1 ECOWAS COMMON INVESTMENT MARKET IN THE REGIONAL INTEGRATION AGENDA Jonathan Aremu Ph.D Consultant, ECOWAS Common Investment Market Abuja
2 Introduction Different group of countries are coming together all over the world with the idea of either (a) defending themselves against the incursions of other blocs ; or (b) as effective shield from negative impact of multilateralism and globalization. For instance: Europe has adopted a single currency that translated all participating countries into an entity functioning as a single economy. Realizing the seriousness of such a development may cause, Asian countries equally adopted necessary protective measures to defend themselves via a more active regional integration. Even the United States, in spite of its size, cannot ignore the need for a regional grouping as it equally teamed up with Canada and Mexico to form North American Free trade Agreement (NAFTA).
3 Introduction(Cont..) Unless a more serious efforts are embarked upon towards our regional economic integration, West African countries are under threats of eventual marginalization from current the global market economic re-grouping arrangements of countries Even the multilateral economic governance rules under the World Trade Organization( WTO), under the Doha Development agenda(dda) remain inconclusive and unreliable to guarantee the aspirations of developing countries Thus economic integration arrangements are becoming inevitable options and prerequisites for facing the tides of globalisation Recent years have witnessed a re-awakening, deepening and widening of existing regional integration agreements (RIAs) throughout the world, with acronyms such as EU, COMESA,ECOWAS,SADC and NAFTA re- adjusting their economic integration agenda for better outcome for their communities
4 Introduction(Cont..) Although some integration agreements have been motivated initially by political considerations, it is clear that economics is now generally the driving force. Thus, countries now enter into RIAs because integration promises various economic benefits such as stimulation of intra- and extra regional 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 the competitiveness of local firms, o the motives for investment, and o 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 issue for emerging economies and regional groupings like in ECOWAS region ; compelling us to examine the phases of regional integration
5 A. Phases of Economic Integration 1 Preferential Trade Arrangement Provision of merely lower barriers among participating nations Non members faces higher levels of barriers to trade. It is the loosest form of economic integration. Example British Common Preference Scheme established in
6 2 Free Trade Area All barriers to trade are substantially removed among members(article XXIV GATT) Each member retains its own barriers to trade with non members. There is need for rule of origin to protect deflection possibilities from non-members. European Free Trade Area (EFTA) is an example; NAFTA another example. Proposed EPA between ACP and EU. 6
7 3. Customs Union No tariff or other barriers on members Common external tariff (CET) on the rest of the world by custom members CET accepted is usually the lowest preunion rate Harmonizing non-tariff barriers under customs union is a difficult task European Union formed in
8 4. Common Market Have all Characteristics Customs Union Permits free mobility of factors Has no invisible trade restrictions Harmonization of trading standards and practices EU achieved this status in
9 5. Economic Union Most advanced type of economic integration Has all attributes of a common market Harmonizes monetary and fiscal policies of member states. Free factor mobility and competition policy Coordination of macroeconomic and budgetary policies Best example is the United States of America. 9
10 Table 1: The Phases of Economic Integration Conditions Free Trade Between Member State Common External Tariff Free Movement Factors Production of of Harmonization of Economic Policy Centralization of Economic & Monetary Policy Phases 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
11 Historical Development of ECIM. ECOWAS has achieved some success in its Trade Liberalization Scheme (ETLS) ; The Customs Union phase in our integration process is nearing completion with the putting in place of common external tariff (CET) with 5-bands; The Community is on its way to a Common Market by allowing the inter- regional flow of factors of production; In line with Articles 3.2 (f) and 3.2 (i) of the revised ECOWAS Treaty therefore, a key and immediate concern is to develop a regional investment code.
12 Historical Development of ECIM(Cont..). ECOWAS Member States decided to use the impetus of preparations towards the Economic Partnership Agreements (EPAs) to harmonize their regulations on investment and work for the establishment of a common regional investment rule and code. The Road Map to EPAs negotiations between West Africa and the European Union (EU) was adopted on August 4, 2004 in Accra, Ghana. Five Thematic Groups made up of regional experts were assembled to work out the negotiation strategies in EPAs. The first meeting of the Thematic Group on Investment met in Abuja in May 2005 and the meeting emerged with its own time table of the negotiation to agree with common Road Map for the community. The second meeting of the Thematic Group was held at Ouagadougou in December 2005
13 Historical Development of ECIM(Cont..). ECOWAS Commission arrived at a conclusion that since the entire developing countries rejected further negotiations of Singapore Issues at the World Trade Organization Ministerial, it will inappropriate to continue to negotiate Investment in the EPAs. Instead further negotiation of investment should be focused at harmonizing the investment policies of ECOWAS member states into a common code for use at later stage Encouraged by what the Commission was doing the EU, through BizClim, finalized a study on ECOWAS Common Investment Code (CIC) and Investment Policy Framework to assist the region in fasttracking the implementation of its Common Investment Market. The Authority of the Heads of State and government adopted the Supplementary Act on Common Investment Market along with two (2) other Supplementary Acts on the 19 th of December 2008 signalling the commencement of ECOWAS Common Investment Market (ECIM).
14 C. Basis for ECOWAS Common Investment Market Based on the above understanding, ECIM was established by the Commission : To enable the region to attract greater and sustainable levels of investment into the region through creating an international competitive investment area, which allows for free movement of capital, labour, goods and services across borders of Member States. To expand economic space for regional actors for investments since national markets of most ECOWAS countries are too small to attract sizeable investment on their own. To satisfy the desires of multinationals, fund managers and other investors 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 and international investors while simultaneously enhancing national investment climate of member states.
15 Basis for ECOWAS Common Investment Market(Cont..) To establish a competitive ECOWAS investment market with a more liberal and transparent investment environment amongst member states so as to: substantially increase the flow of investments into the region from both ECOWAS and non-ecowas sources; jointly promote ECOWAS as the most attractive investment region; strengthens and increase the competitiveness of ECOWAS economic sectors; and progressively reduce or eliminate investment regulations and conditions which may impede investment flows and the operation of investment project in ECOWAS. To ensure that the realization of the above objectives would contribute towards free flow of investment in line with the ambition of the region towards 2020 Vision
16 Basis for ECOWAS Common Investment Market(Cont..) With a single market of about 300 million people, ECOWAS Community could manifest sufficient size and scale agility, flexibility and creativity to attract and retain investment in ways that individual Member State could not. ECIM will consolidate the economic activities in the community into an integrated regional unit that can provide a common platform for future participation in the wider regional and global processes Other advantages of the ECIM include: creating a regional network for policy dialogue among investment policy makers with other stakeholders in the Community; promoting a favorable environment for employment creation through joint regional private/financial sector development and an entrepreneurship culture; improving intra-governmental policy coordination and cooperation between the various governmental agencies in ECOWAS region; and reinforcing the impact of development initiatives supported by international, regional and bilateral funds
17 Basis for ECOWAS Common Investment Market(Cont..) In sum, ECIM will make ECOWAS region to become a single economic space where: There is a coordinated investment co-operation programme among member States that will lead to increased investment from both within ECOWAS and non-ecowas sources; National treatment is extended to ECOWAS investors at the takeoff of the initiative and to all investors by a specified date, subject to the exceptions provided for under the Supplementary Act on investment rules; All industries are opened for investment to ECOWAS individuals and 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 in relation to investment and related activities in ECOWAS; and There is freer flow of capital, skilled labor and professionals, and technology amongst Member States.
18 D. Key Principles for Effective Implementation of ECIM. It is important that Member States recognise the following principles which, to the extent applied, contribute to effective implementation of ECIM: Transparency of national policies, laws and regulations and administrative practices affecting foreign and domestic investment; Coherence and stability of these laws, regulations and administrative practices; changes made in the light of evolving circumstances should respect the rights of investors as provided in the Supplementary Act on common investment rules ; National treatment for foreign investors at both the pre and post establishment stage; exceptions should be clearly and precisely formulated and periodically reviewed with a view to phasing them out; Timely and unrestricted transfer of the proceeds of the investment and guarantee for the repatriation of the capital when the investment is terminated in line with the provisions of the Act;
19 Key Principles for Effective Implementation of ECIM(Cont..). Fair and equitable treatment of domestic and foreign investments with full protection of property rights including intellectual property; high standards on expropriation and compensation; Unrestricted access of investors to effective dispute settlement mechanisms including international arbitration; Movement of key personnel for the investment and simplification of visa regulations; Transparency of incentive measures; Simplification of administrative procedures for the establishment of new companies, the take-over of existing companies, the granting of permits, concessions and licenses as well as for other operations or transactions needed for the establishment or development of private investment; Transparent and equitable regulations and procedures for privatisation and de-monopolisation;
20 Key Principles for Effective Implementation of ECIM(Cont..) Respect of internationally agreed principles of corporate social responsibility in line with international standards; Good corporate governance and integrity in public administration; Removal of barriers to trade, which have a negative effect on investment, through increased regional co-operation; and Promotion of investment policies and measures consistent with their commitments to sustainable development, protection of the environment and the observation of internationally recognised core labour standards.
21 E. General Obligations of Member States towards the Implementation of ECIM In line with the above principles, ECOWAS Member states will be expected to: review their policies and rules affecting investment and private sector development with a view to improving the investment climate in the region; consider adhering to relevant regional rules and instruments as provided by the Act; notify and publish lists of national measures providing exceptions to national treatment and the rationale for maintaining these measures; review their network of bilateral investment treaties and double taxation treaties within and outside the region in line with the provisions of the Act; intensify action to remove obstacles to business development, in particular regulations and administrative practices that obstruct or delay investment;
22 General Obligations of Member States towards the Implementation of ECIM(Cont..) enhance partnership in building human capacities and skills necessary for acquiring and spreading the benefits of investment in the region; develop a framework for the competitive functioning of their markets which would include effective competition laws and the reform of economic regulations; strengthen the capacities of investment promotion agencies to disseminate information and to provide services to investors and encourage co-operation among these agencies at regional and international levels; support small and medium sized enterprises and encourage their cooperation in regional projects and programmes; and consult business groups, private sector associations, social partners and civil society organisations to explore the development of investment opportunities and to provide input to the decision making process on investment policies, laws and regulations;
23 General Obligations of Member States towards the Implementation of ECIM(Cont..) Ensure that henceforth individual national measures and programmes are undertaken on a fair and mutually beneficial basis to other member States; Undertake appropriate measures to ensure transparency and consistency in the application and interpretation of their investment laws, regulations and administrative procedures in order to create and maintain a predictable investment regime in entire ECOWAS region; Begin the process of facilitation, promotion, liberalization and consequently harmonization of national investment laws towards a common code; Take appropriate measures to enhance the attractiveness of the investment environment of member States for direct investment flows;
24 F. Institutional Structures to Implement ECOWAS Common Investment Market In line with the requirement of Article 25 of the Supplementary Act on Community Investment Rules, ECOWAS Council created the following institutions to implement the ECIM initiative 1. National Committee on ECIM The functions of the Committee shall include: Supervision, coordination and revision of the implementation of the CIM in line with the provisions of the Supplementary Act on ongoing basis in the Member States; Reporting to the ECIM Council through the Private Sector Directorate of the ECOWAS Commission; and May establish specialized subcommittees or technical working groups based on need and resources available at national level of individual Member State
25 2. ECOWAS Common Investment Market Council The functions of the ECIM Council shall include: The ECIM Council will supervise, coordinate, and review the implementation of the CIM and the Supplementary Acts on ongoing basis at the Regional level. The ECOWAS Commission shall be the Secretariat of the ECIM Council with the President of the Commission or his representative as the Chairman. The Council shall be the approving Authority for all adjustments to the provisions of the Supplementary Act and the other issues in the ECIM from time to time
26 G. Conclusion Effective implementation of ECIM (under a single investment code ) in our integration agenda would result in a free movement of goods markets, services markets, labour markets, capital markets, and financial markets, and thus make ECOWAS community to a true common market where: There is a coordinated investment co-operation programme among member States that will lead to increased investment from both within ECOWAS region and from non-ecowas sources; National treatment is extended to ECOWAS investors at the take off of the initiative and to all investors at later date, subjected to the exceptions provided for under the Supplementary Act;
27 Conclusion (Cont...) All industries are opened for investment to ECOWAS individuals and corporate citizens, and to all investors from the rest of the world, subject to be exceptions provided for under Supplementary Act; The business sector has a larger role in the co-operation efforts in relation to investment and related activities in ECOWAS; and There is freer flow of capital, skilled labour and professionals, and technology amongst Member States. But these all depend on putting in place effective national and regional structures such as ECIM Council and NCECIM at national levels to transmit the mechanics of implementing the various issues involved in ECIM.
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