includes ~ Buridna Faso, Cape Verde, C6ta d'tvoire, Gambia, Ghana, Guinea, Gui..-Bissau. Liberia, Maft, Mauritania, Niger, Nigeria, Senegal. SIerra Leone, and Togo. Inflation figures are median values. Balance of payments items excluding exports and imports aRl simple sums and may not reconcile. 99 Table 4 - ECOWAS Social Indicators Latest sinsle ~ear Low & middle 1970-75 1980-a5 1993-99 Income POPULATION Total population, mid-year (millions) 116.3 155.5 230.6 5,083.8 Growth rate (% annual average) 2.7 3.0 2.7 1.5 Urban population (% of population) 22.6 29.0 39.4 41.1 Total fertility rate (births per woman) 6.9 6.9 5.5 2.9 POVERTY (% ofpopulation) National headoount index Urban headcount index Rural headcount index INCOME GNP per capita (ust) 370 360 320 1,240 Consumer price index (1995=100) 53 116 139 Food price index (1995=100) INCOME/CONSUMPTION DISTRIBUTION Gini index Lowest quintUe (% of income or consumption) Highest quintile (% of income or consumption) SOCIAL INDICATORS Public expenditure Health (% of GDP) 0.8 1.9 Education (% of GNP) 3.3 3.6 3.7 4.1 Social security and welfare (% of GDp) Net primary school enrollment rate (% of age group) Total 89 Male 91 Female 86 Access to Improved water source (% ofpopulation) Total 35 46 73 Urban 59 63 82 Rural 29 '5f 68 Immunization rate (% under 12 months) Measles 15 64 63 OPT 14 50 83 Child melnutrition (% under 5 years) 31 LNe expectancy at birth (years) Total 43 47 52 65 Male 42 45 50 63 Female 45 48 53 67 Mortality Infant (per thousand live births) 141 110 87 59 Under 5 (per thousand live births) 237 206 145 79 Adult (15-59) Male (per 1,000 population) 569 507 414 234 Female (per 1,000 population) 470 427 357 183 Matemel (per 1oo,(J(J() live births) Births attended by skilled health staff (%) 35 46 This table was produced from the Development Economics central database. 11/812000 ECOWAS (Economic Community of West African States) includes Benin, Burkina Faso, Cape Verde, COte d'ivoire. Gambia. Ghana. Guinea, Guinea-Bissau. Uberla. Mali. Mauritania, Niger. Nigeria. Senegal, Sierra Leone. and Togo. 100 Table S: West Africa and Geography Area (sq. km) Border(km) Land Water Total Benin BF RCI Mali Niger Senegal Togo Ghana Guinea Mauritania Nigeria Algeria Cameroon Gambia (j.. Liberia Libya Chad Bissau Benin 110,620 2,000 112,620 306 266 644 773 Burkina 273,800 400 274,200 306 584 1,000 628 548 Faso C 101 Table 6 - Population, total 1970-80 1981-93 1994-1999 1995 1996 1997 1998 1999 {mill} Benin 3.1 4.3 5.7 5.5 5.6 5.8 5.9 6.1 Burkina Faso 6.2 8.3 10.4 10.0 10.2 10.5 10.7 11.0 Cote d'ivoire 6.8 10.7 14.5 13.9 14.3 14.7 15.1 15.5 Guinea-Bissau 0.6 0.9 1.1 1.1 1.1 1.1 1.2 1.2 Mali 5.9 7.9 10.0 9.6 9.9 10.1 10.3 10.6 Niger 4.8 7.1 9.7 9.2 9.5 9.8 10.1 10.5 Senegal 4.8 6.8 8.7 8.3 8.6 8.8 9.0 9.3 Togo 2.3 3.2 4.3 4.1 4.2 4.3 4.5 4.6 Cape Verde 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.4 Ghana 9.7 13.5 17.7 17.1 17.5 17.9 18.4 18.8 Guinea 4.2 5.3 6.9 6.6 6.8 6.9 7.1 7.3 Liberia 1.6 2.3 2.9 2.7 2.8 2.9 3.0 3.0 Mauritania 1.4 1.9 2.4 2.3 2.4 2.5 2.5 2.6 Nigeria 61.6 88.6 116.0 111.3 114.5 117.7 120.8 123.9 Sierra Leone 2.9 3.8 4.7 4.5 4.6 4.7 4.9 4.9 WAEMU 34.6 49.2 64.3 61.7 63.4 65.1 66.8 68.8 ECOWAS 116.3 164.8 215.3 206.6 212.4 218.1 223.9 229.7 SUb-Saharan Africa 331.4 400.7 602.9 578.5 594.5 611.2 626.9 642.8 Lower middle income 1,481.2 1,798.4 2,039.0 2,006.2 2,028.4 2,050.6 2,072.2 2,093.0 Source: World Development Indicators (WDI), 2001, World Bank 102 Table 7 - Gross Domestic Product (current US$) 1970-80 1981-93 1994·1999 1995 1995 1997 1998 1999 Imilli!!!!! U§i l Benin 707 1,479 2,088 2,009 2,208 2,141 2,306 2,369 Burkina Faso 897 1,971 2,382 2,355 2,538 2,382 2,580 2,580 Cote d'ivoire 4,772 9,136 10,300 9,993 10,845 10,681 11,502 11,113 Guv--Bissau 102 186 242 254 271 269 206 218 Mali 868 1,899 2,415 2,486 2,619 2,475 2,fm 2,570 Niger 1,259 2,019 1,696 1,881 1,988 1.846 2,077 2,018 Senegal 1,754 4,083 4,428 4,476 4,651 4,379 4,666 4,752 Toeo 610 1,171 1,348 1,309 1,473 1.501 1.414 1,405 Cape Verde 0 193 505 491 502 506 540 581 Ghana 3,002 5,180 6,847 6,457 6,988 6.946 7.474 7,774 Guinea 0 1,840 3,841 3,692 3,867 3,783 3,585 3,482 Uberia 719 776 0 0 0 0 0 0 Mauritania 444 895 1,045 1.058 1,116 1,096 1,002 958 Nigeria 29,284 30,878 31,766 28,109 35,299 36,229 32,249 35,045 Sierra leone 674 1,066 821 866 942 850 672 669 WAEMU 10,989 21,943 25,098 24,743 26,593 25.674 27,348 27,025 ECOWAS 45,112 62,572 69,721 65,426 75,307 75,084 72,670 75,534 Sub-Saharan Africa 137,331 258,639 319,886 317,995 331,216 343,350 322,338 324,097 lower middle income 709,937 1,573,375 2,349,905 2,165,270 2,461,660 2,581,510 2,447,130 2,608,900 Source: WoI1d Development Indicators (WDI), 2001, Wood Bank Note: 0 is data not avalalble Table 8 - Gross Domes1ie Product (Real Growth rate) 1970-80 1981-93 1994-1999 1995 1996 1997 1998 1999 !~cen!!!a!l Benin 2.7 2.4 5.1 4.6 5.6 5.7 4.5 5.0 Burkina Faso 3.3 3,4 5.3 4.0 6.0 4.7 6.2 5.8 Cote d'ivoire 5.3 0.3 5.5 7.1 6.9 6.2 5.6 1.6 Guinea-8issau 1.0 3.4 -2.2 4.5 4.7 5.3 -28.2 8.0 Mali 4.0 1.5 5.0 6.2 3.2 6.8 3.4 5,4 Niger 1.3 ~.4 3.7 2.6 3.4 2.8 10.4 ~.6 Senegal 1.7 2.6 52 5.2 5.1 5.0 5.7 5.1 Toeo 4.3 ~.6 42 7.8 9.7 4.2 -2.2 2.1 Cape Verde 5.3 6.5 7.7 3.9 5.1 8.0 7.9 Ghana 0.3 3.3 4.4 4.0 4.6 4.2 4.7 4.4 Guinea 2.3 4.3 4.4 4.6 4.8 4.5 3.3 Uberia Mauritania 1.7 1.9 42 4.6 5.5 3.2 3.7 4.1 Nigeria 4.7 2.9 2.5 2.5 4.3 2.7 1.8 1.0 Sierra leone 2.3 -0.2 -8.6 ·10.0 5.0 ·17.6 ~.8 -8.1 WAEMU 3.7 1.1 5.1 5.6 5.9 5.5 5.0 3.2 ECOWAS 3.7 2.6 3.7 3.9 5.0 3.8 3.5 2.3 Sub-Saheran Africa 3.6 1.1 3.1 3.7 4.7 3.2 2.0 2.0 lower middle income 5.0 3.4 42 5.0 5.1 4.9 2,4 3.6 Source: Wond Development Indicators (WOI), 2001, Wond Bank 103 Table 9 - Gross National Income per Capita (USS current) 1970-80 1981-93 1994-1999 1995 1996 1997 1998 1999 Benin 225 349 363 350 350 380 380 380 Burkina Faso 144 248 232 220 240 240 240 240 Cote d'ivoire 618 807 670 650 660 700 660 670 Guinea-Bissau 173 200 203 220 230 230 160 160 Mali 145 241 248 250 240 260 250 240 Niger 251 300 198 190 200 200 200 190 Senegal 348 575 535 550 530 530 510 500 Togo 260 352 322 310 320 350 320 310 Cape Verde 1,012 1,257 1,210 1,270 1,290 1,290 1,330 Ghana 315 395 383 370 380 390 390 400 Guinea 480 543 560 580 560 520 490 Liberia 444 493 Mauritania 303 483 437 450 460 440 410 390 Nigeria 420 388 243 210 240 270 260 260 Sierra Leone 227 290 165 180 200 160 150 130 WAEMU 306 443 390 401 419 394 409 393 ECOWAS 374 385 323 317 355 344 325 329 Sub-Saharan Africa 389 554 518 520 540 540 510 490 Lower middle income 484 863 1.112 1,010 1,120 1,220 1,190 1,200 Sourca: World Development Indicators (WDI), 2001, World Bank Table 10 - GNI per capita (Real Growth rate) 1970-80 1981-93 1994-1999 1995 1996 1997 1998 1999 '~rcant~el Benin 0.1 -0.2 2.3 1.8 2.8 3.6 2.5 1.9 Burkina Faso 0.9 0.9 2.2 1.8 3.7 2.0 3.7 3.2 Cote d'ivoire 1.2 -3.5 2.9 3.9 5.4 4.4 2.1 0.1 Guinea-Bissau -2.9 2.1 -3.1 1.0 2.3 4.4 -30.4 2.8 Mali 2.0 -1.3 1.6 3.1 0.8 4.0 1.1 3.3 Niger -1.5 -3.3 0.3 -1.6 1.2 -0.7 6.7 -3.9 Senegal -1.2 -0.3 2.4 3.0 4.0 2.3 2.8 2.5 Togo 1.6 -3.6 3.5 6.7 7.9 2.1 -4.8 -0.5 Cape Verde 1.9 3.7 4.5 1.0 2.0 5.1 5.2 Ghana -1.6 -0.4 1.7 1.3 2.1 1.9 2.3 2.1 Guinea 2.0 1.7 1.0 3.5 2.0 1.7 0.5 Liberia Mauritania -0.5 -0.8 2.2 1.9 2.9 0.5 1.7 1.8 Nigeria 0.9 -0.4 -0.1 1.4 -1.0 0.8 -1.7 0.5 Sierra Leone 0.3 -2.6 -5.7 -2.9 2.8 -19.3 -3.5 -9.9 WAEMU 0.7 -1.9 2.3 3.0 4.1 3.3 2.1 0.7 ECOWAS 0.4 -0.6 1.1 1.9 1.6 1.7 0.4 0.8 Sub-Saharen Africa 0.6 -1.3 0.3 1.1 1.7 0.7 -0.5 -0.3 Lower middle income 3.2 2.4 2.5 3.2 3.9 3.9 1.3 1.8 Sourca: World Development Indicators (WDI), 2001, World Bank 104 Table 11 - Structure of the Economy 1990-99 1999 Agriculture Industry Services Agriculture Industry Services {%ofGDPl Benin 36.2 13.7 50.1 37.9 13.8 48.3 Burkina Faso 33.4 24.8 41.8 31.3 28.3 40.4 Cote d'ivoire 30.0 22.4 47.6 26.0 26.4 47.6 Guinea-Bissau 56.7 12.4 30.9 62.3 11.8 26.0 Mali 46.6 17.0 36.4 48.5 16.7 36.8 Niger 39.4 17.4 43.3 40.7 17.2 42.1 Senegal 19.1 21.3 59.6 18.0 25.5 56.4 Togo 38.2 22.0 39.9 41.3 21.0 37.7 Cape Verde 12.9 19.5 67.6 12.0 16.4 71.6 Ghana 39.4 22.5 38.1 35.6 25.3 39.1 Guinea 23.0 33.2 43.8 23.9 37.4 38.7 Uberia Mauritania 26.6 30.3 43.0 25.2 29.3 45.5 Nigeria 27.5 47.6 21.9 Sierra Leone 42.9 25.7 31.4 42.6 26.7 30.7 WAEMU 31.7 20.7 47.6 30.3 23.3 46.4 ECOWAS 30.1 31.2 34.1 16.4 13.4 23.8 SulrSaharan Africa 17.8 31.7 50.5 15.3 29.2 55.5 Lower middle income 16.5 39.7 43.7 14.3 39.3 46.4 Source : Wor1d Development Indicators (WDI), 2001, World Bank Table 12 - InDation, Consumer prices 1970-80 1981-93 1994-1999 1995 1996 1997 1998 1999 (annyal ~l Benin 0.0 0.4 11.2 14.5 4.9 3.5 5.8 0.3 Burkina Faso 0.0 1.0 7.5 7.4 6.2 2.3 5.1 -1.1 Cote d'ivoire 12.0 4.6 8.7 14.3 2.5 4.0 4.7 0.8 Guinea-Bissau 0.0 58.2 27.7 45.4 50.7 49.1 6.5 4,).7 Mali 0.0 4,).8 7.6 13.4 6.8 -0.4 4.0 -12 Niger 10.3 0.9 9.5 10.6 5.3 2.9 4.5 -2.3 Senegal 9.7 4.5 7.8 7.9 2.8 1.8 1.2 0.8 Togo 9.8 3.1 11.6 16.4 4.7 8.3 1.0 4,).1 Cape Verde 0.0 6.9 6.1 8.4 6.0 8.6 4.4 Ghana 39.9 40.2 31.0 59.5 46.6 27.9 14.6 12.4 Guinea 0.0 0.0 0.0 Liberia 0.0 0.0 0.0 Mauritania 0.0 6.8 5.3 6.5 4.7 4.6 8.0 4.1 Nigeria 15.2 26.4 30.7 72.8 29.3 8.2 10.3 6.6 Sierra Leone 11.0 70.6 26.3 26.0 23.1 15.0 35.5 34.1 WAEMU 10.3 7.1 11.5 16.2 10.5 8.9 4.1 4,).4 ECOWAS 15.1 18.7 14.1 23.3 14.9 10.4 8.1 4.5 Sub-Saharan Mica 0.0 0.0 0.0 Lower middle income 0.0 0.0 0.0 Source: World Development Indicators (WDI), 2001, World Bank 105 Table 13 - Official Excbange Rate (National currencylUSS) 1970-80 1981-93 1994-1999 1995 1996 1997 1998 1999 (LCI.! ~r I.!~m, DElIiOd ave!5!9§l Benin 238 326 559 499 512 584 500 616 Burkina Faso 238 326 559 499 512 584 500 616 Cote d'ivoire 238 326 559 499 512 584 500 616 Guinea-Bissau 0 32 445 278 406 584 500 616 Mali 238 326 559 499 512 584 500 616 Niger 238 326 559 499 512 584 500 616 Senegal 238 326 559 499 512 584 500 616 Togo 238 326 559 499 512 584 500 616 Cape Verde 31 73 89 77 83 93 98 103 Ghana 1 200 1,801 1,200 1,637 2,050 2,314 2,647 Guinea 21 401 1,115 991 1,004 1,095 1,237 1,387 Liberia 1 1 15 1 1 1 42 42 Mauritania 48 75 157 130 137 152 188 210 Nigeria 1 6 34 22 22 22 22 92 Sierra Leone 1 128 1,102 755 921 981 1,564 1,804 WAEMU ECOWAS Sub-Saharan Africa Lower middle incorna Source: World Development Indicators (WDI), 2001, Wood Bank Table 14 - Ratio ofparaUel market to official exchange rate, period avg. 1970-80 1981·93 1994·1999 1995 1996 1997 1998 1999 Benin 1 1 1 1 Burkina Faso 1.0 1.0 1.0 1.0 1.0 1.0 Cote d'ivoire 1.0 1.0 1.0 1.0 1.0 1.0 Guinea-Bissau 1.0 1.0 Mali 1.0 1.0 1.0 1.0 1.0 1.0 Niger 1.0 1.0 1.0 1.0 1.0 1.0 Senegal 1.0 1.0 1.0 1.0 1.0 1.0 Togo 1.0 1.0 1.0 1.0 1.0 1.0 Cape Verde 1.0 1.0 Ghana 2.2 1.0 1.0 1.0 1.0 1.0 1.0 Guinea 1.2 1.0 1.0 1.0 1.0 1.0 1.0 Liberia 0.5 0.9 1.1 Mauritania 2.4 1.1 1.1 1.0 1.0 1.0 1.0 Nigeria 2.1 2.6 3.6 3.7 3.9 0.2 0.9 Sierra Leone 0.9 1.0 0.9 0.8 WAEMU ECOWAS Sub-Saharan Africa Lower middle income Source: Wood Development Indicators (WDI), 2001, Wood Bank 106 Table 15 - Tax revenue (0/0 of GDP) 1970-80 1981-93 1994-1999 1995 1996 1997 1998 1999 Benin 10.8 8.4 12.6 12.3 12.6 12.7 13.4 13.5 Burkina Faso 9.1 11.3 9.7 11.1 11.7 11.7 13.7 Cote d'ivoire 21.4 18.6 17.5 18.0 19.0 18.0 17.2 16.7 Guinea-Bissau 4.8 7.0 6.9 6.8 8.0 3.7 9.5 Mali 63.9 22.9 12.8 10.7 12.9 13.6 14.2 14.6 Niger 8.1 7.0 6.6 6.7 7.2 8.0 8.0 Senegal 16.7 15.5 15.9 15.8 16.4 15.9 16.0 16.6 Togo 18.6 13.0 13.6 13.0 13.2 13.8 13.5 Cape Verde 13.0 16.6 17.0 16.8 15.9 15.9 17.2 Ghana 5.5 10.0 14.5 14.7 15.0 14.5 15.8 11.0 Guinea 13.0 9.9 10.2 9.4 10.4 9.9 9.7 Liberia Mauritania 18.3 16.6 17.1 17.2 15.7 15.7 15.8 Nigeria 7.1 5.4 6.0 9.8 Sierra Leone 8.7 8.0 8.9 9.3 4.7 6.7 6.5 WAEMU ECOWAS Sub-Saharan Africa 19.0 20.2 Lower middle incolllE 10.0 12.4 12.8 11.5 11.8 12.6 Source: World Development Indicators (WDI), 2001, World Bank Table 16 - Taxes on International Trade 1970-80 1981-93 1994-1999 1995 1996 1997 1998 1999 (~ of~DPl Benin 7.0 4.7 6.3 6.0 6.2 6.6 6.7 7.1 Burkina Faso 4.5 4.2 5.2 3.5 3.6 3.4 3.8 Cote d'ivoire 5.0 7.6 7.9 8.6 8.9 7.9 7.2 7.1 Guinea-Bissau 3.6 4.1 3.4 4.1 5.6 1.9 5.2 Mali 34.6 12.2 7.2 5.9 7.1 7.8 8.2 8.4 Niger 3.6 3.7 3.1 3.6 4.0 4.6 4.1 Senegal 7.3 4.6 4.8 5.1 5.6 5.1 4.4 4.1 Togo 8.2 6.1 5.6 6.0 6.5 6.9 6.6 Cape Verde 7.4 9.4 9.9 9.6 8.8 9.3 9.6 Ghana 4.3 4.7 4.6 4.8 4.4 5.0 3.8 GUinea 1.2 1.6 1.6 1.4 1.7 1.5 1.6 Liberia Mauritania 8.0 4.5 5.4 4.8 3.3 3.0 2.7 Nigeria 2.5 2.3 2.3 2.8 Sierra Leone 3.7 3.9 4.4 4.8 2.1 3.9 3.4 WAEMU 15.7 8.2 5.5 5.4 5.6 5.9 5.4 5.8 ECOWAS 15.5 7.1 5.1 5.3 5.4 5.0 4.9 5.0 Sub-Saharan Africa 20.8 10.9 Lower middle incomE Source: World Development Indicators (WDI), 2001, World Bank 107 Table 17 - Overall surplus/deficit, eLcap.grants 1970-80 1981-93 1994-1999 1995 1996 1997 1998 1999 as share of GOP, {%} Benin -9.2 -4.0 -7.0 -4.0 -4.0 -1.0 -1.0 Burkina Faso -7.5 -8.3 -8.0 -7.0 -9.0 -8.0 -11.0 Cote d'ivoire -9.2 -1.3 -2.0 0.0 0.0 0.0 -1.0 GUinea-Bissau -24.5 -18.0 -11.0 -20.0 -25.0 -16.0 -14.0 Mali -42.0 -13.1 -7.5 -8.0 -6.0 -6.0 -7.0 -8.0 Niger 0.0 -8.8 -6.7 -6.0 -3.0 -6.0 -6.0 -9.0 Senegal -1.7 -4.3 -2.8 -2.0 -4.0 -2.0 -3.0 -3.0 Togo -6.6 -6.7 -7.0 -6.0 -3.0 -6.0 -6.0 Cape Verde -16.3 -18.3 -23.0 -24.0 -18.0 -13.0 -13.0 Ghana -6.1 -9.7 -9.0 -11.0 -11.0 -8.0 -8.0 Guinea -8.1 -6.2 -7.0 -6.0 -6.0 -6.0 -5.0 Liberia 0.0 0.0 Mauritania -11.8 1.5 -1.0 5.0 4.0 2.0 2.0 Nigeria 0.0 0.3 10.0 9.0 1.0 -13.0 -7.0 Sierra Leone -11.8 -8.3 -10.0 -5.0 -7.0 -11.0 -11.0 WAEMU -18.4 -11.5 -6.9 -6.4 -6.3 -6.9 -5.9 -6.6 ECOWAS -18.1 -11.3 -6.8 -6.5 -5.9 -6.6 -6.9 -6.8 Sub-Saharan Africa Lower middle incomE Source: World Development Indicators (WDI), 2001, World Bank Table 18 - Gross Domestic Investment 1970-80 1981-93 1994-1999 1995 1996 1997 1998 1999 {%ofGDPl Benin 18.5 17.8 17.2 17.4 19.5 19.3 19.6 Burkina Faso 21.0 25.1 28.7 23.3 29.2 29.8 35.2 33.7 Cote d'ivoire 27.8 17.1 15.3 12.9 14.1 16.5 18.3 17.9 Guinea-Bissau 43.0 18.6 22.3 23.1 17.6 14.4 9.3 Mali 28.9 26.6 22.1 22.9 24.6 20.6 21.2 21.0 Niger 41.3 15.5 9.2 7.0 9.3 10.1 10.4 9.6 Senegal 14.0 14.9 15.7 14.7 15.3 15.9 16.4 17.1 Togo 39.8 27.5 15.6 13.6 17.4 16.4 16.9 16.2 Cape Verde 31.5 39.1 42.4 38.0 37.4 36.9 37.6 Ghana 30.1 22.8 20.8 21.1 20.5 20.4 21.0 20.7 Guinea 20.7 16.6 16.6 16.3 16.7 16.4 16.6 Liberia Mauritania 24.9 21.5 19.3 22.4 25.1 24.2 21.2 Nigeria 24.3 15.8 15.1 16.3 13.9 14.1 12.8 14.9 Sierra Leone WAEMU 15.8 18.9 17.1 15.2 17.0 17.8 19.2 19.0 ECOWAS 17.5 17.8 16.7 16.4 16.0 16.5 16.6 17.4 Sub-Saharan Africa 24.9 19.1 17.0 16.8 17.1 17.2 17.5 16.9 Lower middle income 31.2 33.3 27.3 28.0 27.8 27.1 27.0 26.4 Source: World Development Indicators (WDI). 2001. World Bank 108 Table 19 - Net Foreign Direct Investment (% ofGDP) 1970-80 1981-93 1994-1999 1995 1996 1997 1998 1999 (% ofGDPl Benin 0.4 0.2 0.6 0.2 -0.3 0.9 0.8 1.3 Burkina Faso 0.1 0.1 0.5 0.8 0.6 0.5 -0.5 0.5 Cote d'ivoire 1.0 0.5 1.9 2.3 2.1 2.9 2.2 1.8 Guinea-Bissau 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Mali -0.2 -0.1 1.0 1.2 2.3 -0.6 0.6 0.6 Niger 1.1 -0.1 0.0 0.0 0.0 0.0 0.0 0.1 Senegal 0.9 -0.1 1.1 -0.2 -0.1 2.1 0.2 3.3 Togo 2.7 0.8 0.8 0.4 1.6 1.3 0.0 Cape Verde 0.0 0.4 4.7 5.2 5.6 2.3 1.2 11.8 Ghana 0.7 0.4 1.0 1.3 1.0 0.5 0.6 0.6 Guinea 1.2 0.8 0.7 0.4 1.2 0.8 1.1 Uberla 5.7 2.7 0.0 Mauritania 0.1 0.7 0.1 0.6 0.0 -0.3 0.0 0.0 Nigeria 0.7 2.0 3.3 2.4 2.2 4.2 3.8 4.3 Sierra Leone 1.2 0.1 0.3 -0.6 0.0 0.0 0.5 0.3 WAEMU 0.9 0.2 1.2 1.1 1.2 1.7 1.0 1.5 ECOWAS 0.8 1.1 2.1 1.7 1.6 2.8 2.2 2.7 Sub-Saharan Africa 0.4 0.5 1.2 0.4 0.9 1.8 1.4 2.3 Lower middle income 0.0 0.5 2.0 2.2 2.2 Source: World Development Indicators (WOI). 2001, World Bank Table 20 - Trade (Export + import, % of GDP ) 1970-80 1981-93 1994-1999 1995 1996 1997 1998 1999 %of GOP Benin 47.2 63.7 61.9 67.2 64.1 58.8 56.2 55.1 Burkina Faso 34.3 43.2 42.1 42.5 40.5 40.1 46.6 41.9 Cote d'ivoire 62.0 67.4 82.0 81.5 84.8 83.2 81.0 85.4 Guinea-Bissau 56.9 53.5 46.7 42.3 60.9 50.5 69.8 Mali 31.8 50.2 60.6 57.7 55.6 62.8 59.8 62.1 Niger 35.8 44.9 40.0 41.4 40.3 40.2 39.6 35.3 Senegal 62.7 68.4 70.4 73.8 70.1 69.7 67.0 66.5 Togo 65.8 92.4 82.2 78.2 82.4 81.6 85.0 83.0 Cape Verde 60.6 77.2 76.1 74.6 81.9 79.1 81.9 Ghana 44.2 40.3 70.7 57.4 64.4 76.3 80.6 83.0 Guinea 55.4 45.0 43.5 42.8 42.2 47.2 49.2 Uberia 72.0 Mauritania 76.7 111.6 94.7 106.8 103.5 90.7 92.9 87.1 Nigeria 41.9 74.6 79.1 84.0 78.7 78.5 70.7 82.1 Sierra Leone 50.0 40.3 37.5 41.5 46.0 25.5 32.4 30.9 WAEMU 48.8 61.1 61.6 61.1 60.0 62.2 60.7 62.4 ECOWAS 52.5 Sub-Saharan Africa 92.0 79.3 94.1 94.1 94.8 98.8 95.6 Lower middle income 57.3 61.2 76.0 80.0 75.9 78.7 78.4 65.3 Source: World Development Indicators (WDI), 2001, World Bank 109 Table 21 - Exports of Goods and Services 197()"80 1981-93 1994-1999 1995 1996 1997 1998 1999 {~Q gf~I2Pl Benin 14.2 24.9 27.5 30.6 29.6 25.2 24.1 22.7 Burkina Faso 9.0 12.2 13.5 14.2 11.9 12.3 15.5 12.4 Cote d'ivoire 33.5 34.9 45.4 43.4 462 45.2 44.6 48.1 Guinea-Bissau 10.8 16.5 11.7 10.6 21.2 14.6 25.8 Mali 10.6 16.6 23.4 21.5 19.9 26.0 24.7 25.2 Niger 15.4 20.8 16.2 17.1 16.9 16.3 16.1 14.3 Senegal 26.6 26.7 30.2 33.6 29.4 29.1 28.3 27.7 Togo 29.7 41.0 35.9 35.5 37.8 34.0 35.1 33.9 Cape Verde 21.3 20.9 17.0 20.2 26.6 22.1 23.2 Ghana 20.6 16.7 27.9 24.5 24.7 23.8 33.9 33.2 Guinea 42.0 20.4 19.0 19.7 19.6 22.4 22.7 Uberia 27.1 61.7 Mauritania 26.2 45.5 42.4 47.2 45.8 41.8 39.2 38.0 Nigeria 29.5 36.9 41.3 43.9 47.7 44.1 30.6 39.5 Sierra Leone 16.5 16.6 14.4 14.8 13.8 10.4 11.1 10.9 WAEMU 23.3 27.9 33.1 32.9 33.0 32.9 32.6 33.3 ECOWAS 21.5 31.5 35.5 35.9 38.3 36.7 31.1 35.5 Sub-Saharan Africa 23.2 25.9 29.1 28.8 30.6 29.7 28.0 29.8 Lower middle income 15.5 25.3 25.2 24.9 26.0 25.9 25.0 Source: World Development Indicators (WDI), 2001, World Bank Table 22 - Imports of Goods and Services 197()"80 1981-93 1994-1999 1995 1996 1997 1998 1999 (% ofGDP} Benin 37.1 38.1 33.8 36.6 34.5 33.6 32.1 32.4 Burkina Faso 29.3 30.5 28.8 28.3 28.5 27.7 31.1 29.5 Cote d'ivoire 39.6 31.2 36.9 38.1 38.6 38.0 36.4 37.3 Guinea-Bissau 45.4 36.7 35.0 31.7 39.8 35.9 44.0 Mali 26.4 33.5 37.0 36.3 35.7 36.8 35.1 36.9 Niger 28.0 23.5 23.7 24.3 23.4 23.9 23.5 21.0 Senegal 41.8 36.5 40.0 40.1 40.8 40.6 38.7 38.8 Togo 48.4 48.2 46.3 42.7 44.6 47.6 49.9 49.1 Cape Verde 65.8 56.6 59.1 54.4 55.3 57.0 58.7 Ghana 27.3 24.1 43.6 32.9 39.7 52.5 46.7 49.7 Guinea 41.8 24.4 24.5 23.1 22.6 24.7 26.5 Uberia 53.7 54.0 Mauritania 58.2 64.3 52.6 59.6 57.6 48.9 53.7 49.2 Nigeria 26.9 36.3 37.7 40.1 31.0 34.4 40.1 42.5 Sierra Leone 37.1 21.5 23.8 26.7 32.2 15.1 21.3 20.0 WAEMU 37.1 33.1 35.9 36.4 36.5 36.6 35.5 35.8 ECOWAS 30.9 34.7 37.9 38.2 34.6 37.1 39.3 40.9 Sub-Saharan Africa 27.9 26.8 30.2 29.8 29.5 30.2 31.5 31.8 Lower middle income Source: World Development Indicators (WDI), 2001, World Bank 110 Table 23: Direction of Trade Matrix, Exports, 1990 Percentage-of tetal exports Importers Exeortera BEN BFA CIV MLI NER SEN TGO GHA GIN MRT NGA UEMOA ECOWAS SSA EEC NNA Benin BEN 0.714 3.188 0.000 1.480 0.148 2.200 7.729 Burkfna FSIBFA 0.102 12.544 1.508 0.955 0.073 6.099 20.549 Cbte d'ivoir CIV 0.503 3.016 2.823 1.050 1.656 0.941 9.788 Mali Mll 0.000 0.220 27.712 0.047 10.046 0.000 38.025 Niger NER 0.326 0.493 1.703 0.347 0.046 0.198 3.115 Senegal SEN 0.585 0.791 2.874 4.640 0,145 0.929 0.130 950 0,030 0,490 9.745 26.410 23.990 0.620 Togo TGO 2.879 2.314 0.179 0.180 1,155 0.029 6.736 Ghana GHA Guinea GIN Mauritania MRT Ni{leria NGA UEMOA 7.70020.500 9.80038.000 3.100 9.700 6.700 10.900 ECOWAS .... Sub·Sah."SSA 0.060 0.120 1.680 0.470 0.040 0,550 0.070 0.080 0.190 0.010 0.410 11.590 50.240 22.500 Europe.n Table 24: Direction of Trade Matrix, Exporls, 1995 Percenfege ollota rexports Importers Exporters BEN BfA eIY__ lfLl.... N'Ii... s5tt... I~q_~ GHA GIN MBI NGb UEMOA ECO!l!AS SSA EEC_~ Benin BEN -0.194 1.1'.:;11 U.OV.:t 1.1.1.110 \,1.0"" I 5.278 Burkina Fo,BFA 0.344 7.767 0,426 0,731 0.210 0.584 10.084 COte d'lvoir CIV 1.200 3.000 4.900 1.000 1.100 1.600 12.800 Mali MLI 0.000 1.403 3.036 0.330 0.731 0.000 5.500 Niger NER 1.449 0,660 4.031 0.079 0.008 0.112 6.340 Senegal SEN 4.009 1,198 4.450 9.379 0.148 0.970 0.140 1.270 2.200 2.240 20.153 26,410 23.990 0,620 Togo TGO 4.137 1.953 0.183 0.183 0.778 0.033 7.267 Ghana GHA Guinea GIN Mauritania M R T tlioeria ---.NGA UEMOA 5,300 10.100 12.800 5.500 6.300 20.200 7.300 11.800 ECOWAS Sub-Sah."SSA 0.130 0.050 0.160 0.390 0.010 0.070 0.060 0.040 0.070 0,100 0.220 12,970 47.120 8.550 European (EEC 0,020 0.010 0.060 0.020 0.010 0.040 0.010 0.050 0,020 0.020 0,130 0.950 62,060 7,370 North Am.rNNA 0.010 0,000 0.020 0.000 0.000 0.010 0.000 0.030 0.010 0.010 0.080 0.370 17.310 36,140 Rest Of WoROW 0.010 0.000 0.020 0.010 0.000 0,020 0.020 0.030 0.010 0.010 0,090 0.670 22.200 23.050 World WLD 0.010 0,010 0.050 0.010 0.000 0.030 0,010 0.040 0.010 0.010 0.100 0.960 38.710 18.310 Hote: .. meaRS "not applicable," This table sh13ws, for eaeh exporter, the percentage 13f tota1 exp13rts, f.o,b,. that goes to each of its traoe partners for 1995, Source; ADI 2000, World Bonk: UN STAT, COMTRADE III Table 25: Direction of Trade Matrix, Imports, 1990 Percenlage of total Imports Importers EX20rters BEN BFA CIV MLI NER SEN TGO GHA GIN MRT NGA UEMOA ECOWAS SSA EEC Benin BEN 0.1 0.1 0.0 0.3 0.0 0.3 0.0 0.0 0.0 12.6 Burkina Fa BFA 0.0 0.3 0.1 0.2 0.0 0.8 0.0 0.0 0.0 25.1 COte d' Ivoh CIV 1.3 8.7 7.3 5.5 8.6 3.9 0.0 0.0 0.0 5.1 Mall MLI 0.0 0.1 1.6 0.0 4.6 0.0 32 Niger NER 0.1 0.1 0.1 0.1 0.0 0.1 13.5 Senegal SEN 0.4 0.6 0.4 3.2 0.2 0.9 0.09 3.28 0.05 0.12 5.9 5.91 0 Togo TGO 0.6 0.6 0.0 0.0 0.5 0.0 8.8 Ghana GHA 0.0 0.0 0.0 0.0 0.0 0.0 0 Guinea GIN 0.0 0.0 0.0 0.0 0.0 0.0 a Mauritania M RT 0 Nigeria NGA ..!!. UEMOA 2.38 10.18 2.47 10.77 6.65 13.33 8.05 ECOWAS Sub·Sahar,SSA 5.10 14.80 15.57 25.75 8.63 19.41 7.49 0.62 4.95 0.21 0.96 9.80 3.79 0.30 European (EEC 60.03 79.35 88.45 70.41 79.68 73.16 61.22 58.10 69.75 73.38 61.21 47.81 69.26 North Amer NNA 8.92 5.38 5.47 3.45 5.89 5.67 5.62 13.22 10.28 3.45 10.92 6.90 7.07 Resl Of WcROW 27.95 0.47 10.51 0.39 5.80 1.78 25.67 28.06 15.01 22.96 26.91 41.50 23.36 World WLD 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Note: .. means -not applicable.· Thl. table shows. for each Importing country. the percenlage of the value of Its total Imports that originates from each of the exporting countries for 1990, respectively Source: ADI 2000, World Bank; UNSTAT, COMTRADE Table 26: Direction of Trade Matrix, Imports, 1995 Percentage of total Imporl8 Importe.. EXQortt[s BEN BfA elY MbJ NEB SEN TG9 GHA GIN MRT NGA UEMOA ECOWAS SSA EEC Benin BEN 0.1 0.1 0.2 1.2 0.0 0.4 0.0 0.0 0.0 13.2 Burkina FaBFA 0.1 0.6 0.1 0.5 0.1 0.3 0.0 0.0 0.0 27.2 COted'lvoliCIV 8.3 23.7 37.1 14.2 15.7 17.9 0.0 0.0 0.0 2.5 Mall MLI 0.0 1.5 0.7 0.6 1.4 0.0 44.3 Niger NER 0.5 0.2 0.3 0.0 0.0 0.1 17.3 Senegal SEN 2.8 0.9 0.7 6.7 0.2 1.0 0.04 1.16 2.2 0.24 17.2 17.21 o Togo TGO 1.6 0.9 0.0 0.1 0.6 0.0 19.7 Ghana GHA 0.0 0.0 0.0 0.0 0.0 0.0 o Guinea GIN 0.0 0.0 0.0 0.0 0.0 0.0 o Mauritania MRT o Hl9,tll NGA o UEMOA 13.2 27.2 2.5 44.3 17.3 17.2 19.7 ECOWAS Sub.Sahar,SSA 15.4 29.2 3.4 49.6 17.7 17.9 20.9 0.2 1.4 2.2 0.5 14.0 3.79 0.3 European (EEC 58.22 62.5 69.83 46 71.43 67.76 47.28 55.82 63.16 62.78 53.17 47.81 69.26 North AmerNNA 5.83 6.32 8.28 4.14 8.24 8.14 3.3 10.75 12.01 8.48 12.59 6.9 7.07 Rest Of WcROW 20.7 1.9 18.5 0.3 2.6 8.2 28.5 33.2 23.4 26.5 33.7 41.5 23.38 Wgrld WbQ .., .'Bo '99 199 19o 199 lOO lOO 199 100 100 100 100 laO 100 100 Note: ... means -not appttCSO'8, This leble shows, for each Importing country, the percenlage of Ihe value of Its total Imports that orlglnales from each of the exporting countries for 1995, respectively Source: ADI 2000, World Bank; UNSTAT, COMTRADE 112 Table 27 - Real interest rate (%) 1970-80 1981-93 1994-1999 1995 1996 1997 1998 1999 Benin 2.3 12.1 Burkina Faso 0.4 11.8 Cote d'ivoire (2.1) 12.7 Guinea-Bissau (17.7) 1.5 (8.2) 2.1 Mali 1.4 10.0 Niger (0.2) 13.1 Senegal 3.3 9.3 Togo 7.1 9.9 Cape Verde 5.8 5.9 7.4 5.9 3.5 8.2 7.5 Ghana (22.1) (15.9) Guinea 1.0 17.4 16.3 Liberia 8.5 16.1 Mauritania 2.6 2.9 Nigeria (7.5) (5.2) 1.1 (22.9) (12.5) 16.2 24.6 6.5 Sierra Leone (0.3) (15.3) 2.0 (3.6) 4.6 6.1 (2.5) 1.5 WAEMU 8.7 (8.2) 2.1 ECOWAS (2.4) 4.1 3.8 (2.2) 0.0 8.6 10.1 3.9 Sub-Saharan Africa Lower middle income Source: Wor1d Development Indicators (WOI). 2001, World Bank Table 28 - Deposit interest rate (%) 1970-80 1981-93 1994-1999 1995 1996 1997 1998 1999 Benin 5.1 6.7 3.5 3.5 3.5 Burkina Faso 5.1 6.7 3.5 3.5 3.5 Cote d'ivoire 5.1 6.7 3.5 3.5 3.5 Guinea-Bissau 35.5 19.0 26.5 47.3 4.6 3.5 3.5 Mali 5.1 6.7 3.5 3.5 3.5 Niger 5.1 6.7 3.5 3.5 3.5 Senegal 5.1 6.7 3.5 3.5 3.5 Togo 5.1 6.7 3.5 3.5 3.5 Cape Verde 4.0 4.8 5.0 5.0 5.0 5.3 4.8 Ghana 11.5 16.1 29.6 28.7 34.5 35.8 32.0 23.6 Guinea 19.6 17.8 17.5 Liberia 10.3 8.5 6.3 6.4 6.4 6.2 6.3 Mauritania 5.6 Nigeria 3.4 12.6 11.6 13.5 13.1 7.2 10.1 12.8 Sierra Leone 7.6 22.1 9.9 7.0 14.0 9.9 7.1 9.5 WAEMU 5.1 11.6 19.0 26.5 47.3 4.6 3.5 3.5 ECOWAS 5.1 11.0 12.6 15.0 22.8 11.5 6.8 6.5 Sub-Saharan Africa Lower middle income Source: World Development Indicators (WOI), 2001, World Bank 113 Table 29 - Co_reial Baak Spread (LeadiDg rate - Deposit rate) (%) 1970-80 1981-93 1994-1999 1995 1996 1997 1998 1999 Benin 7.5 8.1 (3.5) Burkina Faso 7.5 8.1 Cote d'lvoire 7.5 8.1 Guinea-Bissau 3.4 21.3 6.4 4.5 Mali 7.5 8.1 Niger 7.5 8.1 Senegal 7.5 8.1 Togo 7.5 8.4 Cape Verde 6.5 4.9 7.0 7.0 7.0 7.0 72 7.3 Ghana 7.5 5.2 Guinea 1.0 4.0 4.0 Uberia 8.1 8.8 10.8 9.2 10.4 15.5 10.5 Mauritania 12.0 5.7 Nigaria 3.6 3.6 7.8 6.7 6.8 10.6 8.1 7.5 Sierra Leone 1.6 92 17.3 21.8 18.2 14.0 16.7 17.3 WAEMU 8.4 6.4 4.5 ECOWAS 3.9 7.3 8.3 6.9 6.2 6.1 12.2 12.4 Sub-Saharan Africa Lower middle Income Source: Wood Development Indicators (WDI), 2001. Wood Benk Table 30 - Moaey aDd qoasi mODey (M2) a8 -,4 of GDP 1970-80 1981-93 1994-1999 1995 1996 1997 1998 1999 Benin 14.9 23.5 23.4 24.9 23.4 22.9 21.1 22.7 Burkina Faso 11.2 17.5 22.3 22.0 22.5 23.5 23.3 22.7 Cote d'ivoira 26.9 28.3 25.3 26.5 26.6 25.0 25.0 24.5 Guinea-Bissau 19A 19A 14.0 13.1 17.5 29A 27.6 Mali 15.1 20.1 21.8 20.0 21.3 22.9 23.0 22.8 Niger 9.1 17.0 11.0 14.0 12.7 10.4 7.3 7.0 Senegal 20.9 25.2 21.9 21.7 22.3 22.3 22.0 23.0 Togo 22.5 37.8 24.7 27.8 25.7 21.9 23.6 23.7 Cape Verde 49.4 60.5 62.3 63.1 61.2 58.1 56.2 Ghana 20.2 12.8 15.8 15.0 13.8 15.5 17.1 17.4 Guinea 5.7 8.6 8.8 8.9 9.2 9.7 5.6 Liberia 12.8 15.8 Mauritania 15.7 24.4 16.9 19.3 16.6 15.4 14.4 14.0 Nigeria 15.1 25.0 15.8 14.7 12.1 13.6 17.0 19.0 Sierra Leone 15.7 13.9 11.2 9.3 8.8 12.7 12.7 13.9 WAEMU 17.1 23.8 21.2 21.4 21.0 20.8 21.8 21.8 ECOWAS 16.5 22.7 21.1 21.4 20.8 21.0 21.7 21.4 Sub-Saharan Africa 29.7 33.1 34.1 33.6 32.5 33.9 35.5 36.0 Lower middle income 31.3 462 63.0 53.3 57.3 63.6 74.3 79.1 Source: Wood Development Indicators (WDI), 2001, Wood Bank 114 Table 31 - External debt, total 1970-80 1981·93 1994·1999 1995 1996 1997 1998 1999 (DOD, current US$l {mill} Benin 153.7 1,038.0 1,627.2 1,614.0 1,594.3 1,628.5 1.650.6 1,686.3 BunlinaFaso 122 691 1,318 1,267 1,294 1,297 1,405 1.518 Cote d'ivoire 2,303 13,108 16,575 18,899 19,524 15,609 14,852 13,170 Guinea·Bissau 29 468 918 898 937 921 970 931 Mati 409 1,861 3,031 2,958 3,006 3,142 3,202 3,183 Niger 254 1,351 1,585 1,587 1,536 1.576 1,663 1,621 Senegal 527 3.041 3.729 3,841 3,663 3,661 3.847 3.705 Togo 344 1.117 1,443 1,464 1,472 1.327 1,448 1.500 Cape Verde 108 221 214 202 207 244 284 Ghana 883 3,014 6,334 5,936 6,440 6,346 6,883 6,928 Guinea 772 1.974 3,363 3,242 3,240 3,519 3,546 3,518 Liberia 292 1,479 2,085 2.154 2.107 2,012 2,103 2,On Mauritania 341 1,725 2,426 2,350 2,412 2,456 2,589 2.528 Nigeria 2,997 24,236 31,120 34,093 31,407 28,455 30,315 29,358 Sierra Leone 234 937 1,250 1,178 1,179 1,144 1,256 1,249 WAEMU 518 2,834 3,n8 4,066 4,128 3,645 3,630 3,414 ECOWAS 689 3,743 5,135 5,446 5,334 4,887 5.065 4,884 Sub-Saharan Africa 25,429 133,657 225,807 235,295 231,118 221,221 229,659 216,359 Lower middle income 76,819 430,228 890,149 843,209 871,842 900,628 982,509 977,856 Source: Wood Development Indicators (WOI). 2001. Wood Bank Table 32 • Total debt service to Export ratio 1970-80 1981·93 1994-1999 1995 1996 1997 1998 1999 (% of ex~orts of goods and services} Benin 3.5 8.9 8.0 6.8 5.9 8.7 9.0 10.9 Bul1i:inaFaso 4 8 13 11 12 14 11 16 Cote d'ivoire 18 39 27 23 27 27 26 26 Gulnea·Bissau 46 28 52 37 16 25 16 Mali 5 13 14 13 18 11 11 14 Niger 9 29 19 17 16 20 18 17 Senegal 12 20 18 17 19 17 22 16 Togo 12 16 8 6 9 10 7 8 Cape Verde 7 7 5 4 7 10 11 Ghana 8 31 26 25 27 33 22 20 Guinea 17 18 25 15 21 19 16 Liberia 11 9 Mauritania 25 23 25 23 23 25 28 28 Nigeria 2 24 12 14 14 8 11 6 Sierra Leone 19 18 43 62 45 20 28 30 WAEMU 6 22 17 18 18 16 16 16 ECOWAS 6 21 19 21 19 17 18 17 Sub-Seharan Africa 5 13 15 15 14 15 14 14 Lower middle income 20 14 14 13 13 14 16 Source: Wond Development Indicators (WOI), 2001, Wond Bank 115 Table 33 - West Africa, World Bank Portfolio by Sector, 1999 Benin Burkina Faao Cote d'ivoire Guinea-Bissau Net Net Net Net Projects Undlsb ProJects Undlsb Projects Undlsb Projects Undlsb Major Sector Commit Commit Commit Commit (Nber. of) Bal (Sm) (Nber. of) Bal (Sm) (Nber. of) Bal (Sm) (Nber. of) Bal (Sm) (Sm) (Sm) (Sm) (Sm) Agriculture 3 17.5 3.8 2 46.5 34.7 3 58 47.5 Economic Polley 1 17 0.9 1 25 23.6 Education 3 24.90 13.9 1 26.00 17.1 3 60.30 56.4 1 14.30 12.7 Electric Pwr & Engy. 1 79.70 17.7 Environment 1 8 3.9 1 41 30.7 Finance Hlth Nutn & Popultn 1 27.8 14.3 2 55.5 10.6 1 40 26.8 1 11.7 10.6 Mining 1 21.4 16.1 PrlvateSector Devel 1 30.4 29.9 0 0 0 1 12 10.3 Public Sector Mgmt. 1 7.2 0.4 Social Protection 1 16.7 11.6 1 17 3.1 Telecommunications Transportation 1 40 17.7 2 246.8 108.2 011 & Gas Urban Development 1 25.5 24.1 1 37 15.3 2 50 27.4 1 22 0.3 Water Supply & Santn 1 9.8 2.7 All Sector Group 13 200.6 121.' 7 186.4 93.8 18 821.8 329.0 5 80.2 47.8 Mall Nlaer Senegal Togo Net Net Net Net ProJecta Undlab ProJacts Undlab ProJecta Undlab Projects Undlsb Major Sector Commit Commit Commit Commit (Nber. of) Bal (Sm) (Nber. of) Bal (Sm) (Nber. of) Bal (Sm) (Nber. of) Bal (Sm) (Sm) (Sm) (Sm) (Sm) Agriculture 4 145.3 122.1 2 17.2 12.3 2 35.4 30.8 1 26.2 20.7 Economic Polley 1 60 9.4 Education 1 3.80 3.7 1 41.40 7 4 91.20 65.1 1 36.60 16.3 Electric Pwr & Engy. 2 44.40 16.3 2 110.50 78.9 Environment 1 20.4 0.6 1 26.7 9.4 1 5.2 4 Finance 1 21 20.9 Hlth Nutn & Popultn 1 40 36.3 1 40 22.4 3 83.1 48.6 Mining PrlvateSector Devel 1 12 4.2 1 18.6 13.2 2 41 30.9 1 29.9 24.2 Public Sector Mgmt. Social Protection 2 34.9 21.8 1 5 4.2 Telecommunications 1 10.2 9 Transportation 1 65 13.9 1 28 14.4 3 166.6 153.5 1 50 27.4 Oil & Gas Urban Development 1 80 58.1 1 20 12.5 1 75 56.4 1 26.2 3.9 Water Supply & Sanln 1 100 53.4 All Sector Group --16_ ~~I!.JL -.107.3 8 191.9 - 91.2 20 718.2 530.5 8 173.' 98.8 116 Table 33· West Africa, World Bank Portfolio by Sector, 1999, cont. CapeVercte Gambia Ghana Guinn Net Het Projects Undlsb Projects Unclsb Projects Nat CommIt Unclsb Projects Net Commit Umlsb Major Sector Commit CommIt (Nber. of) Bat($m) (Nber. of) Bat (Sm) (Nber. of) (Sm) Bat (Sm) (Nber. of) (Sm) Bat ($m) (Sm) ($m) Agriculture 3 106 69.~ 3 77.8 29.4 Economic PQllcy 1 181.2 100. Education 2 17.50 5.2 1 20.00 16.1 2 62.00 57.1 3 53.20 19.4 Eledric Pwr & Engy. 1 175.60 35. Environment 1 9.3 7. FInance 1 11.4 1.7 2 26.4 16.1 1 5 5.1 Hlth Nutn & Populln 1 16 14.7 1 35 20.! 2 35.9 15.5 MInIng 1 12.3 2. 1 12.2 1.1 Prlva!eSector Devel 1 9 5.2 2 77 60.1 Public Sector Mgmt 1 3 2.9 2 35.2 24.! 1 19 17.3 Social Protection 1 16.1 14.6 2 14.6 7. I T elecommunicatlons TransporteHon 1 12.5 0.6 1 100 33. I on & Gas 1 17.5 14.6 Urban Development 1 15 11.3 3 120.3 55.€ 1 18 16.3 Water Suppiy & Santn 2 47 27.1 1 25 18.1 lAo Sector Group 8 87.0 45.3 3 53.0 42.1 24 1021.8 537. 13 248.1 _ 122.1 Maurltanea Hllllwia SIerra Leone Net Net Projects Undlsb Projects Undlsb Projects Hat Commit Unclsb Major Sector CommIt Commit (Hber. of) Bal($m) (Nber. of) Bat (Sm) (Mber. of) (Sm) Bat (Sm) ($m) ($m) ~oolture 3 74.3 49.4 Economic PoUcy 1 20 lB.6 1 XI 14.: Education 1 55.00 52.6 Ele<;Iric Pwr & Engy. 2 21.00 15 1 21.00 7.6 EnvIronment 1 5 5.1 finance HIth Nutn & Popultn 2 26.9 23.1 1 20 12.2 Mining 1 15 13.9 PrlvaleSecIor DeveI PubUc Sector Mgmt 1 30 29.6 1 10 0 Social Protection 2 47.5 15.7 1 25 16.6 T eiecommunicatlons 1 10.6 9.4 TransporteHon 2 I.(l 2B.9 Ioil & Gas Urban Deveiopment 1 14 6.1 1 26 2.8 Water Supply & Santn 3 362 47.6 1 35 15.1 ~GroJ!P 14 246.5 167.3 5 437.0 118.8 9 248.0 99,~ 117 118 SELECTED BIBLIOGRAPHY Allechi M'bet and Niamkey Madeleine, 1994. 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