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SADC Regional Integration

SADC Regional Integration. The role of the Lusophone Countries, 2004. Contents. Introduction The SADC Lusophone countries Similarities and differences Economic Integration Sectoral Cooperation Political convergence Conclusions. Introduction.

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SADC Regional Integration

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  1. SADC Regional Integration The role of the Lusophone Countries, 2004 Windhoek, 11-12/06/05

  2. Contents • Introduction • The SADC Lusophone countries • Similarities and differences • Economic Integration • Sectoral Cooperation • Political convergence • Conclusions Windhoek, 11-12/06/05

  3. Introduction • Angola and Mozambique are the SADC Lusophone countries (SLC). • Regional Integration as a process of integration of small economies into the global economy (economies of scale). • SLC integration process through the conditionalities of the Structural Adjustment Programs (SAPs). • The SLC differ in speed, intensity, and the outcomes. • Why compare the variable of the SLC? Windhoek, 11-12/06/05

  4. 2. Angola and Mozambique: Similarities • Former Portuguese colonies • Independence in 1975. • Marxist-Leninist ideology and central planned economy in the post-independence. • Long civil war: regional strategic role in the context of cold war and Apartheid. • Frontline States. • Late 80s introduction of political and economic reforms. • Changes in the constitution (1990). Windhoek, 11-12/06/05

  5. 2. Angola and Mozambique: Differences • Colonial economy - different patterns. • Moz.: Closer to South Africa and landlocked neighbor countries. • Ang.: Colonial platform for exports to Brazil, Portugal. • Political processes: • Moz.: the peace agreement in 1992 followed with regular elections and national reconciliation. • Ang.: several failed peace agreements until the 2002. Still, slowly reconciliation and replacement is taking place. • SAP’s implementation: • Moz.: Implemented systematically. • Ang.: Trapped in a complex and difficult transition. • Angola – huge resource endowment. • Mozambique – national initiative on PRSP; debt relief (HIPIC). Windhoek, 11-12/06/05

  6. SLC: Macro-economic Indicators Source: US, 2005; CIA – The World Fact Book, 2005. Windhoek, 11-12/06/05

  7. 3. SLC: Economic Integration3.1. Country Openness and Climate for Investments • The SAPs aimed at: Address economic decline, and slow down macroeconomic imbalances. • Angola: during the 1990s introduced series of ineffective economic reforms ( civil war, external shocks). • In 2003: Law on Bases for Private Investment – Law 3/03 (substitute the former 1994). • Create the National and Private Investment Agency (ANIP); • Oil, and mining investments require concession, or involvement of parastatal; • Investment approval – include several steps: • The “Doing Business” 2004: average of 164 days (regional 63); • The World Economic Forum, 2004, ranked Angola at 103/104 • Most time consuming county • 2004 Gvt. response: One Stop Shop (Balcao Unico). Windhoek, 11-12/06/05

  8. SLC: Economic Integration (Cont…)3.1. Country Openness and Climate for Investments • Angola: • Corruption: Angola’s economic setback. • Angola ranked at 133/145 countries (Transparence International, 2004). • Petty corruption in the Public Sector (Hodges 2004). • Gvt. Response: • 2004 Anti-corruption Law – not yet inplemented. • Angola participant of NEPAD – peer review include good governance. Windhoek, 11-12/06/05

  9. SLC: Economic Integration (Cont) 3.1. Country Openness and Climate for Investments Mozambique: Under SAPs: • Law on Investments – Law 3/93: • Create the Investment Promotion Centre (CPI) • The process of company registration regarded as time consuming. • “Doing Business” 2004: average of opening business of 153 days. • Constraints: administrative, regulatory, and commercial-legal barriers (SARPN, 2004) • Corruption: severe constraint: • Bribery seeking behavior of public officials (US, 2005). • Transparence International ranked Moz, at 90/145 countries. • Gvt. Response: • Anti-Corruption bill enacted in 2004, and established the Anti- Corruption Unity: Still, Corruption is a “white elephant”. • Mozambique signed the International Convention against Corruption. Windhoek, 11-12/06/05

  10. Economic Integration3.1. Country Openness and Climate of Investments • Both, Angola and Mozambique, have made progress in creating legal and institutional conditions to attract investment. • Still, the processes remain burdensome preventing market entry, and raising costs of doing business. Windhoek, 11-12/06/05

  11. SLC: Economic Integration3.2. Trade Agreements of the SLC: Source: FMI, 2004; US, 2005. Windhoek, 11-12/06/05

  12. SLC: Economic Integration3.3. Foreign Direct Investment flow • Angola: Massive investment in oil industry. • World Bank estimates US$ 1.42 bio (2003), and US$ 1.55 bio (9% GDP)(2004). • USA is the most important trade partner. • Mozambique: • Investments slowed down in 2004: • 143 projects: US$ 508 mio. • RSA the most important trade partner in 2004. Windhoek, 11-12/06/05

  13. SLC: Economic Integration3.3. FDI – Moz.: Regional Share, 2004 Source: CPI, 2004. In: US, 2005. Windhoek, 11-12/06/05

  14. SLC: Economic Integration3.4. Export structure, 2004 Windhoek, 11-12/06/05 Sources: IMF, 2005: 7; SARPN, 2004: 32; CIA, 2004; Tralac, 2005.

  15. SLC: Economic Integration3.4. Export structure (Cont.) • Angola: export based on oil industry and diamonds : • Share 45% in the GDP. • High openness with the World economy. • Employing less than 0.5 % of the population. • No complementarities with other domestic activities. • Angola has the economy of enclave. • Need for export diversification. Windhoek, 11-12/06/05

  16. SLC: Economic Integration3.4. Export structure (Cont.) • Mozambique: export promotion through the Industrial Free Zones (IFZ) – Decree no. 61/99. • Areas covered with special exemptions. • Since late 1990s Mozambique attracted capital-intensive investments in the “mega-projects”. • increase in exports and imports (+). • linking the economy to a global market (+). • However, mega-projects create a few jobs (-); • few linkages with the domestic economy (-). • Mozambique is in need for more labor-intensive exports of goods and services, such as Agriculture, tourism. Windhoek, 11-12/06/05

  17. 4. SLC: Sector Integration4.1. Energy • Electricity: Promising sector in the regional integration. • Angola: • Agreed with Namibia, the construction of the Gove Station, on the New Cunene river, in Feb 2003. • Western Corridor Power (WESTCOR) Project: • Aim: pull of the hidro-potential of DRC, Angola and Namibia. • Capacity: 5.500 MW • MU signed Apr 2002. • Value: US$ 4.0 bn (funding under way – NEPAD projects). Windhoek, 11-12/06/05

  18. 4. SLC: Sector Integration4.1. Energy (Cont.) • Mozambique: • The Cahora Bassa hydroelectric-dam in the Zambezi river. Capacity of 2,075 MW. • Supply domestic needs, RSA, and Zimbabwe. • From 2004 agreement to supply to Malawi: 300 MW for the next 20 years. Windhoek, 11-12/06/05

  19. 4. SLC: Sector Integration4.1. Development Corridors • Based on the concept of the Spatial Development Initiatives (SDI): • Angola: had about 2,700 km of railways network, • The outlet to Luzaka (Zambia), and Lubumbashi (Congo). • Only 850 km (1/3) is operational. • Angola launched in 2004 the “AngoFerro” Project, evaluated US$ 4.0 bn to upgrade and rehabilitate the railways network. Windhoek, 11-12/06/05

  20. 4. SLC: Sector Integration4.1. Development Corridors (Cont…) Mozambique: based on three “development corridors”: Nacala, Beira and Maputo. • Nacala Development Corridor: in the northern province o Nampula linking Mozambique, Malawi and part of Zambia, including the Nacala port, the road and railway. - Privatized in 2000. • Beira Development Corridor: With 2 lines. • Maxipanda line: linking Beira to Zimbabwe. Include the Beira port and 300 km of road, railway, and pipeline. • Sena line: links Beira to coal Mine of Moatize, and Malawi, about 600 km. Upgrading project is underway. Windhoek, 11-12/06/05

  21. 4. SLC: Sector Integration4.1. Development Corridors (Cont.) • Maputo Development Corridor (MDC): • Links the Capital of Maputo to RSA province of Mpumalanga. • Includes the Maputo port, the road, railway and the Border post. • From 2004 also includes the pipeline. • The MDC is located within the IFZ of Maputo. • Also the success story of MOZAL and SASOL. Windhoek, 11-12/06/05

  22. 5. Political Convergence • SLC are young democracies. • Assessment must consider the factors contributing to Democracy consolidation. • Regular democratic elections; • Respect of basic Human rights, and • The absence of political violence (Petters-Barriers, Naidu, 2003: 11). Windhoek, 11-12/06/05

  23. 5. Political Convergence (Cont.) Sources: UNDP, 2004; Transparence International, 2004; Freedom House, 2004 Windhoek, 11-12/06/05

  24. 5. Political Convergence (Cont.) • Angola: • War-torn society facing the legacy of the civil war. • Angola is among the low human development countries, i.e., with lower longevity, lower education and low standard of living for the majority of the population. • The oil revenues did not trickled down to alleviate the poverty. • The country faces the corruption, which “robs its potential” to recover the effects of the long war. • The undermined respect for the constitution, the human rights, and the rule of law, make the country to be ranked as “not free” country. Windhoek, 11-12/06/05

  25. 5. Political Convergence (Cont.) • Mozambique is a poor country: • As the case of Angola, is among the low human development countries which result in low longevity, low educational attainment, and quality of life. • The country faces the effects of corruption preventing the attainment of the goals express in the PRSP, as well as the MDG. • Mozambique was ranked as “partly free”, which need to improve the human rights, and the civil liberties, s well as the rule of law, in general. Windhoek, 11-12/06/05

  26. Conclusion • Mozambique and Angola, form the SLC, given the fact that they have gone through parallel historic and political processes. • Both countries have made progress toward regional integration at levels of economic integration, Sectoral cooperation and Political Convergence. • However, both countries need to consider step further for effective regional convergence addressing the constraints identified. Windhoek, 11-12/06/05

  27. Thank you for the attention. Windhoek, 11-12/06/05

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