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Working Paper 109 - The First Africa Region Review for EAC/COMESA

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Abstract

The Regional Economic Communities (RECs) of COMESA and SADC recognize the importance of trade facilitation in deepening regional integration by reducing the cost of cross-border transactions, and improving the potential of growth through trade. Efforts to address supply-side capacity constraints and trade-related infrastructure needs received added impetus from the AFT initiative, launched at the Hong Kong Ministerial Conference in December 2005. The COMESA Secretariat acted quickly to set up a dedicated mechanism called COMAid to mobilise and coordinate AFT resources to support national initiatives on a demand-driven basis and address constraints, such as deficient transport and distribution networks, at the regional level. However, COMESA/EAC believes that its trade-related problems are too complex and varied, and that addressing them calls for a holistic approach, tighter regional cooperation, and external assistance. It sees in the AFT initiative a window of opportunity to lift the region out of its current marginal state in global trade and harness the benefits of trade as an engine of growth. This paper provides a mapping of trade-related bottlenecks in the EAC/COMESA region to eligible aid-for-trade (AFT) categories, and to articulate a strategy for mobilising significant amounts of aid for trade. To do so, the paper reviews the constraints to trade in EAC/COMESA. It identifies existing AFT-related programmes and activities, and documents the status of their implementation, pointing out any gaps and the causes thereof. The paper is based on the premise that the EAC/COMESA region faces unique and severe constraints to trade related to the fact that many of the member states are land-locked. This, combined with poor infrastructure and services, cumbersome border procedures, inadequate mainstreaming of trade in national development strategies, and lack of progress in deepening economic integration, explains the region’s dismal trade performance, both intra-regionally and externally. AEC/COMESA is aware of these constraints. The region has launched various initiatives to tackle them. The majority of these initiatives relate to trade facilitation measures. The North-South Corridor is one trade-related infrastructure project that has attracted attention in the region, both by virtue of its scale and purported benefits. Even though the implementation of the project was slow initially, the political impetus during the North-South Corridor High Level meeting in Lusaka, Zambia in April 2009 attracted financing in the region of US$1.2 billion. As the first pilot in East Africa, the North-South Corridor clearly shows that Aid for trade can play a key role in sustaining ongoing efforts to overcome bottlenecks to trade. The paper shows that current AFT commitments (all categories combined) fall drastically short of even the most conservative estimates of Africa’s resource needs. The whole of Africa received US$4.6 billion in AFT in 2006, of which $1.6 billion went to EAC, COMESA, and SADC. This amount is a pittance compared to what is needed to help SSA alleviate extreme poverty and attain the other MDGs. There is an urgent need for the RECs, through the Tripartite Task Force, to press the donor community for much bigger commitments. SSA’s fate lies, to a large extent, on its ability to mobilize important amounts of AFT, and for donors to believe in SSA’s future, and respond to its needs. The key message is that an effective AFT strategy should focus primarily on trade facilitation, with some emphasis on trade-related infrastructure. Since substantial aid has traditionally been directed to technical assistance and capacity building, and the trend is likely to continue, there is no need to build this element into the strategy per se. Such a strategy must: (a) Emphasise the contribution of trade facilitation measures in reducing trade costs and enhancing export competitiveness; (b) demonstrate the added benefits of modern trade related infrastructure; (c) demonstrate the political will by the EAC/COMESA member states to address the region’s constraints in the spirit of cooperation and solidarity to landlocked neighbours; and (d) impress on the donor community the need for greater AFT resources to help the region participate fully in global trade and attain the MDGs. The Aid for Trade agenda should also highlight the importance of monitoring to show its impact on trade and development. In this case, the EAC/COMESA region should maintain a database of Aid for Trade for monitoring and evaluation purposes.

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