ECOWAS’ still grappling with fiscal integration
Founded almost 41 years ago, to achieve sub-regional needs, the Economic Community of West African States (ECOWAS) has proved a model, even as it struggles to meet challenges of maintaining the momentum.
With the achievement in 1990, when the bloc established the Economic Community of West African States Monitoring Group (ECOMOG), which successfully brought peace to war-ravaged Liberia and Sierra Leone, ECOWAS rekindled hope of a successful sub-regional organisation. The group stopped the war spilling over to other countries in West Africa and beyond. The feat, even by global standard, remains a model. But what it achieved on the security front has been significantly diminished by economics failure –– curiously, the main goal behind its establishment is the promotion of the economic integration among its members.
This is not a surprise given poor encouraging economic narration is not totally unexpected given the state of economies of member-states. They suffer from the weight of undiversified primary production. A situation, which gets even worse with the dwindling price of primary commodities in the international market.
ECOWAS was founded to achieve collective self-sufficiency for the member states by means of economic and monetary union, creating a single large trading bloc. But members are yet to agree on having a common a currency. For example, the West African Economic and Monetary Union (UEMOA) has eight countries using the CFA franc, previously pegged to the French franc and now to the euro.
In fact, one of the main objectives of pursuing monetary unions in Africa is to boost regional integration, particularly intra-regional trade and investments. Intra-African trade is about 16 per cent on average compared to 21 per cent for Latin America and the Caribbean, 50 per cent for Asia, and 70 per cent for Europe.
The Secretariat and the Fund for Cooperation, Compensation and Development are ECOWAS’ two main institutions to implement economic policies. The Fund was transformed into the ECOWAS Bank for Investment and Development in 2001. Earlier in 2000, five (Anglophone) ECOWAS members formed the West African Monetary Zone (WAMZ), aiming to establish a strong stable currency, called eco, to rival the CFA franc. The eventual goal is for the CFA franc and Eco to merge, giving all of West Africa, including CFA using Central African countries, a single stable currency.
ECOWAS was designated one of the five regional pillars of the African Economic Community (AEC). Together with Common Market for Eastern and Southern Africa (COMESA), Economic Community of Central African States (ECCAS), Intergovernmental Authority on Development (IGAD), and Southern African Development Community (SADC), the West African group signed the Protocol on Relations between the AEC and Regional Economic Communities (RECs) in February 1998.
However, the very slow progress towards economic and monetary integration meant that the Treaty of Lagos was revised in Cotonou, Benin, on July 24, 1993, towards a looser collaboration.
An assessment of progress towards macroeconomic convergence in economic communities on the continent bears testimony to the uncomfortable fact that attainment of set targets has fallen below expectations, regarding monetary integration programmes.
Nobel Prize Laureate in Economics, Professor Robert Mundell, stressed that the degree of factor mobility within a currency union is of utmost importance. Movement of labour and capital goods across borders should not be restricted so that it is easy for factors to move to areas where they can earn maximum remuneration for the services rendered. An essential requirement here is the presence of at least, an internally convertible currency within the union.
Executive Secretary of the United Nations Economic Commission for Africa (UNECA), Mr. Carlos Lopes, said if Africa were a business the management costs of this type of structure would be uncompetitive. “The cost of governing such a fragmented production structure is simply too high for Africa to afford or sustain. Thus, the contribution of regional integration to the promotion of intra-group trade, growth, development and social and political cohesion is unquestionable. The stark conclusion that can be drawn from these facts is that Africa must integrate (or, in business parlance, rationalize and merge) in order to reduce its overhead costs,” he said in a paper delivered in Mauritius on March 8, 2016.
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