In synch: West African integration continues under the auspices of ECOWAS Vision 2020

One of the key defining narratives of Ghana’s economic growth has been its participation in the increasingly expansive role of the Economic Community of West African States (ECOWAS). Founded in 1975, ECOWAS has been pursuing its goal of regional economic integration for nearly four decades now. In recent years, as the EU has stumbled and faltered in its attempts to create a common foreign or security policy, and debt crises have stretched the eurozone to its limits, the wisdom of regional integration as a whole has been brought under scrutiny. However, moves in West Africa to encourage the harmonisation of fiscal policy and regulatory codes, alongside infrastructure sharing and increased regional trade, have continued unabated, seeing some success, although the 15 countries that make up the ECOWAS bloc are far from achieving their vision of a single, common market.

The region’s current strategic document, ECOWAS Vision 2020, lays out the broad goals the organisation hopes to achieve by the end of the decade. Although the removal of trade and Customs barriers – as well as the creation of a single monetary union – perhaps represents the most ambitious of the goals within ECOWAS Vision 2020, the roll-out of regional infrastructure networks, and the application of more broadly interpreted peace and security tenets are also noteworthy.

POTENTIAL IN DIVERSITY: The common thread is openness. The establishment of a regional economic body was intended to help West Africa increase the free movement of people, goods, money and labour across borders. Indeed, given the importance of external commerce, one of the organisation’s largest commissions is devoted solely to the issue of trade, including the establishment of common external tariffs (CET). However, the mandate of the Macroeconomic Policy Commission extends farther than exports and Customs, and faces the complicated task of ensuring a cohesive union among several very different political economies. Part of the challenge comes from the vast disparities among the local economies of the 15 member states.

Three countries are completely landlocked, for example. Some have vast amounts of natural resources and rank as top producers for hydrocarbons and minerals, while others lack a sustainable commodity industry.

Senegal’s economy is smaller and receives a great deal of international aid, but is also strengthened by its political stability, whereas Nigeria’s vast market is growing despite political uncertainty. Indeed, of all 15 member states, five – Nigeria, Côte d’Ivoire, Senegal, Guinea and Ghana – account for 90% of regional GDP.

NATURAL WEALTH: Resources are unevenly distributed throughout the region – Nigeria has most of the oil, while Guinea has bauxite, Ghana gold and Niger uranium. While in many cases such variances would foster trade, West African countries for the most part lack the ability to process raw materials into finished goods or to ship these finished goods to markets, limiting the value brought about by the exchange of raw materials. Other barriers to trade include corruption and nontariff barriers, such as impromptu road tolls extracted by people who have no authority to do so. A recent study by the World Bank and the IMF concluded that in African countries, each day of transit time en route to a port reduced the value of exports by approximately 7%.

The differences in business environments, particularly as they relate to legal frameworks and regulation, also present added complexity at the regional level. For the most part, ECOWAS members have drawn heavily on both the British and French systems of business and governmental oversight, a legacy of their colonial heritage that gives rise to different approaches to market management, judicial arbitration (see analysis) and economic policy, as well as more basic challenges, including linguistic differences.

MONETARY DIFFERENCES: However, the acknowledgement of diversity does not imply that there is no scope for common ground. Indeed, major concrete steps have already been made to align key policies and indicators with one another. This is most evident in the West African Economic and Monetary Union (Union Economique et Monétaire Ouest Africainé, UEMOA), which was created in 1994 as a monetary union among the eight Francophone ECOWAS member states that now share a common currency pegged to the euro.

With over half of ECOWAS members already using the same currency and the goal of harmonising all currencies across the ECOWAS bloc by 2020, the next step planned is for the establishment of a new currency in the putative West African Monetary Zone, of which Ghana is a member as well as the Gambia, Guinea, Nigeria and Sierra Leone. Plans to debut the new currency, which is currently dubbed the Eco, are now set for 2015, although achieving this will involve the difficult task of synchronising national macroeconomic, monetary and fiscal policies, in addition to the creation of a regional banking system and regulator – particularly given that the introduction of the Eco was already delayed in 2003 and 2009 due to the failure among all nations to meet convergence criteria.

The latest news on the subject at the time of writing came in July 2013 when the West African Monetary Agency held a meeting to assess the current state of various deadlines that must be met in the lead up to monetary convergence. At this meeting, the agency urged member states to speed up reforms enhancing tax revenue mobilisation and rationalising public expenditure in order to ensure the implementation of first the Eco and then the single to-be-determined currency for all of the ECOWAS bloc.

OPEN BORDERS: Harmonising trade and Customs procedures remains the second of the major economic objectives of ECOWAS. Trade has traditionally been marginal among ECOWAS states, comprising only onetenth of the region’s total volumes.

After the unified currency, a singular trade and Customs union is due to be implemented by 2020, though the implied loss of sovereignty and uneven enforcement has limited progress towards this goal thus far. However, lower cross-border costs between countries will provide significant advantages in terms of negotiating trade deals on a larger scale, as was pointed out by Ghana’s deputy minister for foreign affairs and regional integration, Thomas Kwesi Quartey, who remarked that the benefits of integration outweighed the disadvantages in early 2013. Quartey stated that, “It is a market of 300m people and we can benefit more from economic integration. For example Ghana, Côte d’Ivoire and Nigeria can all make a common decision on cocoa that would affect the world price.”

An IMF study has also suggested that any revenue losses from an ECOWAS Customs union, which have been mentioned as concerns by some member states, are likely to be minimal. Current revenue from tariffs applied to ECOWAS goods averages 0.1% of GDP, ranging from almost 0% in Mali to 0.6% in Burkina Faso.

However, the IMF also suggests that the introduction of a CET and an economic partnership agreement (EPA) with the EU would have a significant impact on the tax revenues of select member states, although this does not necessarily take into account any resulting increase in trade volumes. For example, Togo would see tariff revenues fall from 8.4% of GDP in 2005 under the UEMOA CET tariff schedule to 3.9% under an ECOWAS-wide CET and an EU EPA. This is largely because the EU currently accounts for 55% of the country’s imports.

ECOWAS took a significant step towards a Customs union following an agreement on a tariff level for the fifth band of a regional CET. In November 2008 Nigeria agreed to a top band of 35%. The new CET structure will be harmonised with the existing UEMOA CET, which has four bands: 0% for essential social goods, 5% for essential and basic raw materials and capital goods, 10% for semi-processed intermediary products, and 20% for finished consumer goods.

The freedom of movement for people among ECOWAS members continues to increase as currently 10 of the member states issue a unified ECOWAS passport, with intra-regional mobility rates nearly three percentage points greater than in Europe. Additionally, visa requirements and entry permits for citizens within ECOWAS have also been all but eliminated, although implementation remains irregular.

INFRASTRUCTURE: In addition to integrating economic and monetary systems, the nations of ECOWAS are also looking to improve connectivity among member states. This remains a crucial aspect to improving intraregional trade as a deficiency of infrastructure has been one of the primary limiting factors in the movement of goods across borders. Indeed, the cost to ship a container within the region compared to Europe has traditionally been up to $300 higher, and compared to OECD countries, the time for exporting and importing containers is nearly three times as long.

The construction of a West African highway network (also referred to as the Trans-West African Highway) spanning 11,000 km from Lagos, Nigeria to Nouakchott, Mauritania as well as from Dakar, Senegal to N’ djamena, Chad remains one of the community’s principal objectives, though after nearly four decades of development, it still remains only partially finished. Even if completed, West African road networks are notorious for their long checkpoints and border controls, a problem which must also be addressed while improving freedom of movement for both goods and people. A USAID study in 2010 found that checkpoints on roads could add up to $14 per 100 km in some countries.

Notable progress has been made in terms of energy distribution and regional electrical transmission. ECOWAS has three major goals it aims to reach by 2015: to provide half the rural and semi-rural population of the region with basic energy access; to bring motive power – which is required to run motors or machinery – to at least 60% of the rural population; and to bring electricity to at least two-thirds of people. Of particular importance to Ghana is the development of the $1bn West African Gas Pipeline that has united Ghana, Togo, Benin and Nigeria. The 687-km pipeline is owned by a mixture of public and private firms, which include the US’s Chevron (with a 36.7% stake), Nigerian National Petroleum Corporation (25%), Royal Dutch/Shell (18%), Volta River Authority of Ghana (16.3%), and gas companies in Togo and Benin, with 2% each.

Other long-term targets include the integration and interconnection of all electricity grids in order to implement a West African Energy Grid. The West African Power Pool is a blueprint for a regional electricity grid that will quadruple capacity by 2020. The project includes laying 5600 km of power lines and would give the region installed capacity of 17,000 MW – enough to meet demand until 2023, according to forecasts. The plan calls for spending $11.8bn over 19 years. Telecoms convergence is in the cards as well with projects such as INTELCOM I and II, which seek to strengthen fixedline and broadband links, while the establishment of a common liberalised telecoms market and regulatory body is also being mooted.

PEACEKEEPING: Another vital, but often overlooked, task of ECOWAS is to serve as a force for regional peace and stability. Ultimate power in ECOWAS rests with the Authority of Heads of State and Government, which is the body responsible for shaping the overall strategy and making key decisions on issues including intervention in conflicts and suspension of member states. The organisation has also taken on a permanent political role, following the establishment of the Commission of Political Affairs, Peace and Security in 1977. However, as might be expected with such an issue in an area fraught with sensitivity over the exercise of sovereignty, the commission has targeted responsibilities that allow it enforce ECOWAS rules without treading on the rights of member state governments.

Consensus over the interpretation and application of those terms has not always been easy to achieve, as evidenced by divides over the bloc’s role in Liberia in 1990s, but there is agreement on the importance of ensuring stability and security amongst member states. The bloc’s peacekeeping forces, heavily funded and staffed by Nigeria and Ghana, have been deployed not just to Liberia, but also to Sierra Leone, Guinea-Bissau, Côte d’Ivoire and most recently, Mali.

END GOAL: Uniting 16 nations with a combined population of 308m and a GDP of more than $300bn, according to the UN, is clearly a complex task. The challenges ahead for completing economic, trade and monetary unification among members of ECOWAS loom large. The vast differences in culture, language and political systems in Europe and the recent difficulties within the EU have proven that such harmonisation does not come without risk. Nevertheless, a fully integrated trade and economic system presents benefits that on face value largely outweigh such challenges, though only time will tell if they can be overcome by 2020.