Foreign Trade, FDI, and Capital Flows Study

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Sub-Saharan Africa

Sub-Saharan Africa, home to more than 1 billion people, half of whom will be under 25 years old by 2050, is a diverse ...

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  • Publication
    Trade as an Engine of Grow in Somalia: Constraints and Opportunities
    (World Bank, Washington, DC, 2021-05) World Bank
    International trade can promote efficiency, knowledge diffusion, technological progress, and—what ultimately matters most—inclusive growth and poverty reduction. Boosting export competitiveness is inextricably linked with rebuilding the productive sectors of Somalia’s economy, generating jobs and incomes, and reducing the country’s large structural trade deficits, which have averaged over 80 percent of GDP since 2015. Somalia supplies a limited number of exports to a relatively small set of markets. Its top five export products in 2018 accounted for more than 83 percent of total goods exports. Dominated by live animals, these exports are primarily unprocessed primary commodities that do not generate spillovers to other sectors of the economy and are vulnerable to weather and other shocks. Somalia also exports to a small set of countries: 82 percent of its exports were sold to just five destinations in 2018, mainly the United Arab Emirates, Oman, and Saudi Arabia. Somalia’s annual goods export revenues could be increased significantly by expanding sales of current exports to new markets and markets where potential remains untapped. Export growth opportunities are greatest for sesame seed and fish. There is also some potential to increase livestock exports by seeking new markets, although econometric analysis suggest that some markets in the Gulf may be saturated. Gums and resins (frankincense and myrrh), fruit, and meat also show potential for increased sales. Countries in East and South Asia present the greatest opportunities for growth. These export opportunities could be prioritized in Somalia’s national trade strategy. Limited or unreliable domestic supply constrains many of Somalia’s exporters. The World Bank’s 2018 Country Economic Memorandum (CEM) presents recommendations for sustainably increasing output of fish, sesame seed, animals, and other commodities that Somalia already exports. To break into new markets, Somali exporters must also invest in gathering information about consumer preferences and policies in unfamiliar markets and establish business relationships with new buyers, shippers, and other partners. The 2018 CEM identifies important roles for public and private sectors in strengthening systems to ensure animal and plant health and developing logistical arrangements to support increased trade flows, which could be reflected in the national trade strategy.
  • Publication
    Monitoring Small-Scale Cross Border Trade in Africa: Issues, Approaches, and Lessons
    (World Bank, Washington, DC, 2020-09) World Bank
    This report synthesizes the work carried out as part of a World Bank ASA (Advisory Services and Analytics) activity to identify better systems and practical strategies that countries can use for improved monitoring of small-scale cross border trade (SSCBT). Large amounts of goods are known to be traded through cross border channels in Africa, yet SSCBT is poorly counted leading to a misrepresentation of the true state of regional integration and possible misalignment of trade and development policies. The study assesses the strengths and limitations of existing SSCBT data systems in East Africa to understand the feasibility and cost effectiveness of different data collection methods. It also looks at conditions along trade corridors in other regions of Africa where SSCBT data are only starting to be monitored to identify common bottlenecks and potential solutions for improved trade data collection in different environments. The analysis draws on fieldwork carried out during July and August 2019, as well as subsequent consultations with local counterparts, including with respect to the impact of the COVID-19 pandemic. Through this work, the study aims to inform policy in countries where SSCBT is important and where the establishment of monitoring systems will be relevant and desirable. The project also contributes to discussions and negotiations on regional integration by raising the profile of SSCBT and drawing attention to the importance of addressing barriers that limit this trade. In addition to this report, findings of the ASA are also being shared with a diverse audience of policymakers, economic analysts, and civil society representatives through short policy notes, working papers, and dissemination events.
  • Publication
    Chad Growth and Diversification: Leveraging Export Diversification to Foster Growth
    (World Bank, Washington, DC, 2019-05-30) World Bank
    This report describes the key policies for Chad to successfully leverage export diversification to foster economic growth. After several unsuccessful attempts at diversifying in the 1990s, Chad has deepened its dependence on commodities, mainly relying on oil; which came to replace cotton. However, the experience of other countries, in Africa and other parts of the world, shows that while large scale production of oil resources offers great opportunities, it comes with major shortcomings. Chad’s Vision 2030 is to become an emerging economy, driven by diversified and sustainable sources of growth. The goal is to triple the average GDP per capita at current prices, by increasing it from US$ 730 in 2014 to US$ 2300 in 2030, while drastically reducing the poverty rate from 46.7 percent in 2011 to 8 percent during the same period. Chad’s economy is overly dependent on crude petroleum, which makes it vulnerable to external shocks. Therefore, to achieve this development goal, only an export diversification strategy can foster a larger menu of goods and services than can become growth-accelerating and job-creating activities. Its implementation challenges are formidable, but the country has little choice, as the social unrest following recurrent oil price slumps, its burgeoning youth population and regional security threats may foment more violence in an already fragile and volatile economy and keep investors away. Hence, this report outlines a strategy to achieve this vision centered on the diversification of its non-oil economy (mainly agricultural-based exports) away from natural resource-based commodities.
  • Publication
    CEMAC: Deepening Regional Integration to Advance Growth and Prosperity
    (World Bank, Washington, DC, 2018-06-29) World Bank
    The Central African Economic and Monetary Community (CEMAC), which consists of Cameroon, the Central African Republic, Chad, the Republic of Congo, Equatorial Guinea and Gabon, is one of the oldest regional groupings in Africa. The main objectives for achieving this are: (i) the creation of a fully functional and effective customs union, (ii) the establishment of a robust system of macroeconomic surveillance, and (iii) the harmonization of sectoral policies and legal frameworks that will create a common market for goods, capital, and services.Despite this ambitious vision, regional integration in the CEMAC zone remains shallow.The oil price shock of 2014-15 severely affected the six CEMAC economies and promoted re-commitment to deepening regional integration.At the regional level, the PREF also aims to: (i) improve the coordination of public financial management (PFM) and fiscal policy; (ii) accelerate regional integration through improvements to the regional economic plan; (iii) improve the business climate; (iv) increase economic diversification; (v) enhance monetary policy transmission mechanisms; and (vi) improve prudential banking supervision.CEMAC is right to focus on reforms to deepening regional integration as a driver of growth.The objective of this Regional Study on CEMAC is to support policy makers in CEMAC in efforts to strengthen regional integration to support economic growth and to reduce the need for economic adjustment. The Regional Study focuses mainly on what can be done at the regional level to support regional integration, macro-stability and long-term growth in the CEMAC area; as such, the Regional Study aims to complement country-specific policies and initiatives to support macro-stabilization, economic development and integration.
  • Publication
    Mali Growth and Diversification
    (World Bank, Washington, DC, 2018-03-14) World Bank
    This report describes the key policies for Mali to succeed leveraging growth with export diversification. For many decades, Mali has been a commodity-dependent country, mainly relying on gold and, to a lesser extent, cotton. However, the experience of other countries, in Africa and other parts of the world, shows that large scale production of minerals and oil resources offers great opportunities, but also presents major shortcomings. These are: tendency to growth beyond potential in cycles of booming prices; high GDP growth volatility that translates into a fragile fiscal stance; a resource curse that favors production of non-tradable goods; and a growth pattern biased toward rent-seeking activities, which prevents expansion of competitive activities creation of abundant and better jobs. Mali is no exception to this. Mali needs to structurally transform itself to accelerate growth and reach its vision, Mali 2025. The Government of Mali does not have a choice: without adequate jobs by 2025, Mali’s burgeoning youth population will foment more violence in an already fragile economy and keep investors away. Hence, it has outlined a strategy to achieve this vision centered on the diversification of its economy (and exports) away from natural resource-based commodities.
  • Publication
    Niger: Leveraging Export Diversification to Foster Growth
    (World Bank, Washington, DC, 2017-12-09) World Bank
    Niger’s Vision 2035 acknowledges the country has little choice but to create ‘a competitive anddiversified economy.’ Economic diversification is a cornerstone component of the Economic Orientation Document (EOD) 2016-19 and the PDES 2017-21. The EOD defines Niger’s economic diversification as moving exports away from natural resources and increasing the value-added component of exports as the foundation for its agro-based industrialization and employment creation policies. Hence, an exports diversification strategy is akin to the country’s economic diversification and, not surprisingly, the PDES contains several axes of policy interventions supporting it. However, Niger faces serious structural challenges to diversify into new productive activities. The country is landlocked, exporting costs are high and, given multiple infrastructure and logistics gaps, access to markets is difficult beyond neighboring regional markets. Rapid population growth and low human capital turns into a low skilled population. Volatile economic growth, reliant on a few commodity exports that closely follow the vagaries of weather and boom and busts of international prices, makes hardly obtained poverty gains vulnerable.
  • Publication
    The Gambia -- Policies to Foster Growth: Volume 2. Macroeconomy, Finance, Trade and Energy
    (Washington, DC, 2015-05-19) World Bank
    While mixed, there has also been progress in the areas of public sector, economic and fiscal management, civil service and justice reform, anti-corruption and public procurement reform. However, The Gambia remains vulnerable to external shocks as the main sources of domestically generated foreign exchange come from tourism and re-export trade whose fate depend largely on exogenous factors. In addition, a major part of the labor force is engaged in farming, and agriculture is vulnerable to weather conditions.
  • Publication
    Republic of Malawi Diagnostic Trade Integration Study Update : Reducing Trade Costs to Promote Competitiveness and Inclusive Growth
    (Washington, DC, 2014-03-25) World Bank
    The diagnostic trade integration study (DTIS) update identifies the trade related constraints holding back Malawi from diversifying and deepening its production base, and increasing trade. The DTIS update identifies and quantifies specific trade costs that determine the availability and price of inputs and the ability of producers to get their products to regional and international markets. The report focuses on tariff policies, regulatory issues impacting on trade, trade facilitation and logistics, and policies affecting agricultural trade and trade in services. Recognizing that the (enhanced) integrated framework and the DTIS (including the 2003 DTIS for Malawi) have not been effective in addressing many of the broader issues requiring large-scale physical investments in most countries, this DTIS update focuses on specific trade related policy and regulatory issues within the mandate and policy space of the ministry of trade and the national implementation unit or similar implementation mechanisms. In this context, the report is structured as follows: chapter one gives introduction. Chapter two outlines the current macroeconomic position and the level of trade openness, summarizes the status of the business enabling environment. Chapter three describes Malawi's current trade policy with a detailed review of the existing tariff schedules. Chapter four addresses a range of the key regulatory issues that raise costs for all producers in Malawi. Chapter five looks in depth at how the trade and regulatory policies within the agricultural sector impact on competitiveness. Finally, chapter six addresses the important issues of trade in services through focusing on professional services such as engineering, accounting, and law.
  • Publication
    Estimating Trade Flows, Describing Trade Relationships, and Identifying Barriers to Cross-Border Trade Between Cameroon and Nigeria
    (Washington, DC, 2013-05-07) World Bank
    Cameroon and Nigeria share a common border of nearly 1,700km and both countries have strong historical and cultural ties. However, the partnership between the two countries has had its difficult periods, most recently when the relationship turned hostile over the disputed Bakassi Peninsula, and economic linkages between the economies remain limited. Expanding trade between the two countries could play a critical role in accelerating economic development and regional integration by opening up new markets for producers, and allowing them to benefit from economies of scale. This will require reducing barriers to cross-border trade, allowing increased trade flows to reach the larger market, and permitting private sector producers to increase the scale of their activities. Removing barriers to trade between the two neighbors is likely to benefit particularly relatively remote areas of both countries. The study finds that regulatory and security barriers at the border and along the road remain key impediments to trade. The remainder of this report proceeds as follows. Section one describes drivers for cross border trade such as historical relations, economic factors, and the policy environment. The next section describes the reality of trade flows by describing existing trade corridors and estimating current trade flows. Section three describes how goods are actually traded across borders between the two countries, and how different actors are involved. Section four describes the barriers to trade, and identifies which barriers are most important. Section five describes the potential for increasing trade. Section six summarizes the findings and presents prioritized recommendations for policy reform.
  • Publication
    Chinese FDI in Ethiopia: A World Bank Survey
    (World Bank, Washington, DC, 2012-11) World Bank
    Chinese Foreign Direct Investment (FDI) into Africa is on the rise and Ethiopia is at the forefront of this trend. On request of the Government, the World Bank surveyed 69 Chinese enterprises doing business in Ethiopia with a 95-question survey in May/June 2012. The survey covered various aspects of the foreign direct investment climate in Ethiopia, including infrastructure, sales and supplies, land, crime, competition, finance, human resources, and questions about general opportunities and constraints for doing business in Ethiopia. This report summarizes the results of survey and provides policy suggestions in light of the analysis; the report also provides some broader background of the expected benefits of FDI into Ethiopia as well as current policies and approaches to promote incoming investment. Addressing identified obstacles could help Ethiopia to take better advantage of foreign investors in order to accelerate the shift from a predominantly low-productivity agriculture-based economy towards a higher-productivity manufacturing and export-based economy. Experiences in successful countries around the world, and especially East Asia show that foreign investment is instrumental to facilitate such a structural transformation and to maintain sustained and broad-based economic development. This study recommends five main areas for policy adjustments to facilitate foreign investors coming into Ethiopia: adjust customs clearance procedures and trade regulations; facilitate currency convertibility and increase transparency of the exchange rate policy; improve tax administration consistency and efficacy; execute impartial labor regulation; and increase the supply and quality of skilled workers.