ECOWAS COMMON INVESTMENT MARKET INTHE REGIONAL INTEGRATION AGENDA

Jonathan Aremu Ph.DConsultant,

ECOWAS Common Investment MarketAbuja

IntroductionDifferent group of countries are coming together all over the world

with the idea of either (a) defending themselves against theincursions of other blocs ; or (b) as effective shield from negativeimpact of multilateralism and globalization .

For instance:

Europe has adopted a single currency that translated allparticipating countries into an entity functioning as a singleparticipating countries into an entity functioning as a singleeconomy.

Realizing the seriousness of such a development may cause , Asiancountries equally adopted necessary protective measures todefend themselves via a more active regional integration.

Even the United States , in spite of its size, cannot ignore the needfor a regional grouping as it equally teamed up with Canada andMexico to form North American Free trade Agreement (NAFTA).

Introduction(Cont..) Unless a more serious efforts are embarked upon towards our

regional economic integration, West African countries areunder threats of eventual marginalization from current theglobal market economic re-grouping arrangements of countries

Even the multilateral economic governance rules under theWorld Trade Organization( WTO), under the Doha Developmentagenda(DDA) remain inconclusive and unreliable to guaranteethe aspirations of developing countries

Thus economic integration arrangements are becoming Thus economic integration arrangements are becominginevitable options and prerequisites for facing the tides ofglobalisation

Recent years have witnessed a re-awakening , deepening andwidening of existing regional integration agreements (RIAs)throughout the world, with acronyms such as EU,COMESA,ECOWAS ,SADC and NAFTA re- adjusting theireconomic integration agenda for better outcome for theircommunities

Introduction(Cont..) Although some integration agreements have been motivated

initially by political considerations, it is clear that economics is nowgenerally the driving force.

Thus, countries now enter into RIAs because integration promisesvarious economic benefits such as stimulation of intra- and extraregional trade and investment

However, for RIAs to affect the flows of foreign direct investment(FDI) a number of factors are of importance, among which are :

o location,o location,o the competitiveness of local firms,o the motives for investment, ando how the agreement affects the policy environment of

participating member states In light of these developments, the role of RIAs as a

determinant of the location of FDI has become a key issuefor emerging economies and regional groupings like inECOWAS region ; compelling us to examine the phases ofregional integration

A. Phases of Economic Integration

1 Preferential Trade Arrangement

• Provision of merely lower barriers amongparticipating nations

• Non members faces higher levels of barriers totrade.trade.

• It is the loosest form of economic integration.

• Example British Common Preference Schemeestablished in 1932

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2 Free Trade Area• All barriers to trade are “substantially”

removed among members(Article XXIV GATT)

• Each member retains its own barriers to tradewith non members.

• There is need for rule of origin to protect• There is need for rule of origin to protectdeflection possibilities from non-members.

• European Free Trade Area (EFTA) is anexample; NAFTA another example.

• Proposed EPA between ACP and EU.

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3. Customs Union

No tariff or other barriers on members

Common external tariff (CET) on the restof the world by custom members

CET accepted is usually the lowest pre-CET accepted is usually the lowest pre-union rate

Harmonizing non-tariff barriers undercustoms union is a difficult task

European Union formed in 1957.

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4. Common Market

• Have all Characteristics Customs Union

• Permits free mobility of factors

• Has no invisible trade restrictions

• Harmonization of trading standards and• Harmonization of trading standards andpractices

• EU achieved this status in 1993

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5. Economic Union

• Most advanced type of economic integration

• Has all attributes of a common market

• Harmonizes monetary and fiscal policies ofmember states.

• Free factor mobility and competition policy

• Coordination of macroeconomic and budgetary• Coordination of macroeconomic and budgetarypolicies

• Best example is the United States of America.

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Table 1: The Phases of Economic Integration

Conditions

Phases

Free TradeBetweenMemberState

CommonExternalTariff

FreeMovement ofFactors ofProduction

Harmonization ofEconomic Policy

Centralizationof Economic &MonetaryPolicy

Free Trade Area Yes No No No No

Customs Union Yes Yes No No No

Common Market Yes Yes Yes Yes No

Economic &Monetary Union Yes Yes Yes Yes Yes

Historical Development of ECIM.

ECOWAS has achieved some success in its TradeLiberalization Scheme (ETLS) ;

The Customs Union phase in our integration process isnearing completion with the putting in place ofcommon external tariff (CET) with 5-bands;

The Community is on its way to a Common Market byThe Community is on its way to a Common Market byallowing the inter- regional flow of factors ofproduction;

In line with Articles 3.2 (f) and 3.2 (i) of the revisedECOWAS Treaty therefore, a key and immediateconcern is to develop a regional investment code.

Historical Development of ECIM(Cont..).ECOWAS Member States decided to use the impetus of preparationstowards the Economic Partnership Agreements (EPAs) to harmonizetheir regulations on investment and work for the establishment of acommon regional investment rule and code.

The Road Map to EPAs negotiations between West Africa and theEuropean Union (EU) was adopted on August 4, 2004 in Accra,Ghana.

Five Thematic Groups made up of regional experts were assembledto work out the negotiation strategies in EPAs .

The first meeting of the Thematic Group on Investment met in Abujain May 2005 and the meeting emerged with its own time table ofthe negotiation to agree with common Road Map for thecommunity.

The second meeting of the Thematic Group was held atOuagadougou in December 2005

Historical Development of ECIM(Cont..).

ECOWAS Commission arrived at a conclusion that since the entiredeveloping countries rejected further negotiations of SingaporeIssues at the World Trade Organization Ministerial, it willinappropriate to continue to negotiate Investment in the EPAs.

Instead further negotiation of investment should be focused atharmonizing the investment policies of ECOWAS member statesinto a common code for use at later stageinto a common code for use at later stage

Encouraged by what the Commission was doing the EU, throughBizClim, finalized a study on ECOWAS Common Investment Code(CIC) and Investment Policy Framework to assist the region in fast-tracking the implementation of its Common Investment Market.

The Authority of the Heads of State and government adoptedthe Supplementary Act on Common Investment Market alongwith two (2) other Supplementary Acts on the 19th of December2008 signalling the commencement of ECOWAS CommonInvestment Market (ECIM).

C. Basis for ECOWAS Common InvestmentMarket

Based on the above understanding , ECIM was established by theCommission :

To enable the region to attract greater and sustainable levels ofinvestment into the region through creating an internationalcompetitive investment area, which allows for free movement ofcapital, labour, goods and services across borders of Member States.

To expand economic space for regional actors for investments sincenational markets of most ECOWAS countries are too small to attractsizeable investment on their own .

To satisfy the desires of multinationals, fund managers and otherinvestors all over the world ; who now give preference to regional,rather than national markets in making decisions where to invest.

To make ECOWAS one of the major destinations for regional andinternational investors while simultaneously enhancing nationalinvestment climate of member states.

Basis for ECOWAS Common InvestmentMarket(Cont..)

To establish a competitive ECOWAS investment market with a moreliberal and transparent investment environment amongst memberstates so as to:

substantially increase the flow of investments into the regionfrom both ECOWAS and non-ECOWAS sources;

jointly promote ECOWAS as the most attractive investmentregion;region;

strengthens and increase the competitiveness of ECOWASeconomic sectors; and

progressively reduce or eliminate investment regulations andconditions which may impede investment flows and theoperation of investment project in ECOWAS.

To ensure that the realization of the above objectives wouldcontribute towards free flow of investment in line with theambition of the region towards 2020 Vision

Basis for ECOWAS Common InvestmentMarket(Cont..)

With a single market of about 300 million people, ECOWASCommunity could manifest sufficient size and scale agility, flexibilityand creativity to attract and retain investment in ways that individualMember State could not.

ECIM will consolidate the economic activities in the community intoan integrated regional unit that can provide a common platform forfuture participation in the wider regional and global processes

Other advantages of the ECIM include:

creating a regional network for policy dialogue among investment policymakers with other stakeholders in the Community;

promoting a favorable environment for employment creation through jointregional private/financial sector development and an entrepreneurshipculture;

improving intra-governmental policy coordination and cooperationbetween the various governmental agencies in ECOWAS region; and

reinforcing the impact of development initiatives supported byinternational, regional and bilateral funds

Basis for ECOWAS Common Investment Market(Cont..)

In sum, ECIM will make ECOWAS region to become a single economicspace where:

There is a coordinated investment co-operation programmeamong member States that will lead to increased investment fromboth within ECOWAS and non-ECOWAS sources;

National treatment is extended to ECOWAS investors at thetakeoff of the initiative and to all investors by a specified date ,takeoff of the initiative and to all investors by a specified date ,subject to the exceptions provided for under the SupplementaryAct on investment rules;

All industries are opened for investment to ECOWAS individualsand corporate citizens, and to all investors by a specified date ,subject to the exceptions provided for in the Supplementary Act;

The business sector has a larger role in the co-operation efforts inrelation to investment and related activities in ECOWAS; and

There is freer flow of capital, skilled labor and professionals, andtechnology amongst Member States.

D. Key Principles for Effective Implementationof ECIM.

It is important that Member States recognise the following principleswhich, to the extent applied, contribute to effective implementation ofECIM:

Transparency of national policies, laws and regulations andadministrative practices affecting foreign and domestic investment;

Coherence and stability of these laws, regulations andadministrative practices; changes made in the light of evolvingadministrative practices; changes made in the light of evolvingcircumstances should respect the rights of investors as provided inthe Supplementary Act on common investment rules ;

National treatment for foreign investors at both the pre and postestablishment stage; exceptions should be clearly and preciselyformulated and periodically reviewed with a view to phasing themout;

Timely and unrestricted transfer of the proceeds of the investmentand guarantee for the repatriation of the capital when theinvestment is terminated in line with the provisions of the Act;

Key Principles for Effective Implementation ofECIM(Cont..).

Fair and equitable treatment of domestic and foreign investmentswith full protection of property rights including intellectualproperty; high standards on expropriation and compensation;

Unrestricted access of investors to effective dispute settlementmechanisms including international arbitration;

Movement of key personnel for the investment and simplification Movement of key personnel for the investment and simplificationof visa regulations;

Transparency of incentive measures;

Simplification of administrative procedures for the establishmentof new companies, the take-over of existing companies, thegranting of permits, concessions and licenses as well as for otheroperations or transactions needed for the establishment ordevelopment of private investment;

Transparent and equitable regulations and procedures forprivatisation and de-monopolisation;

Key Principles for Effective Implementation ofECIM(Cont..)

Respect of internationally agreed principles of corporatesocial responsibility in line with international standards;

Good corporate governance and integrity in publicadministration;

Removal of barriers to trade, which have a negative effecton investment, through increased regional co-operation;on investment, through increased regional co-operation;and

Promotion of investment policies and measures consistentwith their commitments to sustainable development,protection of the environment and the observation ofinternationally recognised core labour standards.

E. General Obligations of Member Statestowards the Implementation of ECIM

In line with the above principles, ECOWAS Member states will beexpected to:

review their policies and rules affecting investment and privatesector development with a view to improving the investmentclimate in the region;

consider adhering to relevant regional rules and instruments asprovided by the Act;provided by the Act;

notify and publish lists of national measures providing exceptionsto national treatment and the rationale for maintaining thesemeasures;

review their network of bilateral investment treaties and doubletaxation treaties within and outside the region in line with theprovisions of the Act;

intensify action to remove obstacles to business development, inparticular regulations and administrative practices that obstruct ordelay investment;

General Obligations of Member States towardsthe Implementation of ECIM(Cont..)

enhance partnership in building human capacities and skills necessaryfor acquiring and spreading the benefits of investment in the region;

develop a framework for the competitive functioning of their marketswhich would include effective competition laws and the reform ofeconomic regulations;

strengthen the capacities of investment promotion agencies tostrengthen the capacities of investment promotion agencies todisseminate information and to provide services to investors andencourage co-operation among these agencies at regional andinternational levels;

support small and medium sized enterprises and encourage their co-operation in regional projects and programmes; and

consult business groups, private sector associations, social partners andcivil society organisations to explore the development of investmentopportunities and to provide input to the decision making process oninvestment policies, laws and regulations;

General Obligations of Member States towardsthe Implementation of ECIM(Cont..)

Ensure that henceforth individual national measures andprogrammes are undertaken on a fair and mutually beneficialbasis to other member States;

Undertake appropriate measures to ensure transparency andconsistency in the application and interpretation of theirinvestment laws, regulations and administrative procedures ininvestment laws, regulations and administrative procedures inorder to create and maintain a predictable investment regimein entire ECOWAS region;

Begin the process of facilitation, promotion, liberalization andconsequently harmonization of national investment lawstowards a common code;

Take appropriate measures to enhance the attractiveness ofthe investment environment of member States for directinvestment flows;

F. Institutional Structures to ImplementECOWAS Common Investment Market

In line with the requirement of Article 25 of the Supplementary Acton Community Investment Rules , ECOWAS Council created thefollowing institutions to implement the ECIM initiative

1. National Committee on ECIM

The functions of the Committee shall include:The functions of the Committee shall include:

Supervision, coordination and revision of the implementationof the CIM in line with the provisions of the SupplementaryAct on ongoing basis in the Member States;

Reporting to the ECIM Council through the Private SectorDirectorate of the ECOWAS Commission; and

May establish specialized subcommittees or technical workinggroups based on need and resources available at national levelof individual Member State

2. ECOWAS Common Investment MarketCouncil

The functions of the ECIM Council shall include:

The ECIM Council will supervise, coordinate, and reviewthe implementation of the CIM and the SupplementaryActs on ongoing basis at the Regional level.Acts on ongoing basis at the Regional level.

The ECOWAS Commission shall be the Secretariat of theECIM Council with the President of the Commission or hisrepresentative as the Chairman.

The Council shall be the approving Authority for alladjustments to the provisions of the Supplementary Actand the other issues in the ECIM from time to time

G. ConclusionEffective implementation of ECIM (under a single investment

code ) in our integration agenda would result in a freemovement of goods markets, services markets, labour markets,capital markets, and financial markets , and thus makeECOWAS community to a true common market where:

There is a coordinated investment co-operation programmeamong member States that will lead to increased investmentamong member States that will lead to increased investmentfrom both within ECOWAS region and from non-ECOWASsources;

National treatment is extended to ECOWAS investors at the takeoff of the initiative and to all investors at later date, subjectedto the exceptions provided for under the Supplementary Act;

Conclusion (Cont...)All industries are opened for investment to ECOWAS

individuals and corporate citizens, and to all investors fromthe rest of the world, subject to be exceptions provided forunder Supplementary Act;

The business sector has a larger role in the co-operationefforts in relation to investment and related activities inefforts in relation to investment and related activities inECOWAS; and

There is freer flow of capital, skilled labour andprofessionals, and technology amongst Member States.

But these all depend on putting in place effective nationaland regional structures such as ECIM Council and NCECIMat national levels to transmit the mechanics ofimplementing the various issues involved in ECIM.

MERCI DE VOTRE ATTENTION

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