AFRICA REGIONAL INTEGRATION CONSULTATION ON STATUS AND EMERGING WORLD BANK GROUP PRIORITIES
PURPOSE OF THE CONSULTATION Discuss the case for and status of integration in Africa; Provide an update on World Bank Group support for regional integration in Africa; Discuss emerging priorities for WBG support for regional integration. Three Questions to Frame the Consultation Question 1: Is Africa realizing its full potential for integration? If not, why not? Question 2: Are we learning the right lessons from World Bank Group s work so far? Question 3: How well do the proposed priorities for World Bank Group support for regional integration resonate with you?
CASE FOR AND STATUS OF REGIONAL INTEGRATION IN AFRICA IS AFRICA REALIZING THE FULL POTENTIAL OF REGIONAL INTEGRATION?
AFRICA: CASE FOR REGIONAL INTEGRATION & COOPERATION Existing Rationale Diseconomies of scale (small fragmented domestic markets). Resources are far removed from markets (e.g. vast hydropower potential can only be tapped if regional power trade is possible). Trans-boundary resource management (e.g. river basins). Global public bads spill across borders (e.g. epidemics). New Arguments Reigniting the economic growth engine after commodity super-cycle (can greater intra-africa trade help diversify economies and increase productivity?). Rapid population growth and high urbanization rates (how will the growing urban population be fed?). Rapid technological advances and for Africa to benefit at scale (e.g. how can the fall in solar energy prices benefit all countries?).
PROGRESS WITH REGIONAL INTEGRATION Africa has not followed a classical approach of integration: common markets customs union common currency full integration of factor markets political union. That is probably the right approach. RI has remained a high priority for AU, RECs and member countries. There is a lot of political commitment behind the agenda. Mixed progress with provision of regional infrastructure. ICT and some areas of the financial sector are integrating. Continental Free Trade Area if realized could be transformational. There are good examples of political cooperation in handling conflict issues.
BUT IS THE GLASS HALF-FULL? REC Trade Integration Regional Infrastructure Productive Integration Free movement of people Financial and macroeconomic integration Averag e Score COMESA 0.572 0.439 0.452 0.268 0.343 0.415 EAC 0.780 0.496 0.553 0.715 0.156 0.540 ECCAS 0.526 0.451 0.293 0.400 0.599 0.454 ECOWAS 0.442 0.426 0.265 0.800 0.611 0.509 IGAD 0.505 0.630 0.434 0.454 0.221 0.457 SADC 0.508 0.502 0.350 0.530 0.397 0.531 Average of six RECs 0.555 0.490 0.391 0.528 0.388 0.484 The scores are on a scale of 0 to 1, with 1 reflecting full integration. The average score is 0.484. Source: Africa Regional Integration Index, 2016 (AU, AfDB, UNECA) Question 1: Why isn t Africa realizing its full potential for integration?
WORLD BANK GROUP SUPPORT FOR REGIONAL INTEGRATION STATUS, RESULTS, LESSONS
WBG SUPPORT FOR RI IS IN TEENAGE PHASE! WB Regional Integration Commitments ($bn) 18 16 16bn RI Share of WB Africa Lending in IDA17 17% 14 12 10 8 6 4 2 0 IDA18 10bn 7bn 4bn 2bn FY08 FY11 FY15 FY17 FY20 AFR Commitments IFC / MIGA Commitments RI Commitments Projects with regional angle are about 25% of IFC s engagement. RI is part of IFC 3.0 Strategy. It is a subset of IFC s focus to crowd in private sector investment covering multiple Jurisdictions. MIGA instruments meant for crossborder activities.
TYPES OF REGIONAL INTEGRATION OPERATIONS Type of Operation Examples of Operations 1. Infrastructure financing OMVG Interconnection Project 2. Grants to regional institutions EAC Financial Sector Integration Project 3. Regional lines of credit WAEMU Affordable Housing Finance Project 4. Regional insurance Pandemic Emergency Facility; African Trade Insurance Agency. 5. Promoting collective action Regional Sahel Pastoralism Project 6. Preparation of feasibility studies Southern Africa Power Pool Project 7. Promoting private sector development Support for OHADA 8. Promoting global public goods South West Indian Ocean Fisheries Project 9. Supporting cross-border policy Burkina Faso Cote d Ivoire Regional Trade reforms Facilitation Development Policy Operation
Regional Infrastructure Collective Action 5,000 KM of transmission lines 1/3 rd of current power trade Dozen trunk roads constructed / upgraded Travel time cut by 50% in some corridors Connected 20 countries to highspeed internet Rapid decline in wholesale internet costs 40 Africa Centers for Excellence in STEM 20 countries moving towards harmonized disease surveillance Managing marine fish resources in 15 countries Coordinated pastoral management in 10 countries EXPECTED RESULTS - EXAMPLES WBG CONTRIBUTIONS
KEY LESSONS FROM WBG S SUPPORT: Need to balance infrastructure financing with deeper policy and soft reforms. Avoiding the pace of the slowest mover. Getting real collective action amongst countries is hard. Domestic sovereignty issues are important. Role of private sector in promoting RI has been insufficient. Lot of scope to leverage private investments. Need a better understanding of sub-regional diagnostics on binding constraints and opportunities for integration. Complexity of issues involved in dealing with multiple countries and stakeholders and the need to be patient to see full benefits. Question 2: Are we learning the right lessons?
EMERGING STRATEGIC PRIORITIES FOR WBG SUPPORT FOR REGIONAL INTEGRATION & COOPERATION IN AFRICA
WHAT ISSUES SHOULD FRAME THE NEW WBG APPROACH? What is a desirable and realistic scenario for the future of integration in Africa: Is it a continuation of an opportunistic approach with deepening in some sectors? Combine physical infrastructure with policy reforms to attract investments and ensure greater value addition and intra-regional trade. Need better engagement on political economy issues when domestic and regional interests do not closely align. Need to use the full suite of WBG instruments to attract private sector investments and address policy and regulatory hurdles in this regard. Above all, go with the priorities of the countries and sub-regions while deepening our partnerships.
EMERGING PRIORITIES FOR WBG SUPPORT 1. REGIONAL ECONOMIC CORRIDORS In selected economic corridors (along trunk routes or agricultural commodities), help address policy / regulatory issues, fill remaining infrastructure gaps, promote value addition and address barriers to trade. Success would be measured by increase in productivity, value addition, trade and job creation. Use a combination of WBG instruments. 2. FUNCTIONING REGIONAL MARKETS Deepen integration in four priority sectors energy, digital & telecom, financial sector and technical skilled labor. Take a holistic approach to establishing legal and regulatory basis for these regional markets to work. Use a combination of WBG instruments.
EMERGING PRIORITIES FOR WBG SUPPORT (2) 3.SCALE-UP INNOVATION &ENTREPRENEURSHIP Certain development challenges are more amenable to regional solutions. And certain great initiatives are operating at a small scale how can they be taken to scale? Areas like R&D in medicine & technology; promoting greater technology uptake through financing instruments. Promote and scale-up entrepreneurship. 4. MANAGING GLOBAL PUBLIC GOODS Cross-country macroeconomic and financial sector risks. Sustainable management of transboundary resources. Support communities affected by forced displacement. Support prevention of and set-up innovative financing for potential epidemic and natural disasters.
EMERGING PRIORITIES FOR WBG SUPPORT Question 3: How well do they resonate?
ANNEX
REC
GROWTH AND TRADE ECONOMIC GROWTH BY SUB-REGIONS TRADE FLOWS IN EAC Real GDP growth (%) 2008-12 2013 2014 2015 2016(e) Central Africa 4.9 4.0 6.0 3.6 0.8 East Africa 5.6 7.2 5.9 6.5 5.3 Southern Africa 3.1 3.7 2.8 1.9 1.1 West Africa 6.2 5.7 6.1 3.3 0.4 Sub-Saharan Africa 4.9 5.2 5.0 3.5 1.7
MISSING VALUE CHAINS EXAMPLE OF CASHEW
HOW ARE WORLD BANK RI PROGRAMS FINANCED? History: Before IDA13, Bank support for regional programs were few and had to be financed from national IDA allocations. Pilot: IDA13 introduced a pilot regional window, which allowed countries to leverage additional IDA resources for regional projects. Eligibility: Regional projects are not just multi-country projects, but must have regional benefit that spills outside national boundaries. Recipients: 95% of regional IDA is currently provided to countries (just like national projects). There is a small provision of regional grants for eligible regional institutions. IBRD and Trust Fund resources also support RI programs, but do not have a leverage benefit as regional IDA. Terms: Financing terms are similar to IDA national projects.
Africa Centers of Excellence: Technical Education EXAMPLES OF BANK-SUPPORTED RESULTS IN 2011& 2012 Senegal IT Maternal Health Nigeria Agriculture (3); IT (1); Oil fields (1); Material Science (1); Health (4) Cameroon IT (1) Rwanda IT (1); Energy (1) Education (1); Statistics (1) Uganda Agriculture (2) Material Science Health Burkina Faso Water Ethiopia Agriculture; Water; Railways engg; Health Kenya Agriculture (2) Energy (1) Ivory Coast Climate change Statistics Mining environ Ghana Crop Improvement Water Mgt. Infectious Diseases Benin Math Togo Poultry Science Mozambique Petroleum (1) Tanzania Agriculture (2); Water; Health Malawi Agriculture (1) Health (1) Zambia Mining (1); Health (1)
COMPLETION OF WAPP AND INTRODUCTION OF MARKET DISCIPLINE WILL BE A GAME CHANGER Existing Hydro Plant (before WAPP) Hydro plant under construction (finance secured) Hydro plant under construction (no WBG involvement) Planned Hydro Plant Planned Hydro Project (no WBG involvement) Existing Thermal Plant Planned Thermal Plant project Gas fields under development Planned Solar Projects 23