2.1.1 Import Substitution Strategies
Beginning in the 1950s, and particularly in the 1960s and 1970s, most developing countries opted for import substitution strategies as a way of achieving economic growth. The goal of these strategies was to locally produce consumer goods previously imported from developed countries. Import substitution was seen as a means for revitalizing economic development and reducing dependence on former colonial powers, by diversifying productive structures within the different African countries. These strategies, which were to begin with the production of final goods and move up gradually towards the production of intermediate and capital goods (since most of these were also imported for final good production), were accompanied by restrictive external trade policie s and considerable protection for emerging industries. In this way, they were expected to consolidate the new-found political independence of certain developing countries through greater economic autonomy.
From the mid-1980s, most African countries adopted the structural adjustment programmes (SAPs) with the support of the Bretton Woods institutions8. These programmes were in two parts, the first being the stabilization part which sought to reduce the short-term imbalance between supply and demand, in order to restore major macroeconomic balances and put forward measures aimed at curbing demand in order to reduce the major imbalances. The second part related to adjustment, the purpose being to reduce sectoral imbalances and boost output, particularly of exportable goods in order to restore the balance of payments in the long term. In this regard, the structural reforms would focus on supply and its redirection in the context of export promotion strategies. These reforms were basically of a microeconomic nature and sought to influence the arbitration and investment choices of businesses according to the requirements of the global markets. These new development options, which marked Africa’s total departure from import-substitution strategies, sought to redirect growth strategies towards the external market.
2.1.2 Trade Liberalisation Policies
Trade policies in Africa underwent major changes within the framework of the SAPs. There was greater liberalization in foreign trade through the reduction of non-tariff barriers and decreases in customs levies applied to imports in a large number of countries. African countries stopped fixing exchange rates and overvaluing their currencies and applied a series of devaluations in order to promote exports and help businesses become more competitive.
The new trade policies adopted by African countries were part of the new development framework. They sought to promote greater openness in order to boost growth and encourage the competitive integration of the African economies into the globalization process.
8 The World Bank and International Monetary Fund (IMF)
The reforms were not, however, entirely successful in Africa. Results were positive because they were higher than population growth rates and resulted in an increase in per capita income. However, the growth remained unstable and the continent’s economic performance was below the 7 percent annual rate needed to halve poverty by the year 2015. Africa was able to maintain relative macroeconomic stability during the 1990s despite external imbalances and the fall in the flow of external resources.
The outcome of these reforms fell below expectations if the continent’s sectoral performance is examined. Production in both the agricultural sector, which employs nearly half of the African population and the industrial sector, dropped significantly between the 1980s and late 1990s. The fall in agricultural production and the difficulties facing the industrial sector led to the decline in Africa’s contribution to world trade. Thus, the share of African agricultural products in international raw-materials trade dropped during this period, while at the same time Latin American countries experienced a share rise. There was however an increase in the proportion of manufactured products in total exports from Africa and this was mainly due to the fact that a few countries such as Tunisia, Mauritius, Egypt and Morocco had succeeded in diversifying their industrial structures and negotiating for international integration based on the export of manufactured products.9
Opening up to external markets did not bring about a recovery in growth or more competitive integration into the international economy. This conclusion must be seen against the background of the political situation, which prevailed on the continent in the 1990s, with the increase in the number of internal conflicts negatively affecting growth. It should also be emphasized that trade liberalization efforts cannot yield results in an environment marked by weak infrastructure as is the situation in a number of African countries. High transport costs, the inefficiency of logistical services to international trade and weaknesses in support services certainly affected the export performances of the African economies. It should be noted that, for example, transport costs for landlocked countries are 200 percent higher compared with those at the nearest port10. Also, handling costs at African ports are markedly higher than those in the developed countries. Thus, weak transport infrastructures and poor support and logistical services certainly weakened the export performance of African countries, heavily reducing the impact of the reforms undertaken.
With these results one has to acknowledge the poor results of the reforms initiated since the early 1980s. Particularly in Africa, the dropping of import-substitution strategies and the choice of greater openness did not markedly boost growth or ensure more competitive integration into the global economy. This outcome clearly explains the latest controversy in the economic assessment of the impact of openness on economic growth
The same process took place in the countries being studied under this exercise, Egypt (1990), Ethiopia (1992), Ghana (1992), and Kenya (1998). These countries like most of the Africa countries have embarked on regional integration efforts mainly through membership in Regional Economic Communities (REC’s) like Economic Community of West African States (ECOWAS), East African Community (EAC), Common Market for East and Southern African States (COMESA) and the European Union (EU). To this end, these countries have been implementing trade liberalization schemes since the early 1990s, but have been delaying
9 See UNECA (2004), Trade Liberalisation and Development: Lessons for Africa, African Trade Policy Centre, UNECA, Addis Ababa, Ethiopia.
10 Ibid
in the harmonization of their trade regimes, including the adoption of common external tariffs. In spite of measures taken to integrate regional economies, the level of intra-regional trade has remained low. Most of these countries in Africa receive non-reciprocal preferential treatment, mostly African countries, under African Growth and Opportunity Act (AGOA) and the Economic Partnership Arrangements (EPA).
2.1.3 AISI and Inter-Regional Trade in Africa.
From the African perspective, a subregional Information Society strategy is envisaged to help build a better knowledge environment, increase dialogue at the highest political levels as well as create a common vision for digital opportunities for African countries. This is aimed at supporting regional integration in which ICTs are envisaged to play a vital role as stipulated in the AISI implementation process, through the Regional Information Infrastructure and Communication Strategies and Plans (RICIs).11 These strategies and plans are envisaged to promote harmonization of national ICT policies and regulatory frameworks, establish open standards and promote interoperability and interconnectivity. This lays the required foundation for promoting e-trade through increased intra-regional trade and integration of African countries into the global economy, hence reaping the benefits of economies of scale as a result of enlarged market sizes. However, challenges still remain with respect to strategies at the regional level. Factors such as inadequate infrastructure, ineffective or unavailability of legal and regulatory policies, limited human capacity, cultural and linguistic factors as well as political will, are some of the factors that derail development endeavours at the regional level in Africa. The AISI is envisaged to play a vital role in promoting regional economic integration in Africa and hence e-trade. In the face of the opportunities and challenges posed by the new paradigm of the global economy, nations are moving towards the integration of their economies with those of their neighbours, to create larger and more competitive regional economic blocs and enhance international trade.
The 6 countries in this study are members of several regional organizations whose progress in policy harmonization encompasses factors impacting ICT development. The different regional blocks such as COMESA are implementing on-going reforms in the ICT sector to improve efficiency and to attract private investment. The Member States aim to harmonize policy changes towards an integrated ICT market. Significant progress has been achieved in a number of areas, such as establishment of a regional association of ICT regulators. In other implications of regional cooperation, members will be obliged to co-ordinate international conventions and agreements such as the WTO Information Technology Agreement (ITA).12 Such kind of initiatives have also been developed in ECOWAS, UEMOA and SADC in various ICT and trade endeavours e.g. the Telecommunications Regulatory Association of Southern Africa, now Communications Regulators' Association of Southern Africa (CRASA) (See Box 2.1 below).
11 See UNECA (2008), AISI A Decade’s Perspective, ECA, Addis Ababa.
12 The Information Technology Agreement (ITA) of the World Trade Organization went into effect on April 1, 1997. The ITA is primarily a tariff cutting mechanism, which requires all signatories to eliminate customs duties on all products listed in Attachment A and Attachment B of the Agreement and to bind these duties and charges at zero. Under the agreement, tariffs are eliminated on information technology products, including computers, telecommunications equipment, semiconductors, and semiconductor manufacturing equipment. The agreement does not apply to domestic taxes, including VAT.
In the East African Community (EAC) increasing harmonization of fiscal and monetary policies also impact investment and marginal costs of doing business in the countries in the region. For example, Kenya, Tanzania and Uganda implemented a common external tariff on January 1, 2005. This implies that if the EAC (which inducted two new Member States, Rwanda and Burundi, in November 2006) wished to join ITA, all the five Member countries would have to eliminate duties on ICT products at the same time. More importantly for these EAC countries’ lCT policies and external trade, it is critical for the growth of manufacturing exports to develop a matching ICT framework for the region hence enhance trade and