COMESA
PROMOTING REGIONAL INTEGRATION THROUGH TRADE AND INVESTMENT
Presented by Amb. Kipgeyot Cheluget, Assistant Secretary General, Programs
COMESA Secretariat.
COMESA Secretariat
FOCUS ON TWO AGENDAS:
COMESA- A REGION OF TRADE
INVESTMENT OPPORTUNITIES
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INDIA – COMESA COOPERATION
AND
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Membership :
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Total Area
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Population
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19 countries- Burundi, Comoros, D. R. Congo, Djibouti,
Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius,
Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, Zimbabwe.
: 12.2 million sq. Km
451 million
GDP
: US $ 450 billion: (Increase in Average Annual GDP
growth : 5.08% from 3.51%(2010)
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Global trade for COMESA MS : Over US$ 244 BN (2010)
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Intra-COMESA Trade: US 18.4 BN(2011)
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Investment flows
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Total Imports Volumes : US $ 137 BN(2010) at 16%
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Total Exports Volumes : US $ 107 BN(2010) at 26%
NB:
: US $ 21,6 BN (2010)
With an estimated population of over 450 million and a combined GDP of
over USD 345 billion, the COMESA region is potentially one of the largest
markets in the world
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Since its establishment, COMESA has made considerable progress
towards economic integration including: trade liberalization, customs
management, transport facilitation, trade and project finance institutional
development, technical cooperation and capacity development.
For
example:
Free Trade Area (2000); Duty Free Quota Free movement of Trade in
Goods which comply to the COMESA RoO.
Custom union (June 2009); Common External Tariff (0%, 10% 25%) to
promote substantial movement of trade in goods within a Bloc- Regional
Integration
Common market 2025; Promote Substantial Movement of Goods and
Services;
The COMESA Secretariat facilitated and worked to the improvement of
member states on ’ trade volumes and values by supporting the expansion
of regional and international markets and production of diversified and
competitive goods and services. There is, therefore, an expected turn in
economic performance as the global economy continues to recover with
improvements in global demand.
COMESA region remains the largest recipient sub-region of FDIs:
Why?
 Open economies: COMESA countries have already adopted the
market liberalization at different levels, opening their markets to
free movement of goods across the borders of 19 COMESA
countries.
 Size of the market: With its 19 Member States and more than 450
million inhabitants (potential consumers), COMESA is the biggest
regional trade bloc in Africa.
 COMESA Free Trade Area: increasing of the intra-regional trade
within the region through trade liberalization and facilitation:
Rules of Origin, transit traffic facilitation, Single Customs
Document, One-Stop-Border Posts.
 Wider
Free Trade Area with the implementation of the First
Tripartite Summit Decisions towards the merger of 3 RECs into a
single FTA (COMESA-EAC-SADC)
REGION
Percentage (2012)
EU
31%
CHINA
15%
COMESA
11%
USA
4%
SOUTH AFRICA
6%
JAPAN
1%
INDIA
3%
Rest of World
24%
Turkey
2%
UAE
3%
Saudi Arabia
2%
Switzerland
6
ROW
17
(2% in 2010)
Products
IMPORTS EXPORTS
Agri.raw materials
2%
3%
food
19%
16%
Manufacturers
59%
27%
4%
15%
fuels
12%
35%
Other products
0.12%
4%
Ores and metals
REGION
IMPORT VOLUMES
EU
22%
CHINA
11%
SOUTH AFRICA
9%
COMESA
6%
USA
7%
INDIA
5% (4% in 2010)
RoW
26%
UAE
5%
SAUDI ARABIA
4%
TURKEY
3%
KUWAIT
3%
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COMESA, EAC and SADC – a total of 26 countries – make up the
Tripartite
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With a combined GDP of USD 624 billion, and a population of 527
million
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Being 57% and 58% of Africa’s population and GDP; and 26/54 of
Africa’s Member States
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It is a booming market already. Intra-tripartite exports increased
from USD 7 billion in 2000 to USD 27 billion in 2008, and imports
from USD 9 billion to USD 32 billion
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Returns on investment are highest in the world
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Infrastructure; utilisation of renewable and non renewable energy,
nuclear and solar.
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Physical infrastructure- development of multi-model systems of
transport(roads, rail, inland waterways, ports). PPP incentives
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Agro – industry and agro-processing; as, key sectoral industrial
clusters;-hides and skins. Ie- set up of manufacturing and packaging
plants.
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Real Estate Development; the lack of low level of affordable/low cost
housing development in the region- a huge demand for domestic and
commercial infrastructure within the region.
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New Technology that promotes Climate Change mitigation; innovative
ways of doing business in the manufacturing sector using solar energy.
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Tourism; Countries that boost the tourism sector with a vast potential ,
such as , Kenya, Rwanda, Southern Africa-Malawi, Zambia. Potential
areas of establishing tourism marketing in the region.
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The strong performance of intra-COMESA trade has been
underpinned by rising intra-COMESA cross-border trade
and investment.
The private sector in the FTA countries has welcomed the
FTA, and the Customs Union, for providing a larger market
for their investment and exports.
Intra-COMESA informal trade is estimated to amount to US$
19 billion, an amount which exceeded the formal trade
figure estimated at US$ 14.3 billion in 2008.
The inclusion of the intra-COMESA informal trade in the
total of intra – COMESA trade would raise trade volumes to
USD 34 billion.
Informal cross-border trade is therefore significant and
factoring it into the planning and priorities of COMESA is of
imperative necessity.
Various systems have been put in place to promote
monetary integration to support intra-regional trade.
CAADP: (African Agriculture Development Program)
Under CAADP, various programmes are underway; Guiding Investments in Agricultural
markets in Africa; Improving Access to Agricultural Inputs- etc.
ACTESA: (Alliance for Commodity Trade in Eastern and Southern Africa)
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This program is aims to Increase farmers productivity and incomes in the COMESA
region, hence responding to existing challenges like trade related constraints, low
productivity, technological and policy related constraints.
COMESA Monetary Institutite:
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The program runs towards the establishment of a Monetary Union in the year 2025.
The date for the Achievement of the Monetary Union was later changed to 2018 by the
COMESA Council of Ministers in 2006. This program has the following stages:
PTA: (COMESA Trade & Development bank)
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Provides trade finance to SMEs and Cross Border Traders in the region; contributes
significantly to Private Sector Development.
RIA: (Regional Investment Agency)
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Specialized agency which is a principal interlocutor on promoting investments in the
region; is an information hub on investment news and investment opportunities. ; It is
at the core of the implementation of the COMESA Common Investment Area with its
role in building capacity of National Investment Promotion Agencies (NIPAs);
CBC: (COMESA Business Council)
CBC is a Business Member based Regional Private
Sector institution of the COMESA. The objective is to
promote collective engagement of the COMESA Private
sector for effective regional integration, competitiveness,
trade and investment. Additionally it is also to promote and
defend the key interests of the private sector in regional
integration, competitiveness, trade and investment.
www.comesabusinesscouncil.org
FEMCOM:
The primary objective of is to promote the activities of
Women in business in COMESA and beyond.
ATI: (African Trade insurance).
 ATI provides investment and credit risk insurance to the
financial institutions/ lenders, investors, manufacturers,
importers and exporters, to enable accessibility of
affordable financial resources for their economic activities.
COMESA/LLPI: (COMESA Leather and Leather Products Institutive)
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India’s total trade with COMESA region has risen
threefold: from $2.55 billion in 2004-05 to $8.48 billion in
2009-10), accounting for 38.2 per cent of India’s total
exports to Africa, while the region’s share in the India’s
total imports from the region stood at 13.1%.
India’s imports from COMESA region were broadly
listed as aluminium, copper, mineral fuel, coffee, resins,
nuts, spices, sugar, leather, organic and inorganic
chemicals and marine products.
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COMESA’s top exports to India from 2007 has been dominated
by fuels, followed by manufactures, ores and minerals,
agricultural raw materials and food items in that order. The
pattern of the flow of exports from 2007 to 2011 also shows
that of the region’s exports of food items, and ores and metal
products, have tended to grow faster relative to the other
exports over the years.
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The exports of Egypt and Libya to India have constituted
mainly of fuels and ores and metals, while the exports of
Madagascar, Malawi and Uganda are characterized mainly by
food exports to India. The exports of Ethiopia, Kenya,
Mauritius, Zambia and Zimbabwe are mainly manufactures. In
all cases however, the countries altogether export ores and
minerals as well as food items to India.
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is clear that COMESA is facing serious barriers to its exports. Even though raw m
aterials and fuels exported by COMESA to the rest of the world are typically su
bject to zero or to very low tariffs, there are still plenty of market access restricti
ons faced by COMESA’s exporters, and these include:
Marketing arrangements differ greatly among importing countries.
COMESA Member States will typically be lacking adequate information about
foreign markets, and that lack of information may be due to lack of transpare
ncy on the part of the importing country.
Negotiations with foreign countries may be constrained by the refusal of the ot
her Party to offer reciprocity to COMESA Member States.
Products other than raw materials and fuels continue to be subject to import d
uties and even quotas.
In negotiating better market access for their products, COMESA Member State
s should target tariff escalation of importing countries.
There are product-specific restrictions on some exports of COMESA Member St
ates.
Trade disciplines of importing countries may also be a major impediment to C
OMESA exports. Those disciplines involve, in particular, rules of origin, SPS and T
BT standards.
Specific barriers affect exports of services, and should be addressed from a diff
erent perspective to that of barriers to exports of merchandise.
Importing country/customs area-specific issues will typically have to be taken i
nto account.
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The COMESA region needs to build its productive capacities in various
sectors such as in agriculture, mining, forestry, fisheries etc. The proposed
cooperation should therefore take into account this consideration. This will
requires that the COMESA region should not be drawn into the formation of
an FTA for the purpose of tracking away primary products. The focus
should rather be on how value should be added to primary products in
order to promote trade.
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Turning to trade, a preferential agreement with India which is
home to about 1.21 billion people, representing 17 percent of
the earth’s population, could have a significant favourable
impact on COMESA region if India removed the existing trade,
health and technical barriers to imports from COMESA, and
complementary measures were in place to address adjustment
in COMESA and, given the different development levels, it
were ensured that the arrangement is asymmetrical in the form
of India offering duty-free-quota-free treatment to imports from
COMESA.
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In terms of prioritization, more focus should rather be on supporting COMESA to
enhance its productive capacity and international competitiveness in order for
COMESA to have the ability to benefit from market access opportunities. The
interventions required to assist build the productive capacity of COMESA and its
competitiveness, include areas where India is a global leader, such as
promoting Science, Technology and Innovation in a wide range of critical sectors
including infrastructure, manufacturing, agriculture, health and education.
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India and COMESA have enjoyed good relations over the years, built on
geographical proximity and history, and more recently on increasing
trade and investment. In 2003, a memorandum of understanding was
signed between India and COMESA covering the following areas: -
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Pharmaceutical products,
Information technology,
Agriculture,
Biotechnology ensuring food security,
Human Resource development (provision of technical training facilities,
development of professional courses and curricula etc),
Housing (including provision of low-cost housing units by the use of local available
materials etc),
tourism,
Industry (including SMEs development),
Energy,
Infrastructure (Railways, Roads, Ports, etc), and
Promotion of Cooperation between the Chamber of Commerce of India and
COMESA Business Council.
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Of the 33 African LDC’s eligible for the Duty Free Tariff
Preferential scheme of India (DFTP), 12 of them are
COMESA member states.
Non Eligible countries: Libya, Egypt, Kenya, Zimbabwe,
Mauritius, Seychelles and Swaziland.
Rationale ; To provide Duty Free Quota Free (DFQF) market
access to Least Developing Countries on products
comprising 92.5% of global exports of all LDCs.
The product coverage ; 85 percent of products are duty free,
9 percent of products have a margin of preference and 6%
of the product lines have no tariff preference.
Most of the countries excluded from the preferential
tariff scheme are mainly those that are the major
trading COMESA member states with India.
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While India has a DFQF market access program, it is limited
to LDCs and excludes some key exports from COMESA
member states.
The DFQF programs should be more comprehensive. Given
that COMESA member states are far smaller economies
that could not threaten India with an avalanche of exports,
India could be invited to put in place a comprehensive
DFQF regime covering all imports from COMESA. COMESA
in return can include a regional COMESA market for Indian
investment that can benefit from the protection of the
COMESA Common External Tariff or similar tariff structures
maintained by member states as well as support where
appropriate in international organizations. India can be
encouraged to export to COMESA capital goods and
intermediate products, in line indeed with its export strategy
that mentions machinery and equipment, and IT products.
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Small and Medium Scale enterprises constitute about 90% of the
private sector of the member states, and provide most of the
employment in the economies of member states especially among
vulnerable sectors of society and are crucial players in the attainment
of the public policy objectives of poverty eradication and wealth
creation.
India has a strong policy regime on SMEs. This can be a source of
experience-sharing and partnerships with member states, as well
as joint ventures in the private sector, in addressing challenges
to development of SMEs in COMESA.
Challenges faced: Inadequate credit facilities for SMEs resulting
in low levels of capitalization or lack of trade finance; Poor
management and business skills leading to high mortality rates;
Poor quality products that may not be competitive; Low levels of
technology and innovation; Information gaps regarding inputs
and markets; Inadequate access to regional and global
markets; Non-tariff barriers in export markets; and ;Inappropriate policy and legal regimes on SMEs.
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learning from the Indian experience and through twinning
programs. Such programs could focus on twinning up local
government authorities, civil society organizations, microfinance
institutions, and other grass-root level institutions with Indian
counterparts.
Linking up SMEs with retail outlets in India could directly assist
address market access constraints;
mentoring and hands-on capacity building, to address the capacity
of SMEs to meet market requirements and other regulatory
requirements in export markets.
joint ventures and preferential market access for products
produced by SMEs can provide a much needed advantage,
through for instance a DFQF regime that covers the products.
These tend to be agro-based products and light manufactures.
The COMESA prioritized clusters of textile and clothing, footwear,
and agro-food products could be considered for such preferential
market access in export markets of partners.
There are also SME clusters in the fields of computer
programming, research and innovation, and light manufacturing.
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It can be expected that Indian investment in COMESA, will be both
in the manufacturing and services sectors, as well as the extractive
industries. Regarding investment in the services sectors,
infrastructure services should be prioritized, particularly information
and communication technologies, and networks and sensors,
transport, and financial services, as well as tourism; and should
take the form of establishment of commercial presence through
joint ventures. The next section deals with investment.
INVESTMENT
 India should put in place tangible measures that increase India’s
investment into COMESA, bearing in mind that COMESA offers
vast opportunities and the Member States have ongoing programs
to generate and attract investment; and joint ventures should be
the preferred form of investment, which should take into account
the priority sectors identified by Member States, particularly health
and infrastructure, agro-food products, textiles, and leather
products;
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Cooperation should be pursued in a range of areas set out the
MoU and the Africa-India Framework of Cooperation, in a
manner that recognizes the valuable contribution of COMESA
and Africa at large towards India’s quest for global influence,
and that taps into India’s leadership in areas such as
technology and innovation through appropriate partnerships
with India in both the public and private sector;
THANK YOU FOR YOUR KIND ATTENTION.
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