Workshop on Industrial Development and
Globalisation
19 May 2011
The “regional dimension” of industrial
policy: the role of regional integration
and regional cooperation
Milasoa Chérel-Robson
Africa Section, Division for Africa, Least Developed
Countries and Special Programmes, UNCTAD
Structure of the session
Part I: Regional integration
I. Brief history of regional integration in Africa
II. Regional integration has economic development motives
III. The relevance of regional integration for industrial development
IV. Obstacles to furthering regional integration in Africa of relevance to
industrial development
Part II: South South cooperation in Africa
I. The state of South-South cooperation
II. Relevance of South South cooperation for industrial development in Africa
III. Selected recommendations for increasing the relevance of South South
cooperation for industrial development
3-4 minutes per slide including class discussion and questions
• Part I: Regional integration
I. Brief history of regional integration in Africa
Key points: understanding the origins and the rationale
behind regional integration in Africa.
Understanding the links between integration at Pan
African level and integration at sub-regional.
Part I: Regional integration
I. Brief history of regional integration in Africa
• Regional integration in Africa dates back to the 1960s and
had mostly political motives.
• 1963: Creation of the Organisation of African Unity
(OAU).
• Subregional groupings were created to provide the
underpinnings of the continent-wide African Economic
Community (AEC) by 2027.
II. Regional integration has economic development
motives
Key points: Unpacking the development benefits that can
be gained from regional integration.
II. Regional integration has economic
development motives (1)
• Theoretical motivations for trade blocs:
– Allocation effects
A corrolary of the allocation effect is scale and
variety effects.
– Accumulation or growth effect
Higher efficiency and faster accumulation
improves competitiveness.
Regional integration has economic
development motives (2)
• Defined as intra-Afican flows of trade in
goods, services, investment and migration
• Improves competitiveness
• Allows economies of scale
• Serves as a launching pad for African
economies’ effective participation in the
global economy.
Table 1: Current state of intra-African trade (table 4 p 25 of EDAR
2009)
III. The relevance of regional integration for industrial
development
Key points: Looking specifically into the positive impact
that regional integration can have on industrial
development.
Differentiating between potential benefits for domestic
and foreign firms.
III. The relevance of regional integration for
industrial development (1): providing economies of
scale for domestic firms
• Lowering trade barriers increases market size. The
potential of the African market for manufacturing
goods produced in Africa is real: 40 percent of
exports of manufacturing in Africa come from
within Africa.
• Six out of the 10 fastest growing economies in the
world over 2001-2010 were African.
Africa’s export composition
The relevance of regional integration for industrial
development (2): lowering the cost of infrastructure
development
• The pooling of resources from different countries
to build key infrastrure essential for improving
competitiveness. Ex: the North/South corridor in
ESA.
• Regional integration brings more peace and
security that in turn favour the pooling of
resources.
The relevance of regional integration for
industrial development (3): harmonisation of
regulatory and legal framework
• Harmonisation of taxation, regulation of
investment and rules of origins lowers transaction
costs.
• For example, SADC: harmonisation of taxation,
investment, stock exchange and insurance.
The relevance of regional integration for
industrial development (4): can collectively
attract FDI
• The characteristics of a trade bloc can influence
the locational decision of foreign firms because of
larger market size.
• Members of trade blocs can also collectively have
a set of policies for FDI.
IV. Obstacles to furthering regional integration in Africa
of relevance to industrial development
Key point: Discussing what hinders regional integration
and hence industrial development.
IV. Obstacles to furthering regional integration in
Africa of relevance to industrial development
• Costs of membership
• Perceived threats by domestic private sector: there
is no viable mechanism for redistribution using
benefits of the net gainers to compensate the more
disadvantaged regional partners.
• Institutional capacity of regional bodies in
fullfilling their mandates.
Part II: South South cooperation
•
The state of South-South cooperation in Africa.
Key points: state of South South cooperation in
Africa.
Understanding the mechanisms behind Africa’s
cooperation with other non-African developing
countries.
Part II: South South cooperation
I. The state of South-South cooperation in Africa (1)
• Regional cooperation within Africa -> regional integration
through regional economic communities (covered in Part I).
• Regional cooperation with non-African developing
countries has increased since 2000. List of countries: the
Bolivarian Republic of Venezuela, Brazil, China, Cuba,
India, Kuwait, the Republic of Korea, Saudi Arabia, Turkey
and United Arab Emirates.
The state of South-South cooperation in Africa
(2)
• Through political, economic and technical
cooperation.
• Interaction with countries enable exposure to
lessons learnt from their development experience
that could be of benefit to African countries.
• II. Relevance of South South cooperation for industrial
development in Africa
Key points: understanding the mechanisms through which South
South cooperation could benefit industrial development in Africa.
II. Relevance of South South cooperation for
industrial development in Africa (1)
• Southern partners generally use official flows to
promote trade and investment activities in Africa.
It is not aid but ‘expressions of solidarity and
cooperation borne out of shared experiences and
sympathies’.
Share of Africa’s total trade with developing
countries including non African countries has
been on the rise since 1990
Relevance of South South cooperation for
industrial development in Africa (2): investment
in infrastructure and productive sectors
Relevance of South South cooperation for
industrial development in Africa (3)
• potential market for manufacturing despite heavy
concentration of exports of primary commodities
for now.
• Africa’s exports of Low to Medium and High
technology manufacturing to Republic of Korea,
Saudia Arabia, United Arab Emirates was higher
than 10 percent in 2008.
Relevance of South South cooperation for
industrial development in Africa (4)
• Southern FDI to Africa is increasing but the
industrial sector still has to attract more
investment in manufacturing.
• The current situation is that manufacturing
constitutes a very small part of Southern
FDI.
Relevance of South South cooperation for
industrial development in Africa (5): Links with
technology-conscious economies.
Relevance of South South cooperation for
industrial development in Africa (6)
• Formation of alliances between Africa and
Southern countries has changed the pace
and dynamics of multilateral trade and
climate change negotiations.
III. Selected recommendations for increasing the
relevance of South South cooperation for industrial
development
Key points: Listing what needs to be done to increase the
positive impact of South South cooperation on
industrial development in Africa.
III. Selected recommendations for increasing the
relevance of South South cooperation for industrial
development
• Engagement at regional level not only on a bilateral level.
Devise a regional industrial strategy if non existent.
• Influence the composition of trade and investment and
increase the role of manufacturing.
• Establish a real FDI for development policy.
• Be assertive.
Thank you !
Main sources: UNCTAD’s Economic
Development in Africa Report for 2009 and
2010.
Additional references will be provided on CD of
the course.