COMESA
History and background
The Common Markets for East and Southern Africa was formed in 1994 to replace the Preferential Trade Area which had existed since 1981. COMESA as per its treaty was established as an organization of free independent sovereign states which agreed to co-operate in developing their natural and human resources for the good of all their people.
In post-independence Africa, the idea for a common market already existed. During this period, African states felt the need to have a collective interdependence. This could be achieved through either a Pan-African economic agreement or individual sub-regional agreement. Consequently, a ministerial meeting was held in Lusaka, Zambia in 1965 to discuss the establishment of a unifying organization that would cater to the economic community in Africa. The meeting was followed by another in Addis Ababa where the first ten countries signed the official treaty. In the following years of the 1970’s the pressure for integration became more pronounced as Africa continued to be gradually dependent on the well off Northern countries.
In 1978, yet another meeting of ministers of trade was held in Lusaka where the idea of creating the Preferential Trade area (PTA) was born. PTA came into effect in 1981 with the signing of a treaty in Lusaka. It called for an eventual transition to a common market as had been planned after ten years of operating. In 1993 the transition took place and the COMESA treaty was signed on November 1993 in Kampala. Initially, COMESA had 16 member states: Burundi, Comoros, Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Sudan, Swaziland, Uganda, Zambia, and Zimbabwe. The treaty was then ratified in Lilongwe, Malawi, on December 8, 1994. That same year Angola, Lesotho, Mozambique, Namibia, and Tanzania joined the organization. Later, Tanzania, Lesotho and Mozambique withdrew their membership while Egypt joined the organizationin 1999. Over the next decade, Seychelles and Libya joined while Namibia quit in 2004 and Angola suspended itself from membership in 2007. Today COMESA is based in Lusaka Zambia and has 20 member states from North Africa, Southern Africa and Indian Ocean states.
In 2000, COMESA as a member of the ACP countries (Africa, Caribbean and Pacific Group of States) signed a treaty known as the Cotonou agreement with the EU. The treaty permitted the EU to trade with the ACP countries on a non-reciprocal basis. This meant that the EU would have to pay taxes to penetrate the ACP countries but these countries would have tax free access to EU markets. It was signed to benefit the developing countries. However this agreement was working against WTO’s policies and had to be revised in 2005.
In 2009 a meeting was held in Cairo concerning the establishment of the COMESA monetary institute which would help in the ultimate creation of a monetary co-operation program that would allow the establishment of a COMESA monetary union hopefully in 2018. For the preparation of the monetary co-operation program, the COMESA Monetary Institute (CMI) was launched at the Kenya School for Monetary studies in Nairobi. In addition to a monetary union, in 2011, COMESA in conjunction with SADC and EAC signed a declaration to commence co-operation for an eventual monetary union for the entire region
In Africa, COMESA is the largest economic community with an estimated GDP of 40 billion dollars from its population of more than 400 million. In 2000, It moved into a free trade area with hopes of acquiring full customs union by the year 2008. The customs union was launched in 2009 but very little has come out of it because member countries are yet to adopt the common market legislation for the customs union. By 2025, it is COMESA’s goal to eventually have an EU model in Africa by forming the United States of Africa.
Its aims and objectives in a nutshell are to help remove structural and institutional weaknesses of member states to attain development through co-operation in trade, customs and monetary affairs. The detailed objectives are to create and maintain:A full free trade area guaranteeing the free movement of goods and services produced in COMESA by removal of all tariffs, a customs union under which goods and services imported from non-COMESA countries will attract an agreed single tariff in all COMESA states, free movement of capital and investment supported by the adoption of a common investment area, a gradual establishment of a payment union based on the COMESA clearing, the adoption of common visa arrangements which will lead to free movement of people from member states.
In addition to the aims and objectives, COMESA abides by some principles laid down in its treaty. They include, Equality and inter-independence of the member States, solidarity and collective self-reliance among the member States, Inter-State co-operation, harmonization of policies and integration of programs among the member States, non-aggression between the member States. The recognition, promotion and protection of human and people's rights in accordance with the provisions of the African Charter on Human and People's Rights, accountability, economic justice and popular participation in development. The recognition and observance of the rule of law. The promotion and sustenance of a democratic system of governance in each member State, the maintenance of regional peace and stability through the promotion and strengthening of good neighborliness, the peaceful settlement of disputes among the member States, the active co-operation between neighboring countries and the promotion of a peaceful environment as a pre-requisite for their economic development
STRUCTURE
There are four organs of COMESA which have the power to take decisions on behalf of COMESA. These organs are: the Authority of Heads of State and Government; the Council of Ministers; the Court of Justice; and the Committee of Governors of Central Banks as illustrated below. The Intergovernmental Committee, the Technical Committees, the Secretariat and the Consultative Committee make recommendations to the Council of Ministers, which in turn make recommendations to the Authority.
1.1 Authority of the Heads of State and Government
The Authority, made up of Heads of State and Government is the supreme Policy Organ of the Common Market and is responsible for the general policy, direction and control of the performance of the executive functions of the Common Market and the achievement of its aims and objectives. The decisions and directives of the Authority are by consensus and are binding on all subordinate institutions, other than the Court of Justice, on matters within its jurisdiction, as well as on the member States. The inaugural meeting of the Authority took place in Lilongwe, Malawi in December 1994.
1.2 Council of Ministers
The Council of Ministers is the second highest Policy Organ of COMESA. It is composed of Ministers designated by the member States. The Council is responsible for ensuring the proper functioning of COMESA in accordance with the provisions of the Treaty. The Council takes policy decisions on the programs and activities of the COMESA, including the monitoring and reviewing of its financial and administrative management. As provided for in the Treaty, Council decisions are made by consensus, failing which, by a two-thirds majority of the members of the Council. The Council meets once a year.
1.3 COMESA Court of Justice
The COMESA Court of Justice is the judicial organ of COMESA, having jurisdiction to adjudicate upon all matters which may be referred to it pursuant to the COMESA Treaty. Specifically, it ensures the proper interpretation and application of the provisions of the Treaty; and it adjudicates any disputes that may arise among the member States regarding the interpretation and application of the provisions of the Treaty. The decisions of the Court are binding and final. Decisions of the Court on the interpretation of the provisions of the COMESA Treaty have precedence over decisions of national courts. The Court, when acting within its jurisdiction, is independent of the Authority and the Council. It is headed by a President and consists of six additional judges appointed by the Authority. Consideration is being given to establishing the Court of Justice in the not too distant future.
1.4 Committee of Governors of Central Banks
The Committee of Governors of Central Banks is empowered under the Treaty to determine the maximum debt and credit limits to the COMESA Clearing House, the daily interest rate for outstanding debt balances and the Staff Rules for Clearing House staff. It also monitors, and ensures the proper implementation of the Monetary and Financial Co-operation programs.
1.5 Intergovernmental Committee
The Inter-governmental Committee is a multi-disciplinary body composed of permanent secretaries from the member States in the fields of trade and customs, agriculture, industry, transport and communications, administrative and budgetary matters and legal affairs. Decisions of the Committee are by a simple majority. Its main functions include:
· Development of programs and action plans in all the sectors of co-operation, except in the finance and monetary sector,
· Monitoring and keeping under constant review and ensuring proper functioning and development of the Common Market,
· Overseeing the implementation of the provisions of the Treaty and, for that purpose, requesting a technical committee to investigate any particular matter.
1.6 Technical Committees
There are 12 Technical Committees, namely, on Administrative and Budgetary Matters; on Agriculture; on Comprehensive Information Systems; on Energy; on Finance and Monetary Affairs; on Industry; on Labor, Human Resources and Social Affairs; on Legal Affairs; on Natural Resources and Environment; on Tourism and Wildlife; on Trade and Customs; and on Transport and Communications. The Technical Committees are responsible for the preparation of comprehensive implementation programs and monitoring their implementation and then making recommendations to the Council.
1.7 Consultative Committee
The Consultative Committee of the Business Community and other Interest Groups is responsible for providing a link and facilitating dialogue between the business community and other interest groups and other organs of COMESA.
1.8 Secretariat
The Secretariat is headed by a Secretary General who is appointed by the Authority for a term of five years and is eligible for re-appointment for a further term of five years. The basic function of the Secretariat is to provide technical support and advisory services to the member States in the implementation of the Treaty. To this end, it undertakes research and studies as a basis for implementing the decisions adopted by the Policy Organs. The various activities of the Secretariat encompass: Agriculture; Transport and Communications: Industry and Energy; Trade and Customs; Monetary Co-operation; and Administration. The Office of the Secretary General includes the Legal Office, Technical Co-operation, Women in Development and an Audit Unit.
Functions of COMESA
One of the key functions of COMESA is to achieve sustainable economic and social progress in all Member States as aforementioned through increased co-operation and integration in all fields of development particularly in trade, customs and monetary affairs, transport, communication and information, technology, industry and energy, gender, agriculture, environment and natural resources.
COMESA also aims at achieving inter-State co-operation, harmonization of policies and integration of programmes among the member States in a bid to ensure smooth and peaceful integration between the member states.
Additionally, COMESA works to ensure there is peaceful settlement of disputes among the member States, the active co-operation between neighboring countries and the promotion of a peaceful environment as a pre-requisite for their economic development. In attaining the goal of economic prosperity, COMESA realizes that peace, security and stability are basic factors in getting investment, development, trade and regional economic integration. Insecurity and instability greatly affects the ability of states to develop their individual economies as well as their capacity to participate and take full advantage of the regional integration arrangement under COMESA.
Another function of COMESA is ensuring significant and sustained increases in productivity in industry, manufacturing, processing and agro-industries to provide competitive goods as the basis for cross-border trade and to create more wealth, more jobs and more incomes for the people of the region.
COMESA also works to ensure there is equality and inter-independence of the member States. This means that what one country doesn’t have, she can get it from another country. For instance, if Kenya doesn’t have enough maize, she can easily import the maize from Tanzania. This means that states will boost each other’s economy.
COMESA aims at development of comprehensive, reliable and up to date information data bases covering all sectors of the economy including industry, energy, environment, agriculture transport, communications, investment and finance, trade, health and human resources to form the basis for sound investment decisions and macro-economic policy formulation and programming.
In order to achieve economic development among its members, COMESA aims at achieving co-operation in strengthening the relations between the Common Market and the rest of the world and the adoption of common positions in international forums. COMESA aims at having open markets between all its members to ensure free trade. Also, the cooperation will ensure that the member states have a strong say in international conferences vis-à-vis influence key decisions that will affect their states.
In addition, COMESA works at establishing new programmes for trade promotion, trade expansion and trade facilitation especially geared to the private sector, so as to enable the member states to take maximum advantage of the Common Market.
Agriculture is the main economic sector in most COMESA member countries as it contributes largely to the Gross Domestic Product (GDP) and foreign exchange earnings e.g. agriculture contributes, on average, about 39% of the GDP in Sudan, and more than 80% of total exports till 1999. The contribution of agricultural exports declined to less than 10% after Sudan starting to export oil products (Bank of Sudan, 2007). The development of agricultural sector (production and trade) is vital for food security, economic and rural development in the COMESA region. And so COMESA works at increasing agricultural production, with special emphasis on the joint development of lake and river basins so as to reduce dependence on rain-fed agriculture and new programmes on food security at the provincial or district levels, national and regional levels;
Achievements of COMESA
Neo-functionalism, one of the main proponents of integration poses that conflict can best be solved by the collaborative efforts of states as opposed to the effort of a single state. Ernst Haas (a neo-functionalism theorist) in his pioneer study; ‘The Uniting of Europe’ defines integration as “the process where political actors in several distinct national settings are persuaded to shift their loyalties, expectations and political activities toward a new centre, whose institutions possess or demand jurisdiction over the preexisting national states…” (Haas, 1968: 16) The African states have thereby collectively developed the regional organization- COMESA as a means to develop their individual countries. The organization has had numerous successes and challenges over the years but has been mostly successful.
The Economy Watch, in a report on COMESA highlights the first of major achievements has been the elimination of all the tariff barriers among all member states in 2000 hence achieving the goal of a free trade. This in turn has boosted the economies of member states. (COMESA, 2010)Further; the organization has made impressive progress in the productive sectors of industry and agriculture. Trade facilitation and liberalization can be attributed to the 5% growth of intra-COMESA trade in 2012 from 2011.There lies an exponential potential of greater trade and COMESA has to a large extent put measures to exploit it.
Secondly; as from October 2012, the Regional Payment and Settlement System (REPSS) was established. It is a program that allows member states to transfer funds within COMESA on the same day and at low costs mainly through their central banks. It helps both exporters and importers as it fast, safe, secure and it eliminates the need for confirmed letters of credit and associated costs. In addition, the system solves the problem of using the poor infrastructure in the region for transactions among member states. (COMESA's regional payment and settlement goes live, 2014)
The reduction of transport costs by 25% has also been a major milestone of COMESA. The organization has placed special emphasis on network development to enable direct telecommunication links through better infrastructure to avoid the expenses of third country transit systems. The organization has addressed the regulatory and policy aspects of transport and communication to make the movement of goods, services and people between member states easier and cheaper.
Like other organizations; COMESA has established some institutions to mainly fund its progress and facilitate economic integration of member states. These organizations include: the COMESA Trade and Development Bank in Nairobi Kenya, a clearing House in Harare Zimbabwe, an Association of commercial banks, a leather institute in Ethiopia and a re-insurance company in Nairobi Kenya among others. In regard to the clearing house; COMESA introduced the COMESA dollar in 1997 to replace national currencies to ease the transaction cost and maximize gains. In addition, has used facilitation of bilateral agreements, promotion of export drives by member states and identifying specific projects with growth potential, as tools to promote investment in the region.
COMESA, as stated by its secretary general, Mr. Sindiso Ngwenya in a summit in Johannesburg, South Africa, stands on the threshold of the realization of a united states of Africa. This has led the organization to seek deeper collaboration with other regional organizations as in the case of the COMESA-EAC-SADC Tripartite. Until the closure of the TradeMark Southern Africa (TMSA) in February 2013 as a result of the termination of UK’s Department for International Development (DFID) financial contribution, the partnership between TMSA and COMESA achieved numerous objectives. Some of these include the robust, easy to use and accurate Corridor Monitoring Mechanism based on GPS tracking data operational on the North-South Corridor, training of customs officers in the region on Risk Management, Post Clearance Audit and Facilitation Skills as well as providing assistance to border management agencies in the design and implementation of integrated Border Management systems in selected countries in the region and improving systems at border posts resulting in reduced clearance time and cost.
Lastly, with regard to infrastructure, the Tripartite developed the “Corridor Approach” for planning infrastructure. It involves doing an economic assessment of the corridor, assessing its threats, getting support of the country concerned to address these threats, doing the project preparation plan and submitting the paper to a financier (especially grants).An example of this is the North-South Road Corridor which involves a number of corridors in the COMESA-EAC-SADC region. The TMSA identified this transport corridor as a priority regional corridor in terms of the relative freight movement, undertook an economic analysis and calculated the net present value (NPV) as well as internal rate of return of the corridor. This process had the added benefit of estimating the cost of backlog maintenance and periodic and regular maintenance for the next 20 years. (COMESA, 2010)
A study of COMESA in Kenya and Ethiopia
Kenya
Kenya has enjoyed the economic leadership in the east African bloc having the largest and most advanced economy in the region. The country has been seen to perform better since 2003 in attracting FDI and 2007 attracted USD 728million in FDI. Furthermore the International Financial Corporation in 2007 ranked the country as among the top three countries in Africa to have made such significant strides in creating conducive business environment between the years 2006/2007. It also plays a significant role in being not only the transport, communication but also financial hub of east Africa and agriculture accounting for 24% of its GDP in 2007. It has liberalized economy which it has worked towards over the years and has removed all obstacles that in the past hampered the free flow of trade and foreign private investors.
Some of the barriers lifted were exchange controls, import, export licensing as well as restrictions on remittance of profits and dividends all of which have been eliminated. The reforms have created a conducive and necessary environment to attract foreign investment. In line with the Government Economic Recovery Strategy for Wealth and Employment creation (2003-2007), the government has taken various strides to create a positive environment for both foreign and domestic investment.
Kenya has prioritized fighting corruption and promoting good governance-some key objectives of COMESA. COMESA has since become Kenya’s leading export destination such that its accounts for 36.6% of total exports while Kenya on the other hand exports to COMESA countries have grown by 29.9% from a significant 86.22 million in 2007 to Ksh 111.363 million in 2008 accounting for 32.3% of the exports. Kenya’s exports include a thread of manufactured products as opposed to raw products which enrich and enhance diversification of Kenya’s manufacturing power. Some of the dominating products are petroleum products, sacks and bags, medicaments, tea, coffee and food products.
Ethiopia
Ethiopia has a population of about 15 million people and as one of the world’s oldest civilization has made a high progress in its key sectors of development indicators. Primary school enrollment has increased by three times, child mortality has reduced by half and the number of people with clean water has increased by more than double. Poverty reduction has accelerated in the recent and Ethiopia is generally been seen to advance.
Ethiopia since 1990 has always pursuing development strategies based on both state and private sectors. There has been an elimination of discriminatory tax credit and foreign trade treatment of the private sector with limited success to provide a more simple bureaucratic system of regulations and procedures. There has been an ambitious reform effort to initiate a transition to a more democratic system of governance and a decentralized system led by the government. Ethiopia has been seen to has a fast growing non-oil economy in Africa with a double digit growth with a continuous improvement in access to basic services and facilities
Ethiopia recommended the set up of a sub-regional Preferential trade Area and later the result was an adoption of the Lusaka Declaration of a PTA for Eastern and Southern Africa and hence COMESA was born in 1993 with its 16 founding members. In the recent time Ethiopia has undertaken a number of actions such as tightening fiscal policy and the reduction of government’s borrowing hence mitigating the impact of high food prices on the poor, reduction on domestic borrowing of public enterprise, a tightening money supply and gradual depreciating of the local currency in abide to address global economic crisis
Its income tax rate is 35%and top corporate tax rate is 30%. Some of the other taxes include a value added tax (VAT). Overall in recent years tax revenue as percentage of GDP was 11.9%.
The globalization trend
The 1990s decadewas dubbed the globalization decade. Though globalization is not a new phenomenon, the current form of globalization, particularly in the context of economics and finance, draws its motive force from two mutually reinforcing sources: the unrelenting revolution in information and communication technology (ICT); and the 'triumph' of market principles over command economics.
The adoption of the market economy as the economic model of choice by many nations across the globe has resulted in greater liberalization of trade and finance. Through the new enabling liberal environment and the agency of ICT, the world has witnessed movements of capital at unprecedented speeds and volumes. This phenomenon, dubbed financial globalization, poses a new threat to emerging economies because of its high elasticity to huge 'mood swings' which can ruin economies as the crisis as in the case of the Asian 'Tiger' Economies in 1997/98.
At the level of micro-economics, globalization is spawning a new corporate dynamic in which the most evident form is a growing wave of mergers. There is also an ever increasing inter-firm strategic alliance as firms seek to: exploit economies of scale or synergy, take advantage of differences in comparative advantage, spread the risks of high fixed costs, and gain access to new technologies and new markets. Every year has witnessed record corporate consolidations. Clearly, these waves of mergers and acquisitions point to a fundamental shift in the way the concept of competition and co-operation in the post-modern era is viewed. The message here appears to be "small may be beautiful but big and larger is better". In 1997, the UN (Department of Economic and Social Affairs) estimated that the largest 100 transitional corporations accounted for about one third of global foreign direct investment.
Another challenge to COMESA would be the competition between different states when it comes to business and dominating the market. Although all these African nations are for ‘unity’ one always has to be ahead of the others.
As globalization intensifies, COMESA is faced with traditional and much more complex challenges. The insufficiency of funds, for instance, has been a main challenge to COMESA. This is because economic crisis do not only affect businesses but regional blocks as well. This causes strain and slows down the functioning of the organization. Self interests of individual countries could also be said a challenge to COMESA. The countries might decide to stop trading or importing, and for those that have Ports they might stop all ships that are going in and out of the country either as a result of a power struggle or a power hungry leader. This affirms the Realist view that acquiring self interest is the primary goal of states regardless of the negative effects on other actors. Some states deny or push laws that were implemented by COMESA simply because a certain leader believes it is a worthless risk.Thishalts advancement and development in regions.
COMESA has conducted a study on cyber security and protection of vulnerable information infrastructure. The study which is on Public Key Infrastructure Protection has come up with frameworks for cyber-security and Critical Information Infrastructure Protection (CIIP). It was done in collaboration with the Association of Regulators for Information and Communications in Eastern and Southern Africa (ARICEA) and the International Telecommunication Union (ITU) (Institute for global dialogue, 2011).The initiative is informed by the new forms of organized cybercrime mainly aimed at financial gains, with an expansion of the types of threats to various platforms and to various countries. “The incredible benefits that information technology has brought modern organizations have not come without risks. These risks vary in size and scope, from revealing new vulnerabilities in our critical infrastructures to enabling new forms of fraud,” said Secretary General SindisoNgwenya during the Cyber Security and Public Key Infrastructure Summit in Nairobi, Kenya, November 26, 2013.(COMESA, 2011)
Conclusion
All through the paper, COMESA has been illustrated as more of a success story yet it faces some common challenges. In the 9th COMESA Business Forum in February 2014 held in Kinshasa, DRC Report, COMESA sought to re-assert itself by urging deeper implementation of its objectives hence encouraging member states to encourage industrialization through supporting active participation of small and medium enterprises (SMEs) in national and regional markets. It also urges member states to ease access of finances to SMEs and value addition as well as discouraging exportation of raw materials by businesses in the region.
Member states are requested to accelerate the implementation of the COMESA business visa and the eventual elimination of visa requirements and the protocol on free movement of persons, labor, services, the right of establishment and residence. The organization condones the inclusion of private sector, women and youth entrepreneurs, innovation, science and technology.
COMESA further urges the promotion of authentic African products-supporting COMESA origin products into regional markets. It entails the establishment of the brand ‘Made in COMESA’ to ease market access and encourage consumer preference for the products.
Finally; in the forum, COMESA requests that the agreement on harmonization of agricultural inputs such as seeds and fertilizers is implemented to ensure inclusiveness within the regional agriculture market in regards to agriculture and agri-business as it is the back-bone of the COMESA region and the continent at large (The 9th COMESA Business Forum, Kinshasa, 2014)
References
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COMESA's regional payment and settlement goes live. (2014, July 16). Retrieved July 2, 2014, from COMESA: http://www.comesa.int
Haas, E.B., (1968): The Uniting of Europe, Stanford University Press
(2011, June). Retrieved July 2014, from Institute for global dialogue.
COMESA's regional payment and settlement goes live. (2014, July 16). Retrieved July 2, 2014, from COMESA: http://www.comesa.int
COMESA. (2010, June 29). Retrieved July 2, 2014, from Economy Watch: http://www.economywatch.com
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Ustr.gov, (2011). Common Market for Eastern and Southern Africa (COMESA) | Office of the United States Trade Representative. [online] Available at: http://www.ustr.gov/countries-regions/africa/regional-economic-communities-rec/common-market-eastern-and-southern-africa-comesa [Accessed 3 Jul. 2014]
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(2014). The 9th COMESA Business Forum, Kinshasa. Kinshasa: COMESA business council.
History and background
The Common Markets for East and Southern Africa was formed in 1994 to replace the Preferential Trade Area which had existed since 1981. COMESA as per its treaty was established as an organization of free independent sovereign states which agreed to co-operate in developing their natural and human resources for the good of all their people.
In post-independence Africa, the idea for a common market already existed. During this period, African states felt the need to have a collective interdependence. This could be achieved through either a Pan-African economic agreement or individual sub-regional agreement. Consequently, a ministerial meeting was held in Lusaka, Zambia in 1965 to discuss the establishment of a unifying organization that would cater to the economic community in Africa. The meeting was followed by another in Addis Ababa where the first ten countries signed the official treaty. In the following years of the 1970’s the pressure for integration became more pronounced as Africa continued to be gradually dependent on the well off Northern countries.
In 1978, yet another meeting of ministers of trade was held in Lusaka where the idea of creating the Preferential Trade area (PTA) was born. PTA came into effect in 1981 with the signing of a treaty in Lusaka. It called for an eventual transition to a common market as had been planned after ten years of operating. In 1993 the transition took place and the COMESA treaty was signed on November 1993 in Kampala. Initially, COMESA had 16 member states: Burundi, Comoros, Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Sudan, Swaziland, Uganda, Zambia, and Zimbabwe. The treaty was then ratified in Lilongwe, Malawi, on December 8, 1994. That same year Angola, Lesotho, Mozambique, Namibia, and Tanzania joined the organization. Later, Tanzania, Lesotho and Mozambique withdrew their membership while Egypt joined the organizationin 1999. Over the next decade, Seychelles and Libya joined while Namibia quit in 2004 and Angola suspended itself from membership in 2007. Today COMESA is based in Lusaka Zambia and has 20 member states from North Africa, Southern Africa and Indian Ocean states.
In 2000, COMESA as a member of the ACP countries (Africa, Caribbean and Pacific Group of States) signed a treaty known as the Cotonou agreement with the EU. The treaty permitted the EU to trade with the ACP countries on a non-reciprocal basis. This meant that the EU would have to pay taxes to penetrate the ACP countries but these countries would have tax free access to EU markets. It was signed to benefit the developing countries. However this agreement was working against WTO’s policies and had to be revised in 2005.
In 2009 a meeting was held in Cairo concerning the establishment of the COMESA monetary institute which would help in the ultimate creation of a monetary co-operation program that would allow the establishment of a COMESA monetary union hopefully in 2018. For the preparation of the monetary co-operation program, the COMESA Monetary Institute (CMI) was launched at the Kenya School for Monetary studies in Nairobi. In addition to a monetary union, in 2011, COMESA in conjunction with SADC and EAC signed a declaration to commence co-operation for an eventual monetary union for the entire region
In Africa, COMESA is the largest economic community with an estimated GDP of 40 billion dollars from its population of more than 400 million. In 2000, It moved into a free trade area with hopes of acquiring full customs union by the year 2008. The customs union was launched in 2009 but very little has come out of it because member countries are yet to adopt the common market legislation for the customs union. By 2025, it is COMESA’s goal to eventually have an EU model in Africa by forming the United States of Africa.
Its aims and objectives in a nutshell are to help remove structural and institutional weaknesses of member states to attain development through co-operation in trade, customs and monetary affairs. The detailed objectives are to create and maintain:A full free trade area guaranteeing the free movement of goods and services produced in COMESA by removal of all tariffs, a customs union under which goods and services imported from non-COMESA countries will attract an agreed single tariff in all COMESA states, free movement of capital and investment supported by the adoption of a common investment area, a gradual establishment of a payment union based on the COMESA clearing, the adoption of common visa arrangements which will lead to free movement of people from member states.
In addition to the aims and objectives, COMESA abides by some principles laid down in its treaty. They include, Equality and inter-independence of the member States, solidarity and collective self-reliance among the member States, Inter-State co-operation, harmonization of policies and integration of programs among the member States, non-aggression between the member States. The recognition, promotion and protection of human and people's rights in accordance with the provisions of the African Charter on Human and People's Rights, accountability, economic justice and popular participation in development. The recognition and observance of the rule of law. The promotion and sustenance of a democratic system of governance in each member State, the maintenance of regional peace and stability through the promotion and strengthening of good neighborliness, the peaceful settlement of disputes among the member States, the active co-operation between neighboring countries and the promotion of a peaceful environment as a pre-requisite for their economic development
STRUCTURE
There are four organs of COMESA which have the power to take decisions on behalf of COMESA. These organs are: the Authority of Heads of State and Government; the Council of Ministers; the Court of Justice; and the Committee of Governors of Central Banks as illustrated below. The Intergovernmental Committee, the Technical Committees, the Secretariat and the Consultative Committee make recommendations to the Council of Ministers, which in turn make recommendations to the Authority.
1.1 Authority of the Heads of State and Government
The Authority, made up of Heads of State and Government is the supreme Policy Organ of the Common Market and is responsible for the general policy, direction and control of the performance of the executive functions of the Common Market and the achievement of its aims and objectives. The decisions and directives of the Authority are by consensus and are binding on all subordinate institutions, other than the Court of Justice, on matters within its jurisdiction, as well as on the member States. The inaugural meeting of the Authority took place in Lilongwe, Malawi in December 1994.
1.2 Council of Ministers
The Council of Ministers is the second highest Policy Organ of COMESA. It is composed of Ministers designated by the member States. The Council is responsible for ensuring the proper functioning of COMESA in accordance with the provisions of the Treaty. The Council takes policy decisions on the programs and activities of the COMESA, including the monitoring and reviewing of its financial and administrative management. As provided for in the Treaty, Council decisions are made by consensus, failing which, by a two-thirds majority of the members of the Council. The Council meets once a year.
1.3 COMESA Court of Justice
The COMESA Court of Justice is the judicial organ of COMESA, having jurisdiction to adjudicate upon all matters which may be referred to it pursuant to the COMESA Treaty. Specifically, it ensures the proper interpretation and application of the provisions of the Treaty; and it adjudicates any disputes that may arise among the member States regarding the interpretation and application of the provisions of the Treaty. The decisions of the Court are binding and final. Decisions of the Court on the interpretation of the provisions of the COMESA Treaty have precedence over decisions of national courts. The Court, when acting within its jurisdiction, is independent of the Authority and the Council. It is headed by a President and consists of six additional judges appointed by the Authority. Consideration is being given to establishing the Court of Justice in the not too distant future.
1.4 Committee of Governors of Central Banks
The Committee of Governors of Central Banks is empowered under the Treaty to determine the maximum debt and credit limits to the COMESA Clearing House, the daily interest rate for outstanding debt balances and the Staff Rules for Clearing House staff. It also monitors, and ensures the proper implementation of the Monetary and Financial Co-operation programs.
1.5 Intergovernmental Committee
The Inter-governmental Committee is a multi-disciplinary body composed of permanent secretaries from the member States in the fields of trade and customs, agriculture, industry, transport and communications, administrative and budgetary matters and legal affairs. Decisions of the Committee are by a simple majority. Its main functions include:
· Development of programs and action plans in all the sectors of co-operation, except in the finance and monetary sector,
· Monitoring and keeping under constant review and ensuring proper functioning and development of the Common Market,
· Overseeing the implementation of the provisions of the Treaty and, for that purpose, requesting a technical committee to investigate any particular matter.
1.6 Technical Committees
There are 12 Technical Committees, namely, on Administrative and Budgetary Matters; on Agriculture; on Comprehensive Information Systems; on Energy; on Finance and Monetary Affairs; on Industry; on Labor, Human Resources and Social Affairs; on Legal Affairs; on Natural Resources and Environment; on Tourism and Wildlife; on Trade and Customs; and on Transport and Communications. The Technical Committees are responsible for the preparation of comprehensive implementation programs and monitoring their implementation and then making recommendations to the Council.
1.7 Consultative Committee
The Consultative Committee of the Business Community and other Interest Groups is responsible for providing a link and facilitating dialogue between the business community and other interest groups and other organs of COMESA.
1.8 Secretariat
The Secretariat is headed by a Secretary General who is appointed by the Authority for a term of five years and is eligible for re-appointment for a further term of five years. The basic function of the Secretariat is to provide technical support and advisory services to the member States in the implementation of the Treaty. To this end, it undertakes research and studies as a basis for implementing the decisions adopted by the Policy Organs. The various activities of the Secretariat encompass: Agriculture; Transport and Communications: Industry and Energy; Trade and Customs; Monetary Co-operation; and Administration. The Office of the Secretary General includes the Legal Office, Technical Co-operation, Women in Development and an Audit Unit.
Functions of COMESA
One of the key functions of COMESA is to achieve sustainable economic and social progress in all Member States as aforementioned through increased co-operation and integration in all fields of development particularly in trade, customs and monetary affairs, transport, communication and information, technology, industry and energy, gender, agriculture, environment and natural resources.
COMESA also aims at achieving inter-State co-operation, harmonization of policies and integration of programmes among the member States in a bid to ensure smooth and peaceful integration between the member states.
Additionally, COMESA works to ensure there is peaceful settlement of disputes among the member States, the active co-operation between neighboring countries and the promotion of a peaceful environment as a pre-requisite for their economic development. In attaining the goal of economic prosperity, COMESA realizes that peace, security and stability are basic factors in getting investment, development, trade and regional economic integration. Insecurity and instability greatly affects the ability of states to develop their individual economies as well as their capacity to participate and take full advantage of the regional integration arrangement under COMESA.
Another function of COMESA is ensuring significant and sustained increases in productivity in industry, manufacturing, processing and agro-industries to provide competitive goods as the basis for cross-border trade and to create more wealth, more jobs and more incomes for the people of the region.
COMESA also works to ensure there is equality and inter-independence of the member States. This means that what one country doesn’t have, she can get it from another country. For instance, if Kenya doesn’t have enough maize, she can easily import the maize from Tanzania. This means that states will boost each other’s economy.
COMESA aims at development of comprehensive, reliable and up to date information data bases covering all sectors of the economy including industry, energy, environment, agriculture transport, communications, investment and finance, trade, health and human resources to form the basis for sound investment decisions and macro-economic policy formulation and programming.
In order to achieve economic development among its members, COMESA aims at achieving co-operation in strengthening the relations between the Common Market and the rest of the world and the adoption of common positions in international forums. COMESA aims at having open markets between all its members to ensure free trade. Also, the cooperation will ensure that the member states have a strong say in international conferences vis-à-vis influence key decisions that will affect their states.
In addition, COMESA works at establishing new programmes for trade promotion, trade expansion and trade facilitation especially geared to the private sector, so as to enable the member states to take maximum advantage of the Common Market.
Agriculture is the main economic sector in most COMESA member countries as it contributes largely to the Gross Domestic Product (GDP) and foreign exchange earnings e.g. agriculture contributes, on average, about 39% of the GDP in Sudan, and more than 80% of total exports till 1999. The contribution of agricultural exports declined to less than 10% after Sudan starting to export oil products (Bank of Sudan, 2007). The development of agricultural sector (production and trade) is vital for food security, economic and rural development in the COMESA region. And so COMESA works at increasing agricultural production, with special emphasis on the joint development of lake and river basins so as to reduce dependence on rain-fed agriculture and new programmes on food security at the provincial or district levels, national and regional levels;
Achievements of COMESA
Neo-functionalism, one of the main proponents of integration poses that conflict can best be solved by the collaborative efforts of states as opposed to the effort of a single state. Ernst Haas (a neo-functionalism theorist) in his pioneer study; ‘The Uniting of Europe’ defines integration as “the process where political actors in several distinct national settings are persuaded to shift their loyalties, expectations and political activities toward a new centre, whose institutions possess or demand jurisdiction over the preexisting national states…” (Haas, 1968: 16) The African states have thereby collectively developed the regional organization- COMESA as a means to develop their individual countries. The organization has had numerous successes and challenges over the years but has been mostly successful.
The Economy Watch, in a report on COMESA highlights the first of major achievements has been the elimination of all the tariff barriers among all member states in 2000 hence achieving the goal of a free trade. This in turn has boosted the economies of member states. (COMESA, 2010)Further; the organization has made impressive progress in the productive sectors of industry and agriculture. Trade facilitation and liberalization can be attributed to the 5% growth of intra-COMESA trade in 2012 from 2011.There lies an exponential potential of greater trade and COMESA has to a large extent put measures to exploit it.
Secondly; as from October 2012, the Regional Payment and Settlement System (REPSS) was established. It is a program that allows member states to transfer funds within COMESA on the same day and at low costs mainly through their central banks. It helps both exporters and importers as it fast, safe, secure and it eliminates the need for confirmed letters of credit and associated costs. In addition, the system solves the problem of using the poor infrastructure in the region for transactions among member states. (COMESA's regional payment and settlement goes live, 2014)
The reduction of transport costs by 25% has also been a major milestone of COMESA. The organization has placed special emphasis on network development to enable direct telecommunication links through better infrastructure to avoid the expenses of third country transit systems. The organization has addressed the regulatory and policy aspects of transport and communication to make the movement of goods, services and people between member states easier and cheaper.
Like other organizations; COMESA has established some institutions to mainly fund its progress and facilitate economic integration of member states. These organizations include: the COMESA Trade and Development Bank in Nairobi Kenya, a clearing House in Harare Zimbabwe, an Association of commercial banks, a leather institute in Ethiopia and a re-insurance company in Nairobi Kenya among others. In regard to the clearing house; COMESA introduced the COMESA dollar in 1997 to replace national currencies to ease the transaction cost and maximize gains. In addition, has used facilitation of bilateral agreements, promotion of export drives by member states and identifying specific projects with growth potential, as tools to promote investment in the region.
COMESA, as stated by its secretary general, Mr. Sindiso Ngwenya in a summit in Johannesburg, South Africa, stands on the threshold of the realization of a united states of Africa. This has led the organization to seek deeper collaboration with other regional organizations as in the case of the COMESA-EAC-SADC Tripartite. Until the closure of the TradeMark Southern Africa (TMSA) in February 2013 as a result of the termination of UK’s Department for International Development (DFID) financial contribution, the partnership between TMSA and COMESA achieved numerous objectives. Some of these include the robust, easy to use and accurate Corridor Monitoring Mechanism based on GPS tracking data operational on the North-South Corridor, training of customs officers in the region on Risk Management, Post Clearance Audit and Facilitation Skills as well as providing assistance to border management agencies in the design and implementation of integrated Border Management systems in selected countries in the region and improving systems at border posts resulting in reduced clearance time and cost.
Lastly, with regard to infrastructure, the Tripartite developed the “Corridor Approach” for planning infrastructure. It involves doing an economic assessment of the corridor, assessing its threats, getting support of the country concerned to address these threats, doing the project preparation plan and submitting the paper to a financier (especially grants).An example of this is the North-South Road Corridor which involves a number of corridors in the COMESA-EAC-SADC region. The TMSA identified this transport corridor as a priority regional corridor in terms of the relative freight movement, undertook an economic analysis and calculated the net present value (NPV) as well as internal rate of return of the corridor. This process had the added benefit of estimating the cost of backlog maintenance and periodic and regular maintenance for the next 20 years. (COMESA, 2010)
A study of COMESA in Kenya and Ethiopia
Kenya
Kenya has enjoyed the economic leadership in the east African bloc having the largest and most advanced economy in the region. The country has been seen to perform better since 2003 in attracting FDI and 2007 attracted USD 728million in FDI. Furthermore the International Financial Corporation in 2007 ranked the country as among the top three countries in Africa to have made such significant strides in creating conducive business environment between the years 2006/2007. It also plays a significant role in being not only the transport, communication but also financial hub of east Africa and agriculture accounting for 24% of its GDP in 2007. It has liberalized economy which it has worked towards over the years and has removed all obstacles that in the past hampered the free flow of trade and foreign private investors.
Some of the barriers lifted were exchange controls, import, export licensing as well as restrictions on remittance of profits and dividends all of which have been eliminated. The reforms have created a conducive and necessary environment to attract foreign investment. In line with the Government Economic Recovery Strategy for Wealth and Employment creation (2003-2007), the government has taken various strides to create a positive environment for both foreign and domestic investment.
Kenya has prioritized fighting corruption and promoting good governance-some key objectives of COMESA. COMESA has since become Kenya’s leading export destination such that its accounts for 36.6% of total exports while Kenya on the other hand exports to COMESA countries have grown by 29.9% from a significant 86.22 million in 2007 to Ksh 111.363 million in 2008 accounting for 32.3% of the exports. Kenya’s exports include a thread of manufactured products as opposed to raw products which enrich and enhance diversification of Kenya’s manufacturing power. Some of the dominating products are petroleum products, sacks and bags, medicaments, tea, coffee and food products.
Ethiopia
Ethiopia has a population of about 15 million people and as one of the world’s oldest civilization has made a high progress in its key sectors of development indicators. Primary school enrollment has increased by three times, child mortality has reduced by half and the number of people with clean water has increased by more than double. Poverty reduction has accelerated in the recent and Ethiopia is generally been seen to advance.
Ethiopia since 1990 has always pursuing development strategies based on both state and private sectors. There has been an elimination of discriminatory tax credit and foreign trade treatment of the private sector with limited success to provide a more simple bureaucratic system of regulations and procedures. There has been an ambitious reform effort to initiate a transition to a more democratic system of governance and a decentralized system led by the government. Ethiopia has been seen to has a fast growing non-oil economy in Africa with a double digit growth with a continuous improvement in access to basic services and facilities
Ethiopia recommended the set up of a sub-regional Preferential trade Area and later the result was an adoption of the Lusaka Declaration of a PTA for Eastern and Southern Africa and hence COMESA was born in 1993 with its 16 founding members. In the recent time Ethiopia has undertaken a number of actions such as tightening fiscal policy and the reduction of government’s borrowing hence mitigating the impact of high food prices on the poor, reduction on domestic borrowing of public enterprise, a tightening money supply and gradual depreciating of the local currency in abide to address global economic crisis
Its income tax rate is 35%and top corporate tax rate is 30%. Some of the other taxes include a value added tax (VAT). Overall in recent years tax revenue as percentage of GDP was 11.9%.
The globalization trend
The 1990s decadewas dubbed the globalization decade. Though globalization is not a new phenomenon, the current form of globalization, particularly in the context of economics and finance, draws its motive force from two mutually reinforcing sources: the unrelenting revolution in information and communication technology (ICT); and the 'triumph' of market principles over command economics.
The adoption of the market economy as the economic model of choice by many nations across the globe has resulted in greater liberalization of trade and finance. Through the new enabling liberal environment and the agency of ICT, the world has witnessed movements of capital at unprecedented speeds and volumes. This phenomenon, dubbed financial globalization, poses a new threat to emerging economies because of its high elasticity to huge 'mood swings' which can ruin economies as the crisis as in the case of the Asian 'Tiger' Economies in 1997/98.
At the level of micro-economics, globalization is spawning a new corporate dynamic in which the most evident form is a growing wave of mergers. There is also an ever increasing inter-firm strategic alliance as firms seek to: exploit economies of scale or synergy, take advantage of differences in comparative advantage, spread the risks of high fixed costs, and gain access to new technologies and new markets. Every year has witnessed record corporate consolidations. Clearly, these waves of mergers and acquisitions point to a fundamental shift in the way the concept of competition and co-operation in the post-modern era is viewed. The message here appears to be "small may be beautiful but big and larger is better". In 1997, the UN (Department of Economic and Social Affairs) estimated that the largest 100 transitional corporations accounted for about one third of global foreign direct investment.
Another challenge to COMESA would be the competition between different states when it comes to business and dominating the market. Although all these African nations are for ‘unity’ one always has to be ahead of the others.
As globalization intensifies, COMESA is faced with traditional and much more complex challenges. The insufficiency of funds, for instance, has been a main challenge to COMESA. This is because economic crisis do not only affect businesses but regional blocks as well. This causes strain and slows down the functioning of the organization. Self interests of individual countries could also be said a challenge to COMESA. The countries might decide to stop trading or importing, and for those that have Ports they might stop all ships that are going in and out of the country either as a result of a power struggle or a power hungry leader. This affirms the Realist view that acquiring self interest is the primary goal of states regardless of the negative effects on other actors. Some states deny or push laws that were implemented by COMESA simply because a certain leader believes it is a worthless risk.Thishalts advancement and development in regions.
COMESA has conducted a study on cyber security and protection of vulnerable information infrastructure. The study which is on Public Key Infrastructure Protection has come up with frameworks for cyber-security and Critical Information Infrastructure Protection (CIIP). It was done in collaboration with the Association of Regulators for Information and Communications in Eastern and Southern Africa (ARICEA) and the International Telecommunication Union (ITU) (Institute for global dialogue, 2011).The initiative is informed by the new forms of organized cybercrime mainly aimed at financial gains, with an expansion of the types of threats to various platforms and to various countries. “The incredible benefits that information technology has brought modern organizations have not come without risks. These risks vary in size and scope, from revealing new vulnerabilities in our critical infrastructures to enabling new forms of fraud,” said Secretary General SindisoNgwenya during the Cyber Security and Public Key Infrastructure Summit in Nairobi, Kenya, November 26, 2013.(COMESA, 2011)
Conclusion
All through the paper, COMESA has been illustrated as more of a success story yet it faces some common challenges. In the 9th COMESA Business Forum in February 2014 held in Kinshasa, DRC Report, COMESA sought to re-assert itself by urging deeper implementation of its objectives hence encouraging member states to encourage industrialization through supporting active participation of small and medium enterprises (SMEs) in national and regional markets. It also urges member states to ease access of finances to SMEs and value addition as well as discouraging exportation of raw materials by businesses in the region.
Member states are requested to accelerate the implementation of the COMESA business visa and the eventual elimination of visa requirements and the protocol on free movement of persons, labor, services, the right of establishment and residence. The organization condones the inclusion of private sector, women and youth entrepreneurs, innovation, science and technology.
COMESA further urges the promotion of authentic African products-supporting COMESA origin products into regional markets. It entails the establishment of the brand ‘Made in COMESA’ to ease market access and encourage consumer preference for the products.
Finally; in the forum, COMESA requests that the agreement on harmonization of agricultural inputs such as seeds and fertilizers is implemented to ensure inclusiveness within the regional agriculture market in regards to agriculture and agri-business as it is the back-bone of the COMESA region and the continent at large (The 9th COMESA Business Forum, Kinshasa, 2014)
References
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