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Regional Integration and Debt in Africa: A Comparative Report of Africa’s Regional Groupings
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2. Historical basis
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African leaders have long recognised the significant opportunities presented by a regional approach to development and have supported regional efforts for many years to sustain advances made in economic policy reform and democratic governance. With the current challenges of debt crisis, regional integration in Africa is no longer a subject of academic debate or mere political expression; it is an imperative if the goals of integrated economic development and a debt-free continent are to be realised.
The 1980 Final Act of Lagos was the first continent-wide effort by the African governments towards regional integration through forging a comprehensive unified approach to economic development. The drive towards regional integration was given a further boost in 1991 with the adoption, by the OAU summit, of the Abuja Treaty establishing the African Economic Community (AEC), which stipulated a stage-by-stage modus operandi that must be put in place to achieve this goal. First, is the strengthening of existing sub-regional economic groupings and establishing new ones where deemed desirable. Second, is the consolidation of tariff and non-tariff barriers as well as the strengthening of sectoral integration at the continental level. And, third, is the promotion of the coordination and harmonisation among the existing and future economic groupings for a gradual establishment of an African Common Market. To this end, it authorized the drafting of the treaty for the establishment of the African Economic Community whose aim is to promote collective and accelerated self-reliant and self-sustaining development cooperation among the states and their integration in the economic, social and cultural fields. That treaty was subsequently signed in Abuja in June 1991.
So far, the AEC has established direct working relations with the Economic Community of West African States (ECOWAS) in the West African region, the Economic Community of Central African States (ECCAS) in the Central region. In the Southern African Region the AEC has been dealing with the Southern African Development Community (SADC) and in East Africa with the East Africa Community (EAC) as well as Common Market for East and Southern Africa (COMESA). In North Africa, there is the Arab Maghreb Union (UMA) that has no direct contact with the AEC, so far. Apart from these Regional Economic Communities (RECs), there are other groupings like the Economic and Monetary Union of West Africa (UEMOA) and the Customs and Economic Union of Central Africa (UDEAC), all of which are engaged in the promotion of integration. All these organizations were already in existence and operating when the AEC Treaty was signed in Abuja in June 1991.
Post independence Africa witnessed two major macroeconomic regimes: the pre and post Structural Adjustment periods. The pre- Structural Adjustment period notwithstanding the political importance of pan-Africanism was informed by import substitution strategy.
This strategy was not pro-open trade policy and to that degree has adversely affected regional integration efforts. The adoption of Structural Adjustment Programs (SAPs) starting in mid 1980s in almost all African countries had led to openly adopting a liberalization (open economy) policy. The identical nature of policy instruments prescribed by International Financial Institutions (IFIs) across countries in the continent implies a defacto macro policy harmonization, at least at the level of intent. Although the SAPs followed across the continent have resulted in relatively better fiscal posture and some degree of success in managing major macro variables, evidence from studies on debt and regional integration indicate that both the macro environment and the current fiscal posture (including indebtedness) leaves much to be desired.
Though trade liberalization is linked with the quest for regional integration, trade liberalization is also associated with increased debt levels3. In SADC for instance, trade liberalization was followed by devaluation of local currencies that meant that debtor firms or governments had to search for more local currency to pay off foreign debts. Trade liberalization exposed local industries to intense foreign competition that caused company failure and inability by firms to meet their debt obligations either local or foreign. Liberalization allowed firms to borrow directly offshore, sometimes without approval by government, leading to huge debt built up.
Although regional integration in Africa is attainable and can secure more development by pulling the region out of its debt trap, of all its regional economic communities (RECs) none of them have specific constitutional reference to the debt problem despite it being the biggest obstacle to regional integration. Most RECs are into conventional regionalism (an initial stage of regional integration) where the regional integration is not effectively mainstreamed in member country structural operations. Conventional regionalism as opposed to monetary regionalism is based on trade and does not increase the monetary and financial linkages between participating economies until they reach a high level of integration4.
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Footnotes:
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Tekere Moses et al (2002) Regional Integration and Debt in Southern Africa, A Study Report to AFRODAD, Harare.
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Balassa Bela (1961) Theory of Economic Integration, Hornewood (Illinois); Richard Erwin.
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