International and regional trade experts say Africa’s Continental Free Trade Area Agreement (ACFTA) will have a major impact in boosting intra- African trade and the flow of Foreign Direct Investment into the continent once the necessary infrastructure and governments’ commitment is there.
Besides, the establishment of the ACFTA is expected to promote economic diversification, structural transformation, technological development and the enhancement of human capital in the continent.
Dr. Tesfachew Tafera, Former Director at Africa, Least Developed Countries and Special Programs tells The Ethiopian Herald that with the right mix of infrastructure and governments’ commitment, ACFTA
brings a huge opportunity for African countries’ investment boom by allowing trade among them.
Africa’s trade with other regions like Asia and Europe and 70 to 80 percent of that trade accounts for exporting of raw materials and importing of manufacturing products. But intra-Africa trade will encourage African countries to trade manufacturing products amongst themselves.
Hopefully, many of these products would be produced in the industrial parks, he adds. “Special economic zones or industrial parks have a direct and indirect economic contribution in attracting FDI and boosting intra-Africa trade in the long run.”
For instance, countries like Congo, Rwanda, Mali and others in Africa import hundreds of thousands of military boots from China. Why can’t buy from Ethiopia? As Ethiopia is producing boots, shoes and leather products and the opportunity is plenty, he says, recognizing the fact that the situation of infrastructure needs to improve.
“One of the challenges of safety is going to be making sure that there are enough infrastructures so as to ensure a smooth trade flow.”
In addition, governments have to be aware that signing the agreement by itself is not enough. They have to be committed enough to open up their borders, build roads and railways to make it easy for their citizens to trade with other Africans in the continent, Tesfachew states.
By dismantling barriers that restrict the flow of capital investments, it is possible to make sure that capital flows freely across the continent, says Dr. Stephen Karingi, Regional Integration, and Trade Division Director. This would enable ACFTA to effectively contribute financial resources to accelerate product capacity diversification and ultimately economic development in the continent.
He further says that more than ever, the continent can expect special competition in attracting FDI to double up efforts to attract greater and quality investment flows. “That is why we see ACFTA offers us a unique opportunity for Africa to harness more FDI through targeted investment promotion and facilitation.”
According to him, ACFTA is considered one of Africa’s ability to boost FDI inflows. It enables to achieve integrated African market where goods, services, people and capital circulate freely and complement regional integration efforts that benefit 1.2 billion Africans.
Recently, African Ministers of Trade met and made important progress paving the way to launch the operationalization of ACFTA in the coming month. Negotiations in the coming month are also expected to start mainly on competition and intellectual property and notably investment, he underscores.
ACFTA through its infrastructure development and industrialization needs potential to unleash the productive capacity of African countries to trade more with each other. Investment for trans-boundary infrastructure and those trans-boundary socio-economic zones can help the continental advantage of the region of value chains, he adds.
The Ethiopian Herald, July 4/2019
BY TSEGAYE TILAHUN
