Regional integration in Africa is often thought of as a political process, involving states and regional institutions. But the outcomes of regional integration rely on private sector involvement and buy-in. Companies are driving cross-border investment and trade, and also some forms of migration and capital flows. In addition, causality between the political and private sector spheres of regional integration can run either way: In Europe, political institutions came first; and regional integration centered on a cross-country agreement, involving states and the private sector, to promote a regional coal industry; in Asia, regional integration has been driven by firms developing regional value chains, with political processes and formal institutions coming only much later.
In Africa, the private sector is already helping to advance regional integration; but this role may be enhanced further. Private sector actors point out important non-tariff barriers in the form of inefficient customs procedures, cumbersome rules of origin, inadequate infrastructure and bottlenecks, and costly shipping. Developing regional production networks in Africa requires regional economic communities (RECs) to focus on these, and other, important non-tariff issues together with the private sector. These enable supply chain trade between countries through agreements on intellectual property protection, free capital movement, regulated competition policy, migration and visas, ICT, trade-related finance, and customs clearance services. Some demand to enhance the role of the private sector by giving it formal access to regional bodies. It is proposed that this way their input and advice on these matters may be more effectively incorporated into regional agendas and policies.
The private sector can also play an important role in advancing the type of institutions which African RECs need to ensure that regional agreements are more effectively implemented. “Rules-based” institutions can promote member state accountability through creating mechanisms within a legal architecture capable of enforcing agreements and penalizing derogations from them. A prominent proposal is to bring the private sector into regional dispute resolution forums in order to hold REC member states to account without politically fraught State involvement.
Others are more cautious about the role of the private sector in regional integration, and point to its role in lobbying in the interests of individual pressure groups, thereby derailing regional tariff reductions and regional industrial policy. Recent work also shows the role they can play in aggravating non-tariff barriers through collusive practices.
This raises a number of vital questions panelists should address:
- What should the role of the private sector play in regional integration? How may the private sector “push” for regional integration? Which outcomes does this bring about?
- What successful examples can we learn from? Which instances of private sector involvement in regional integration – be they from Africa or beyond – may be named as best practices?
- What kinds of institutions are necessary? Which institutions may allow the private sector to participate more fully in regional integration? In which cases are institutions needed to limit the activities of the private sector?
- Is there a case for regional industrial policy? Is it possible for competing private sector interests from member RECs to work together to advance a regional industrial policy (as promoted by the Tri-Partite Agreement)?