West Africa Reproductive Health Commodity Security: Economic Community of West African States Trade and Economic Integration

Publication date: 2005

West Africa Reproductive Health Commodity Security Study Phase 1 Task Report: 7 Economic Community of West African States Trade and Economic Integration West Africa Reproductive Health Commodity Security Study Phase 1 Task Report: 7 Economic Community of West African States Trade and Economic Integration David Sarley DELIVER DELIVER, a six-year worldwide technical assistance support contract, is funded by the U.S. Agency for International Development (USAID). Implemented by John Snow, Inc. (JSI) (contract no. HRN-C-00-00-00010-00), and subcontractors (Manoff Group, Program for Appropriate Technology in Health [PATH], and Social Sectors Development Strategies, Inc.), DELIVER strengthens the supply chains of health and family planning programs in developing countries to ensure the availability of critical health products for customers. DELIVER also provides technical support to USAID’s central contraceptive procurement and management, and analysis of USAID’s central commodity management information system (NEWVERN). This document does not necessarily represent the views or opinions of USAID. It may be reproduced if credit is given to John Snow, Inc./DELIVER. Recommended Citation Sarley, David. 2005. West Africa Reproductive Health Commodity Security. “Economic Community of West African States Trade and Economic Integration.” Arlington, Va.: John Snow, Inc./DELIVER, for the United States Agency for International Development. John Snow, Inc. 1616 North Fort Myer Drive, 11th Floor Arlington, VA 22209 USA Phone: 703-528-7474 Fax: 703-528-7480 Email: deliver_project@jsi.com Internet: deliver.jsi.com Contents Economic Community of West African States Trade and Economic Integration. 1 Monetary and Trade Integration and Convergence . 3 Tariff Barriers to Intra-regional Trade . 7 Conclusion. 11 Tables 1: Progress for the Key Convergence Indicators . 3 2: ECOWAS Measures Concerning the Free Movement of Persons, Goods, and Capital. 5 3: Tariff Rates by Country and Group. 7 4: Ghana Imports Analysis on Specified Pharmaceutical Products 2003. 8 5: Burkina Faso Imports of Pharmaceuticals 2003. 8 6: Trends in Merchandise Exports in Regional Trade Agreements, 1980 and 2000 . 12 iii iv Economic Community of West African States Trade and Economic Integration The Economic Community of West African States (ECOWAS) comprises 15 countries: Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Senegal, Sierra Leone, and Togo. Founded in 1975, ECOWAS promotes economic integration in “all fields of economic activity, particularly industry, transport, telecommuni­ cations, energy, agriculture, natural resources, commerce, monetary and financial matters, social and cultural issues.” ECOWAS has a population of 245 million; 65 percent live in rural areas and 54 percent live in Nigeria. The average yearly income for each person in West Africa is U.S.$309, compared to $470 for each person in sub-Saharan Africa. These average incomes vary from an estimated $1,290 in Cape Verde to $140 in Sierra Leone and Liberia, which are ranked by World Bank as the joint fourth poorest countries in the world.1 The region's economic growth has averaged only 2.5 percent during the past three years while its population has been growing by 2.2 percent a year. It is estimated that economic growth of about 6–7 percent a year would be required to meet the goal of cutting extreme poverty in half by 2015. According to the World Bank2, West Africa is lagging behind in efforts to meet the Millennium Development Goals: • More than 55 percent of West Africans live on less than U.S.$1.00 a day. • Life expectancy at birth is only 46 years. • Secondary school enrollment is 20 percent. • Forty-two percent of adults are illiterate. • Twenty-nine percent of children under the age of five show the effects of malnutrition. 1 Gross national income (GNI) per capita in 2001 using the Atlas Method: http://siteresources.worldbank.org/ICPINT/Resources/GNIPC.pdf Sierra Leone is estimated to be the poorest using a PPP approach. 2 http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:20180526~menuPK:34457~pagePK:34370~ piPK:34424~theSitePK:4607,00.html 1 2 Monetary and Trade Integration and Convergence Regional governments show strengthening of economic integration as a necessary condition for stronger economic development. Eight countries in the region (Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo) as members of the West Africa Economy and Monetary Union (WAEMU) share a common currency, a common central bank, a development bank, a regional stock exchange, and a common banking regulator. As progress in ECOWAS toward economic and monetary union was slow, a separate track was established for economic and financial convergence for WAEMU countries and non-WAEMU countries. Non-WAEMU countries were to move toward economic convergence so they could introduce a common currency (the West African Monetary Zone [WAMZ]) by 2003. They would then merge with the West African CFA franc zone countries in 2004 to form the West African Central Bank (WACB). Convergence indicators have been set that non-WAEMU countries must meet before the WAMZ can be introduced. As the 2002, the Secretary’s report stated, while progress has been made, the trade liberalization scheme is not yet operational, and a common external tariff has not been introduced. National macroeconomic and sectoral policies have not been harmonized. The West African Monetary Institute’s (WAMI) is responsible for tracking member performance in meeting the economic convergence criteria required for introduction of the WAMZ. The WAMI Macroeconomic Convergence and Economic Development Report for the first six months of 20033 shows the following progress for the key convergence indicators. Note that some indicators are tentative. Table 1. Progress for the Key Convergence Indicators Convergence Target Meeting Target in 2003 Not Meeting Target in 2003 Single-digit inflation rates Nigeria and Sierra Leone Ghana, Gambia, Guinea Budget deficits 4% as a share of GDP Nigeria, Ghana, Gambia Guinea, Sierra Leone Gross foreign exchange reserves have at least 3 months of import cover Gambia, Nigeria above target but coverage declining; Sierra Leone was steady at the target Guinea below target Ghana moving toward attaining target Central bank financing less than 10% of previous year’s tax revenue Ghana 0% (decrease) Nigeria 0.3% (an increase) Gambia 0.8% (increase) Guinea 3.4% (decrease) Sierra Leone likely OK (Continued) http://www.wami-imao.org/english/doc/convergence%20report%20half%20year%202003.pdf 3 3 Convergence Target Meeting Target in 2003 Not Meeting Target in 2003 Secondary Criteria Tax revenue less than 25% of gross domestic product Nigeria Sierra Leone, Ghana, Gambia, Guinea Public sector wages less than 35% of tax revenue Gambia, Guinea, and Nigeria Ghana at 49% Investments from tax revenue at least 20% None met the target Interest rates No positive real interest rates The report concludes that while progress has been made towards economic convergence, the fiscal situation in several countries is worsening. The ECOWAS website provides information from a review conducted in 2002 of members’ performance in implementing a number of ECOWAS measures concerning the free movement of persons, goods, and capital. These are summarized in the table 2. 4 Table 2. ECOWAS Measures Concerning the Free Movement of Persons, Goods, and Capital B e n i n B u r k i n a F a s o C a p e V e r d e C ô t e d ’ I v o i r e G a m b i a G h a n a G u i n e a G u i n e a B i s s a u L i b e r i a M a l i N i g e r N i g e r i a S e n e g a l S i e r r a L e o n e T o g o Free movement of persons Visa abolished for ECOWAS 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 Committee to monitor free movement 9 9 X X X X 9 X X 9 9 9 9 X 9 Brown card motor vehicle insurance 9 9 X 9 9 9 9 9 X 9 9 9 9 9 9 Travel certificate & harmonized immigration and emigration forms X X X X X X X X X X X X X X X Free movement of Transit tax goods levied Harmonized customs documents 9 9 9 X 9 9 X 9 X 9 9 9 9 9 9 Transit certificate (ISRT) 9 ? ? ? X ? ? X X 9 9 9 X X 9 All barriers to trade in goods eliminated 9 X X X 9 Not for processed goods Not for processed goods X X Not for processed goods Not for processed goods Not for processed goods Not for processed goods 9 Not for processed goods Preferential tariffs to ECOWAS industrial products 9 X X X X X 1125000 UA owed to Benin No products for trade liberalization scheme X X X X 75,140 owed to compensa­ tion fund X Monetary co­ operation Transit tax in forex NTB of a monetary nature abolished 9 9 9 9 9 9 9 9 9 9 9 9 9 No 9 (Continued) 5 B e n i n B u r k i n a F a s o C a p e V e r d e C ô t e d ’ I v o i r e G a m b i a G h a n a G u i n e a G u i n e a B i s s a u L i b e r i a M a l i N i g e r N i g e r i a S e n e g a l S i e r r a L e o n e T o g o Contributions to WACH paid 9 X Not a member ? 9 9 9 7600000 UA in arrears 5700000 UA in arrears 9 9 9 9 9 9 Harmonization of economic and financial policies Protocol on community levy ratified X 9 X 9 9 9 9 but not paid X X 9 9 9 9 X 9 but not paid Payment of contributions 9 9 X X X X X X X 9 X X X X X Arrears (000 UA) 1,138 1,317 2,393 4,337 1.514 4,472 12,883 3,335 791 3,593 4,537 4,437 6 Tariff Barriers to Intra-regional Trade In theory, there should be free trade within ECOWAS for regional industrial and, therefore, pharmaceutical products. However, only Gambia, Sierra Leone, and Benin have removed tariff barriers to industrial products from other ECOWAS countries. The continued application of tariffs to manufactured products from ECOWAS partners creates two disincentives to regional pharmaceutical manufacturing. 1. The financial cost of paying between 24 percent in Nigeria and 12.1 percent in Senegal on regional imports plus the 0.5 percent ECOWAS levy (see table 3). 2. It increases customs and transshipment delays and, therefore, transport costs. Table 3. Tariff Rates by Country and Group Country/Group /b Tariff Rate (unweighted in %) /a Year All Goods Agriculture Manufactures Benin 2001 14.7 15.5 14.1 Burkina Faso 2001 12.8 14.8 12.6 Côte d’Ivoire 2001 12.6 14.5 12.3 Ghana 2000 14.0 21.3 13.0 Guinea 1998 16.4 16.6 16.3 Guinea-Bissau 2001 14.0 17.0 13.3 Mali 2001 12.9 14.8 12.5 Niger 2001 14.5 15.1 14.4 Nigeria 2001 23.4 29.0 24.0 Senegal 2001 12.3 14.4 12.1 Togo 2001 14.5 14.6 14.4 Source: World Bank Trade Data Base (www.worldbank.org). These high tariff barriers partly explain why intra-ECOWAS trade remains small at around 10 percent compared to other comparable trade blocs. The rate has grown from 9.6 percent to 15.6 percent in the WAEMU countries. By comparison, it is 12 percent in the Southern African Development Cooperation (SADC) countries, 15 percent in the Caribbean Community (CARICOM) countries, and 20.8 percent in the Latin American free trade area (MERCOSUR) countries. Specific information on tariffs was collected from Ghana and Burkina Faso. The tables overleaf provide information on the aggregate value of imports and the ex-ante and ex-post tariff. The ex- ante tariff is the tariff rate that is documented in the Customs tariff book and that should be levied on all imports. The actual, ex-post duty collection is usually less than the official ex-ante rate because of duty exemptions. In Ghana, the variation overall between ex-ante and ex-post tariffs is very large as category 3003 medicines in bulk are imported almost duty free. In Burkina, the ex- ante tariffs are much lower than the ex-ante tariffs in Ghana but the ex-post are similarly low. In both countries, most of the imported pharmaceuticals are brought in duty free. 7 Table 4. Ghana Imports Analysis on Specified Pharmaceutical Products 2003 HS Code Product Description Value of Imports (million of Cedi) Ex-ante Tariff Rate (%) Ex-post Tariff Rate (%) 3001 Glands/organs 462 11.0 11.1 3002 Human blood, vaccines, etc. 79,359 1.7 1.7 3003 Medicament not in measured doses/forms for retail sale 2,327,006 0.1 0.2 3004 Medicament in measured doses/forms for retail sale 58,375 18.0 18.1 3005 Wadding/gauze/bandages/similar for retail sale 8,286 13.8 13.7 3006 Pharmaceutical goods specified in note 4 to this chapter 18,842 1.5 1.4 401410 Sheath contraceptives 10,940 0.1 0.1 All pharmaceuticals 2,492,329 23.6 0.7 Table 5. Burkina Faso Imports of Pharmaceuticals 2003 Nom Value of Imports CIF (Millions CFA) Ex-ante Tariff (%) Ex-post Tariff (%) 300220 Vaccins pour la medecine humaine 3,558 4.5 0.3 300410 Medicaments en doses, avec penicillines, streptomycines ou derives 256 4.5 1.0 300420 Medicaments en doses, avec d'autres antibiotiques 202 4.5 1.7 300432 Medicaments en doses, avec des corticosurrenales 7 4.5 3.5 300439 Medicaments en doses, avec d'autres hormones 21 4.5 2.7 300440 Medicaments en doses, avec uniquement des alcaloides 55 4.5 2.0 300450 Medicaments en doses, avec des vitamines ou produits du N 29.36 25 4.5 3.4 300660 Preparations chimques contraceptives a base d'hormones ou de spermicides 149 4.5 0.2 Totale 4,273.5 4.5 0.4 In addition to high tariff barriers, the continuing existence of non-tariff barriers within ECOWAS countries helps explain the relatively small amount of intra-regional trade. Several barriers affect trade for Burkina Faso; some are political and economic while others are regulatory. Many are due to external crisis in the region, such as the recent violence in Côte d’Ivoire. This led Burkina to experience delays in reproductive health commodity deliveries, which aggravated delivery schedules and caused unnecessary wastage. Parallel pharmaceutical and contraceptive markets in Burkina Faso and Ghana present a threat to public health and, because of uncertain costs, they ultimately undermine social marketing, commercial, and not-for-profit cost recovery programs. Although Burkina Faso’s Ministry of Health (MOH) usually permits social marketing advertisements for reproductive health commodities, the current ban on any advertising of branded products could discourage regional exporters. 8 Several other barriers were identified during field research in Burkina Faso that can affect intra- regional trade: • differing drug policies and essential drug lists • insufficient transparency in public transactions • lack of harmonized registration requirements • differences in regional quality regulations • differences in standard treatment guidelines for diseases • conflict between Anglophone and Francophone countries drug management policies. 9 10 Conclusion The long tradition of regional integration in ECOWAS provides an institutional basis for a pooled procurement mechanism. This is far stronger in the Francophone countries than in Anglophone countries because of the stronger economic and financial convergence in the Francophone countries. While establishing a common ECOWAS currency would also provide a stimulus to help make pooled procurement work, this is still some time into the future. The absence of free intra-regional trade, continuing arrears in contributions from some member states to ECOWAS, differences in essential medicines lists and the lack of a common drug registration mechanism all represent important barriers to pooled procurement. These issues can be overcome, but to buy in to the concept, all member countries need to be convinced that pooled procurement has tangible financial benefits (see table 6). 11 Table 6. Trends in Merchandise Exports in Regional Trade Agreements, 1980 and 2000 Regional Trade Blocs Exports Within Bloc ($ million) Export Share in Bloc Total (%) Export Share in World Total (%) 1980 2000 1980 2000 1980 2000 High Income and Others APEC /a 357697 2259727 57.9 73.2 33.7 48.5 CEFTA 7766 15102 14.8 12.1 2.9 2.0 European Union 456857 1416825 60.8 62.1 41.0 35.9 NAFTA 102218 676440 33.6 55.7 16.6 19.1 Africa CEMAC 75 125 1.6 1.2 0.3 0.2 CEPGL 2 10 0.1 0.8 0.1 0.0 COMESA 616 1534 6.1 6.0 0.6 0.4 Cross Border Initiative 447 1091 8.8 12.4 0.3 0.1 ECCAS 89 181 1.4 0.9 0.3 0.3 ECOWAS 692 3331 10.1 10.8 0.4 0.5 Indian Ocean Commission 10 116 1.2 4.7 0.0 0.0 MRU 7 10 0.8 0.7 0.0 0.0 SADC 617 4419 2.0 12.2 1.6 0.6 UDEAC 75 124 1.6 1.2 0.3 0.2 UEMOA 460 847 9.6 15.6 0.3 0.1 Latin America and Caribbean ACS 4892 13780 8.7 5.5 3.1 3.9 Andean Group 1161 5177 3.8 8.5 1.7 1.0 CACM 1174 2477 24.4 12.4 0.3 0.3 CARICOM 576 1078 5.3 15.0 0.6 0.1 Central American Group of Four 692 1483 18.1 12.1 0.2 0.2 Group of Three 706 3711 1.8 1.7 2.1 3.4 LAIA 10981 42665 13.7 12.9 4.4 5.2 MERCOSUR 3424 17925 11.6 20.8 1.6 1.4 OECS 8 38 9.1 10.0 0.0 0.0 Middle East and Asia Arab Common Market 661 1238 2.4 2.9 1.5 0.7 ASEAN 13350 100818 18.7 23.9 3.9 6.6 Bangkok Agreement 1464 17218 3.7 5.2 2.2 5.2 EAEC 98532 776658 35.6 47.0 15.1 26.0 ECO 1165 4495 5.4 5.5 1.2 1.3 GCC 4632 8561 3.0 5.2 8.5 2.6 SAARC 613 2798 4.8 4.3 0.7 1.0 UMA 109 1081 0.3 2.3 2.3 0.8 All Above Trade Bloc Total 1071768 5381083 39.7 50.5 16.1 18.8 Source: World Bank Trade Data Base (www.worldbank.org). 12 13

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