Yesterday, TOP co-hosted a highly informative seminar discussion with the All Party Parliamentary Group on Debt, Aid & Trade, focussing on the vital need for infrastructure and streamlined border procedures to facilitate intra-African trade and development. We were joined by panellists from solar energy provider ToughStuff, international development consultants Crown Agents and the Head of the Development Division at the OECD.
Fast facts on African Infrastructure:
- A third of Africa’s population is landlocked – every 1% increase in distance increases trade costs by 0.25%
- Africa currently only generates enough electricity to power 1 light bulb per person for 3 hours a day. There are around 1.3 billion people without access to electricity
- Transport costs can make up 50-75% of the price of retail goods in Africa
- Sub-Saharan Africa has one of the lowest road densities in the world
- The current cost of trading across borders is estimated at $2 trillion – 15% of world trade – 10% of which is the result of border and customs procedures
A recent World Bank study has shown that developing economies bear a disproportionate amount of global trade costs due to the “thickness” of their borders – trade is being stifled by poor logistical performance, lack of energy and technology, transport connectivity and lengthy customs procedures. Less than 10% of African exports go to other African countries, while 75% of European exports go to other European states. The World Trade Organisation has estimated that if a multilateral Trade Facilitation Agreement could be reached in December this year, it would deliver almost half the benefits of the Doha Development Agenda, up to $70 billion a year – the majority of which would go to developing countries, as well as stimulating the global economy by more than $1 trillion. The OECD has also produced a paper, “Trade Facilitation Indicators: The Potential Impact of Trade Facilitation on Developing Countries’ Trade”, that shows the combined effect of improving border and customs procedures could reduce total trade costs for LDCs alone by almost 14.5%.
Infrastructural reforms to improve border management, product standards, transport and distribution would therefore have vast benefits for developing countries by significantly lowering trade costs as well as giving a much needed boost to the global economy. In order for some of the key elements of border reform, such as information websites and electronic single windows, to become a reality it will also be necessary to address the energy bottleneck that is stifling progress throughout much of the continent.
The discussion highlighted the need to increase political will and vocal support from the private sector for reaching a WTO Trade Facilitation Deal in December. Governments must look past the narrow time margins of traditional donor cycles and appreciate the incredible long term benefit that investment in this area will bring. The commercial world must also rise to the challenge and vocalise the improvements they would like to see that would ease their access to new markets.
Trade Facilitation is not a cost, but an investment.
Read the OECD Paper here