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Al-Ahram Weekly 2 - 8 March 2000 Issue No. 471 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 2 - 8 March 2000 Issue No. 471
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Interview Features Focus Heritage Travel Living Sports Profile People Time Out Chronicles Cartoons Letters Economic, and moral, imperatives
By Gamal Nkrumah
The Common Market of Eastern and Southern Africa (COMESA) is one of Africa's most dynamic economic groupings. COMESA's Kenyan-born secretary-general, Dr Erasmus Mwencha, is confident that his organisation can, despite several serious challenges, successfully function as a magnet for attracting foreign funds. Mwencha spoke frankly about some of these challenges, touching upon sensitive subjects like underdevelopment, poverty, unemployment and AIDS. But more importantly, the COMESA secretary-general outlined ways in which his organisation intends to overcome the obstacles and realise the aspirations of its 380 million people.
In terms of population and market size, COMESA is one of the continent's largest economic groupings. Figures are on the upward trend, signifying a growing market. It is against this backdrop that the COMESA 2000 summit in Cairo comes at a very opportune moment. The countries of the region are poised for an economic take-off, and they are determined to market themselves as promising emerging markets with a potential for lucrative investments. Mwencha has made it clear that the COMESA 2000 summit is a golden opportunity for politicians and businessmen from within COMESA and from other parts of the world to look into doing business with COMESA countries.
With liberalisation and privatisation programmes under way in many of the continent's countries, Africa is undergoing far-reaching economic transformations. The African nations that are implementing similar economic reform and economic deregulation programmes must pool their resources, exchange views, share experiences and coordinate their policies. This will enable African countries to play an active role in the global arena, instead of becoming further marginalised.
What are the objectives of the COMESA 2000 Cairo Conference?
The conference aims at increasing international and regional business' awareness of COMESA's investment potential. We are getting ready to usher in a Free Trade Area by 31 October 2000, and so the conference aims at enhancing intra-COMESA trade and economic relations.
What are the challenges facing COMESA?
COMESA covers 21 member states which individually face many challenges, chief among which is their low level of development. The UNDP human development report of 1998 identified only two countries out of these as being in the high development category. The region has high levels of illiteracy and low income. The majority live on less than US$1 per day -- below the poverty line. The HIV/AIDS pandemic which kills mainly the economically most productive age group is another critical problem. Then, there is the brain drain and non-repatriation of skills. It is estimated that over 30,000 African Ph.D. holders live abroad because of poor working conditions at home. The heavy debt burden and civil strife are other major problems facing COMESA countries. Trade patterns are biased towards the developing states, and it is difficult to change those patterns. Low capacity in mobilisation of savings and financial resources is yet another problem, and so is poor or no infrastructure. But all of these problems are being fought.
Do you agree that intra-COMESA trade needs special attention?
For 16 years COMESA has striven to improve and integrate trade and investment in the region. It has helped create a number of institutions facilitating trade on both the demand and supply sides, such as the Eastern and Southern Africa Trade and Development Bank (PTA Bank), which provides trade and investment credit. There is also the PTA reinsurance company, which provides reinsurance services in the region. There is the COMESA Yellow Card (a third party insurance facility) which facilitates cross-border movement of traffic. A number of private-sector led associations have been created as independent organisations that promote trade within COMESA. These include the COMESA Metallurgical Industries Association (COMESAMIA); the Eastern and Southern African Business Association (ESABO); the Federation of National Associations of Women in Business in COMESA (FEMCOM); the Pharmaceutical Manufacturers of Eastern and Southern Africa (PHARMESA); and the COMESA Bankers Association (BAPTA).
What steps have been taken by COMESA to accelerate trade liberalisation in the region?
One area in which COMESA has made good progress is in the removal of tariff barriers. On 1 July, 1999, four countries had published the 90 per cent tariff reduction; six countries had published the 80 per cent tariff reduction; one country the 70 per cent reduction; and three countries the 60 per cent reduction. The elimination of non-tariff barriers is another measure designed to accelerate trade liberalisation. The classic non-tariff barriers -- quantitative restrictions, licensing, import permits and restrictive foreign exchange controls -- have been largely eliminated. Rules of origin have been simplified and, with the adoption of a 35 per cent local value added criteria, there is more scope for import content. The regulations will undergo further changes to take into account developments at the WTO and WCO. The adoption of a single COMESA Customs Document (COMESA-CD) to replace the previous multiplicity of documents -- up to 32 in some countries -- is yet another measure designed to accelerate trade liberalisation. The installation of efficient customs management and trade statistics systems to facilitate data and revenue collection and to establish the basis for a harmonised tariff -- the Automated System of Customs Data (ASYCUDA) -- is already installed in 13 countries, Eurotrace in 19 -- and both will facilitate trade liberalisation. A Customs Bond Guarantee Scheme to facilitate transit traffic and reduce the cost of financing transit goods also helps. The establishment of the Trade Information Network (TINET), which now has 47 computerised focal points set up in 20 member states, also accelerates trade liberalisation. These focal points provide information on export and import opportunities available in each country, including trade flow analyses, company registers, comparative COMESA tariffs and national tariffs, non tariff barriers and macro-economic profiles of member states. We have also established a COMESA website (http://www.comesa.int) to provide information to businesses and interested parties, both within and outside COMESA.
Moreover, COMESA has successfully introduced a number of trade facilitation measures, including harmonised road-transit charges, introduced in 1991. Intra-COMESA trade, valued at about $4.2 billion, is growing at the rate of 20 per cent per annum. Trade with third countries is growing at about seven per cent per annum. Transport transit facilitation measures have reduced costs by 25 per cent. The movement of goods within the region has been made easier and more efficient.
What is the future of emerging markets in Africa and in COMESA in particular?
The theme for the Cairo Conference is "COMESA 2000, the Emerging Market". We believe COMESA to be a viable market that will be enhanced by the removal of major barriers to the movement of goods. Though the population of COMESA countries have a low per capita income, they number more than 380 million. This is a large market by any means. Estimated GDP in 1998 was $165 billion. In Cairo we shall be selling COMESA to investors and hope to win many, judging by confirmations of attendance. Integration is bound to bring more FDI's, therefore more growth and, consequently, a larger market. COMESA is in Africa, and what goes for COMESA is valid for the rest of Africa. Investment climate and business opportunities in the COMESA region have improved considerably and continue to improve. Most countries have implemented far-reaching economic and political reforms. It is, for example, a matter of satisfaction that a number of member states have established "one stop" investment centres for promoting, receiving, appraising and licensing, so that investment proposals are not delayed. These single-window facilities also provide information on investment opportunities available in member states. Studies show that returns on investments in Africa are competitively high. There are many investment opportunities including telecommunications, agri-business, tourism, mining and infrastructure. The future of the emerging COMESA market is bright.
What is the impact of globalisation on COMESA countries and development in the aftermath of the Seattle WTO summit?
COMESA recognises that globalisation has winners and losers. Because globalisation gives free rein to competitive market forces the nations that do not compete for foreign investment and export earnings on the world market will lose out. Small economies, such as many in the COMESA sub-region, with their small domestic markets, non-diversified production bases, underdeveloped infrastructure and inadequately skilled human capital, stand little chance of competing globally. The challenge for COMESA is to ensure, through regional integration, that the domestic growth and competitiveness of small economies is strengthened, powers of domestically entrenched special-interest groups and rent-seekers weakened, and policy stability and credibility enhanced, thus making it easier to attract investment. In addition to expanding the effective size of markets and improving access to export markets and providing incentives for foreign direct investments, the main challenge facing COMESA is how to spur economic growth and investment through increased productivity. Increased productivity will require a restructuring and diversification of the productive base. Also, COMESA countries cannot compete in global markets in terms of high productivity and high quality on the basis of low labour wages alone. Access to technology and knowledge is critical. Through greater regional cooperation and networking between domestic, regional and international partners, COMESA will strive to improve access to technology and other resources, and thus enhance competitiveness in the global marketplace.
Globalisation and liberalisation of world trade has increased interdependence, but it has also heightened asymmetries in the world economy. Increasingly, the developed North is consolidating its competitive advantage through a new breed of global multinational corporations whose tentacles span the world in a complex network of business and investment alliances. This, like the growing volatility of capital flows, poses a severe challenge for COMESA and Africa as a whole. Given the current state of economic structures of most African states it is doubtful that they can withstand the competition and shocks attendant on globalisation. Regarding the aftermath of the Seattle WTO negotiations, COMESA's position is that Africa should remain committed to the multilateral trading system because of the opportunities and potential gains from trade available. However, in order to take advantage of these opportunities, and reap the gains, the multilateral trading system should assist Africa in overcoming its real difficulties: namely, severe supply-side impediments; insufficient capacity for formulating and implementing trade policies and institutional weaknesses. In other words, integration in the world economy should be treated as a means to development rather than an objective in itself. Efforts to maximise the advantages of the trading and financial system for the weaker partners should constitute a key moral imperative.
What steps are taken to facilitate better social, health and educational facilities in the COMESA region and how can countries in the region collaborate more closely?
COMESA member states are already working closely in several social economic areas. By trying to improve people's economic welfare we are indeed improving their health as well. Poor people are unable to have proper diet, and cannot meet their medical expense. They are also unable to pay for their children's education. On the other hand, COMESA has supported schemes and programmes leading to better health: in the field of pharmacy, for instance, it has created an independent institution PHARMESA (the Pharmaceutical Manufacturers of Eastern and Southern Africa). As COMESA goes into free trade, sanitary and phytosanitary measures are being harmonised. Although the COMESA Secretariat is not involved much in providing formal education, it provides several technical workshops to member states in business planning, agriculture and fisheries.
Civil wars and uprisings are raging in several COMESA member states. Do you see a political role for COMESA in ensuring peace and stability in the region?
COMESA recognises that without peace and security there cannot be meaningful development. But we also know that most of the military conflicts in the region have economic roots -- that is to say a lack of access to, and sharing of, economic resources. COMESA's approach to the issue of wars is threefold. First, COMESA will concentrate on creating an environment that enables trade and investment to take place, and one that creates more opportunities for interaction, cooperation and integration. This will in turn not only provide opportunities for economic growth, but will also create a greater awareness of oneness, thus diminishing conflict. Second, COMESA will work closely with organisations such as OAU, IGAD, SADC and the UN that are mandated directly to mediate and resolve conflicts. In this respect, COMESA's focus will be on prevention and post-conflict reconstruction. Third and finally, through the COMESA Court of Justice, COMESA will arbitrate trade disputes, including those that have the potential to escalate into military conflicts, and thus work to prevent wars.
