UNCTAD Report urges Africa to pursue “developmental regionalism”

The gains made by African countries from streamlined trading system will benefit foreign firms more than African firms, unless the continent’s governments take vigorous measures to boost their private sectors.

This is according to a new report released by the United Nations Conference on Trade and Development (UNCTAD).

​The Economic Development in Africa Report 2013, subtitled “Intra-African Trade: Unlocking Private Sector Dynamism”, states that efforts to reinforce economic growth on the continent have relied on a “textbook” and “linear” approach to regional cooperation that does not fit with Africa’s situation.

The report noted that what is required is a “21st century approach to dealing with 21st century challenges”, suggesting that African countries adopt a new approach to regional integration, referred to as “developmental regionalism”.

Developmental regionalism encompasses cooperation among countries in a broader range of areas than just trade and trade facilitation, to include – for example – investment, research and development, as well as policies aimed at accelerating regional industrial development and regional infrastructure provision, such as the building of better networks of roads and railways.

Harvesting the many benefits that can come from vibrant regional markets – spurred by African leaders’ 2012 decision that they will eliminate barriers to intra-African trade – depends on an expansion of the continent’s private sector, the report notes.

Selling in nearby markets gives firms cost advantages through proximity, potentially reduced transport expenses, better knowledge that allows goods to be fitted to local conditions, and, if sufficient customers can be found, enough critical mass to justify expanding industry.

But additional holistic approaches – a form of enhanced teamwork – are required of African governments to enable the private sector to expand and thrive, the report says.

“Experiences elsewhere in the world indicate that setting up regional markets will result in a greater demand for goods; African businesses must therefore be encouraged and enabled to provide these goods or they will lose out to foreign competitors”, the report warns. 

The report says that regional industrial policies are an important tool for developmental regionalism. African countries need to coordinate their national industrial policies around regional industrial policies in order to build complementarities in what can be produced and traded within Africa.

While there are elements of a “developmental” integration agenda in some African subregions, such as the proposed Tripartite Free Trade Area that will cover 26 countries mostly in Eastern and Southern Africa, the report says that more numerous and more comprehensive developmental integration programmes should be designed and implemented in Africa.