Economic Development in Africa Report 2013

Inter-African Trade - Unlocking Private Sector Dynamism

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This report argues that for African countries to reap developmental gains from intra-African trade and regional integration, they need to place the building of productive capacities and domestic entrepreneurship at the heart of the policy agenda for boosting intra-regional trade. It also analyzes the range of strategies and complementary policies that will be needed, besides trade policies, to ensure that regional integration enhances African enterprise development and economic development in general. It explores, among others, the role of national and regional industrial policy and the scope for developing regional development corridors. Lessons are drawn from other developmental regional experiences.

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The private sector, enterprises and productivity

Africa has a rich and long history of attempts to promote trade through regional economic cooperation. However, the focus of regional trade initiatives on the continent has been more on the elimination of trade barriers and less on the development of productive capacities, particularly in manufacturing and agrorelated industries. While lifting tariff and non-tariff barriers to intra-African trade is important, policymakers must also foster entrepreneurship and address supplyside constraints inhibiting the ability of the private sector to produce and export. Elimination of tariffs across countries will not have any significant impact on intra- African trade if market imperfections on the input side (for example in credit, labour and capital markets) are not adequately dealt with. In this regard, there is a need for sustained measures to boost productive capacity to enable African countries to meet regional demand that may be created by eliminating barriers to regional trade. If this is not done there is a risk that domestic firms will be unable to take advantage of the market access opportunities created by regional integration, leaving ample space for foreign firms to capture most of the benefits from the process, with dire consequences for domestic enterprise and industrial development.

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