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Regional Integration: Positioning Botswana as a regional economic hub Experiences from Kenya. Presentation by Cyrille Nabutola to BITC 20 th November 2013. REGIONAL INTEGRATION – BITC 2013. Index Introduction Overview of integration Global trends The Kenyan Experience

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regional integration positioning botswana as a regional economic hub experiences from kenya

Regional Integration: Positioning Botswana as a regional economic hubExperiences from Kenya

Presentation by Cyrille Nabutola to BITC

20th November 2013

regional integration bitc 2013
REGIONAL INTEGRATION – BITC 2013

Index

Introduction

Overview of integration

Global trends

The Kenyan Experience

Leveraging Botswana for success

Conclusion

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REGIONAL INTEGRATION – BITC 2013

Introduction – A brief overview of EPZA

Established in 1990 as a semi-autonomous state corporation to promote, facilitate and create and enabling business environment for investments in Kenya’s free economic zones;

Implement an incentivized programme for export oriented investments. Transitioning to Special Economic Zones.

Performance status in year 2012:

Over 40,000 Kenyans employed by EPZ firms (direct) and 160,000 indirectly.

48 zones established hosting 90 enterprise across different sectors with investments exceeded USD 447 Mn.

Annual EPZ exports topped USD 470 Mn.

Supporting USD 211 Mn. in domestic expenditure.

Attracted investors from over 15 countries drawn from the Americas, Asia, Australia, Europe, and Africa.

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REGIONAL INTEGRATION – BITC 2013

Introduction - What is integration?

These are deliberate programmes based on agreements among governments of 2 or more countries that offer common approaches and treatment usually of a preferential nature on a variety of socio-political and economic issues.

My presentation will focus on regional integration and more specifically on issues of economic integration. These are typically characterized by trade, monetary and fiscal policies jointly developed, adopted and applied by member countries.

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Introduction – Why do countries seek integration?

Some key reasons:

Market and resource benefits – access to a wider market base, manufactured products and factors of production e.g. Egypt selling into Kenya & Ethiopia;

Investment benefits – attraction of investments from member countries (intra) as well as from third countries targeting wider market base encompassing member countries e.g. S.A. investors in Botswana & Tanzania;

Economies of scale – access to larger markets and raw materials allow for upscale of production, lower costs and attendant benefits e.g. Tanzanian cotton used in Kenya;

Logistical advantages – access to transport corridors and seaports for cargo and people movement e.g. Uganda, Rwanda & Burundi through Kenya.

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Overview of integration

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Overview of integration (…continued)

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Overview of integration (…continued)

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REGIONAL INTEGRATION – BITC 2013

Global Trends (Europe)

The European Union (EU):

Established through Treaty of Maastricht (1992);

28 member countries with a combined population of 509 million (7% of the world’s population);

EU GDP in 2012 was USD. 17.4 trillion (US’s USD. 15.7 trillion); Accounted for 20% of global trade, 16.4% of global imports (2011) and 15.4% of global exports (2011). Two thirds of EU trade was among member countries;

Challenges include global recession and economic issues among member countries (Greece, Spain, Portugal, etc.);

Emergence of new economic powerhouses e.g. Turkey with GDP of USD. 1.4 trillion and Poland with GDP of USD. 0.9 trillion.

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Global Trends (Asia)

The Association of South East Asian Nations(ASEAN):

Established through Treaty originally by five nations i.e. Indonesia, Malaysia, the Philippines, Singapore and Thailand (1967),

10 member countries with a combined population of 670 million (9 % of the world’s population);

ASEAN GDP in 2012 was USD. 3.6 trillion (US’s USD. 15.7 trillion). Attracted USD. 111.4 billion in FDI in 2012 (China 121.1 billion). Accounted for 30% of global trade (2011). 25.4% of ASEAN trade was among member countries;

Challenges include: political, economic and social diversity among member countries (democracy, border disputes, unemployment, etc.);

Emergence of new economic powerhouses e.g. Indonesia with GDP of USD. 1.2 trillion and Thailand with GDP of USD. 0.6 trillion.

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Global Trends (Africa)

The Common Market for Eastern and Central Africa (COMESA):

As a successor to the Preferential Trade Area (PTA) established in 1981, COMESA was established in 1994,

19 member countries with a combined population of 389 million (5 % of the world’s population);

COMESA GDP in 2012 was USD. 0.7 trillion (US’s USD. 15.7 trillion). Attracted USD. 9.3 billion in FDI in 2012 (China 111.4 billion). Accounted for less than 2% of global trade in 2012. 8% of COMESA trade was among member countries accounting valued at USD. 18.4 billion in 2011;

Challenges include: Infrastructure, political and economic issues among member countries;

Key players in intra-COMESA trade in 2011 were Kenya with an export market share of 20%, Egypt with an export market share of 16% and D.R. Congo with an export market share of 12.4%.

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REGIONAL INTEGRATION – BITC 2013

Global Trends (Africa)

The East African Community (EAC):

Initially established in the 1970s, but collapsed due to political wrangles among member countries. Current EAC took form in 2010 through signing of EAC protocol;

5 member countries with a combined population of 200 million (3 % of the world’s population);

EAC GDP in 2012 was USD. 0.8 trillion (US’s USD. 15.7 trillion). Attracted USD. 1.7 billion in FDI in 2011 (Africa USD. 55 Billion or 3.5% of global total). Accounted for less than 1% of global trade in 2012;

13% of EAC trade was among member countries valued at US$. 4.5 billion in 2011;

Challenges include: Infrastructure, security and economic issues among member countries;

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Global Trends (Africa)

The Sothern Africa Development Community (SADC):

Begun as Southern Africa Development Community Conference in 1980 and was converted into a development community in 1992. SACU was established in 1910 .

SADC has 15 member countries with a combined population of 234 million (4 % of the world’s population). SACU covers 5 countries (Botswana, Lesotho, Namibia, South Africa and Namibia).

SADC GDP in 2010 was USD. 0.6 trillion (US’s USD. 15.7 trillion);

Attracted USD. 9.3 billion in FDI in 2012 (China 111.4 billion). Accounted for less than 2% of global trade in 2012 valued at USD. 353.6 billion in 2011. 4% of SACU trade was among member countries;

Challenges include: Infrastructure, political and economic issues among member countries;

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Global Trends (Africa)

Into the future:

Tripartite discussions currently being held towards merging COMESA, EAC and SADC into one mega trade block;

Benefits will include a much larger market, resource pool, increased competition, increased investment inflows/outflows and increased intra-Africa trade;

Major challenges will include resolving trade disputes, non-tariff barriers especially on food and agri-products, and monitoring of value addition in member countries to qualify for rules of origin thresh-hold;

Integration will no doubt include ECOWAS in West Africa at some point.

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Kenya

  • Some Quick Facts:
  • Gained independence in 1963,
  • New constitution in 2010, 47 county governments,
  • Area 582,650 Sq. Km.,
  • President H.E. Uhuru Kenyatta (elected 2013),
  • Pop. 43 million (2012 est.),
  • GDP PPP US$ 37.34 Bn. (2012 est.),
  • Gateway to East & Central Africa,
  • Capital Nairobi (pop. 4,000,000).
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REGIONAL INTEGRATION – BITC 2013

Botswana

  • Some Quick Facts:
  • Gained independence in 1966,
  • 9 administrative districts,
  • Area 581,730 Sq. Km.,
  • President Lt. Gen. SeretseKhama Ian Khama (elected since 2008),
  • Pop. 2 million (2012 est.),
  • GDP PPP US$ 14.41 Bn. (2012 est.),
  • At the heart of southern Africa,
  • Capital Gaborone (pop. 225,000).
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REGIONAL INTEGRATION – BITC 2013

The Kenyan experience

Key Benefits:

By 2012, Kenya’s exports had a market share of 20% in COMESA and 57% in EAC. Kenya was Uganda’s largest FDI source and Uganda was Kenya’s major export market;

Kenyan companies and MNCs continue to expand into the region tapping into a wider pool of resources, opening branches, subsidiaries and forming strategic alliances. Many Kenyan professionals in EAC/COMESA countries;

Kenya has leveraged on its strategic location, infrastructure and business ecosystem towards becoming the economic hub for the region;

Embarked on the Lamu Port South Sudan Ethiopia (LAPSSET) project considered Africa’s most ambitious infrastructure project will create a Rail, Road and Oil Pipeline network that will link the Indian Ocean on Kenya’s coast with the Atlantic Ocean on Cameroun’s coast.

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The Kenyan experience

Major Challenges:

Under the terms of the EAC agreement, Kenyan exporters had to endure five years of paying higher tax tariffs on regional exports giving their neighbouring competitors an edge;

Differences in interpretation of the protocol and customs’ regulations by institutions in member countries remain a major challenge creating artificial non-tariff barriers;

Poor infrastructure and connectivity within the region continues to increase cost of doing business among member countries;

Security concerns, conflict and political instability in some countries within the trading blocks remain a challenge for traders & investors;

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Examples of Kenyan regional success stories

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Leveraging Botswana for success

Strategic issues:

What are Botswana’s current comparative and competitive advantages over her neighbours?

Which industrial clusters and sectors will be strategic for Botswana in its future trade with regional partners?

What resources are required to realize Botswana’s strategic goals and how will those resources be developed?

What partnerships and linkages can Botswana develop across the regional trading blocks for success?

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Leveraging Botswana for success

Opportunities for consideration:

Economic vibrancy can only be achieved by attracting economic activity through investment, trade and tourism – case of Dubai.

Botswana has a vibrant beef industry, what about leather and what opportunities are there for it on the continent?

Botswana can be the regional hub for shopping and conventions - what kind of incentives and infrastructure would be required to make that happen?

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REGIONAL INTEGRATION – BITC 2013

Leveraging Botswana for success

Opportunities for consideration:

Can Botswana’s leverage on investments in ICT and the knowledge economy to create high quality jobs – case of Rwanda?

Can Botswana supply reliable and affordable electricity to countries across Africa?

How does Botswana’s investment in infrastructure work for the region?

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Thanks for listening

www.epzakenya.com