regional integration

REGIONAL INTEGRATION

Presentation by Mark D. Tomlinson

AFRICA: VERY LARGE, VERY SMALL

• Africa is larger that the US, Europe, Brazil, Australia and Japan combined.

• GDP of 47 economies of sub-Saharan Africa in aggregate approximately GDP of Belgium

• Median GDP about $4 billion; a modern city• Basic services to median population of 15million?• Infrastructure over median land area equivalent to

France?

SQUARE MILES POPULATION (2004)

Africa 11,715,721 885 million

Belgium 11,787 10,4 million

SQUARE MILES POPULATION (2004)

Europe 3,120,066 584 million (excl. Russia) Mozambique 308,653 19,2 million

SSA GROWTH RATESGrowth• Sub -Saharan Africa 1995-2003 3,3%

SSA in 2003:• 19 countries < 3% pa• 14 countries 3%-5% pa• 13 countries > 5% pa

SSA in 2004: 5.0% Best in 8 yrs!• But no country will reach MDGs• MDGs require sustained growth of 7%pa. How?

NEED MORE EXPORT LED GROWTH

Many countries have not been able to take advantage of trade opportunities because of supply side constraints throttling competitiveness.

• Africa’s share of global trade continues to slide: 3% in 1980 about 1.5% today.

• Intra-regional trade lowest for any region, average about 10% of GDP

• FDI remains about just 1% global total, with most going to South Africa.

COMPETITIVENESS ISSUES

• Capital inefficiencies in many sectors: increases to manufacturing costs

• Serious infrastructure deficiencies: road and rail networks, ports, power systems, telecommunications

• Trade facilitation deficiencies: trade policy, customs regulations and administration, customs facilities

CAPITAL OUTPUT RATIOS

Country GDP range Period Av. CapitaOutput

Ratio

Thailand $520-609 1963-1966 0.45China $440-603 1993-1996 0.32Indonesia $500-600 1980-1985 0.28

SSA $540-590 1990-2003 0.14SSA (inc. SA) $560-590 1997-2003 0.18

MAINSTREAMING REGIONAL INTEGRATION WITHIN THE AAP

OBJECTIVE:Strengthen growth, particularly export-led growth through incorporating regional approaches into national PRS and CAS

PRIORITIES: * Policy reforms to improve the environment for private business, investment and trade;* Infrastructure, facilities and systems to sharpen competitiveness and improve agricultural production andtrade facilitation;* Improved service delivery through regional approaches.

MAINSTREAMING REGIONAL APPROACHES IN THE AAP

PRIORITIES:

* Support to selected Regional Economic Communities (RECs)- assigned key roles for implementation of NEPAD- main fora for regional policy debate at senior level- key roles in preparing priority regional investments

* Capacity development- nationally and in RECs; important for progress on each objective

REGIONAL APPROACHES: GROWTH

Incorporating regional programs in CAS will aim to reinforce support for growth in four areas:

• Implementation of customs unions. Harmonized regional customs facilities and systems

• Gap-filling in regional infrastructure. Focus on trade corridors, regional power systems and international telecommunications

• Financial sector development and integration. Focus on broadening access to financial services and introduction of trade-related instruments

• Agricultural productivity. Regional approaches to enhance agricultural research and technology development.

REGIONAL APPROACHES: SERVICE DELIVERY

Main thrust will continue to be through national engagements. Regional approaches will complement in three areas:

• Management of water resources at basin level – water supply, irrigation, flood control, environmental objectives;

• Improving outcomes in tertiary education, health care through rationalizing facilities regionally;

• Combating migratory diseases, malaria, HIV/AIDS, tsetse.

REGIONAL APPROACHES: RECsFor selected RECs, move from support for

specific TA to program engagements focusing on harmonization of main donor support (jointly with AfDB.) Focus:

• Capacity development of the REC closely aligned with near-term capacity needs in view of regional deliverables set by member states; and

• Strengthening capacity of the REC to select and prepare priority regional investments, including through establishment of multi-donor sub-regional funds.

REGIONAL APPROACHES: CAPACITY DEVELOPMENT

•Improved regional statistics•Stocktaking of regional analyses•Identification of capacity development needs•Identification of roles: RECs, ACBF, others•Capacity building in specific contexts: near term deliverables and longer term needs.•Harmonization of approaches•Funding, implementation and M&E.

REGIONAL PROGRAMS TO DATE•Existing portfolio of 14 projects, including 3 GEF•Total IDA commitment $632 million•Total disbursed $84.6 million; average age 2.5 years•Examples: West Africa Gas Pipeline, WA Power Pool, Emergency Locust Program, Regional Trade Facilitation, Capital Markets Development•FY05: $265 million in six operations•Strong pipeline ($2 billion) for IDA 14 in transport, energy, water, telecomms, financial sector, human development, and agriculture•Strong support from AFR management

OPERATIONAL PRIORITIES* STRATEGY

- Lessons: IDA 13 retrospective of regional programs (equivalent to CPAR) plus OED review

- Regional Assistance Strategies (RAS): two in FY06 based on existing regional PRS, two in FY07. Explicit linkages into and among CAS

* NEW OPERATIONS- Strong demand for regional investment financing under NEPAD STAP. Build regional program to $500m pa. FY06 program $400m plus.- Non-lending engagements with RECs focusing on harmonization, gap-filling TA

- Capacity development* IMPLEMENTATION

- Partnership approaches- Identify best practice. Invest significantly

Operational ChallengesStaffing- Ongoing. FY06: CD16 staffed as full CMU. Senior field positions plus

Washington staffStrategic Approaches - More effective RECs: policy and projects. Capacity.- Additional regional PRS, improved regional PRS- Outward looking CASOperations- Creating best practice: lending, non-lending, AAABudget- Regional working comparatively expensive- Invest in AAA to strengthen knowledge base for capacity development,

investment.

Thank you!

More impact through regional approaches