Chapter II 2. Literature Reviewresearch-system.siam.edu/images/independent/ISSUES_IN...Chapter II 2. Literature Review 2.1 Introduction This study is initially following the theory

Chapter II

2. Literature Review

2.1 Introduction

This study is initially following the theory of Gumisai Mutume of Africa Recovery where

he wrote on how to boost trade within Africa to achieve regional integration by lowering barriers

and diversifying production. While in addition it accumulates with several other economic and

institutional theories like that of Adebajo and Ismail who wrote on a comprehensive assessment

of the security dilemmas confronting the West Africa region. Reason being that West Africa is

today facing delay, hindrance, handicaps and obstruction in economic growth as a result of their

low level of regional cooperation and integration.

This chapter is divided into two section the first section is the general literature review

based on the research purpose and topic while the second section review the different methodology

used by other regions in the world to achieve economic growth and trade expansion.

In order to provide justifications for this research, the supporting review of the literature

and studies is derived from the following rationales: a) achieving effective improvement and

structural transformation of ECOWAS regional economy b) Towards successful administration

reform and successful economic management that can raise the theory of development.

2.2 Justification one:

Background of integration in Africa and Economic Development Ethics

Africa’s regional integration has been a stated priority agenda for both African

governments and the donor community since the early years of independence. Regional integration

imperatives have to do with the dynamics of the globalizing economy, as a means to enhance and

assure competitiveness through better leverage in international trading (Ndomo, 2009).

“Revitalized regional integration offers the most credible strategy for tackling Africa’s

development challenges because of the many weaknesses that overwhelm the limited capacities

and resources of individual countries (Ndomo, 2009). Collective efforts with dynamic political

commitment to integration can help to overcome the daunting challenges” (Ndomo, 2009).

Economic development deals with the welfare of the people in terms of higher incomes

and better standards of living (Swaminathan, 2003). This may not be equally distributed within

nations and across nations. Ethical dimensions of economic development deal with the promotion

of morally desirable outcomes, such as equality of opportunity to individuals within the country

and across the countries (Swaminathan, 2003). It implies, in short, more equitable distribution

of income, elimination of poverty, hunger, and discrimination of all sorts based on caste, class and

gender1. Many economists, starting with Adam Smith, have discussed the ethical dimensions of

economic prosperity2. Karl Marx3, and A.C. Pigou4 dealt extensively with the ethical dimensions

of economic growth (Swaminathan, 2003). Equally important is the fact that economic prosperity

has, on several occasions, led to desirable distribution of income and the elimination of extreme

deprivation (Swaminathan, 2003). The traditional theory of economic development is based on

the premise that an increase in per capita income and an economic shift from primary sectors to

1 M.S. Swaminathan Research Foundation for the Regional Meeting on Ethics of Science and Technology. 2003. UNESCO. 2 Smith, Adam. 1975. The Theory of Moral Sentiments, original reprinted in D.D. Raphael and A.L Macfie (Ed.), Oxford Clarendon Press 3 Marx, Karl. 1887. Capital, First English Edition, Progress Publishers 4 Pigou, A.C. 1952. The Economics of Welfare, 1952, Macmillan, London.

secondary and tertiary sectors will increase labour productivity in both agriculture and industry

sectors (Swaminathan, 2003). Another important aspect has been that agricultural development

has either preceded the shift to industrial development, as in the West, or taken place

simultaneously along with industrial growth, as in the case of some countries of Southeast Asia.

Such a situation removes the constraint of food shortages in the economy (Swaminathan, 2003).

Keeping food prices low and making food affordable has been crucial to the success of economic

development (Hayami and Ruttan, 1985). Broadly speaking, this was the experience of the West

in the early nineteenth century and that of the Southeast Asian nations in the twentieth century

(Swaminathan, 2003).

With the exception of some island nations and ‘city states,’ the development of agriculture,

bringing abundant and cheap food, has preceded industrial development in many countries,

particularly the populous ones, including Japan (Swaminathan, 2003). Hence, economic

development represented by growth in Gross Domestic Product (GDP) per capita was assumed to

be ethically correct. As a country gets richer everyone is expected to share in the prosperity

(Swaminathan, 2003).

In the words of Mahbub ul Haq, “No sustainable improvement in human well being is

possible without growth. But, it is also wrong to suggest that high economic growth rates will

automatically translate into higher level of human development5

Per capita income may increase, and the GDP growth might be impressive, but many

people may still remain poor, hungry, malnourished, and live without the minimum basic amenities

of housing, sanitation and safe drinking water. Sometimes only the rich benefit, as the poor do not

get to participate in income generating economic activities. Lack of education, skills and assets

are the major handicaps of the poor. In addition, discrimination by class, race, caste, community

and gender, widen the income differentials and perpetuate poverty and hunger (Swaminathan,

2003).

2.2.1Governance and the Economy

Recently the terms "governance" and "good governance" are being increasingly used in

development literature. Bad governance is being increasingly regarded as one of the root causes

of all evil within our societies.

West Africa has largely become a zone of economic decline, political instability and human

insecurity in the beginning of the 21st Century. Many of the countries of West Africa have

attempted to respond to the economic crisis of the 1980s by embarking on some sort of economic

reforms along neo-liberal lines. Some countries in the sub-region, such as Ghana and Mali, have

secured improvements in their macro-economy. But most have failed to sustain growth and

poverty reduction (Economic Commission for Africa, 2004).

Similarly, the last decade of the 20th century also saw a historic shift in patterns of politics

and governance in West Africa from largely autocratic and neo-patrimonial towards liberalization

and democracy. However, the results have been mixed. While some West African States have

made significant progress towards democratic governance and human security, many others have

suffered reversals. Democratic progress has been made in Benin, Mali, Ghana, Senegal, Nigeria

and Cape Verde, but there has been stagnation or reversals in the political, social, and economic

conditions in countries such as Liberia, Sierra Leone, and Côte d’Ivoire (Economic Commission

for Africa, 2004).

5 Mahbub ul Haq. Human Development Centre. 2003. Human Development in South Asia 2002, Oxford University Press.

According to the World Bank governance is “the manner in which power is exercised in

the management of a country's economic and social resources for development”. West Africa has

a large quantity of natural resources including oil, diamonds, gold, cobalt, uranium, copper, bauxite

but bad governance has tainted these opportunities and potentials. Nigeria with all the oil deposits

has not inched up significantly in its developmental goals and objectives, Talk of the gold mines

of Ghana but yet the region has failed to make significant impact in improving the living standards

of its people. Ghana should know that the current oil finds will have little bearing on the

socioeconomic development of the country if the present government and future governments do

not embrace the tenets of good governance (Kanyam, 2009)

The Economic Commission for Africa (ECA) has been in the forefront of the good

governance debate, repeatedly pointing out the centrality of governance factors underlying the

contemporary African predicament and stressing the interrelationship between good governance

and sustained economic development. While it may be true that mismanagement and inefficiency

may be tackled by reducing the size and role of government, ECA has maintained that reconstituted

proactive, democratized developmental States have the best prospects for the region’s recovery

and development and have an essential role to play. It continues to advocate that reversal of

economic decline will require engaged and proactive governments with improved capacity to

formulate policies manage essential services and endure public accountability and transparency.

In its renewed efforts to serve Africa better, and in its capacity as the lead agency of the governance

component of NEPAD, ECA has recommitted itself to help strengthen government capabilities

and effectiveness and to help consolidate institutions and good governance practices on the

continent (Economic Commission for Africa, 2004).

The crisis of human insecurity in West Africa has multiple origins, including pre-colonial,

colonial and post-colonial exploitation and manipulation by external powers, as well as persistently

negative international terms of trade. But bad governance is a significant factor in the pathologies

of violent conflicts and insecurity. Declining economic fortunes and stalled political reforms have

fostered mass poverty, inequality has deepened, and social, economic and political tensions have

intensified in the midst of continuing abuse of political and civil rights, leading to intense violent

conflicts and instability in the sub-region (Economic Commission for Africa, 2004).

There are different faces of bad governance which I might not be able to mention all but

here are some of it; poor tax administration, widespread smuggling, over-centralized decision-

making, policy reversals and poor implementation/enforcement, unnecessarily cumbersome

procedures, corruption, political interference and regulatory capture (Business. Enquirer, 2010)

Despite the enthusiasm for democratic transition, “in reality, the governance landscape is

still mired in political conflicts, with Côte d’Ivoire experiencing the most recent insurgency

problem (Economic Commission for Africa, 2004). A number of States in the West Africa sub-

region are still fragile and are undergoing reconstruction from years of conflicts and civil wars.

West Africa continues to be a sub-region plagued by political conflicts and strong-willed political

interest groups that wreak havoc on the economic and social development of the sub-region

(Economic Commission for Africa, 2004).

To segregate the achievers from non-achievers in the developing block, we can look at per

capita income levels. The level of per capita income is normally used as a guideline of a country’s

economic performance, the larger the per capita income, the richer the country; and vice versa.

Faster growth in Gross Domestic Product, and an increase in per capita income levels, normally

leads to the economic well being of the population. This appears to be true for most rich nations

where people enjoy higher standards of living. The Asia-Pacific region has a large number of

countries in the developing block and a few countries, like Japan, Australia and New Zealand, in

the developed block (Swaminathan, 2003).

The foundation of all the economic policies, poverty reduction strategies and development

goals rest on good governance. Ensuring environmental sustainability requires effective and

efficient governance (Kanyam, 2009).The key to eradicating extreme poverty and hunger, rest on

good governance, the catalyst to achieving universal primary education, Promoting gender equality

and empowering women is good governance (Kanyam, 2009).

Our governments and leaders must recognize that, faced with the same economic

constraints and economic marginalization in the global economic system, countries like China,

India, Malaysia, Singapore, South Korea just to mention a few have spurred their economies to appreciable height even though there is still some room for improvement. Today the progress of

these countries has shifted the development paradigm and the hegemony in the global economic

system has taken a twist little did the world know that these countries could emerge economic

giants, flex their economic muscles and rival the dominance of the west in the global economic

system (Kanyam, 2009).

Prof. Alex A. Kwapong of Ghana indicated that the ADF-IV (African Development

Forum-IV) Sub-regional workshop for Central and West Africa held in Accra, provided an ideal

opportunity for deepening consultation, exchanging ideas, and building consensus on highly

complex issue of good governance. He emphasized that bringing a stakeholder group representing

key segments of society together with governance experts from the various countries in the two

sub-regions, would provide a good chance for building up strong momentum for the ADF IV and

even the New Partnership for Africa's Development (NEPAD) (Economic Commission for Africa,

2004). Governance is defined as the manner in which power is exercised in the management of the

affairs of a nation. It encompasses effective States, mobilized civil societies, and productive

private sectors. Effective States create an enabling political and legal environment for economic

growth and equitable distribution. Vibrant civil societies mobilize groups and communities,

facilitate political and social interaction, help to generate social capital, and foster societal cohesion

and stability. Productive private sectors generate jobs and income. All three factors (in

combination with sound economic management and an enabling social policy environment) are

now universally recognized as essential for sustained development. Its key elements include

accountability, transparency, combating corruption, participation and an enabling legal/judicial

framework (Economic Commission for Africa, 2004).

2.2.3 Security Instability

The stability of a country in terms of physical security is necessary for economic

development when considered within the context of inter-state rivalry and competition. However

the relationship between security and development reverses when the sources of insecurity

emanate from within the borders of a country. Since the demise of communism and the collapse

of the Soviet Union as a super power, there has been an increase in the spread of democracy as the

preferred form of governance in most parts of the world6 (Apogan-Yella, 2005).

In the past these governments labeled genuine internal demands for change as either

communist or capitalist inspired within the context of cold war politics and sometimes received

open support from either the Eastern or Western bloc countries to reinforce their hold on power.

For example France, during the cold war period had a very high-profile military role in its former

6 See http://www.dtic.mil, underdevelopment: major cause of insecurity in west Africa Abstract pg. iii

colonies in Africa which in no small way helped in propping up leaders of those countries

(Apogan-Yella, 2005). It must however be mentioned that until the crisis in Cote d’Ivoire, France

has systematically reduced its military presence in Africa since the end of the cold war, and instead

has aimed at diversifying its commercial relations in Africa beyond its colonies (Apogan-Yella,

2005).

Armed rebellion and human insecurity is essentially a phenomenon of the failed State. It

arises principally from the failure of the West African State to sustain economic growth and to

distribute the social product equitably (Economic Commission for Africa, 2004). The typical West

African State contains a large army of unemployed and not immediately employable. They provide

a ready base of recruitment for armed rebellion (Economic Commission for Africa, 2004).

Armed rebellion is also a manifestation of many pathologies afflicting most West African

States, notably social, economic and political marginalization of sub-national and religious groups

and exclusion from all sources of power - economic, political, social, and symbolic (Economic

Commission for Africa, 2004). The unequal distribution of power and resources between groups

that are also divided by race, religion, or language, as is usually the case in West African States,

serves as a breeding ground for conflict (Economic Commission for Africa, 2004). The rising

incidence of armed rebellion is often a reaction to the use of political repression as the first and

primary response to dissidence and protest, reliance on force as the chief means of securing popular

compliance, and militarization of power by rulers who tend to rely on an ethnically based military

(Economic Commission for Africa, 2004). Internal conflicts in West Africa are commonly

financed by the illegal sale of arms or the illicit extraction of high value natural resources such as

diamonds, gold, and timber.7 Weapons trafficked across the sub-region are eventually used by

rebel groups and criminals for fighting civil wars, as in the case of Liberia, Sierra Leone and Cote

D’Ivoire, among others, or used for armed robbery8(ATUOBI, 2007).

The phenomenon also reflects the inability of the State to provide more peaceful means of

resolving conflict, especially as most of the States in West Africa have failed to establish

appropriate legal systems and frameworks for peaceful resolution of conflicts. It also reflects the

weakness or in some cases the absence of viable early warning systems and safety valves

(Economic Commission for Africa, 2004).

The spread of armed rebellion in West Africa reflects the porous nature of borders in the

sub-region, especially the inability of governments to police their national borders. This often leads

to the eventual and inevitable spill over of violent conflicts from one national theater to the other,

especially as dissidents flee to nearby States, provoking cross-border raids. Armed rebellions

sometimes spread across borders as rogue leaders extend their pillaging and criminal activities

such as diamond and arms smuggling into neighboring States, or arm rebels and dissidents in other

countries in order to avenge perceived support given to their own rebels by governments in the

sub-region, or pursue other geo-political interests (Economic Commission for Africa, 2004).

The phenomenon of armed rebels is also related to and aggravated by the proliferation of

small arms and light weapons in the West African sub-region (Economic Commission for Africa,

2004). The uncontrolled accumulation and proliferation of small arms poses a major threat to sub-

regional security. There are said to be about eight million small arms in the hands of non-state

actors in the sub-region. They are readily available for use as the tools of death by armed groups,

7 See Conflict and Anti-Corruption Overview at http://reliefweb.int

http://www.usaid.gov/missions/westafrica/cprevention/overview/index.htm. (Accessed:28/7/07). 8 Addo, P., Cross-Border Activities in West Africa: Options for Effective Responses, KAIPTC Paper No. 12,

May 2005 p. 6

bandits and rebels (Economic Commission for Africa, 2004). Small arms and poverty have also

encouraged the emergence of child combatants, a phenomenon that is sweeping through the West

African sub-region and which poses a very difficult problem to handle (Economic Commission for

Africa, 2004).

The proliferation of small arms has increased the lethality of the wars in the Mano River

Basin States (Guinea, Liberia and Sierra Leone), the communal conflicts in Nigeria, the citizen

crises in Côte d’Ivoire, and the separatist rebellion in the Casamance area of Senegal and Guinea-

Bissau. The proliferation of small arms, particularly those in the hands of sub-state actors, does

not only exacerbate and prolong conflicts, but also undermines economic activities carried out

under difficult and dangerous conditions. During and after the conflicts, combatants and criminals,

emboldened by their weapons, pay little respect to infrastructure, taking wantonly from their

environment, often terrorizing and thereby destabilizing society with their weapons. Thus, the

abundance of small weapons in the West African subregion reinforces a cycle of violence and

underdevelopment (Economic Commission for Africa, 2004).

2.2.4 Evolution of Civil-Military relations in the Region

Apart from the anti-colonial struggle, organised armed violence to seize political power

has affected West Africa in several way, even in many countries where the democratic functioning

of the political system was absent or severely lacking; this made it difficult in principle for

democratic changeovers to take place and gave an a priori legitimacy (or provided justification

after the event for some actors) to the notion that “political power grows out of the barrel of a gun”

(DIALLO, 2005). This was illustrated by the fact that:

Over a 35-year period, coups d’état became widespread as a means of seizing political

power;

Violent conflicts developed where the issue at stake was often political power. This period

was sustained by the growth and illegal circulation of arms in the region. Armed power developed

in a context where it was not just democracy that was deficient but, even more seriously, the

workings of the State (DIALLO, 2005). Indeed, the crumbling away of the State and the

bankruptcy of governance mechanisms led to the growth and dispersal of armed participants,

with soldiers, dissidents, militias, rebels and/or mercenaries fighting with legal armed forces for

political power(DIALLO, 2005).

An ECOWAS supplementary protocol was signed in 2001 in Dakar. Its main issue was the

development of a constitutional State based on rule of law, strengthening of democracy and

adopting common principles of good governance within ECOWAS’ 15-member States.

The Supplementary Protocol sets out the relationship between the properly constituted

defence and security forces and government (DIALLO, 2005). It aims to face the challenge of

democratisation, whose importance can be measured in the light of several key points:

Of the 15 countries which joined (and remain in) ECOWAS as from 1975, only 2

never experienced a coup d’état and a military regime between 1960 and 2005

(Cape Verde and Senegal).

Two periods were marked by the absence of a coup d’état and the direct military

control of political power: Shortly after independence, from 1960 to 1964 and from

2000 to 2005 (DIALLO, 2005).

In this new period, where military governments are absent in the ECOWAS zone, 7 of the

15 current Heads of State are military personnel who made the transition to civilian life before or

after coming to power or participating in government (DIALLO, 2005) 9

.

Between 1983 and 1989, 13 West African countries were dominated by military regimes.

The turn of the 1990s was marked by a sharp rise in the democratisation process concomitant with

the development in many countries of national conferences, and the sharp fall in the number of

military-controlled regimes. In 1999, only one country within ECOWAS still had a government

which was the result of a military coup (DIALLO, 2005).

Military governments did not produce economic miracles; they paralysed or hindered any

political system founded on pluralism, freedom and democracy. They created (or exacerbated) an

acute crisis in political governance. The militarisation of political governance generally went hand

in hand with inhibiting or repressing democracy (DIALLO, 2005).

The ECOWAS Protocol dealing with the prevention mechanism and the Supplementary

Protocol are, respectively, the instruments designed to respond to these dual requirements for

action for peace, security, democracy and good governance. The Supplementary Protocol

illustrates the importance that member States give to the issue of taking democratic control of the

armed forces within the framework of security sector governance and the strengthening of the rule

of law. The Protocol establishes the recognition by the 14 signatory States of the major

constitutional convergences that are the basis for the legality and legitimacy of the principles

prescribed in the document (DIALLO, 2005)

The Protocol prescribes that:

“The armed forces must be apolitical and under the command of a legally

constituted political authority;

No serving member of the armed forces may seek to run for elective political

office10

.

“Every accession to power must be made through free, fair and transparent

elections.

Zero tolerance for power obtained or maintained by unconstitutional means”.

“Popular participation in decision-making, strict adherence to democratic

principles and decentralisation of power at all levels of governance” (DIALLO,

2005)

Article 19 of the Protocol stipulates that:

The armed forces and police shall be non-partisan and shall remain loyal to the

nation. The role of the armed forces shall be to defend the independence and

territorial integrity of the State and its democratic institutions (DIALLO, 2005).

The police and other security agencies shall be responsible for the maintenance of

law and order and the protection of persons and their properties (DIALLO, 2005).

The armed forces, police and other security agencies shall participate in ECOMOG

missions as provided for in Article 28 of the Protocol (DIALLO, 2005).

They may also, on the decision of the constitutionally constituted authorities,

participate in peacekeeping missions under the auspices of the African Union or the

United Nations (DIALLO, 2005).

9 See. Workshop on the role and place of the ECOWAS Supplementary Protocol in Security Sector Governance in West Africa at West African

Network on Security and Democratic Governance (WANSED). Pg 5-8. 10 See Article 1 of Chapter 1 of the Protocol which covers the CONSTITUTIONAL CONVERGENCE PRINCIPLES in Section 1.

Members of the armed forces may be drafted to participate in national development

projects (DIALLO, 2005).

Within the framework of its aim of strengthening democracy through a respect for rights

and freedoms, Article 22 of the Supplementary Protocol bans the use of arms to disperse non-

violent meetings or demonstrations (DIALLO, 2005). The banning of “all cruel, inhuman and

degrading treatment”, the prescribed requirement for the scrupulous respect for human rights and

humanitarian law constitute important directions concerning the choice of, and desire for,

democracy and good governance that the Supplementary Protocol seeks to promote (DIALLO,

2005).

The protocol’s contribution to the security sector governance of ECOWAS; in these sector

ECOWAS can make a tangible contribution to the achievement of Supplementary Protocol’s aims

through activities such as:

The development of a dialogue between civilians and military personnel

An awareness of the Protocol’s principles and advocating for its adoption by all

actors.

A contribution to civic training for defence and security forces and teaching them

about their country’s constitution and ECOWAS’s principles and rules.

The Protocol highlights fairly clearly the direction to take in terms of the indicative content

of training at this level: it states that “the armed forces, the police and other security agencies shall

during their training, receive instructions about the Constitution of their country, ECOWAS

principles and regulations, human rights, humanitarian law and democratic principles. In this

regard, seminars and meetings bringing together members of the armed forces, Police and other

Security Agencies and other sectors of society shall be organised from time to time. Joint training

sessions shall also be arranged for members of the armed forces from different ECOWAS

countries, university dons and members of the civil society11

”. According to DIALLO (2005)

these illustrated protocol about security means

A contribution to the dissemination of democratic values and principles, the respect for

humanitarian law and personal rights among defence and security bodies.

Awareness among civil authorities of the need to confine defence and security forces to

legal, constitutional and non-partisan activities.

A strengthening of the democratic governance capabilities of the security sector in a way

which embodies parliamentary control, involves civil society and which prevents defence

and security forces from lapsing into illegal, secret and repressive practices.

2.2.5 Reducing Corruption

Corruption as a social, legal, economic and political concept is entangled in ambiguity and

thus encourages controversy. Some of the conceptual clarifications of corruption have come from

moralists, functionalists, social censurists, and social constructionists and realists. The moralists

consider "corruption as an immoral and unethical phenomenon that contains a set of moral

aberrations from moral standards of society, causing loss of respect for and confidence in duly

constituted authority".12Nye is one of the prominent proponents of this view. He defines corruption

as "a behavior that deviates from the formal duties of a public role (elective or appointive) because

of private-regarding (personal, close family, private clique) wealth or status gains, or violates rules

11 Art. 23, paragraphs 1 and 2 of the ECOWAS Supplementary Protocol. 12 See. Gould, D.J. "Administrative Corruption: Incidence, Causes, and Remedial Strategies” in Farazmand, A. ed.

Handbook of Comparative and Development Public Administration, Marcel Dekker: New York 1991 p. 468.

against the exercise of certain types of private regarding influence"13(ATUOBI, 2007). He further

up to say that the lack of consensus on a common definition of corruption as a social, political,

security and development issue has led to the outpouring of several definitions. The United Nations

(UN) defines corruption as:

“An abuse of public power for private gain that hampers the public interest, this gain may

be direct or indirect…. Corruption entails a confusion of the private with the public sphere or an

illicit exchange between the two spheres. In essence, corrupt practices involve public officials

acting in the best interest of private concerns (their own or those of others) regardless of, or against,

the public interest.”14

There has been a growing focus on the canker of corruption in the new democracies of

West Africa. Corruption has become a major campaign theme in many recent West African

elections such as Benin in 1996, Nigeria in 1998, and Ghana in 2001(Economic Commission for

Africa, 2004). The past decade has seen the emergence of independent anti-corruption

commissions in countries such as Ghana, Nigeria, and Sierra Leone, often anchored in new liberal

constitutions or statutes (Economic Commission for Africa, 2004)15

.

It is true that some of these official anti-corruption campaigns have been designed largely

to score public relations points and/or expose the misdeeds of former officials. But enthusiasm for

public relations stunts and post-incumbency has not been matched by enthusiasm for institutional

and preventive measures that would prevent current office holders from looting assets (Economic

Commission for Africa, 2004). Typically, little attention has been paid to public sector and other

institutional reforms that would promote official transparency, streamline regulations, reduce

official indiscretion, and prevent corruption (Economic Commission for Africa, 2004). The

existence of widespread corruption, especially in societies beset by mass poverty and very high

levels of unemployment, has a deeply corrosive effect on trust in government and contributes to

crime and political disorder 16

(ATUOBI, 2007). In the political realm, corruption undermines

democracy and good governance by flouting or even subverting formal processes (ATUOBI,

2007).

Corruption in legislative bodies reduces accountability and distorts representation in

policymaking; corruption in the judiciary compromises the rule of law; and corruption in public

administration results in the unequal distribution of services. More generally, corruption erodes

the institutional capacity of government as procedures are disregarded, resources are siphoned off,

and public offices are bought and sold. At the extreme, unbridled corruption can lead to state

fragility and destructive conflict, and plunge a state into “unremitting cycle of institutional anarchy

and violence (Theobald R. 1990). In spite of the negative effects of corruption on development,

peace and security, anticorruption campaigns in the member states of the Economic Community

of West African States (ECOWAS) are often cosmetic and rarely address the fundamental

problems.17 An earlier attempt to place corruption on the ECOWAS agenda is found in the Protocol

Relating to the Mechanism for Conflict Prevention, Management, Resolution, Peacekeeping and

Security18 (ATUOBI, 2007).

13 Nye, J. (1979). "Corruption and Political Development: A Cost-Benefit Analysis" in Ekpo M.U. ed.

Bureaucratic Corruption in Sub-Saharan Africa: Toward a Search for Causes and Consequences, University

Press of America: Washington, D.C., 1997 p. 417. 14 See. United Nations Manual on Anti-Corruption Policy Opt cit p. 15. 15 See http://www.uneca.org/adfiv/documents 16See http://reliefweb.int/node/24166 pg. 2. 17 See Global Corruption Report 2003, West Africa at

http://unpan1.un.org/intradoc/groups/public/documents/APCITY/UNPAN008451.pdf (Accessed: 5/7/07). 18 See Articles 46, 48, 49 of the ECOWAS Protocol relating to the Mechanism for Conflict Prevention,

The following types or manifestations of corruption are identified in the literature: Grand

or Political Corruption, States Capture and Administrative or Petty Corruption (ATUOBI, 2007).

Grand Corruption: This involves higher level officials and larger sums of money. This

may include kickbacks to win large public procurements, embezzlement of public funds,

irregularities in public finances and in political party and campaign financing, and political

patronage and clientelism. Other examples of Grand Corruption are cases of large multinational

companies paying millions of dollars to government leaders or politicians to obtain business

contracts19. This type of corruption may also be referred to as Political Corruption simply because

it usually involves large scale political and economic interest of public office holders.

State Capture: is used to describe a situation where economic elites develop relationships

with political officials through whom they exert undue influence over them and over public policy

for their own personal gain20 (ATUOBI, 2007).

Administrative or Petty Corruption: describes everyday low level abuse of power that

citizens and businessmen experience within the state bureaucracy, such as demand for small bribes

or gifts before certain services, which are supposed to be free, are rendered21.

Broadly, the following are identified as acts/forms of corruption: bribery, embezzlement,

fraud, intimidation, extortions, and abuse of power. The rest are: conflict of interest, insider

trading, receiving an unlawful gratuity, favouritism, nepotism, illegal contributions, money

laundering, identity theft and white-collar crime22 (ATUOBI, 2007).

Independence in West Africa unlocked the floodgate [of corruption]. Politicians used their

public office to extract ‘commissions’ at every available opportunity (ATUOBI, 2007). The

common cut on government contracts in West Africa was 10 per cent. In numerous cases,

prominent politicians simply looted the state treasury, transferring money to their private

accounts23.

Writing about West Africa in (1961), Franz Fanon stated: “Scandals are numerous,

ministers grow rich, their wives doll themselves up, the members of parliament feather their nests

and there is not a soul down to the simple policemen or the customs officer who does not join in

the great procession of corruption24.”Then, in (1965), Arthur Lewis also stated that corruption in

West Africa existed through the “vast pickings in bribes, state contracts, diversion of public funds

to private uses, and commissions of various sorts.” He added that “to be a Minister in West Africa

at the time was to have a lifetime’s chance to make fortune. He continued that bribery and

corruption became a way of life, accepted as a means of getting by, earning a living, obtaining a

service or avoiding hassle25.”

Management, Resolution, Peacekeeping and Security, Abuja, December, 1999. 19 Quiňones, Enery. “What is Corruption?” in OECD Observer, May 2000. See

http://www.oecdobserver.org/news/fullstory.php/aid/233/What_is_corruption_.html (Accessed: 17/7/07). 20 USAID, “Corruption Assessment Handbook – Draft Final Report,” Washington May 2006, p. 8.at

http://www1.worldbank.org/publicsector/anticorrupt/USAIDCorAsmtHandbook.pdf (Accessed: 12/7/07). 21 See. Quiňones, Enery op.cit. 22 See Types of Corruption at http://www.anticorruption.info/types_levels.htm (Accessed: 20/7/07). 23 Meredith, Martin, The State of Africa: A History of Fifty Years of Independence, Free Press: London, 2006 p.

172. 24 Ibid p.170. 25 Ibid.

2.3 Justification two: The Importance of Trade

Trade is an essential component of economic growth and provides an opportunity for

African countries, communities, and producers to earn a living. After years of impressive growth,

Africa has suffered a slow-down in the wake of the financial crisis, the effects of which have been

compounded by the preceding fuel and food crises. Not only are African countries struggling to

build their own markets and reduce poverty through trade, but they will have an even more difficult

time with the decrease in investment, demand for African products, and remittances, and will

rebound slower than developed and emerging economies (trade & investment block, 2012).

For decades, sub-Saharan Africa has struggled to take advantage of global trade. Though

some progress has been made in recent years, the global financial crisis threatens to diminish these

gains. Sub-Saharan Africa faces the world's greatest challenges in accessing local, regional, and

global markets. The region also faces significant supply-side challenges that need to be addressed

so that as policies are improved, Africans can produce competitive products and transport them to

markets (trade & investment block, 201226).

In 2008, 1% of global trade was worth $195 billion, more than five times the development

assistance sub-Saharan Africa received that same year. The ability to export products to regional

and international markets can be a vital source of income for many sub-Saharan African

countries. Developed countries can provide much needed investment in infrastructure and capacity

building. Finally, increasing trade and investment among African countries could bring real

benefits in increased employment and higher incomes. (trade & investment, 2012).

The United States signed African Growth and Opportunity Act (AGOA) into law in May

2000 in order to offer tangible incentives for African countries to develop their economies and

build free markets. The initiative helps African exporters take advantage of reduced tariffs in the

US market. AGOA has increased the export of products as diverse as oil, clothing and flowers and

benefited countries like Nigeria, Angola, Lesotho, Kenya, Swaziland and Madagascar. AGOA has

brought about an estimated $300 billion in export earnings and created more than 300,000 jobs,

mostly in manufacturing. In addition, AGOA has enabled a dramatic increase in US exports to

Africa, from $5.9 billion in 2001 to $18.5 billion in 2008. (trade & investment block, 2012)

2.3.1 ECOWAS Share in the World Trade

Burkina Faso

Table 2.1

BASIC INDICATORS

Population (thousands, 2010) 16 469 Rank in world trade, 2010 Exports Imports

GDP (million current US$, 2010) 8 820 Merchandise 139 149

GDP (million current PPP US$, 2010) 20 529 excluding intra-EU trade 113 123

Current account balance (million US$, 2008) - 1 709 Commercial services 175 144

Trade per capita (US$, 2007-2009) 209 excluding intra-EU trade 149 118

Trade to GDP ratio (2007-2009) 42.3

Annual percentage change

2010 2005-2010 2009 2010

Real GDP (2005=100) 130 5 3 9

Exports of goods and services (volume, 2005=100) a 124 24 ... ...

Imports of goods and services (volume, 2005=100) a 107 7 ... ...

26 Global anti-poverty advocacy organization ONE (www.ONE.org). trade & investment 2012

TRADE POLICY

WTO accession 3 June 1995 Contribution to WTO budget (%, 2011) 0.015

Trade Policy Review 4, 6 October 2010 Import duties collected (%, 2007-2009)

GPA accession - in total tax revenue 18.0

Tariffs and duty free imports to total imports 7.0

Tariff binding coverage (%) 38.9 Number of notifications to WTO and measures in force

MFN tariffs Final bound Applied 2010 Outstanding notifications in WTO Central Registry 7

Simple average of import duties Goods RTAs - services EIAs notified to WTO 2 - 0

All goods 42.1 11.9 Anti-dumping (30 June 2010) ...

Agricultural goods (AOA) 98.2 14.5 Countervailing duties (30 June 2010) ...

Non-agricultural goods 13.2 11.5 Safeguards (22 October 2010) 0 Non ad-valorem duties (% total tariff lines) 0.0 0.0 Number of disputes (complainant - defendant)

MFN duty free imports (%, 2009) Requests for consultation 0 - 0

in agricultural goods (AOA) 0.0 Original panel / Appellate Body (AB) reports 0 - 0

in non-agricultural goods 10.8 Compliance panel / AB reports (Article 21.5 DSU) 0 - 0

Services sectors with GATS commitments 2 Arbitration awards (Article 22.6 DSU) 0 - 0

MERCHANDISE TRADE Value Annual percentage change

2010 2005-2010 2009 2010

Merchandise exports, f.o.b. (million US$) 1 288 22 30 43 Merchandise imports, c.i.f. (million US$) 2 048 10 -7 10

2010

2010

Share in world total exports 0.01 Share in world total imports 0.01

Breakdown in economy's total exports Breakdown in economy's total imports

By main commodity group (ITS) By main commodity group (ITS)

Agricultural products 30.1 Agricultural products 15.1

Fuels and mining products 0.6 Fuels and mining products 21.7

Manufactures 3.1 Manufactures 57.9

By main destination By main origin

1. Switzerland 63.5 1. European Union (27) 30.2

2. South Africa 11.2 2. Côte d'Ivoire 16.0

3. European Union (27) 9.1 3. China 9.7

4. Singapore 4.9 4. Togo 4.5

5. Ghana 2.7 5. United States 4.0

COMMERCIAL SERVICES TRADE Value Annual percentage change

2009 2005-2009 2008 2009

Commercial services exports (million US$) 106 14 34 -3 Commercial services imports (million US$) 503 10 44 -11

2009 b

2009 b



By principal services item By principal services item

Transportation 19.4 Transportation 59.0

Travel 57.4 Travel 11.1

Other commercial services 23.3 Other commercial services 29.9

INDUSTRIAL PROPERTY

Patent grants by patent office Trademark registrations by office, 2005

Residents Non-residents Total Direct residents Direct non-residents Madrid Total

... ... ... 30 ... ... 30

a Refers to 2006 and to the average annual percentage change for 2005-2006.

b Breakdowns by services items refer to 2008. Source: WTO Statistics Database, 2011

Cape Verde

Table 2.2

BASIC INDICATORS

Population (thousands, 2010) 496 Rank in world trade, 2010 Exports Imports



Current account balance (million US$, 2009) - 239 Commercial services 134 162

Trade per capita (US$, 2008-2010) 3 576 excluding intra-EU trade 108 136



2010 2005-2010 2009 2010

Real GDP (2005=100) 139 7 4 5

Exports of goods and services (volume, 2005=100) a 191 18 12 ...

Imports of goods and services (volume, 2005=100) a 181 16 13 ...

TRADE POLICY

WTO accession 23 July 2008 Contribution to WTO budget (%, 2011) 0.015

Trade Policy Review ... Import duties collected (%, 2008-2009)








Non-agricultural goods 15.2 9.9 Safeguards (22 October 2010) 0 Non ad-valorem duties (% total tariff

lines) 0.0 0.1 Number of disputes (complainant - defendant)






2010 2005-2010 2009 2010

Merchandise exports, f.o.b. (million US$) 45 20 10 27 Merchandise imports, c.i.f. (million US$) 742 11 -14 5

2010

2010








1. European Union (27) 94.1 1. European Union (27) 78.1

2. Brazil 1.5 2. Brazil 4.4

3. United States 1.5 3. China 4.3

4. India 0.6 4. Japan 2.3

5. Guinea-Bissau 0.4 5. Thailand 2.1

Unspecified destinations 1.8 Unspecified origins 1.0


2010 2005-2010 2009 2010

Commercial services exports (million US$) 499 15 -18 6 Commercial services imports (million US$) 314 9 -12 2

2010

2010







INDUSTRIAL PROPERTY

Patent grants by patent office Trademark registrations by office


... ... ... ... ... ... ...

a Refers to 2009 and to the average annual percentage change for 2005-2009. Source: WTO Statistics Database, 2011

Cote d’Ivoire

Table 2.3

BASIC INDICATORS




Current account balance (million US$, 2009) 1 670 Commercial services 119 88

Trade per capita (US$, 2007-2009) 1 028 excluding intra-EU trade 93 64

Trade to GDP ratio (2007-2009) 88.4 Annual percentage change 2010 2005-2010 2009 2010

Real GDP (2005=100) 112 2 4 3

Exports of goods and services (volume, 2005=100) 92 -2 9 -1

Imports of goods and services (volume, 2005=100) 121 4 11 8

TRADE POLICY

WTO accession 1 January 1995 Contribution to WTO budget (%, 2011) 0.058

Trade Policy Review 4, 5 July 1995 Import duties collected (%, 2007-2009)















2010 2005-2010 2009 2010

Merchandise exports, f.o.b. (million US$) 10 320 6 6 -6 Merchandise imports, c.i.f. (million US$) 7 830 6 -12 13

2010 a

2010 a









2. United States 7.8 2. Nigeria 20.6

3. Nigeria 7.0 3. China 7.2

4. Ghana 5.5 4. Thailand 5.1

5. Burkina Faso 3.7 5. United States 3.3



2009 2005-2009 2008 2009

Commercial services exports (million US$) 816 4 10 -5 Commercial services imports (million US$) 2 324 4 10 -7

2009

2009







INDUSTRIAL PROPERTY



... ... ... ... ... ... ...

a Breakdowns by destination/origin refer to 2009. Source: WTO Statistics Database, 2011

Ghana

Table 2.4

BASIC INDICATORS







Real GDP (2005=100) 137 7 5 7

Exports of goods and services (volume, 2005=100) ... ... ... ...

Imports of goods and services (volume, 2005=100) ... ... ... ...

TRADE POLICY


Trade Policy Review 28, 30 January 2008 Import duties collected (%, 2007-2009)















2010 2005-2010 2009 2010


2010 a

2010 a








1. South Africa 44.0 1. European Union (27) 27.8


3. India 5.3 3. Nigeria 8.7

4. Malaysia 3.2 4. United States 7.7

5. United States 2.8 5. India 4.3


2010 2005-2010 2009 2010

Commercial services exports (million US$) 1 344 4 -2 -12 Commercial services imports (million US$) 2 444 16 16 3

2010

2010







INDUSTRIAL PROPERTY



... ... ... ... ... 677 677


Guinea

Table 2.5

BASIC INDICATORS








2010 2005-2010 2009 2010

Real GDP (2005=100) 111 2 0 2

Exports of goods and services (volume, 2005=100) 118 3 3 1

Imports of goods and services (volume, 2005=100) 131 6 17 0

TRADE POLICY

WTO accession 25 October 1995 Contribution to WTO budget (%, 2011) 0.015

Trade Policy Review 12, 14 october 2005 Import duties collected

GPA accession - in total tax revenue ...

Tariffs and duty free imports to total imports ...













2010 2005-2010 2009 2010

Merchandise exports, f.o.b. (million US$) 1 250 8 -22 19 Merchandise imports, c.i.f. (million US$) 1 100 6 -22 4

2010 a

2010 a









2. Switzerland 19.5 2. China 6.7

3. Russian Federation 10.6 3. United States 5.2

4. United States 6.7 4. Australia 3.9

5. Canada 4.0 5. Brazil 2.9


2010 2005-2010 2009 2010

Commercial services exports (million US$) 61 12 -29 -9 Commercial services imports (million US$) 381 13 -28 32

2010

2010







INDUSTRIAL PROPERTY



... ... ... ... ... ... ...


Guinea-Bissau

Table 2.6

BASIC INDICATORS


GDP (million current US$, 2010) 879 Merchandise 177 195






2010 2005-2010 2009 2010

Real GDP (2005=100) 116 3 3 3



TRADE POLICY

WTO accession 31 May 1995 Contribution to WTO budget (%, 2011) 0.015

Trade Policy Review ... Import duties collected















2010 2005-2010 2009 2010

Merchandise exports, f.o.b. (million US$) 125 7 -7 5 Merchandise imports, f.o.b. (million US$) 220 16 16 -4

2010 a

2010 a




Agricultural products ... Agricultural products ...

Fuels and mining products ... Fuels and mining products ...

Manufactures ... Manufactures ...


1. India 86.6 1. European Union (27) 46.9

2. Singapore 12.1 2. Senegal 40.9

3. European Union (27) 0.8 3. Thailand 7.0

4. Panama 0.2 4. China 2.4

5. Korea, Dem. People's Rep. of 0.2 5. Gambia 1.6


2009 2005-2009 2008 2009


2009 a

2009 a







INDUSTRIAL PROPERTY



... ... ... 2 ... ... 2

a Breakdowns by destination/origin refer to 2005. Breakdowns by services items refer to 2008. Source: WTO Statistics Database, 2011

Nigeria

Table 2.7

BASIC INDICATORS




Current account balance (million US$, 2010) 2 476 Commercial services 83 36



Real GDP (2005=100) 138 7 7 8



TRADE POLICY


Trade Policy Review 28, 30 June 2011 Import duties collected (%, 2006-2008)















2010 2005-2010 2009 2010


2010 2010








1. United States 34.4 1. European Union (27) 21.8

2. European Union (27) 22.4 2. United States 17.9

3. India 10.5 3. China 16.6

4. Brazil 7.0 4. Antigua and Barbuda 5.6

5. Equatorial Guinea 3.1 5. India 5.4


2010 2005-2010 2009 2010

Commercial services exports (million US$) 2 613 13 -4 49 Commercial services imports (million US$) 20 163 26 -27 22

2010

2010







INDUSTRIAL PROPERTY



... ... ... ... ... ... ...

Source: WTO Statistics Database, 2011

Sierra Leone

Table 2.8

BASIC INDICATORS







Real GDP (2005=100) 131 5 3 5



TRADE POLICY

WTO accession 23 July 1995 Contribution to WTO budget (%, 2011) 0.015

Trade Policy Review 9, 11 February 2005 Import duties collected (%, 2007-2009)



Tariff binding coverage (%) 100 Number of notifications to WTO and measures in force






MFN duty free imports Requests for consultation 0 - 0

in agricultural goods (AOA) ... Original panel / Appellate Body (AB) reports 0 - 0

in non-agricultural goods ... Compliance panel / AB reports (Article 21.5 DSU) 0 - 0



2010 2005-2010 2009 2010

Merchandise exports, f.o.b. (million US$) 338 16 7 46 Merchandise imports, c.i.f. (million US$) 770 17 -3 48

2010

2010




Agricultural products ... Agricultural products ...

Fuels and mining products ... Fuels and mining products ...

Manufactures ... Manufactures ...



2010 2005-2010 2009 2010

Commercial services exports (million US$) 60 -5 -5 3 Commercial services imports (million US$) 134 9 -2 18

2010 2010







INDUSTRIAL PROPERTY

Patent grants by patent office, 1995 Trademark registrations by office, 2009


... 5 5 ... ... 750 750


Benin

Table 2.9

BASIC INDICATORS







Real GDP (2005=100) 122 4 4 3



TRADE POLICY

WTO accession 22 February 1996 Contribution to WTO budget (%, 2011) 0.015
















2010 2005-2010 2009 2010


2010 a

2010 a








1. China 24.0 1. European Union (27) 36.6


3. Nigeria 8.7 3. Côte d'Ivoire 6.9

4. India 8.6 4. Ghana 6.8

5. Niger 7.2 5. Togo 5.3


2009 2005-2009 2008 2009


2009

2009







INDUSTRIAL PROPERTY



... ... ... ... ... ... ...


Mali

Table 2.10

BASIC INDICATORS








2010 2005-2010 2009 2010

Real GDP (2005=100) 126 5 5 5

Exports of goods and services (volume, 2005=100) a 115 7 ... ...

Imports of goods and services (volume, 2005=100) a 107 4 ... ...

TRADE POLICY

















2010 2005-2010 2009 2010


2010

2010








1. South Africa 57.1 1. European Union (27) 24.0

2. Switzerland 12.1 2. Senegal 13.6

3. European Union (27) 8.9 3. Benin 9.9

4. Senegal 4.4 4. China 9.9

5. United States 3.2 5. United States 9.0


2009 2005-2009 2008 2009


2009

2009







INDUSTRIAL PROPERTY



... ... ... ... ... ... ...

a Refers to 2007 and to the average annual percentage change for 2005-2007. Source: WTO Statistics Database, 2011

Niger

Table 2.11

BASIC INDICATORS








2010 2005-2010 2009 2010

Real GDP (2005=100) 128 5 -1 9



TRADE POLICY

WTO accession 13 December 1996 Contribution to WTO budget (%, 2011) 0.015

Trade Policy Review 11, 13 November 2009 Import duties collected














2010 2005-2010 2009 2010

Merchandise exports, f.o.b. (million US$) 930 14 -5 8 Merchandise imports, c.i.f. (million US$) 2 150 18 12 13

2010

2010








1. United States 16.7 1. China 43.8

2. Japan 16.6 2. European Union (27) 25.3

3. European Union (27) 15.9 3. United States 6.1

4. Switzerland 15.6 4. Nigeria 3.9

5. Nigeria 11.1 5. Japan 3.3


2009 2005-2009 2008 2009

Commercial services exports (million US$) 100 4 59 -21 Commercial services imports (million US$) 735 28 62 23

2009

2009







INDUSTRIAL PROPERTY



... ... ... ... ... ... ...


Senegal

Table 2.12

BASIC INDICATORS







Real GDP (2005=100) 118 3 2 4

Exports of goods and services (volume, 2005=100) 122 4 -9 6

Imports of goods and services (volume, 2005=100) 135 6 -17 4

TRADE POLICY


Trade Policy Review 11, 13 November 2009 Import duties collected



Tariff binding coverage (%) 100 Number of notifications to WTO and measures in force











2010 2005-2010 2009 2010


2010

2010








1. Mali 25.4 1. European Union (27) 43.6

2. European Union (27) 13.8 2. Nigeria 10.2

3. India 9.7 3. China 8.3

4. Switzerland 7.7 4. Thailand 3.3

5. Guinea 4.2 5. Brazil 2.7



2009 2005-2009 2008 2009

Commercial services exports (million US$) 1 076 12 7 -9 Commercial services imports (million US$) 1 248 13 15 -10

2009 a

2009 a







INDUSTRIAL PROPERTY



... ... ... ... ... ... ...

a Breakdowns by services items refer to 2008. Source: WTO Statistics Database, 2011

Togo

Table 2.13

BASIC INDICATORS








2010 2005-2010 2009 2010

Real GDP (2005=100) 116 3 3 3



TRADE POLICY


Trade Policy Review 3, 5 July 2006 Import duties collected (%, 2007-2009)















2010 2005-2010 2009 2010

Merchandise exports, f.o.b. (million US$) 800 4 -11 0 Merchandise imports, c.i.f. (million US$) 1 550 8 0 3

2010 a

2010 a








1. Niger 12.7 1. European Union (27) 43.3

2. Benin 10.9 2. China 15.8

3. India 9.8 3. United States 4.2

4. Burkina Faso 9.7 4. Ghana 3.6

5. Mali 7.1 5. South Africa 3.0



2009 2005-2009 2008 2009

Commercial services exports (million US$) 265 16 28 5

Commercial services imports (million US$) 374 11 18 5

2009

2009







INDUSTRIAL PROPERTY



... ... ... ... ... ... ...


With greater emphasis on the private sector, there is an evolving strong public/private

partnership and a greater private sector role in economic management. However, there is need for

legal and regulatory reforms as a prerequisite for private sector participation. The private sector in

most countries of West Africa is dominated by informal sector and small and medium scale

enterprises (SMEs). Policies including access to financial resources and support to enhance the

growth and development of these sectors are under consideration in some countries. For example,

the Gambia formulated a comprehensive National Policy to address the development and

transformation of these sectors (Economic Commission for Africa, 2004).

2.3.2 Why Does Trade Matter to Africa?

Through specialisation and an enhanced division of labour, the theory of comparative

advantage states that increased openness to trade can boost the level of consumption and incomes

in an economy (BIS, 2011). A significant body of international evidence confirms this proposition

suggesting that greater openness to trade is, on average, associated with faster growth and

increasing productivity (BIS, 2011). Trade openness can influence both growth and the level of

income through three key channels:

1. The transmission of technological innovation: New growth theories emphasise the

importance of technological spillovers as being a key source of long run growth. It is

through such technological spillovers that trade enhances the ability of domestic firms to

compete with firms in other economies, because imported goods embody foreign

knowledge and expertise (BIS, 2011). By preventing domestic producers from adapting

new technologies to local uses and incorporating them into the production process, trade

barriers impede the flow of technology into a country slowing down the long run growth

rate of an economy (BIS, 2011).

2. Facilitating Competition: By exposing firms to enhanced competition, trade openness can

force firms to lower costs, facilitating improvements in productivity and efficiency (BIS,

2011). By lowering the returns to producing in the import competing sector and increasing

returns to exporting, trade openness facilitates a reallocation of resources from lower to

higher productivity firms and sectors, leading to faster economic growth (BIS, 2011).

3. Economies of Scale: By enabling firms to operate in more and larger markets, trade

openness allows firms to realise the benefits of economies of scale, facilitating further cost

reductions (BIS, 2011).

4.

2.3.3 Trade and Transport Cost in West Africa

Only a few hundred kilometres separate Lagos, Nigeria, from Accra in Ghana. For the

thousands of traders who ply this route, the journey through Togo and Benin can take a full day,

punctuated by arduous border checks, harassment and solicitations from officials for kickbacks.

Customs officials and police at roadblocks will make you unload and unpack every little package

in order to delay you for hours. Everyone knows the intention is to force travellers to pay(Mutume,

2002). In real senses some of this activity is illegal and it is due to the slow implementation of

regional integration agreements aimed at eliminating tariff and non-tariff barriers in the region.

Despite pronouncements of support by politicians for regional economic ties, the reality on the

ground for traders remains difficult (Mutume, 2002).

Poor infrastructure makes the costs of transporting goods in Africa among the highest in

the world. A poor transport system "acts as a non-tariff trade barrier27. The transport sector in West

Africa plays a key role in the economic development of the sub-region and generates about six

percent of its GDP (World Bank, 2012). Better transport infrastructure, more streamlined

import/export procedures, and less corruption, delay and uncertainty would save traders millions,

leading to lower prices for consumers. The increased business would mean more revenue for

government: Reducing costs will lead to more business and that means more tax revenue (West

Africa Trade Hub, 2012)28. In other words greater efficiency would reduce costs and creating a

single ECOWAS market would also increase trade (West Africa Trade Hub, 2012). For example

Bromley and Chavas (1989) offered a spatial model illustrating how risky economic environments

tend to undermine the willingness of economic agents to engage the market. The point in that work

was to illustrate the concept of a willingness to pay for institutional coherence (Bromley and Foltz,

2011).

Following up on that model, Bromley (2008) offered a spatially explicit elaboration of that

same problem to suggest that agricultural assets both those assets considered part of the “village

commons” and those under the exclusive control of individual agents (that is, privately controlled

assets) face inevitable degradation if prevailing institutional arrangements are defective (Bromley

and Foltz, 2011). This conclusion is important because the standard account suggests that private

assets are optimally managed while assets managed in common will inevitably be dissipated.

However, when institutional incoherence erodes net returns to land, even privately-owned assets

become degraded. Degradation sets in because of the lack of adequate net returns from the farming

operation to allow maintenance of and investments in the underlying asset base (Bromley and

Foltz, 2011). Consider a simple von Thünen model of net economic rent available at varying

distances. The model incorporates two rent gradients, one without corruption (R) and a second one

(R~) depicting the additional dissipation of net rent arising from bribes and delays along the

27 Building an efficient road network. Public-private partnerships hold the key to regional infrastructure By Gumisai Mutume 2002 pg 23

28See. http://www.watradehub.com. usaid-west-africa-trade-hub-study-traders-could-save-us80-million-if-barriers-eliminated.pdf

http://www.watradehub.com/sites/default/files/resourcefiles/feb12/usaid-west-africa-trade-hub-study-traders-could-save-us80-million-if-barriers-eliminated.pdf

transport corridors of West Africa. Notice that bribery reduces net returns to land such that the

extensive margin is shifted towards the market to the left of the extensive margin, institutional

incoherence (numerous checkpoints demanding bribes and imposing unnecessary delays) distorts

enterprise choice by lowering net rents on traded goods29

World Bank’s Board of Executive Directors recently approved US$90 million in grant

financing by the International Development Association (IDA) that aims to reduce trade and

transport barriers in the port and on the roads along Abidjan-Lagos in Cote d’Ivoire (World Bank,

2012). The Abidjan-Lagos Trade and Transport Facilitation Project in Cote d’Ivoire is the second

phase of a regional Program including Ghana, Togo and Benin. It will finance trade and transport

facilitation activities along the 130 kilometer coastal corridor in Cote d’Ivoire, as well as trade

facilitation reforms in Customs and in the Port of Abidjan. The 1,000 km Abidjan-Lagos corridor

is the global gateway to coastal and landlocked countries in West Africa, with all landlocked

countries using at least one port along the corridor (World Bank, 2012).

The Abidjan-Lagos Corridor links some of the largest and economically most dynamic

cities in Africa - Lagos, Accra and Abidjan. Achieving this project will improve road infrastructure

and decrease delays in border crossing time and in port dwell time, and will also reduce non-

logistics costs, such as inventory and storage costs in the sub-region (World Bank, 2012)30.

In the second meeting of finance ministers of Americas and the Caribbean it is noted that

public policies can help to reduce transport costs. While the cost of logistics services seems to lie

in the hands of the private sector, government action and inaction have an important influence:

they can indirectly impact every step in the logistic chain, from ocean shipping to domestic

trucking to transfers, storage and warehousing; more directly, they can influence customs

clearance and border crossings31

.

In inland transportation both the cost of international road transport and domestic trucking

movements are driven more by infrastructure quality and service competition than by distance.

Government prioritization of maintaining roads and encouraging competition in warehousing,

transfer stations and in trucking services may have a significant impact on the prices of delivered

foods32

. Likewise regionally improved and integrated transportation corridors and networks would

reduce the costs for the end consumer. A doubling of the number of border crossings could reduce

transport costs to a lower per-cent if used across the regions. There are important areas which can

be looked into for policy initiatives, which are as follows;

Land Transportation: Focuses on speed and ease of travel and on competition in trucking

services provision. Improve road quality which can be effective if kept in mind that the present

value of maintaining a road regularly is an order of magnitude less than rehabilitating it once every

ten years. The regions also need to strengthen trucking regulations and enforcements and transport

infrastructure investment planning based on sophisticated freight flow modeling. They need to

facilitate the development of ample storage, warehousing, and transfer facilities33

.

Maritime Transport: Focus on investments, operational efficiency and landside linkages

for greater connectivity, encourage consolidation or coordination of small private operators,

establish and use competition authority to investigate vertical and horizontal integration issues

29 http://www.aae.wisc.edu. Daniel Bromley and Jeremy Foltz, Sustainability under siege: Transport costs and corruption on West Africa’s trade

corridors. 2011. Pg. 34 & 35 30 http://www.worldbank.org 31 See. http://idbdocs.iadb.org 32 http://idbdocs.iadb.org 33 See. http://idbdocs.iadb.org. second meeting of the finance ministers of the americas and the caribbean

Trade Facilitation, Customs and Border Crossings: Focuses on customs standards

harmonization, improve clearances/inspections through better cross-border collaboration and also

setting standard and clearance times for both import and export. Simplification of customs

declarations forms, procedures and clearance and making use of risk-based selectivity process for

inspections will help.

2.3.4 Trade and Environment Relationship

The relationship between trade and environment is dynamic and complex; a

straightforward approach to understanding this relationship is to look at the basics: the physical

and the policy-to-policy linkages. Economic activities, including trade are often dependent on the

environment and natural resources. In the Western Hemisphere this is particularly relevant given

the share of agriculture in the Gross Domestic Product (GDP) of the region (Organization of

American States Unit, 2005)34.

Trade openness and a well facilitation are believed to stimulate economic growth due to its

influence in integrating world economies and generating better markets (Evans S.c. Osabuohien,

2007). The dismal performances of African trade can be attributed to several factors traditionally

associated with trade facilitation such as complex customs requirements, lengthy and non-

transparent bureaucratic procedures associated with the movement of goods and services across

international borders. These trade impediments could be compounded when countries are parties

to several non-functioning regional and bilateral trade agreements, leading to significantly high

cost of doing business and competitiveness (Njinkeu, 2007)

Trade and transport facilitation, therefore, addresses a wide agenda in economic

development and trade that may include improving transport infrastructure and services, reducing

customs tariffs, and removing non-tariff trade barriers including administrative and regulatory

barriers. Such regulatory procedures in international trade go beyond mere customs inspections to

include fiscal controls, safety and security measures, environment and health checks, consumer

protection mechanisms, and trade policy regulations (Hansen & Liliana, 2008)

Trade facilitation is a comprehensive and integrated approach to reducing the complexity

and cost of the trade transactions process, and enhancing the efficiency, transparency and

predictability of international trade. Trade facilitation brings around the same theme various

stakeholders in the public and private sectors, domestic and international; many of which not

traditionally associated with international trade negotiations. With the interplay of these

stakeholders, a successful trade facilitation program can help define a consistent, transparent and

predictable trading environment based on internationally accepted norms and practices

(Njinkeu, 2007).

The trade facilitation agenda at the multilateral level is limited. The July 2004 framework

(WTO (2004) starting the negotiation towards a potential multilateral trade facilitation agreement

is limited to three Articles of GATT, including Article V on freedom of transit; Article VIII

dealing with fees and formalities connected with importation and exportation; and Article X

publication and administration of trade regulations (Njinkeu, 2007)35.

Article V has three main obligations. Firstly, that traffic in transit should not be subject to

unnecessary delays or restrictions and should be exempt from customs duties, transit duties and

34 See. http://www.oas.org/dsd/policy_series/6_eng.pdf 35 See. www.aercafrica.org/documents/.../NjinkeuD_Trade18DB34.pdf

other charges. Secondly, charges such as those associated with transportation or administrative

expenses need to be reasonable (transportation charges apply to products being transported on the

same route under like conditions). Thirdly products in transit should be given most favored nation

(MFN) treatment. This would require each member to designate roads and routes for goods in

transit as well as provide for the necessary facilities such as customs and excise warehouses and

container terminals where containers may be landed for transit, for carriage or for delivery to a

container depot. An associated requirement is to endeavor to minimize delays. For most African

governments to be able to move to world standards the pressing needs are connected to

infrastructure development and improvement of services, the creation of training centre’s and the

training of personnel (Njinkeu, 2007).

Article VIII of GATT deals with fees and formalities for importation and exportation.

Members are required to keep, at a reasonable level, fees for government regulatory activities

performed in connection with the importation and customs entry processes, such as the processing

and clearing of documents and goods, and inspections. A second requirement is the need to reduce

the number and range of fees and charges, as well as minimizing the incidence and complexity of

import and export formalities and to decreasing and simplifying import and export documentation

requirements. A necessary condition for compliance is the ability to distinguish between import,

export and excise duties and anti-dumping duties and countervailing duties on the one hand, and

customs related ‘service charges’, such as import and export entry transaction fees, inward and

outward cargo transaction fees, licensing fees, stamp fees etc on the other. Despite progress in

most African countries the region lacks such ability. Numerous documents are still required. Many

of the issues covered in Article VIII have been dealt with in some African countries e.g through

the 1999 Revised Kyoto Convention of the World Customs (Njinkeu, 2007). He continued that

Organization (WCO, World Customs Organization) covering pre-arrival clearance, post audit

systems, risk management and single administration document (SAD). Most countries and regional

integration schemes have adopted the ASYCUDA system (Automated SYstem for CUstoms

DAta)36 to upgrade their customs administration. As a result the only impediment to making

binding commitment in the negotiations is due to limited human, institutional and financial

resources (Njinkeu, 2007).

Article X (Publication and Administration of Trade Regulations) imposes on contracting

parties four main obligations. First, is the obligation to promptly publish and in the relevant media

all decisions affecting international trade policy such as laws, regulations, judicial decisions and

administrative rulings of general application that affect imports and exports. A second obligation

is for this official publication to precede enforcement. Third obligation is the need to administer

laws, regulations, decisions and rulings related to imports and exports in a uniform, impartial and

reasonable manner (Njinkeu, 2007).

Fourth is the obligation to maintain or institute independent judicial, arbitral or

administrative tribunals or procedures for review and correction of administrative action relating

to customs operations. Overall the main intention of Article X is to provide to the business

community the basic ‘rule of law’ and administrative justice procedures and guarantee

predictability and fairness (Njinkeu, 2007). All African governments have moved with some sort

of reform in this area. Negotiations in the World Trade Organization (WTO) framework would

aim at limiting policy reversals (Njinkeu, 2007). It would be expected that the administration of

trade laws and regulation do not hinder the activities of traders any further than it needs to in order

to achieve their stated purpose. Predictability requires independent judicial, arbitral or

36 See. www.asycuda.org

administrative tribunals or procedures for review and correction of administrative actions in

custom transactions (Njinkeu, 2007). Relevant independent agencies need to be created and

provided with the means for delivering on their mandates. Such agencies cannot be given extensive

discretionary powers (Njinkeu, 2007).

Other GATT agreements also deal with trade facilitation related issues such as the

Agreement on customs valuation; the Agreement on Import Licensing, Agreement on Pre-

shipment Inspection; the Agreement on Rules of Origin; the Agreement on Technical Barriers to

Trade; or the Agreement on the Application of Sanitary and Phytosanitary Measures (D

Njinkeu, 2007).

Business, political leaders and development partners have a key role to play to ensure that

resources are effectively channeled into delivering much-needed hard and soft infrastructure

improvements, and that the regulatory environment is reshaped to facilitate trade, rather than

inhibit it. Emerging models of collaboration between the private and public sector, including

developing innovative forms of trade financing and tackling both hard and soft constraints to trade,

are starting to make a real difference. (BAA, ONE partner, 2011)

Measuring Trade facilitation, Wilson, Mann and Otsuki (2003a, 2003b, and 2004) present

four indicators that simultaneously capture the main policy concerns: port efficiency, customs

environments, regulatory environment, and quality of information and communication technology

infrastructure. The port efficiency (PE) measure is constructed in accordance with GATT article

V (freedom of transit) that regulates the free flow of goods across borders. PE is a proxy for the

impediments to transit in port operations. Poorly-performing ports have been shown to strongly

reduce trade volumes and having a greater dampening effect on trade (Wilson et al, 2003a, 2003b,

2004; Clark et a l, 2004); hence we may expect that improvement of port efficiency affects

positively trade flows.

2.4 Economic Growth and Management

Since the Millennium Development Goals were signed, new investments in the fight

against poverty have produced real results and improved the lives of millions of people. Progress

has also been made in getting children into school in most of the African countries. These results

are evidence that development assistance can have a transformative impact in the world's poorest

countries, especially when it is combined with committed and transparent leadership and policies

aimed at economic growth (ONE, issues, 2012)

An international network devoted to reducing poverty through business, says that

accelerating regional integration is essential to unlocking Africa’s trading potential (business

action for Africa, 2011)

For Africa to secure its share of the benefits and gains from trade, the imperative for the

international community to progress world trade agreements is matched by the need for

acceleration in the pace of economic integration in Africa to create larger and more competitive

markets (BAA, ONE partner, 2011).

However the investment climate in Africa is improving. Many of the continent's economies

have rebounded from the global financial crisis faster than most in the developed world. Africa is

expected to grow around 4% this year, compared to the 2.6% growth estimated for the United

States (ONE trade & investment blog, 2012). Africa has increased the value of its exports over

the past five years, in part due to the boom in commodities but also due to more favorable terms

of trade though the preferences under AGOA. There is an enormous potential for economic growth

as a new generation of African consumers provide demand for mobile phones, banking services

and consumer goods. By 2015, as many as 200 million Africans will have entered the consumer

goods market. Further capitalizing on this will require increased investment in infrastructure,

energy and communications technology. This will help to reduce the cost of trade and transport

and make African goods more competitive (ONE trade & investment blog, 2012).

2.4.1Increase Production

Before structural adjustment took hold in Africa, many governments sought to industrialize

their economies through policies of import substitution (Mutume, 2002). In other words, they used

trade measures such as charging high tariffs on imports of goods produced domestically to

encourage the local manufacture of these products. But structural adjustment and the advent of

World Trade Organization rules governing global trade have precluded such policies (Mutume,

2002).

What is certain, however, is that across West Africa many incentives to promote industrial

development have been dismantled through structural adjustment (Mutume, 2002). "The

immediate impact has been widespread de-industrialization." While in 1980 there were 14

countries in sub-Saharan Africa with per capita manufacturing production comparable to

Indonesia, by 1995 these countries had all been overtaken by that Asian nation, according to the

UN Conference on Trade and Development (UNCTAD) study (Mutume, 2002). In Ghana a star

performer of structural adjustment employment in the manufacturing sector fell from a peak of

78,700 in 1987 to 28,000 by 1993. Large sections of the country's manufacturing industry were

devastated by the removal of tariffs and state supports, as cheaper imports from outside Africa

eroded their competitiveness. Another disturbing issue is that Ghana's potential to manufacture

and export garments, footwear, toys and other light consumer goods cannot be realized in the face

of stiff external competition. "There is a need for a more active state role than permitted under

adjustment programmes," so as to better support West African industrialization (Mutume, 2002).

2.4.2 Nurturing the Small-Scale Sector

Jite Okoloko (Nigerian) in his statement with the BBC representative in Africa noted that

West Africa (Nigeria) had shrubs and trees growing on steel pipes, major corrosion of underground

pipes. The government's neglect of the agricultural sector presented an opportunity for his firm to

reawaken the industry. He further states that “The private sector is in there to extract and maximise

value, shareholder value that's the whole essence of being in business and there's nowhere in the

world, whether it's in the United States where he studied, wherever in the world, that the

government has been able to run projects more effectively than private sectors."

For ECOWAS countries to pursue more trade opportunities, they will also require a

dynamic private sector to play a role (Mutume, 2002). In many African countries the private sector

is often made up of a few giant multinational corporations at one end and a large but small-scale

informal sector at the other. One of the challenges facing West African policymakers is how to

deal with a small-scale sector that is responsible for a significant portion of production, trade and

services (Mutume, 2002).

ECOWAS leaders cannot continue to ignore this sector if integration or trade expansion is

to succeed because is as an effective means of integration from below, as small-scale trade is often

conducted and driven by the needs of indigenous traders rather than governments or international

agencies. A major critique of current regional integration efforts in Africa is that their design and

objectives are driven by a preference for formal rather than informal trade notes Ms. Mkhonza

(Mutume, 2002). In a joint statement of the ECA (East African Cooperation) which comprises of Kenya,

Uganda and Tanzania, these three members of the community are as an example of a regional trade

bloc in Africa beginning to incorporate the informal sector into its activities and policies. This is

attributed to the realization of the significance of the cross-border activities taking place in their

community, reports the African Development Bank (ADB) (Mutume, 2002). To mobilize all the resources West Africa requires for effective integration and economic

growth we must broaden our perception of the private sector to include ordinary citizens, staple

food growers, cash crop farmers, taxi drivers, small enterprise owners, traders and street vendors

(Mutume, 2002).

2.5 Bank’s Operation and Development

The ECOWAS Bank for Investment and Development (EBID), took over from the

ECOWAS Fund, and is now set to play a crucial role in the economic integration of West

Africa. The ECOWAS Bank for Investment and Development (EBID), based in Lomé, Togo, is

the principal financial institution of the Economic Community of West African States (ECOWAS).

As part of its brief to foster greater integration among member states EBID created, in conjunction

with the African Development Bank, a Conflict Prevention Fund in 2004 World Diplomatic

Communication Group (2007).

At its inception in 1975, ECOWAS set up a Fund for Cooperation, Compensation and

Development, commonly known as the ECOWAS Fund. This fund was directed mainly at the

public sector and used to finance projects contributing to the greater integration of the region for

example, to provide access to ports for landlocked countries World Diplomatic Communication

Group (2007).

EBID have two operational arms, ERDF and ERIB - one focusing on development projects

and the other on private sector projects. ERDF finances public sector projects which focus on

issues such as poverty reduction and basic infrastructural development while ERIB is totally

dedicated to the financing of projects in the private sector World Diplomatic Communication

Group (2007).

2.5.1 African Development Bank

ADB (African Development Bank) AfDB’s specific objectives to promote regional

integration focus on the support to the establishment of effective and efficient continental and

regional institutional frameworks to promote trade and manage the integration process, to facilitate

an enabling policy framework for investment to provide technical assistance and knowledge to

facilitate delivery of priority regional infrastructure. The Strategy is based on 2 pillars, namely

regional infrastructure, including support to the development corridors and investment and

institutional capacity building, including trade facilitation. The Banks also provides general

support to the provision of regional public goods (James, Bilal, Isabelle Ramdoo, Hohmeister &

Luckho 2010).

2.5.2 IDA and IBRD Regional Integration Assistance Strategy for Sub Saharan Africa:

The objective of the regional strategy is to provide a coherent and focused framework to

guide the Bank’s assistance in support of regional integration and regional programmes. The

strategy is structured around 3 pillars and 1 cross-cutting theme, namely expanding and upgrading

regional infrastructure, including transport networks, energy and telecommunications, institutional

cooperation for economic integration, through trade measures to improve regional environments

for business, investment and industrial development, and coordinated interventions to provide

regional public goods, in particular through the improvement and management of shared water

resources, increase in agricultural productivity and the setting up of regional and sub-regional

programs to address the cross border dimensions of major health issues. Strengthening regional

strategic planning and connections with national development plans is a cross-cutting theme. It

covers capacity development of the AU including the NEPAD, capacity development of selected

RECs and strengthening connection between regional policy commitments and national planning

(James, Bilal, Isabelle Ramdoo, Hohmeister & Luckho 2010).

2.6 Justification Three: Regional Integration and Development

Regional Integration has become a unique and distinctive characteristic of development

efforts of nations in the recent years (Olutayo A-O).

It is now considered an essential driver for political stability, sustainable development and

poverty eradication (Tywuschik and Colin, 2009; Briet, 2010). An important element of integration

is that it is voluntary and the level of integration is variable and context as well as situation

specific/dependent. Key ingredients of regional integration are cooperation, coordination, conflict

and independence (Olutayo A-O).

Integration in the ECOWAS region, particularly, if well implemented and dynamized

therefore could lead to institutionalization with interdependence that would ensure cooperation,

liberalizations schemes, high level interregional trades, positive capital flows, harmonized

economic and financial policies and economic growth. This will lead to encouraged oneness of

motives towards equal development of all integrating actors in the region and this will ultimately

jump start human development in the region. (Olutayo A-O).

The process of regional integration in general involves joining together different economies

into large economic areas for the purpose of free trade while at the same time removing all

discriminatory barriers between them. This in turn creates the necessity for some degree of

cooperation and coordination of policies between them. The commonly cited forms of integration

include:

1. Free Trade Area – This occurs when nations jointly remove all trade restrictions amongst them,

while retaining their freedom to pursue individual policies, e.g. early EEC or NAFTA.

2. Customs Unions – This represents an upgrade of free trade area but member countries must

undertake joint external trade relations with non-member states i.e. common external tariffs on

goods from non member states.

3. Common/Single Markets – This occurs when customs unions upgrade their relationship further

to allow free movement of factors of production i.e. the so called ‘4 Freedoms’ between them e.g.

the EU (Zurich, April 2005).

Table 2.14: Schematic Representation of Regional Integration Schemes

Scheme free intra

scheme

trade

common

trade

policy

free factor

mobility

common

monetary &

fiscal policy

one

government

Free trade

area

Yes No No No No

Customs

Union

Yes Yes No No No

Common

Market

Yes Yes Yes No No

Economic

Union

Yes Yes Yes Yes No

Political

Union

Yes Yes Yes Yes Yes

Source: Ali M. El-Agara, Regional Integration: Experience, Theory and Measurement [1999]

4. Complete Economic/Financial Union – This involves a situation when countries that formed

a common market completely unify and harmonize their monetary and fiscal policies.

5. Complete Political Union – occurs when two or more member states unite to form a sovereign

nation under one federal or centralized institutional structure e.g. the now defunct Mali federation

or the unification of the East and West Germanys (Anadi, 2005).

The success of any integration scheme be it free trade area, customs unions, common/single

markets, monetary union or even political union, enhances competition and efficiency within the

integrated area, through increased specialization, and generally ensures better allocation of scarce

resources into the most productive areas. In terms of trade, based on the assumptions of perfect

competition in markets, the classical economic theories insist that the disappearance of tariffs and

non tariff barriers i.e. complicated customs procedures or somewhat difficult standards etc.,

between member states ensures increased smooth flow of trade within the integrating area, thereby

increasing the gains in overall national welfare. Also, it assumes that as better allocation of

resources is attained, product prices decrease in favour of consumers. Thus, the welfare benefits

occur if the aggregate gains by consumers far outweigh the losses encountered by both the

producers in relation to marginal cost and benefits and the government in terms of loss of revenue

(Anadi, 2005).

In addition, a meaningful integration process also leads to ‘trade creation’ within the

integrating area, as member states redirect their trade and increasingly trade more between

themselves than with non members e.g. when one member state’s exports replace goods of

inefficient producers within another member country. On the other hand, it is widely

acknowledged that integration could also lead to ‘trade diversion’ or adverse trade effects, if

consumers are forced to buy goods manufactured within the integrating area at higher prices, as

against cheaper similar goods from outside the union (Anadi, 2005).

Greater gains from integration could also come in the form of increased investment as more

prudent application of factors are attained, thus increasing the overall welfare gains. However, this

can only be assured with the enthronement of effective enforcement mechanisms in relation to

commitments under regional integration. Economic blocs could also gain useful leverage from

integration particularly in tariff reduction Agreements negotiation with trading partners (Anadi,

2005).

The regional integration process in West Africa has evolved well beyond the modest

ambitions of the 1975 ECOWAS treaty. The revised treaty of 1993 not only expanded the

ECOWAS mandate to reflect its role as the West African building bloc of the African Economic

Community (AEC) and the growing commitment of the political authorities to deepening the

integration process, but also provided for the required legal, institutional and financial capacity for

making ECOWAS a supranational organization. These provisions formed the basis for the

subsequent re-structuring of the ECOWAS institutions and re-orientation of the integration

programmes toward an accelerated achievement of economic and monetary union. The process of

institutional modernization and enhancement of technical capacity embarked upon by ECOWAS

has attracted the strong support of ECA and many other development partners (Fatoumata,

UNECA 2010).

The involvement of Nigeria in the potential formation of a single currency for West Africa

has proved especially problematic. Nigeria is considerably larger in size than its ECOWAS

counterparts and has been unable to control its large budget deficit. In addition as a major oil

exporter, Nigeria’s economy differs greatly from the other member-states, which are still largely

dependent on one or two major cash crops for their economic well being (Masson, 2004). Several

economists have suggested that a West African monetary union would be undesirable to many

ECOWAS member-states, whose small markets and narrow economic bases would likely be

unable to weather any substantial trade shock (Ibid) Erin Carr (2010).

Efforts to create a monetary union have been hindered by the wide range of income levels

and country sizes that exist amongst the Community’s many members. Further exacerbating the

socio-economic and political obstacles to monetary union is the continued prevalence of poverty,

civil unrest, and spread of HIV/AIDS, corruption, and inadequate health care. Life expectancy in

the region varies dramatically, from 37.9 years in Sierra Leone to 69.4 in Cape Verde (Asante, 53).

More than half of the members of ECOWAS have average life expectancies below 50 years (CIA

World Factbook). In 2001 fourteen West African nations were ranked in the lowest category of

the United Nations Development Programme’s human development index scale (Asante, 53).

The economic objectives of ECOWAS remain largely unrealized. The lack of market

integration through trade liberalization was presented in the Executive Secretary’s 25th

Anniversary Report as “the most glaring failure for ECOWAS” (Bach, 72). According to former

executive secretary, Abass Bundu, the inability of the organization to realize its goal is a product

of insufficient political will: the slow pace of regional integration in West Africa has almost

nothing to do with the limitations noted in the 1975 ECOWAS treaty. The adoption of an ideal

treaty is of little importance if member states do not decide to consider regional integration as an

important national enterprise (Ibid) Erin Carr (2010).

2.6.1 Business Growth Challenges in ECOWAS

ECOWAS faces a range of challenges that have a major impact on the rate of progress

toward economic integration, and consequently higher levels of trade, economic growth and

poverty reduction (BAA, 2011).

The selected current and emerging development challenges facing Africa in 2010, focuses

on international trade, financing for development and the green economy. In trade, Africa

experienced huge falls in 2009, largely parallel with that of global trade. There were signs of

recovery in 2010 but they were slow and uncertain. Looking more closely into the micro structure

of Africa’s trade, trade in services demonstrated stronger resistance against external global shocks,

in sharp contrast to vulnerable merchandise trade. Swiftly growing cooperation between Africa

and the main emerging economies also helped offset some of the trade impact due to decreased

global demand. These signs reflect the potential that international trade holds for Africa (UNECA

economic report in Africa 2011).

Forty percent of East Africans live in landlocked countries versus a world average of 1

percent, making it much harder for producers to access international markets, and only 10 percent

of African trade is with other African countries. Transport costs are 60 to 70 percent higher in

Africa than the USA or Europe (BAA, ONE partner, 2011).

In ECOWAS three of its member states are landlocked. Being landlocked has always been

considered disadvantageous, and historically countries have made efforts to avoid being

landlocked. Landlocked countries are not just cut off from sea resources but, much more

importantly, they have no direct access to seaborne trade, which continues to be essential for a

successful participation in international commerce. The situation of these countries is in many

cases aggravated by the fact that the condition of being landlocked coincides with other factors

such as remoteness from major markets, tropical climates, or considerable distance from the coast

(Hansen & Liliana UNCTAD, 2008).

Across Africa, whilst the broader political and structural frameworks are being put in place

to enable regional integration and trade, much more progress needs to be made to make common

markets work in practice, and to tackle significant infrastructure constraints. Inadequate

infrastructure can easily lead to congestion at inspection facilities at any border inland or in ports;

a lack of staff; and non-harmonized working hours that are not necessarily business friendly can

result in unforeseen delays and add additional handling or storage charges. Infrastructure and

capacity constraints also remain a problem when it comes to roads, ports, railway lines, handling

and storage facilities as well as equipment, transport vehicles, or railway stock (Hansen & Liliana

UNCTAD, 2008).37 They continued that the existence of multiple trading blocs disrupts the cross-

border flow of goods, and existing trade agreements are either not in place or not being

implemented. Limited improvements in customs facilitation, a wide range of non-tariff barriers

and a lack of standardized documents and procedures all contribute to the cost and complexity of

doing business.

Despite significant growth in international trade, such trade operations and the related

cross-border movements can be incredibly complex, involving many actors and administrative

steps. In West African countries there are distinct regulatory procedures and regimes that affect

cross-border operations. These operations fall into the wider categories of revenue collection and

fiscal protection, public safety and security, environment and health, consumer protection, and

trade policy. Procedures, documentary requirements, inspections, visas, and vehicle regulations as

well as general security issues can all severely hamper the movement of goods across borders

(Hansen & Liliana UNCTAD, 2008).

Business costs may be a direct function of collecting information and submitting

declarations or an indirect consequence of border checks in the form of delays and associated time

penalties. These costs can result in forgone business opportunities and reduced competitiveness.

This is especially true for already disadvantaged countries in ECOWAS such as Burkina Faso,

Mali, and Niger (landlocked developing countries) (Hansen and Liliana UNCTAD, 2008).

37 See. https://members.weforum.org

Hard infrastructure continues to be a major barrier to progress. At Lagos port (Nigeria) for

example, congestion and slow clearance procedures can lead to a 14 week-clearance time. It can

take six weeks to clear containers in Mombasa and four weeks in Abidjan. It is currently more

expensive and takes longer to move a product from Abidjan to Lagos, a distance of 940 kilometers,

than to import the same product from China or India (BAA, 2011)

Checkpoints and roadblocks are a serious detriment to trade in Africa and cause extreme

delays and increased transport costs. Nearly all ECOWAS member states maintain checkpoints

where drivers are sometimes subjected to administrative harassment and numerous extortions.

Thus, for example, on the highway linking Lagos and Abidjan there are 69 checkpoints—that is 7

checkpoints every 100 kilometers. Payments at checkpoints include taxes, transit charges, and

bribes, which vary according to the type of vehicle, the type of goods transported, and the

nationality of the transporters or driver. They may involve the police, customs officers, and/or

gendarmes. Some of these checkpoints are legal; others unfortunately are not (UNECA, 2004).

A coalition of businesses, the World Bank and customs organizations of five ECOWAS

countries are identifying ways to improve customs administration along the Abidjan-Lagos transit

corridor. The route has five customs points and partners have been examining potential options for

a green channel fast track mechanism for Authorized Economic Operators to enable reliable

businesses to be granted authorization for more simplified and streamlined customs procedures

(BAA, 2011).

In recent debate, five sets of factors have been most frequently invoked to account for

Africa's poor economic performance:

External conditions: the legacy of centuries of slave trade and colonial rule, and Cold War

manipulations of African politics;

heavy dependence on a small number of primary exports and resulting terms of trade

declines and volatility;

internal politics: authoritarianism, corruption, and political instability;

economic policies: protectionism, statism, and fiscal profligacy;

demographic change: rapid population growth;

Social conditions: deep ethnic divisions in African society, indicated by high levels of

ethnolinguistic and religious diversity and low levels of "social capital" as variously

measured (David E & Jeffrey D, 1998).

In regards to climate effects on Africa’s agricultural development, climate in tropical

Africa differs from other parts of the tropical world for several key reasons. First, because Africa

is a large landmass, vast interior parts of the continent become extremely hot, as the temperature

is not moderated by proximity to the sea or monsoon rainfall. This differs, for example, from the

island economies of Southeast Asia, where temperatures at a similar latitude and altitude are

moderated. Second, Africa misses out on the great monsoon rainfalls that provide vital seasonal

precipitation to South Asia and East Asia. A lesser monsoon phenomenon occurs in West Africa,

but not in East Africa. Thus, other than in a part of West Africa (centered on Nigeria), Africa lacks

the high seasonal precipitation of Southeast Asia. Either it rains all year10 round, as near the

equator, or seasonal rainfalls are generally much less than in Southeast Asia.

2.6.2 Electricity Sector

The power or electricity sector represents Africa’s greatest infrastructure challenge.

Electricity access in Sub-Saharan Africa is only 25 percent, compared with 50 percent in South

Asia, and 80 percent in Latin America. Even for the few that have power, the available supply is

expensive and highly unreliable (World Bank, 2011).

Limitations in West African electricity had severely affected the economies of the sub-

region and continued to hamper the development of most West African Countries (Fatoumata,

2010). Energy was one of the key vectors of development which had an impact on the achievement

of the Millennium Development Goals (MDGs) to which ECOWAS member states had subscribed

and that investment is the solution to this problem38.

West African workshop (experts in the energy sector) treated several topics regarding the

energy sector and a topic such as Electrify Interconnection in West Africa and recommended the

establishment of a fund to foster public-private participation (PPP) in the critical area, and added

that is necessary if Africa is to generate adequate energy to power its development. According to

them, the fund must be at national and sub-regional levels, and will assist in PPP preparatory and

implementation activities as well as support the financing of components of PPP obligations via

Kiteonline (2010).

The workshop was organized to conduct an in-depth review of the nature and structure of

PPPs in electricity sector in Cote d’Ivoire, Ghana, Mali, Nigeria and Senegal and their supporting

institutional frameworks so as to extract best practices and learning points towards strengthening

this business model and enhance access to electricity in the sub-region via Kiteonline (2010).

The pooling and sharing of energy resources would revolutionize the power sector in West

Africa. Integrating power systems would enable countries to have a reliable and affordable supply

of electricity (Madamombe, 2005).

2.7 Justification Four: Regional and political stabilization

In terms of achievement, through the adoption and application of the ECOWAS

Mechanism (1999) and the Supplementary Protocol on Democracy and Good Governance (2001),

the Organization has been able to progressively and incrementally stabilize the region and promote

democratic governance. Strict adherence to Constitutional Convergence Principles has yielded

relatively peaceful, transparent and credible outcomes in recent presidential elections in Guinea,

Niger, Benin, and Nigeria.

By applying the policy of “Zero Tolerance” to power obtained or maintained by unconstitutional

means, ECOWAS has been able to put pressure on “wayward regimes to change their ways through

a combination of sanctions and preventive diplomacy. Sahara reporters (2011).

In security and political stability, echoing the views of many international relations experts,

Professor Bola Akinterinwa, Director General of the Nigerian Institute of International Affairs

(NIIA), believes that ECOWAS could not be faulted for laying emphasis on security and political

stability (Sahara reporters, 2011).

“Economic development and political stability are two sides of the same coin and in their

wisdom, ECOWAS leaders have always sought to prevent, manage and or resolve regional

conflicts with the knowledge that without political stability there will be no economic

development. Sahara reporters (2011)

2.7.1 Governance and Development

38 West Africa electricity deficit: Experts recommend private-public participation.Kiteonline.net. Tuesday, 20 July 2010

It can be noted that good governance, in all its facets, has been demonstrated to be

positively correlated with the achievement of better growth rates, and particularly through the

building of institutions in support of markets. Recent empirical analysis suggests a positive

correlation between democratic governance and the levels of income, investment, human capital,

economic liberalization, and distributive income growth in society. UN Secretary-General Kofi

Anan has said that “good governance is perhaps the single most important factor in eradicating

poverty and promoting development”. And a former Kenyan Vice-President has also noted that

“good political and economic governance underpins sustainable development” Ronald Hope

UNECA (2003).

The New Partnership for Africa’s Development (NEPAD) states that development is

impossible in the absence of democracy, respect for human rights, peace, and good governance. In

the NEPAD framework document, the institutional reforms to strengthen political governance in

Africa will need to focus on: (1) the administrative and civil services; (2) the strengthening of

parliamentary oversight; (3) the promotion of participatory decision-making; (4) the adoption of

effective measures to combat corruption and embezzlement; and (5) the undertaking of judicial

reforms. Ronald Hope UNECA (2003).

Institutions and public institutions in particular, have been a failure in Africa. Many of

these institutions have been captured by the elite to serve narrow personal interests. The resultant

effect has been the lack of the ability of the state to provide the requisite institutional framework

to support good governance. In too many African countries, both the public and private sectors do

not operate according to widely accepted rules that are transparent and enforced by accountable

institutions. Consequently, the challenge for African policy-makers, under the NEPAD, is to shape

policies and institutional development in ways that enhance good governance and sustainable

development. Ronald Hope UNECA (2003).With respect to economic and corporate governance,

the NEPAD framework document states that the objective here is to promote a set of concrete and

time-bound programs aimed at enhancing the quality of economic and public financial

management, as well as good corporate governance (Ronald Hope UNECA, 2003). Good

governance for development requires the following:

Meeting people’s needs

ECOWAS leaders should pledge to focus on areas that would have the greatest impact on

poverty reduction, such as infrastructure provision, cross-border trade and the promotion of the

informal sector (Mutume, 2002).

All West African states are to be guided by strict adherence to the rule of law, popular

participation in governance, respect for human rights and fundamental freedoms, while public

policy-making and execution should be both accountable and transparent; political organizations

should not be based on religious, ethnic, regional or racial considerations, and violent and

destructive fundamentalism in religious practice should be discouraged (Aderinwale, 2001).

Peace and Security Stability

The Security and Peace Stability for regional trade increase and GDP growth of One

Member State are inseparably linked to that of other Member State in ECOWAS. Security and

peace stability in West Africa are the preconditions for FDI and regional trade development. The

instability in one country affects the stability of neighbouring countries (Aderinwale, 2001) and

has serious implications for regional unity (Aderinwale, 2001). The interdependence of Member

States and the link between their security and peace stability make it imperative to develop a very

strategic plan that should be based on a unity of purpose and a collective political consensus,

derived from a firm conviction that ECOWAS cannot make any significant progress without

finding lasting solutions to the problem of peace and security (Aderinwale, 2001). Unity and

cooperation, empowering law enforcement agencies will help strengthen the security power across

the region (Aderinwale, 2001).

Democracy, good governance, respect for human and peoples’ rights and the rule of law

are prerequisites for the security and peace stability of the ECOWAS Regional Member States. As

stated by Aderinwale (2001) that lack of democracy, denial of personal liberty and abuse of human

rights are causes of insecurity.

As declared in the CSSDCA (Conference on Security, Stability, Development and

Cooperation in Africa) peace constitutes the basis of all wholesome human interactions and that

with peace should go security (Aderinwale, 2001). In other words if any disputes occur let it be

settled in a peaceful manner because it is good if African’s note that we are the solutions to our

problems if we wake up in cooperation to find solution to African development problem economic

situation will change. The erosion of security and stability is thus one of the major causes of the

crises that continue to plague African states, and one of the principal impediments to economic

growth and human development on the continent39

. The CSSDCA Declaration also provides a

framework for collective action and for cooperation at various levels: continental, regional and

international (Aderinwale, 2001).

If justice, as described above as an attribute of good governance, is so significant to

democracy and democratic claim, how do West Africans arrive at that frame of mind? Is it an

inborn quality or a way of thinking that can be learnt? If the former is the case, then there is

nothing we can do! Our society is doomed to fail (Aderinwale, 2001). But if it is the latter, if it

is the case that we can train ourselves to have respect for others, Africans can modify and

influence the sort of society they want, starting with the school system and young people, the

future custodians of society (Aderinwale, 2001).

Justice makes it possible for a society to be governed in a level-headed and equitable

manner. It enhances the basic principle that law in the land is supreme and above all personal

interests (Aderinwale, 2001). It ensures that elected politicians have respect for the system and

maintain a state of order, transparency, accountability, social justice and the freedom of the

people (Aderinwale, 2001). This includes respect for variance in opinion and religious

orientation. Justice promotes cultural differences because it recognizes and accommodates

plurality. Most significantly, justice also ensures that the spending and planning of the present

generation is mindful of the interests of the generations yet unborn (Aderinwale, 2001).

The responsibility for security and peace stability of ECOWAS lies primarily with the

states and also with the United Nations Security Council because the United Nations Security

Council holds the responsibility of maintaining international peace and security of every nation

(Aderinwale, 2001). The close cooperation of ECOWAS Security Council, Regional Economic

Communities, the African Union (AU), and the UN Security Council has the responsibility of

promoting security and peace stability in West Africa (Aderinwale, 2001).

It is only within the context of a just society that we can talk of peace and economic

cooperation. A complementary aim is the continuous improvement in the living conditions and

prosperity of the majority of West African people (Aderinwale, 2001). In the absence of both

39 See. 1. Ayodele Aderinwale, Bridging the Gap between the State and the Civil Society: The Role of Regional Institutions in Constitution-

making Processes: The CSSDCA Framework, presentation at the CDD Conference on Constitutionalism in Africa, Cape Town, June 2001. 2. Olusegun Obasanjo, Africa in Search of Common Values, Ota, ALF Publications, 1993.

democracy and prosperity of the people, any attempt at building or creating a culture of peace or

security cannot succeed (Aderinwale, 2001).

Encouraging Investment

To enhance intra-African trade and achieve economic growth ECOWAS countries will

need to attract the private sector both domestic and foreign. Moving towards better investment

environment as another source generating growth requires ECOWAS to build considerable amount

of Policy Corporation and coordination environment that includes harmonization of national

investment policies of member states (Enweze, Africa Recovery, 2002)

Respect for the rule of law and clear, consistent and predictable macro-economic policies

are prerequisites for a suitable business environment (Enweze Africa Recovery, 2002)

Capital Market Innovation (CMI)

Capital Market innovation is to provide a dipper capital market for operators, more

competition leading to greater efficiency and a greater range of investment and opportunity to

enjoy economies of scale (Jonathan, 2009). The introduction of Scheme for movement of capital

starting with cross listing and cross trading of securities is required (Bamba, 2009). Member States

should be encouraged to set up integrated system based on single ECOWAS Stock Exchange

(Bamba, 2009).

All participants in the capital market should be free to offer their services in the region and

investors should be able to buy and sell securities in the regions market freely (Jonathan, 2009).

2.7.2 Open Trade

Higher trade taxes should be eliminated in the sub-region of ECOWAS and even in the

continent to encourage trade among regional members because in a general view higher trade taxes

on the continent compared to other regions are among the factors discouraging trade among

African countries (Mutume, 2002). The Tariffs on essential inputs in farm production such as

fertilizers (produced by a number of African countries) average four times those imposed in

Southeast Asia (Mutume, 2002). The phased approach outlined in the Abuja agreement, such as

reducing tariffs selectively at a regional level, has been implemented only in parts of a couple

regions in the continent (Mutume, 2002). To a great extent, it has been superseded by the type of

across-the-board trade liberalization promoted through the structural adjustment programmes

financed by the World Bank and International Monetary Fund (IMF) (Mutume, 2002)40. Generally World Bank studies show that a 10 per cent drop in transport costs could result

in a 25 per cent increase in total African trade. The Bank also concludes that only about 25 per

cent of the decline in Africa's share of world exports can be attributed to poor prices, while the rest

is due to non-price factors such as poor infrastructure and information services (Mutume,2002).

2.7.3 Policy Cooperation and Coordination

40 Africa Recovery, Vol.16 #2-3 (September 2002), page 20. How to boost trade within Africa. Lower barriers and diversify production

Movements towards Common Investment Market (CIM) requires; Considerable amount of

Policy cooperation and coordination, and Effective harmonisation of national investment policies

of Member States (Prof. Bamba ECOWAS Commissioner Macro-economic Policy).

Cooperation is needed to address regional coordination failures and finance common policy

solutions in presence of cross-border externalities. By pooling resources, individual countries can

also attain greater developmental gains than they would if they were to act on their own. The

current juncture has already revealed the significant costs that individual countries face when

adequate collective institutional infrastructure to deal with global challenges is not in place. In

other words, the emergence of global and regional “bads” has highlighted the value of efficient

provision of global and regional public “goods”41

(Viña del Mar, IDB 2009). They continued that

nevertheless, economic integration functions as a powerful counter-cyclical force by expanding

regional markets and enhancing global competitiveness. Moreover, the payoff of regional

cooperation increases in the current environment of economic crisis and potential

“deglobalization,” dwindling of international trade and the retrenchment of global finance (Viña

del Mar, IDB 2009).

Bottom-up cooperation in Asia relies on competitive firms and unfolding financial and

infrastructure integration, all supported by lean official institutional arrangements. Enlarged

Europe tests its comprehensive top-down approach of deep integration based on supranational

institutions and wide availability of regional funds. In LAC, in the absence of the top-down

institutional arrangements as in Europe or the bottom-up integrated production networks in Asia,

an effective policy coordination mechanism requires vision, leadership and accountability at the

highest executive level. Unlike in poorer regions, there is a scarce availability of grant funding for

middle-income countries which implies a need to develop innovative regional institutional and

financial instruments to absorb the costs of policy coordination failures (Viña del Mar, IDB 2009).

2.8 Governance and Institution

In Bichaka Fayissa and Christian Nsiah (2010) study on impact of good governance to

economic growth they focused and took into consideration the traditional sources of economic

growth such as investment in physical and human capital, openness to trade, foreign investment,

and official development assistance. They specify a simple double log-linear Cobb-Douglass

production function and hypothesize a positive relation between investments in physical capital,

investment in human capital, the openness of the economy, and real GDP per capita income. Where

they stated that it makes sense to expect that foreign direct investment (FDI) will promote growth,

not just by providing direct capital financing, but also creating positive externalities.

It was indicated in the results from their model of choice that all the governance variables

have positive and statistically significant effects on the GDP per capita (at p < .05) of African

countries. However, they found that the magnitude and significance of the impact of good

governance depends on the proxy of good governance used. When the voice and accountability

index (VAI) is used as the proxy for good governance, a 10 percent improvement in the voice and

accountability of a county’s citizenry leads to a .68 percent increase in its real per capita income

(Bichaka and Christian, 2010).

In the case of political stability (PSI), it was find that a 10 percent increase in the political

stability index of a country corresponds to a .37 percent rise in its real per capita income. While a

41 See. http://idbdocs.iadb.org, Second Meeting of the Finance Ministers of the America’s and the Caribbean. Pg. 2

10 percent improvement in a country’s government effectiveness index (GEI) and regulatory

quality (RQI) lead to a .73 and .61 percent increase in its real per capita income, respectively. A

10 percent improvement in rule of law (RLI) and control of corruption index (CCI) translate into

a .21 and .15 percent rise in per capita income (Bichaka and Christian, 2010). When considering

the composite governance indicator (GOI) which is the unweighted average of all the six sub-

categories of good governance, they find that a 10 percent improvement in good governance,

results in a .91 percent increase in the real per capita income of a country (Bichaka and Christian,

2010). In their study and in the case of government effectiveness, the quantile regression estimates

presented indicate that government effectiveness has a positive impact on growth at all economic

level.

An empirical study on ECOWAS done by Abdoulaye Diop, Gilles Dufrénot and Gilles

Sanon42

on the bases of bad governance and weak institution impact to the economy. Using the

following specification and equation

1

117116

543211 inf

ititititit

itititititit

AccountIGoveffectaid

lationtradeIilletyy

Where 1it is a disturbance term. ity represents the growth rate of per-capita real GDP in country

i during the year t (PPP adjusted).

It was found that there are high inflation rates in the ECOWAS countries above the 7-11%

threshold. In applications specific to the developing countries, authors find a negative inflation-

growth relationship when inflation goes above a threshold of 7-11% but a non significant effect

below this threshold. While in comparison with the South East Asian countries (ASEAN) inflation

is found below this threshold, meaning that inflation is much lower in ASEAN compare to

ECOWAS.

Using investment rate equation;

2

876

543211

ititititit

ititititititititit

crediturbanreguly

rightsypolylawyyII

They assume that growth effects of ECOWAS private investment depend upon the following

factors: the rule of law (law), property rights (rights), regulatory burden (regul) and political

violence (pol).

They also considered the rate of urbanization, urban, how this affects ECOWAS private

investment. Saying that on one hand, cities have to contend with a host of problems that have a

strong bearing effect on the countries’ ability to attract private investment: weak access of the

population to basic infrastructure and housing, poor regulatory environment for urban

development, insecurity, municipal unsustainable finance. These factors, which represent multi-

dimensional aspects of well-being in towns, hinder the potential productivity of the urban zones. On the other hand, private investment benefits from the positive externalities of

urbanization implied by the existence of productive infrastructures.

42 Is per-capita growth in Africa hampered by poor governance and weak institutions? An empirical study on the ECOWAS countries by Abdoulaye

Diop, Gilles Dufrénot & Gilles Sanon.

2.8.1 Harmonizing Policies and Coordination

Addressing the invisible barriers to connectivity in Africa is equally, if not more important

than addressing the physical infrastructure deficit. New highways will not improve

competitiveness if traders are stuck for days at border checkpoints or must pay exorbitant bribes

along the way. New ICT infrastructure won't result in lower prices for consumers if there are

restrictions on competition or high transit fees through neighboring countries. Regional markets

won’t attract investment if different policies, regulations and tariffs continue to isolate small

national economies (World Bank, 2011).

Strengthened economic integration includes enhancing economies of scale facilitated by

regional infrastructure, trade diversification, and providing learning-by-exporting experiences that

help African firms launch successfully into global markets. When combined with improved

regional economic and political stability, closer economic integration can enhance incentives for

both domestic and foreign investment, thus spurring existing industries and new business start-

ups. By complementing benefits from regional infrastructure, closer institutional cooperation and

collaboration will leverage gains in competitiveness and encourage growth through increased

intraregional and global trade (World Bank, 2011)43.

Harmonizing policies and programmes among ECOWAS regional organizations is an

important step towards building greater coherence among regional member communities across

West Africa and even Africa as a whole (James, Bilal, Isabelle Ramdoo, Hohmeister & Luckho

2010)44.

2.8.2 Improving Regional Fertilizer Markets

In 2000, the member states of the Economic Community of West African States

(ECOWAS) signaled their commitment to the United Nations’ Millennium Development Goal of

halving hunger and poverty by 2015 (MDG1). To achieve that goal, agriculture in the region

needed to grow by 6.8 percent annually (Johnson et al. 2008). From 2000 to 2009, however, West

African agriculture grew at half the desired rate—3.7 percent—due to many biophysical and

socioeconomic constraints, including heavy reliance on rain-fed production systems, traditional

practices of soil fertility maintenance, and limited access to markets. Consequently, crop yields in

West Africa are significantly lower than global averages, and their rate of increase has barely kept

up with population growth. Cereal production in West Africa increased by 4.4 percent per annum

from 1980 to 2009, an annual growth rate only marginally above the population growth rate

(Bumb, Johnson, and Fuentes, 2011)45.

About two-thirds of this growth was accounted for by expanding cultivated area; one-third

represented yield growth. This trend will have to change, as land becomes scarcer while demand

for cereals and other agricultural products continues to grow, as a result of population and income

growth as well as urbanization (Bumb, Johnson, and Fuentes, 2011).

A survey of four West African fertilizer markets, in Ghana, Mali, Senegal, and Nigeria, provides

insights into the constraints that keep adoption below optimal levels. A combination of policy,

43 See. Web.Worldbank.org. Regional integration assistance strategy 2011. 44 See. WWW. Ecdpm.org/dp99. 2010. Joining up Africa Support to Regional Integration by James Mackie, Sanoussi Bilal,

Isabelle Ramdoo, Henrike Hohmeister and Takesh Luckho. 45 http://www.ifpri.org. Balu L. Bumb, Michael E. Johnson, Porfirio A. Fuentes. Policy Options for Improving Regional Fertilizer Markets in West Africa. IFPRI Discussion Paper 01084

institutional, and infrastructure improvements is recommended to address these constraints and

increase agricultural production (Bumb, Johnson, and Fuentes, 2011).

The population in the ECOWAS region of West Africa is projected to almost double over

the next 15 years, from 230 million in 2010 to 430 million by 2025 (FAO 2010). Such growth is

expected to put immense pressure on the ability of West African agriculture to meet the growing

demand for food staples and maintain stability in domestic and regional food security systems

(Bumb, Johnson, and Fuentes, 2011).

The key challenges for agriculture in West Africa are the continued heavy reliance on

traditional rainfed production systems and practices of soil fertility maintenance, as well as poor

access to markets. Consequently, the presence of high production and marketing risks and limited

access to rural services and institutions (credit and extension, market information) invariably

contribute to limited adoption of modern inputs, such as fertilizer, improved seeds, and machinery

(Crawford et al. 2006). According to estimates by Johnson et al. (2008), to achieve the MDG of

halving poverty by 2015, agriculture in West Africa will need to grow by 6.8 percent annually;

and for that to happen, spending in agriculture will need to increase from $6.6 billion in 2004 to

$31.8 billion by 2015, translating into an annual growth in spending of 20 percent or more per

year. Particular attention will need to focus on increasing productivity through the adoption of

yield-enhancing technologies (for example, fertilizer and improved seeds) and promoting greater

integration of regional food staple markets (Bumb, Johnson, and Fuentes, 2011).

Nutrient depletion is a major issue in West African agricultural system and this occurs

because of inadequate replenishment. There are large exports of nutrients with the cassava tubers,

and the soils become more prone to erosion. Because of limited use of nutrients supplied from

external sources (mineral fertilizer), both cereal and cassava production rely heavily on nutrients

supplied by the soil (Bumb, Johnson, and Fuentes, 2011).

To sustain production growth for both cereals and root crops, therefore, nutrient use from

both organic and inorganic sources will need to be increased. As the supply of nutrients from

organic sources is limited and traditional fallow systems are no longer a viable option, nutrient

supply from mineral fertilizers will need to increase severalfold, first, to sustain the soil fertility in

the long run, and second, as an agricultural intensification strategy to facilitate the adoption of

other yield-increasing technologies to achieve CAADP and MDG goals. The potential to realize

higher yields under current available technologies exists (Bumb, Johnson, and Fuentes, 2011).

2.8.3 Trade and FDI Development Trend

Several African countries have shown signs of economic recovery during the past decade.

For instance, Ghana in West Africa, and Uganda and Ethiopia in East Africa, have achieved

substantial improvements in their growth performance. During 1991–99 their average growth rate

reached 4.4%, 6.9% and 4% respectively. These countries also represent an important share of the

GDP of their region (between 10% and 20%). Their economic performance could lay the ground

for a take-off in broader areas if there are enough growth spillovers. Increased linkages among

African countries, through an expansion of intraregional trade, can be a crucial device for creating

the necessary growth spillovers and fostering the regional take-off (Robert and Khalid, 2004). Over

the past decades, however, the outcome of regional integration in Africa has been disappointing.

Simple inspection of trade figures shows that both the levels and the growth rates of intra-African

trade remain very low. Depending on the country, the shares of such a trade in total trade ranged

from 0.02% to 8% in 1970 and from 0.1% to 10.5% in 1990. Compared with other regions, the

African record is also unsatisfactory. For instance, the shares of intraregional trade in total trade

are more than five times higher in the European Union and in the NAFTA. During the 1990s, trade

among Southern Cone and NAFTA countries increased by 15% and 10% points respectively. Over

the same period, intra-African trade increased by only four percentage points (Robert and Khalid,

2004)46.

Countries attracting large amounts of FDI generally follows a wide spread agreement

which is to have good economic fundamentals, that means, to have achieved a high degree of

macroeconomic and political stability and also have favourable growth prospects, large size of

market and natural endowment. They also tend to possess a good infrastructure and legal system

(including enforcement of laws), a skilled labour force, and a foreign sector that has been

liberalized to some extent (membership in free trade areas is a particular attraction). It is no secret

that the African continent is perceived as one in which there is so much turbulence, war, civil

disturbance, civil strife, confusion, and political instability and so on. In many of its regional state

the lack of credible macro-economic policies keeps industry away (Mutum, 2002). Policies change

too frequently and so "businessmen do not know, from one day to the other, one week to the other

or one month to the other, exactly what is going to happen." Another missing ingredient in the

formula is an efficient transport and communications system. Poor infrastructure is a major cause

of West Africa's low competitiveness (Mutum, 2002). In order to allow trade to flow, investment

in physical infrastructure such as roads, railways, power lines, air services and telecommunications

and so on is necessary (Mutum, 2002).

Most developing countries compete for Foreign Direct Investment (FDI) in other to

integrate their markets, and the effect of globalization is changing the strategies of multinational

companies (MNCs). ECOWAS Member States should aspire, in the long run, to join the club of

countries attracting significant amounts of high-quality, export-oriented FDI. To do this in this

‘globalizing’ world depends on the ability to provide a favorable FDI regime and competitive

factors of production which depends on adaptable labor skills, sophisticated supplier networks and

flexible institutions. A stable, efficient, and service-oriented environment that welcomes investors

without discrimination and also legal and intellectual property rights, effective competition

policies, a strong judiciary and minimum bureaucratic harassment (Pigato, 2001). ECOWAS

region requires upgrading national laws and incentives to best international practices; lowering

transactions costs (i.e. the costs related to setting up business, dealing with bureaucracy, paying

taxes, exporting and importing, hiring and firing workers etc.); and improving the supply of skills,

infrastructures legal and judicial systems and institutions. First priority should go to rationalizing

tax rates and incentives. Incentives should be retained only if they are moderate and in line with

development objectives47

. They should also aim to increase FDI inflows into existing areas of

comparative advantage such as extractive and other natural resource activities and adopt

appropriate policies to maximize their benefits (Pigato, 2001).

FDI privatization should also be pursued. It may become a powerful instrument to attract

foreign investors, provided they can count on fair and stable rules of the game (Pigato, 2001).

Privatization can result in net gains for both foreign investors and the country, though the interests

may, at times, appear to diverge. Foreign investors are interested in access to market share of the

enterprises that are being privatized, rather than in acquiring productive facilities (with the

46 See. ROBERT LONGO; The International Fund for Agricultural Development, Roma, Italy and KHALID SEKKAT; University of Brussels,

Brussels, Belgium on Economic Obstacles to Expanding Intra-African Trade 2004. 47 See. Africa Region Working Paper Series No. 15. The Foreign Direct Investment Environment in Africa April 2001. Miria A. Pigato, Senior Economist, AFTM2, Africa Region, The World Bank

obligation to restructure and rehabilitate, and often with its consequent downsizing). They might

require special deals or continuation of existing protection (Pigato, 2001). By contrast,

Governments objectives in privatization are to have better services for consumers, higher budget

revenues and faster growth. The challenge for the Government is to protect both foreign investors

and consumers, and make sure that the benefits from privatization are equally shared. To this aim,

Governments should set clear rules regarding not just privatization rules but competition and

pricing rules. Particular care should be taken in the privatization of infrastructure. Governments

must also prevent undue market concentration and restrict mergers that would undermine

competition; and introduce environmental, health and safety obligations of public services (Pigato,

2001).

FDI is important in economic transformation of a nation or region. It represents an inflow

of foreign resources that can raise domestic savings and GDP growth rates in the area of finance.

This finance can include purchases by the foreign direct investor of equity capital (including

additional paid up capital) in the foreign investment enterprise (FIE), reinvestment of profits by

the FIE and loans to the FIE from the parent firm.48

FDI inflows to developing Asia continued to grow, while South-East Asia and South Asia

experienced faster FDI growth than East Asia. The two large emerging economies, China and

India, saw inflows rise by nearly 8 per cent and by 31 per cent, respectively. Major recipient

economies in the Association of South-East Asian Nations (ASEAN) subregion, including

Indonesia, Malaysia and Singapore, also experienced a rise in inflows. The fall in FDI flows to

Africa seen in 2009 and 2010 continued into 2011, though at a much slower rate. The 2011 decline

in flows to the continent was due largely to divestments from North Africa. In contrast, inflows to

subSaharan Africa recovered to $37 billion, close to their historic peak (UNCTAD, 2012).

2.8.4 Increasing the Interest for Regional Trade

The recently published paper of Erik von Uexkull (2012) stated that the increasing interest

in regional integration is often attributed to the disappointing progress of multilateral trade

negotiations in the WTO (World Trade Organization). And in continuation he emphasize that there

also appears to be a widespread notion that regional trade, in some way, is “better” for developing

countries than trade with the rest of the world. Which is shown as example in the recently published

fourth report on Assessing Regional Integration in Africa (African Development Bank, African

Union, UN Economic Commission for Africa, 2010) emphasizes the importance of regional trade

for development and poverty reduction in Africa. At the same time, aid for trade projects are

increasingly taking a regional focus, for instance by providing technical support for regional

institutions, cross-border transport corridors, and other trade facilitation measures. Undoubtedly,

trading with regional neighbours in the ECOWAS is an important part of its regional members

overall trade expansion and employment creation.

In the area of trade facilitation it is very important because, for instance a few hundred

kilometres separate Lagos, Nigeria, from Accra in Ghana. For the thousands of traders who ply

this route, the journey through Togo and Benin can take a full day, punctuated by arduous border

checks, harassment and solicitations from officials for kickbacks (Mutum, 2002). Customs

48 See. Economic Survey of Europe 2001. Economic Growth and Foreign Direct Investment in the Transition Economies Chapter five. Pg 185

officials and police at roadblocks will make you unload and unpack every little package in order

to delay you for hours (Mutum, 2002)49

.

Actions in facilitating this areas of customs interface, transit regulations and road

transportation requires proper harmonization of road transport regulation, streamlining of transit

procedures including the implementation of a regional bond guarantee system, the single custom

document, and the creation of one stop windows for customs and other formalities for transit to

landlocked countries and also a proper capacity building to implement the program, and the

establishment of national and regional facilitation committees and lastly a proper modernization

of the computerized custom information systems, focusing on the provision of interfaces between

the different systems existing in the region (Njinkeu, 2007).

In addition noting Article V of the General Agreement on Tariffs and Trade (GATT, 1994)

on "Freedom of Transit" and other relevant international conventions on goods in transit;

ECOWAS member states should cooperate in the area of facilitation of goods in transit and should

expeditiously study the necessary measures to facilitate the transportation of goods both in transit

and inter-State, covering land, maritime and air links, respectively (Njinkeu, 2007). Agreement to

these covers few objective areas which are (a) to facilitate transportation of goods in transit, to

support the implementation of the contracting parties Free Trade Area, and to further integrate the

region’s economies; (b) to simplify and harmonize transport, trade and customs regulations and

requirements for the purpose of facilitation of goods in transit; and (c) to establish an effective,

efficient, integrated and harmonized transit transport system in ECOWAS (Njinkeu, 2007).

The low values and volumes of intra- ECOWAS Zone trade have been un-helpful to the

regional integration process. Intra-regional trade remains at less than 15% of overall trade figures

(while 70% of the European Union trade happens within the EU). The leading economies in the

region; namely Nigeria, Ghana, Cote d’ Ivoire, and Senegal are sustaining respective national

development agendas and thus prefer linkages with developed countries outside the region. The

existence of many currencies in the sub-region and different religions and believers is a key

drawback to its trade and integration drives (Reuben, 2011). In order to be able to compete

globally, ECOWAS countries ought to liberalize their economies and to avoid imposition of

protectionist trade laws, in other to achieve long desired economies of scale (Reuben, 2011).

2.8.5 Improving Regional Environments

Following are series of major and simultaneous transitions needed in a wide range of

sectors and policy areas to move toward achieving sustainable security stability, increase in

Foreign Direct Investment and good governance in the ECOWAS region that is economically and

environmentally acceptable. In West Africa one of the decisive challenge confronting governments

is the problem of environmental degradation as a result of the massive impact of corruption,

insecurity and bad governance system across the regions and the major cause of it is policy failure

in the economic, agricultural, energy, industrial and other sectoral policies area50

49 Africa Recovery, How to boost trade within Africa. Lower barriers and diversify production. Vol.16 #2-3 (September 2002), page 20. By

Gumisai Mutume.

50 See for more info. Sub-Regional Report in National Implementation of Agenda 21 of the Southern African Development Community in New York 1997.WWW.UN.Org

1. Eradicate Corruption

Technology is the missing link of Africa’s development, while corruption is the morbid

link. West Africa must acquire her own manuscripts and minimize corruption in order to develop

(News Africa, 2012)51

. Corruption is a major hindrance to economic development. More and more

development experts have come to the conclusion that it is impossible to alleviate poverty without

first curbing corruption (Vienna, 1999). The responsibility of containing corruption must not

ignore the participation of international firms, foreign governments and others engaged in corrupt

practices either actively or passively (Vienna, 1999).

Governments need to introduce appropriate legislation to eradicate corruption and

provide whatever means are necessary to ensure that appropriate steps are taken to build systems

of integrity and rule of law (Vienna, 1999). There is no doubt about the strong desire of every

incoming administration in most of the West African nations especially Nigeria to fight corruption.

Somehow, this desire has failed to curb the rise in cases of corruption due to several factors

(GWEGWE, 2010). Chief among them is the crass ignorance of the root causes of corruption in

the country. Correct diagnosis is very fundamental in finding cure for an illness (GWEGWE,

2010). The inability of successive administrations to cure corruption can therefore be rightly

attributed to the shallow and narrow nature of the nation’s anti-graft protocols. Presently, the war

against corruption is mainly anchored on the principles of investigation, arrest, and prosecution of

suspected offenders. This can be likened to mowing a lawn. Sooner or later, the grass will grow

again. To effectively fight corruption, its roots must have to be uprooted. The rise in cases of

corruption is linked to a number of fundamental factors. They include wrong social orientation,

poor leadership culture, unemployment, poverty, tribalism, and the lack of political will

(GWEGWE, 2010)52

. The aim, therefore, is to achieve a fundamental increase in the honesty,

efficiency, and fairness of government53

.

Except some practical actions are taken to encourage sound moral values in society, the

war against corruption will suffer severe blows54.

2. Institutional Cooperation

Institutional cooperation can lead to economic integration. Institutional cooperation at the

regional level of the ECOWAS are essential to surmount the wide array of policy, operational, and

institutional constraints to the free movement of goods, services and people that inhibit expansion

of markets (James, Bilal, Isabelle, Hohmeister and Takesh, 2010) Institutional cooperation achievement at the ECOWAS regional level includes lowering

tariff and nontariff barriers to trade among ECOWAS regional member states and with global

market; and developing integrated and deeper regional financial markets, free trade agreements,

and customs unions (James, Bilal, Isabelle, Hohmeister and Takesh, 2010). It also includes

harmonizing technical standards; developing common procurement or financial management

regulations, procedures, and codes; and enhancing the capacity of regional professional

associations. Accomplishing these aims will require improving the capacity of ECOWAS national

51 See. http://www.africa-news.eu/africans-in-uk/4028-reduce-corruption-in-order-to-develop 52 See. FocusNigeria.com 53 See. Prevention: An Effective Tool to Reduce Corruption by Vienna, December 1999. Pg. 5. 54 See. focusnigeria.com. how to curb corruption in Nigeria by kali Gwegwe 2010.

and regional agencies to drive the reform and harmonization agenda and to design and implement

cross-border regulatory arrangements (James, Bilal, Isabelle, Hohmeister and Takesh, 2010).

3. Facilitation of Capital Flows across the Regions

In a study done by Reuben (2011), it was stated that for ECOWAS to achieve substantial

growth of GDP, and competitiveness it must address the minimum conditions for effective capital

account liberalization. These conditions include: 1.) Stable macroeconomic environment that is

free of high domestic inflation rates, fiscal and monetary instability, and external imbalances of its

member countries, 2.) Strong prudential guidelines and adequate supervisory frameworks that

would checkmate excessive financial market risk, 3.) Stable political environment in the sub-

region, 4.) The financial sector must be sound and fully integrated within the context of a monetary

union, 5.) Determination and execution of a well sequenced liberalization program55. This is

important because the ECOWAS Zone is made up of a number of countries that are likely to be at

different stages of economic and financial development, evolution of institutional structures as

well as legal and business practices (Reuben, 2011).

55 See. (Reuben Ade Alabi, 2011) and (ASEAN Sec. Report, 2005)

Documents

Chapter II 2. Literature Reviewresearch-system.siam.edu/images/independent/ISSUES_IN...Chapter II 2. Literature Review 2.1 Introduction This study is initially following the theory