REGIONAL INTEGRATION Presentation by Mark D Tomlinson

REGIONAL INTEGRATION Presentation by Mark D. Tomlinson

AFRICA: VERY LARGE, VERY SMALL • Africa is larger that the US, Europe, Brazil, Australia and Japan combined. • GDP of 47 economies of sub-Saharan Africa in aggregate approximately GDP of Belgium • Median GDP about $4 billion; a modern city • Basic services to median population of 15 million? • Infrastructure over median land area equivalent to France?

SQUARE MILES Africa Belgium POPULATION (2004) 11, 715, 721 885 million 11, 787 10, 4 million

SQUARE MILES Europe (excl. Russia) Mozambique POPULATION (2004) 3, 120, 066 584 million 308, 653 19, 2 million

SSA GROWTH RATES Growth • Sub -Saharan Africa 1995 -2003 3, 3% SSA in 2003: • 19 countries • 14 countries • 13 countries < 3% pa 3%-5% pa > 5% pa SSA in 2004: 5. 0% Best in 8 yrs! • But no country will reach MDGs • MDGs require sustained growth of 7%pa. How?

NEED MORE EXPORT LED GROWTH Many countries have not been able to take advantage of trade opportunities because of supply side constraints throttling competitiveness. • Africa’s share of global trade continues to slide: 3% in 1980 about 1. 5% today. • Intra-regional trade lowest for any region, average about 10% of GDP • FDI remains about just 1% global total, with most going to South Africa.

COMPETITIVENESS ISSUES • Capital inefficiencies in many sectors: increases to manufacturing costs • Serious infrastructure deficiencies: road and rail networks, ports, power systems, telecommunications • Trade facilitation deficiencies: trade policy, customs regulations and administration, customs facilities

CAPITAL OUTPUT RATIOS Country GDP range Period Av. Capita Output Ratio Thailand China Indonesia $520 -609 1963 -1966 $440 -603 1993 -1996 $500 -600 1980 -1985 0. 45 0. 32 0. 28 SSA (inc. SA) $540 -590 1990 -2003 $560 -590 1997 -2003 0. 14 0. 18

MAINSTREAMING REGIONAL INTEGRATION WITHIN THE AAP OBJECTIVE: Strengthen growth, particularly export-led growth through incorporating regional approaches into national PRS and CAS PRIORITIES: * Policy reforms to improve the environment for private business, investment and trade; * Infrastructure, facilities and systems to sharpen competitiveness and improve agricultural production and trade facilitation; * Improved service delivery through regional approaches.

MAINSTREAMING REGIONAL APPROACHES IN THE AAP PRIORITIES: * Support to selected Regional Economic Communities (RECs) - assigned key roles for implementation of NEPAD - main fora for regional policy debate at senior level - key roles in preparing priority regional investments * Capacity development - nationally and in RECs; important for progress on each objective

REGIONAL APPROACHES: GROWTH Incorporating regional programs in CAS will aim to reinforce support for growth in four areas: • Implementation of customs unions. Harmonized regional customs facilities and systems • Gap-filling in regional infrastructure. Focus on trade corridors, regional power systems and international telecommunications • Financial sector development and integration. Focus on broadening access to financial services and introduction of trade-related instruments • Agricultural productivity. Regional approaches to enhance agricultural research and technology development.

REGIONAL APPROACHES: SERVICE DELIVERY Main thrust will continue to be through national engagements. Regional approaches will complement in three areas: • Management of water resources at basin level – water supply, irrigation, flood control, environmental objectives; • Improving outcomes in tertiary education, health care through rationalizing facilities regionally; • Combating migratory diseases, malaria, HIV/AIDS, tsetse.

REGIONAL APPROACHES: RECs For selected RECs, move from support for specific TA to program engagements focusing on harmonization of main donor support (jointly with Af. DB. ) Focus: • Capacity development of the REC closely aligned with near-term capacity needs in view of regional deliverables set by member states; and • Strengthening capacity of the REC to select and prepare priority regional investments, including through establishment of multi-donor sub-regional funds.

REGIONAL APPROACHES: CAPACITY DEVELOPMENT • Improved regional statistics • Stocktaking of regional analyses • Identification of capacity development needs • Identification of roles: RECs, ACBF, others • Capacity building in specific contexts: near term deliverables and longer term needs. • Harmonization of approaches • Funding, implementation and M&E.

REGIONAL PROGRAMS TO DATE • Existing portfolio of 14 projects, including 3 GEF • Total IDA commitment $632 million • Total disbursed $84. 6 million; average 2. 5 years • Examples: West Africa Gas Pipeline, WA Power Pool, Emergency Locust Program, Regional Trade Facilitation, Capital Markets Development • FY 05: $265 million in six operations • Strong pipeline ($2 billion) for IDA 14 in transport, energy, water, telecomms, financial sector, human development, and agriculture • Strong support from AFR management

OPERATIONAL PRIORITIES * STRATEGY - Lessons: IDA 13 retrospective of regional programs (equivalent to CPAR) plus OED review - Regional Assistance Strategies (RAS): two in FY 06 based on existing regional PRS, two in FY 07. Explicit linkages into and among CAS * NEW OPERATIONS - Strong demand for regional investment financing under NEPAD STAP. Build regional program to $500 m pa. FY 06 program $400 m plus. - Non-lending engagements with RECs focusing on harmonization, gap-filling TA - Capacity development * IMPLEMENTATION - Partnership approaches - Identify best practice. Invest significantly

Operational Challenges Staffing - Ongoing. FY 06: CD 16 staffed as full CMU. Senior field positions plus Washington staff Strategic Approaches - More effective RECs: policy and projects. Capacity. - Additional regional PRS, improved regional PRS - Outward looking CAS Operations - Creating best practice: lending, non-lending, AAA Budget - Regional working comparatively expensive - Invest in AAA to strengthen knowledge base for capacity development, investment.

Thank you! More impact through regional approaches