Ethiopia’s economic and social development activities in the region are testimonies that the nation is discharging share in the Africa integration agenda, said Prime Minister Hailemariam Desalegn in the Ethio-kenya business forum held in Nairobi last week.
The concept of regionalism has considerable resonance in the African continent, both in the rhetoric of African unity and as a preferred vehicle for economic development. But the environment for attaining regional integration is challenging because state structures are weak and Africa’s political leaders cling to the most conservative principles of statehood and sovereignty.
Africa has been formally committed to the creation of an African Economic Community since the Organization of African Unity (OAU) adopted the Lagos Plan of Action in 1980. The Abuja Treaty to establish the African Economic Community was adopted in 1991 and its principles were subsequently incorporated into the Constitutive Act of the African Union in 2000. The vision of an integrated African common market by 2030 remains, based on open trade and the creation of larger markets. The scale of the enterprise is daunting, involving the integration of 54 countries.
Progress has been patchy and halting, but the vision remains strong. The Chairman of the African Union, President of the African Development Bank (AfDB) and Executive Secretary of the UN Economic Commission for Africa (UNECA) jointly reiterated that vision in May 2010: Africa is increasingly focusing on regional integration as a strategy for achieving sustainable economic growth as there is a consensus that by merging its economies and pooling its capacities, endowments and energies, the continent can overcome its daunting development challenges.
The New Partnership for Africa’s Development (NEPAD), a twenty-first-century platform for African economic regeneration, also stressed the importance of improving regional infrastructure and promoting integration in order to enable Africa to play a full part in the global economy. According to a senior UNECA official, the emphasis on better transport infrastructure and corridor management to support the free trade area agenda is especially important for IGAD’s two existing landlocked states, Ethiopia and Uganda, and for its latest new applicant, South Sudan.
Africa’s eight Regional Economic Communities (RECs) are the building blocks for achieving integration through the creation of free trade areas, advancing to customs unions and the eventual establishment of common markets. Thus IGAD has institutional responsibility for advancing economic integration in the Horn.
The organization was established in 1986 with an original membership of six – Ethiopia, Somalia, Sudan, Kenya, Uganda and Djibouti – and a primary focus on famine and drought. Political relations among member states were fraught with tensions so it restricted its goals to functional cooperation on a limited range of technical issues such as desertification and environmental protection. There was also a problem of overlap with other regional groupings since two members, Kenya and Uganda, were already part of the (then moribund) East African Community (EAC).
In the Horn of Africa different stages of integration currently coexist. In the formal sector, each country maintains its own import regime but has agreed on targets set by regional organizations such as IGAD, COMESA and EAC, where progress has generally been slow. On the other hand, informal cross-border trade is essentially a free trade area with elements of a common market in the movement of labour and capital. This creates a localized common market in south Somalia, northeast Kenya and southeast Ethiopia, and in the Ethiopia–Somaliland border zone.
Ethiopia is trading more vigorously with its neighbours. Somalia is now Ethiopia’s fourth largest trading partner, based on its importation of khat. Somalia, Sudan, Djibouti and Kenya together account for some 17% of Ethiopia’s export trade.
The Horn of Africa is not well endowed with fossil fuels. Sudan has been the sole oil producer in the region and only began to export oil in 1999. It has proven reserves of 6.3bn barrels and became Africa’s fifth largest producer with output of about 500,000 barrels a day. Oil wealth resulted in the country’s economy growing fivefold in the first ten years of production. Crude oil, mostly destined for China and Asia, provided 90% of the value of Sudan’s total exports. This has changed with the creation of two Sudans in July 2011. Most of Sudan’s existing oil production came from what is now South Sudan, which also has the best prospects for future discoveries.
Ethiopia remains wholly dependent on oil imports and currently imports about 2.5 million tons of petroleum annually at a cost of US$1.4bn. Despite various reports that it relies increasingly on Sudan for its oil supplies, the trade tables show that until 2010 Ethiopia continued to buy the great majority of its petroleum oils from Saudi Arabia.
It imports most of its petroleum gases from Sudan but plans announced by the Ethiopian Petroleum Enterprise for Sudan to provide all its petroleum requirements by 2010 have not been realized. Were this to happen, it would represent a new level of economic dependence in Ethiopia’s relationship with Sudan, a relationship that has often been characterized by hostility and suspicion in the past. It would also give Ethiopia a direct interest in the continuation of oil production in Sudan and economic reasons to encourage Sudan and South Sudan to firm up their arrangements for oil production.
To lessen its dependence on expensive fuel imports and enhance its energy security Ethiopia is giving top priority to the development of renewable energy resources, principally hydropower. Dam-led development has also been attempted in Sudan – where conditions are arguably less favorable because of higher evaporation rates. Ethiopia’s Growth and Transformation Plan records that the country is generating 2,000 MW of electricity but has the potential to generate 45,000 MW from hydropower. The target is to increase generating capacity to 10,000 MW by 2015. This is partly for domestic consumption but the increased production is also intended for export to Sudan, Djibouti and Kenya. Electricity exports to Sudan started in 2010. Lines to Djibouti were connected in May 2011. The transmission line to Kenya is expected to be ready in 2014. This is part of a wider programme to link nine regional countries to a single electricity grid by 2016.
The most ambitious and controversial project to date is the Great Ethiopian Rennaisance Dam – billed as the biggest dam in Africa – on the Blue Nile, close to the Sudanese border. This is expected to produce 5,250 MW of electricity. Construction began in April 2011 with a projected completion date of 2017. This is an enormous project with a price tag of $4.7 billion, which is thus far being raised by public subscription. Foreign backers have been wary of supporting the project in the face of an intense Egyptian lobby which refused to join the framework agreement on water-sharing for the Nile basin. Ethiopia’s hydropower development on the Omo River (in Southeast Ethiopia) is also proving successful in attracting Kenya. The Gilgel Gibe III is a power-generation project – billed as the tallest dam in Africa – was completed this year. The $1.7bn project will produce 1,870 MW of electricity, from which Kenya would also benefit when it joins the current cross border grid.
In a nutshell, the received wisdom is that regional trade integration can be a powerful force for peace. Building interdependence between countries, creating economic incentives for peace and developing non-military means for resolving disputes are all goals of the proponents of trade integration. Using trade as the cement, Regional Trade Agreements (RTAs) help to bind countries interests to a common future.
As Prime Minister Hailemariam said – Efforts of connecting Ethiopia to Djibouti, Sudan, Kenya and South Sudan by power, road and railway transport are examples of its commitment to Africa’s integration, besides efforts of bolstering its economy, Ethiopia is working to connect with countries in the region.
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