Arab leaders and citizens do not often look at Africa for inspiration. For decades, the Dark Continent has been beset by civil wars, military coups, famine and recurrent outbreaks of endemic diseases. Millions of lives have been lost and economies destroyed. But Africa is waking up and moving forward and for the first time in decades achievements have been secured and growth sustained in many of the continent’s 55 nations.
This month something remarkable happened that promises to change the fate of African nations for good. At the African Union’s summit in Niger, Nigerian President Muhammadu Buhari gave the African Continental Free Trade Area a major boost by signing the continent’s largest economy onto the deal. With Nigeria joining the pact the world is now seeing the birth of the world’s largest free trade zone — a 55-nation bloc worth $3.4 trillion.
The pact aims are creating a single market for goods and services, facilitate free movement of people and investments, and eventually introduce a single-currency union.
Even more remarkable the leaders launched a Pan-African payment system aimed at reducing the use of third currencies — US dollars and Euros — in bilateral trade settlement across Africa saving nations between $5 billion and $7 billion, according to Okey Oramah, president of the African Export-Import Bank.
There are efforts to push for the creation of an African Monetary Fund to help African states engage more actively in regional trade and intra-regional trade. The purpose is to help supplement what the IMF provides to countries facing balance of payments problems. Once operational it will have a capital subscription of up to $22 billion, but for the fund to exist a treaty that was agreed on in 2014 must be ratified by at least 15 nations.
Coming into effect by 2020 analysts believe the bloc will become the world’s largest free trade zone by cutting trade tariffs and barriers between 1.2 billion people. Aside from improving the continent’s infrastructure and bilateral trade, leaders hope that the free zone will have positive geopolitical impact by bringing in stability and preserving peace.
Raising the income of citizens and improving their living standards will help in the fight against terror groups in the long run, according to observers. UN Deputy Secretary General Amina Mohammed was quoted as saying that the AU’s goal of achieving peace across Africa by 2020 was attainable, adding that “we must work hard to silence the weapons.”
The continentwide trade agreement took 17 years to negotiate and approve but its rewards will be felt within few years, according to observers. African countries currently trade only about 16 per cent of their goods and services among one another, compared to 65 per cent with European countries. But by agreeing to reduce tariffs on 90 per cent of goods and services the AU estimates it will give a 60 per cent boost in intra-African trade by 2022.
Positive flow OF FDIs
In addition the agreement is expected to increase the positive flow of direct foreign investments into many countries in Africa. With more than 75 per cent of Africa’s external exports are raw material, such as oil and minerals which has stripped the continent of its natural wealth for centuries, the new pact will attract foreign investors who are expected to invest in the manufacturing sector, thus creating a new wave of industrialisation.
Yet the deal will have to go through a teething phase that includes tough negotiations on removing barriers and providing for fair competition. Also the deal faces legal and stereotypical challenges in the form of existing World Trade Organisation (WTO) agreements that may hinder Africa’s collective negotiations on free trade with the rest of the world.
But overall the perception is positive and exciting and this is why one feels, as an Arab, that we have fallen behind.
The Arab world, of over 300 million citizens, should have moved to integrate its economies and create a viable free trade zone long ago. Ironically, the legal frameworks and agreements within the Arab League charter and beyond do exist and references to intra-Arab free trade have been made since the mid 1950s. But a quick look at intra-Arab trade reveals that it only makes less than 10 per cent of total external Arab trade estimated at $1.75 trillion dollars.
Interestingly, trade among GCC countries makes up more than 70 per cent of total intra-Arab trade and more than 80 per cent of total Arab external trade, the bulk being oil and related products. It is incumbent upon the GCC countries to take the lead in integrating other Arab economies since they have the infrastructure, wealth and experience.
There is a lot or work to be done especially as we need to move from the rhetorical assurances to enforcing agreements and creating a real pan Arab economic structure that ensures free trade, economic complimentarily, movement of people and intra-Arab flow of investments. The rewards are not only financial but political as well. That is the only way this part of the world can compete, innovate and preserve its achievements for future generations.
— Osama Al Sharif is a journalist and political commentator based in Amman.