Excellency Commissioner Mohamed Daramy, Commissioner Trade, Customs, - - PDF document

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Excellency Commissioner Mohamed Daramy, Commissioner Trade, Customs, Tourism, Mines, Industry and Free Movement Presentation Format: Common Market and the Investment Climate

• (1).
• Mr. Chairman/Mr. Rapporteur, Please permit me to take this
• pportunity to express on behalf of the President of the ECOWAS

Commission, Dr. Mohamed Ibn Chambas, my colleague Commissioner, the ECOWAS delegation and on my own behalf my gratitude to the President of the Republic of Ghana, His Excellency, Mr. John Agyekum Kuffour, the Government and people of Ghana for the warm welcome and generous hospitality extended to all delegations. (2). Let me also express my since appreciation to the workshop

• rganizers, the UEMOA Commission, the ECA (SRO-WA, the Ghana

Chamber of Commerce and Industry and of course the ECOWAS Commission. (3).

• Mr. Chairman/Mr. Rapportuer, the session this morning will

examine and evaluate the status of our regional integration within the context of trade and trade facilitation, improvements of business climate, infrastructural development, regional competitiveness, macroeconomic convergence and challenges and opportunities for the private sector. (4). The establishment of a common market has been and is still one

• f the aims and objectives of the ECOWAS Commission. This aim or
• bjective is reflected in the provisions of sub section 2(d) of Article 3 of

the Revised ECOWAS Treaty. The establishment of a common market follows a series of steps, such as: == the liberalisation of trade among member states, the abolition of non- tariff barriers to establish a free trade area, the adoption of a common external tariff and a common trade policy vis a vis third countries (Article 37 of the Revised Treaty) == the removal between member states of obstacles to the free movement

• f persons, goods, services, capital and the right of residence and

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• establishment. Actions BEFORE we get to the boarders, actions at the

BORDERS and actions beyond the BORDERS. == the Commission is mandated to coordinate the adoption of common policies in the economic, social, financial and cultural sectors to enhance the establishment of an economic union leading to the establishment of a monetary union. == ECOWAS is also mandated to enhance the creation of an enabling environment to support SMES and to harmonise national investment and competition policies leading to single investment and competition policy frameworks. (5). A single regional market has several attendant advantages:

• common policies, procedures and practices will make entry into a

single market less costly;

• permits economies of scale;
• can improve marginally attractive economies because small markets

usually ignored by investors on a stand alone basis can be evaluated within a large market on an incremental basis; and

• enhances the transfer of technology within the region. etc

(6). What role has ECOWAS played so far in trade and trade facilitation?

• adoption of the ECOWAS/UEMOA CET based on 4 bands,

0%, 5%, 10 and 20%. Nigeria has a fifth band of 50% (498 tariff lines) to protect local production.

• Studies on a common customs code, common definition of

customs value, previously based on the (Brussels definition, WTO art VII GATT, threshold value and lump sum values), harmonization of VAT and indirect internal taxes have been completed and validated at a steering committee workshop.

• Studies on regional competition and investment policies have

been completed, validated and presented to the ECOWAS Parliaments for its advisory opinion

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• 4 teams have been dispatched to compile a list of sentsitive

products in member states

• A West Africa common industrial policy has been developed

etc (7). Despite all the efforts at the establishment of a common sub regional market, the region still faces many complex and daunting challenges, among which, are the following:

• The EECOWAS Trade Liberalisation Scheme (ETLS) has not

progressed as envisaged due to problems of definition of rules of

• rigin and documentation in support of deriving benefits under the

Scheme;

• failed to enhance competitiveness
• r failed to combat supply side constraints;
• private-public partnerships that are key determinants of

competitiveness in the private sector have not been established

• lack of knowledge of the specific industrial capacities and capabilities

across the whole value chain of member counties, a key tool in modernizing our industries;

• inadequate research and development efforts;
• inability to provide a link between trade, industry and market access;
• deficient in our efforts to close the technology gap;
• national policies not aligned to regional adopted policies
• Inability to demonstrate compliance with international product and

service quality standards; (8 ). THE WAY FORWARD

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• Support to the private sector in areas, such as, helping to improve its

productive and hence its competitiveness capacity;

• improving infrastructure, adequate education and health systems and

institutional support to improve domestic savings and stream lining business registration and establishment procedures;

• removal of cumbersome administrative and legal barriers;
• there is a need to encourage our industries to shift from a culture of

assistance and rent seeking to a culture of building productive capacities and capabilities;

• enhance capacity utilization making it easy to recoup fixed committed

costs.; The most successful trading counties follow a progression: From commodities to labour intensive manufacturing to production of high technology goods to capital goods and finally services. Most of the countries in our region are drawing plans to enter the second stage. Statistics based on studies by UNIDO indicates that, in 2004 the sub region contributed only 0.4% of global trade, its share of Africa’s foreign trade dropped from 25 % (1986) to 20.5% (2002). INVESTMENT It is generally agreed that wealth creation and poverty reduction are closely correlated to economic growth, which is itself directly linked to the volume

• f sustainable investment entering a country. Africa does not receive

excessive amounts of private investment. The barriers to investment whether local, regional or foreign vary greatly across the region. The reasons for this variation are due to basic issues of governance, the legal framework, regulatory environment, incentives, tax policy and lack of basic infrastructure etc.

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The main barriers to investment have to be evaluated in terms of the particular type of investor. Presently in our sub region we can discern the following classes of investors: (1).

• SUBSIDIARIES OF LARGE EUROPEAN TRANSNATIONAL

CORPORATIONS: == characterized by long history of more than 30 years in host country; == generally robust in terms of absolute size measured by sales revenues, employment and net assets; == major users of local content almost entirely unprocessed natural resources, == rates of new investments are low, == growth inhibited by limitations of local market and cannot grow by acquisition because of dominant market position (2).

• NEW GENERATION OF NORTHERN FDIS

== the recent arrivals (post 1990); == not subsidiaries of large TNCS; == greater share in manufacturing and service sectors; == relatively small and use a high proportion of local resource content; == more dynamic than the TNCS in terms of export growth and employment; == difficult to identify and target by policy interventions (3)

• NEW GENERATION OF ASIAN FDIS

== Subsidiaries of small TNCS are concentrated in low value export sectors like the garments and textile sectors; == absorbs large amounts of unskilled labour and generates substantial amounts of export; == adds little value to production and generate low wage employment

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` (4).

• INVESTORS FROM WITHIN THE REGION

== relatively small firms that target the domestic market and some the export markets; == the most cautions group of the new generation FDIS (lifetime savings invested); == invests for the longer term and have above average growth rates in terms of employment generation, per capita spending on training and consistent sales record. (5)

• SOUTH AFRICAN FDIS

== some are large, rapidly expanding service companies particularly in financial service and telecommunications sectors; == in terms of size, investment levels and growth, they have dominated or are dominating the African market. These classifications underscore the growing importance of investor groups that currently are not adequately captured by the investment strategies of the host countries. Factors influencing investment: The performance of any economy depends upon the soundness and adequacy of its economic policies, factor endowments, technological know=how or acquisition, human resource capabilities, good governance, adherence to the rule of law and promotion of fundamental human rights etc. In theory, this is what the West preaches to us.

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The Chinese example should demonstrate to us whether there is any correlation between good governance and economic productivity and economic prosperity. Let us debate on this. In attracting DFDI flows, the factors deemed important by most investors but have shown some improvement in our region for quite sometime now are political stability, economic stability, and availability of skilled labour and key clients. Other equally important factors necessary for attracting FDIs are: The business climate, local market conditions, resource availability (Chinese story on coconut drink), pro-active investment promotion initiatives and assets availability etc MEASURES TO ATTRACT AND RETAIN FDIs Attraction of FDI flows is one thing and retention is another. The essential conditions are: a sound and effective regulatory framework based on a range

• f guarantees and protection; ownership of assets (allowing investors to own

land (not the Zimbabwe example) and participation in privatization programmes for non-strategic public enterprises; provision of fiscal incentives through taxation policy incentives targeted to certain types of investments(e.g. a free trade zone); bilateral investment treaties based on trust; good governance, the most overused concept in the 90s; macroeconomic reforms and stability; trade liberalization, an offshoot of globalization; market integration; foreign exchange market liberalization and policy consistency and application. For countries without long term strategic plans for attracting FDI inflows, the following may help in increasing investment over the medium term: Tax reform, legal and judicial reforms, institutional reforms, capital market development, human capital development, credible privatization, new upgraded infrastructure and investment promotion and facilitation, stability and infrequent changes in government. Policies should be based on tested conditions and critical analysis of possible outcomes.

• Mr. Chairman/Mr.Rapporteur, these are my remarks at this plenary session

and I will be available to entertain any questions. I thank you all for your kind attention and wish all of us fruitful deliberations.

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• INTERVENTIONS--CLOSING STATEMENT
• (1).

Regional competition policy addresses anti-competitive behavior by foreign firms and maximize the benefit from FDI and trade==7, 6UEMOA have competition policies==agreements in restraint of trade, price fixing, output setting, division of markets, false and misleading advertisement etc ensures consumer welfare and protection

• (2).

15 Nigerian Banks will in 2 months each boast of US$ 2 billion in shareholders funds. Bank consolidation has repositioned Nigerian for global competition

• (3).

Customs traffic regime mostly emphasizes revenue generation to the detriment of trade facilitation Three key enabling factors can assist to support the competitiveness of the private sector: a. direct support to SMES in the form of technical assistance funds b. advisory services and c. a predicable investment and business climate. d. full faith implementation of the conclusions

• f the private sector declaration at Cotonou on 6 June 2007 vis

a vis == enhancing the free movement of persons

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= resolving the problems of financing the private sector, especially long term finance == building effective private=public partnerships == developing infrastructural facilities == == implementing incentive tax system favouring job creation and investments == negotiated safeguard mechanisms, based on asymmetry due the differences in levels of development and HDI indices == setting up or upgrading National investment and development supervised by regional development banks == undertaking or reinforcing banking reforms, improvements in probity and accountability == solving money transfer problems == reducing the level of intervention of Government in the public sector == developing an efficint dispute settlement mechanism

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ECONOMIC PARTENESHIP AGREEMENT NEGOTIATIONDS 1. Key instruments to promote investments 2. The EC is interested in the market access pillar and its related rules and procedures not provable development dimensions 3. IMF, move away from trade based taxes, recovery is 20==30%

• r less of lost revenue as a result of trade liberalization. Move

from the ports to inside the country (VAT) 4. Conditional tariff offer approach, sensitive products==revenue diversification 5. The EU General Affairs and External relations Council (GAERC) 17 October 2006 on aid for Trade. In addition to provision under EDF, EU members agreed to provide Euro 1 billion by year starting in 2010 and I billion euro per annum==and for trade for what 6. WTO 5 pillars a. building productive capacity b. trade development t (EU) c. trade related infrastructure d. trade related adjustment and e. trade policy and regulations (EU) 7. A study by Karing in 2005 estimates that EU’s trade gains induced by the implementation of the EPA will be thus: Nigeria $791 milli0n in 2008

• 8. EU’s aggregate trade gain during this period for all 4 EPA

groups will be $4.1billion with Nigeria providing 19.5% of this

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• aggregate. Tariff revenue loss to Nigeria $427 million. 4 EPA

regions will incur tariff revenue loses of $2 billion in 2008. Nigeria will lose USD 426 million (MAN) compared to SAD 254 and CEMAC 366 in 2008 9. ETLS 2 protocols, 1 supplementary protocol and 3 regulations 2003 1. Compensation computation == customs duties and taxes times statistical taxation rate times CIF value == not internal taxes

• 2. 4 Years, 1/1/ 2002 through 31/12/2006

REVISED IN 32004(100—80 60==30) 3. Time limit, 6 months, customs declaration, original certificates of origin and copies of declaration of the release for consumption 4. 90 days to screen and effect payment from community levy proceeds 5. provisionally signature of HOSAG and 6. ratification by 9 member states 7. Approval committee 5: Trade, Industry, Finance (Customs), ECOWAS national Unit, Chamber of Commerce, Others (3 months)==7 digit registration |Number(first 3 digits, country geographical code, 4 sequence number , position of enterprise within the Member Sate. Approved 1 1digitd Country Code 3 sequence 4 product 2 year 2