Economic corridors: Vehicles for economic transformation
By Magreth Nunuhe
WINDHOEK – THE Economic Commission for Africa and the Walvis Bay Corridor Group hosted Corridor Management Institutions (CMIs) across Africa to establish a continental corridor alliance. The African Corridor Management Alliance (ACMA) is expected to coordinate the sharing of best practices and other strategies in support of the development and management of economic corridors on the continent.
The inaugural meeting that took place 13-15 February at Walvis Bay was held against the backdrop of promoting corridors as vehicles for economic transformation and boosting intra-African trade. It also mapped out a strategy for the new organisation.
Addressing the delegates, Willem Goeiemann, Namibia’s Permanent Secretary in the Ministry of Works and Transport said the process of establishing ACMA is a major milestone in defining Corridor Management Institutions’ performance and prospects in the integrated management of economic corridors through enhanced investment in infrastructure.
“With effective management, economic corridors will improve physical connectivity between the corridor states, thereby enhancing access to markets, while expanding economies of scale for value chain,” he said.
The meeting that brought together heads of CMIs, representatives from the African Development Bank (AfDB), the African Union Commission (AUC), NEPAD, the Afrexim Bank and various other economic integration stakeholders, to discuss the architecture of the African Corridor Management Alliance.
Abidjan-Lagos Corridor, the Northern Corridor that links Mombasa to Kigali and Kampala, the Walvis Bay Corridor with routes to seven southern African countries and the Maputo Corridor connecting Mozambique, Swaziland and South Africa are among prominent corridor groups in Africa.
“The development and management of transport corridors is an integral and critical part of trade facilitation strategies and reforms. The ultimate goal of a corridor is to promote both internal and external trade by providing more efficient transport and logistics services through the implementation of strategies and interventions that reduce transit times and cost of shipping goods along the corridor and improve the quality of services and infrastructure along the corridor,” said Johny Smith, the CEO of Walvis Bay Corridor Group and the chairperson of African Corridor Management Alliance.
He pointed out that the development and modernisation of transport infrastructure and removal of non-tariff barriers along all corridors of Africa is critical for trade expansion and regional integration, which is why the role of corridor management institutions in addressing these challenges is paramount.
“Within the continent of Africa, transport corridor operations are largely characterised by long transit times and high cost, making the cost of doing business in Africa very expensive with a negative impact on the ability of African firms to compete globally,” he maintained, saying that support for development corridors aims to stimulate intra-regional and global trade and to foster market integration in the continent.
Corridors and free trade
In his address at the Walvis Bay meeting, Stephen Karingi, Director of the Capacity Development Division of ECA highlighted the potential for ACMA to contribute to regional integration and intra-African trade particularly in the area of trade facilitation.
Karingi said the establishment of ACMA is timely in view of the 2017 deadline for the conclusion of negotiations to establish the Continental Free Trade Area (CFTA).
Plans to establish a Continental Free Trade Area in order to deepen and increase intra-regional trade within Africa is well underway and parties to the declaration are optimistic to meet the deadline at the end of this year, he said.
A template CFTA text has been produced for both goods and services, which is in line with the request made to the African Union Commission by delegates at the 27th African Union Summit held last year in Kigali, Rwanda.
“Technical materials have been prepared on the negotiation modalities, which we expect to be adopted at the March (2017) negotiating forum. Outside Addis (Ababa), the ECOWAS (Economic Community of West African States) Heads of State have mandated ECOWAS to coordinate their member states in the negotiations,” he added.
Karingi said that the Tripartite Free Trade Area (TFTA) services negotiations have been agreed to be conducted as part of the CFTA process. “Overall, there is good momentum across the continent,” he enthused.
African leaders endorsed to set up a Continental Free Trade Area by 2017 during the 2012 African Union Summit as a key component of the AU’s strategy to boost trade within the region by at least 25-30 percent in the next decade.
The Declaration called on AU member states, regional economic communities (RECs), and development partners to adopt the necessary measures toward the effective implementation of an Action Plan detailing priority action areas to address the obstacles to increasing intra-African trade.
“Globally, the WTO Trade Facilitation agreement is on the verge of entering into force. As of now, only two ratifications are missing. Eighteen African countries have already ratified the agreement, and 25 Category A notifications and four Category Band C notifications have also been submitted from the region. While we focus on our continental priorities, we should not lose track of the important global developments that can be built on to advance the trade facilitation agenda in Africa,” Karingi noted.
He said that the African Corridor Management Alliance is well placed to advice corridor states on how to best take advantage of this process and effectively implement international commitments for the benefit of traders. At the AU Summit held in Addis Ababa, Ethiopia last month, Heads of States again confirmed their commitment to meeting the deadline for establishing a Continental Free Trade Area.
“The ECA (United Nations Economic Commission for Africa) has been following the negotiations process very closely and in our view there is no technical reason preventing this deadline to be met,” said Karingi.
Trade is important for economic growth and development as proved globally that it can lift people from poverty to prosperity.
But in Africa, trade has on a large scale not served its purpose to achieve rapid and sustainable economic growth and development mainly due to size, structure and direction.
Africa plays an insignificant role in world trade, with only a 2.4 percent share of global exports of which Sub‐Saharan Africa account for just 1.7 percent.
This is due to the fact that African countries do not trade much with each other and have thus not been able to fully take full advantage of the economies of scale and other benefits (such as income and employment generation) that greater market integration would have provided.
In some cases products and services, products that could have been sourced competitively from other African countries are procured from outside the continent.
As it is, intra-African trade stands at around 13 percent compared to approximately 60 percent, 40 percent, 30 percent intra-regional trade that Europe, North America and Southeast Asian Nations have achieved, respectively.
The main factor that enhances trade is transport infrastructure, which plays a significant role in reducing transactional costs. With this in mind, Africans governments have been facilitating infrastructure development to promote the expansion and improvement of development corridors.