Study on liberalisation and regulation West Africa .levels of liberalisation in West Africa ......

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Transcript of Study on liberalisation and regulation West Africa .levels of liberalisation in West Africa ......

  • External Trade

    StudyStudy on on existingexisting regulationsregulations and and levelslevels of of liberalisationliberalisation in West in West AfricaAfrica

    Seminar on Seminar on servicesservices and and establismentestablismentinin EPA EPA contextcontext

    Praia, March 2010Praia, March 2010

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    Objectives of study Assist West African states, ECOWAS, WAEMU in assessment

    of regulatory framework and designing an offer for EPA.

    identify a series of data on the existing regulations and national and regional policies on services and investment

    identify the actual level of trade liberalisation, comprising any barriers to market access to services and more generally to foreign direct investment (in the senseof GATS arts XVI and XVII);

    provide West African countries with a comprehensiveoverview in order to facilitate the development of a regional offer on trade in services.

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    Geographic coverage of study

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    Focus of study

    rules on investment in manufacturing, mining and agriculture and establishment in services

    existing national & regional regulations in selected service sectors: professional services construction services distribution services financial services telecommunication services transport services (especially maritime transport

    services)

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    Some details of the project

    Desk stage, Nov. 2008 to Jan. 2009Online study of GATS commitments, regional

    rules of ECOWAS and WAEMU and national regulations of all 16 countries

    Field stage, Jan. 2009 April 2009 Dakar meeting and visits to selected countries

    by team members

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    Foreign direct investment regime

    Overall on paper an open environment in majorityof countries but still very selective systems

    Restrictions in mining sector: Benin, Burkina Faso, Ghana local participation required), Mali, Niger, Senegal

    Restrictions in agricultural sector: Benin, Mali Almost no restrictions to manufacturing Restrictions on foreign land ownership: Ghana, Liberia,

    Mali, Sierra Leone, Togo, Cape verde Restrictions on transfer of capital: many countries,

    sometimes dependent on financial limits, sometimes destination , sometimes sector

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    Foreign direct investment regimes

    Restrictions to establishment in certain services sectors: financial services (MRT, CIV, GHA, NGA), telecommunications, construction, transport

    Many joint venture requirements & capital requirements

    Very few evident restrictions but not clearlyenforced rules either

    Often opaque approval processes for investors: prior government approval needed but no transparency about types of authorization

    Uncertainty main problem. Very difficult to fullyestablish the rules

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    Constrains on FDI in SSA*

    1. Corruption (72%)2. Weak infrastructure (70%)3. Economic outlook, incl inflation (68%)4. Crime (68%)5. Access to finance (67%)6. Regulatory framework (63%)7. Policy uncertainty and/or political instability

    (62%)

    *Based on 4 studies by World Bank, UNCTAD and CREFSA of MNEs present in region

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    Problems identified by economicresearch (UNCTAD, 2008)

    Legal and judicial system Financial system Taxation Labour relations Investment procedures Land tenure Customs administration Weak property rights Red tape Corruption

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    Criteria for choosing a host country (ESF) Cost and benefit analysis (short, medium and long term) Potential market (size, local demand), incl in region and

    simplicity and cost of export Existing competition on the market Cost of entry (entry barriers) incl discrimination Good governance and regulatory certainty (level of

    corruption, transparency and implementation of the regulations, independent regulatory authority etc)

    FDI incentives (special zones, tax incentives, corporate tax, etc.)

    Availability of inputs (HR, financial and communication services, transport, infrastructure)

    Country Risk Assessment: political stability, international commitments that lock MA

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    Lessons of study

    Investors need legal security. Competition for FDI in world is high

    De facto the level of openness in manyWest African countries high esp. In manufacturing but also in many services sectors

    Pay attention to both Mode 3 establishment in services and non-services establishment

    No secure binding of openness: Need to select priority sectors where investmentneeded (infrastructure) and bind in EPA

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    Services: overall findings

    Diverse picture of GATS commitments GATS does not reflect actual situation Much more openness already reality Commiting openness and inscribing

    precise limitations would strengthenlegal certainty

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    Services Sector Commitments No commitments

    Tourism BEN, BF, CVE, CIV, GMB, GHA, GIN, GNB, MLI, MRT, NER, NGA, SEN, TGO SLE

    Transport BEN, CVE, CIV, GMB, GHA, GIN, NER, NGA, SEN, SLE BF, GNB, MLI, MRT, TGO

    Financial BEN, CIV, CVE, GMB, GHA, NGA, SEN, SLE BF, GIN, GNB, MLI, MRT, NER, NGA, TGO

    Business services

    BEN, CIV, CVE, GMB, GIN, SEN, SLE BF, GHA, GNB, MLI, MRT, NER, NGA, TGO

    Communication CIV, CVE, GMB, GHA, NGA, SEN, SLE BEN, BF, GIN, GNB, MLI, MRT, NER, TGO

    Construction CIV, CVE, GMB, GHA, SLE, TGO BEN, BF, GIN, GNB, MLI, MRT, NER, NGA, SEN

    Education CVE, GMB, GHA, MLI, SLE BEN, BF, CIV, GIN, GNB, MRT, NER, NGA, SEN, TGO

    Recreation CVE, GMB, GNB, SLE, TGO BEN, BF, CIV, GHA, GIN, MLI, MRT, NER, NGA, SEN

    Distribution CVE, GMB, SEN BEN, BF, CIV, GHA, GIN, GNB, MLI, MRT, NER, NGA, SLE, TGO

    Environment CVE, GMB, GIN BEN, BF, CIV, GHA, GNB, MLI, MRT, NER, NGA, SEN, SLE, TGO

    Health GMB, GIN BEN, BF, CVE, CIV, GHA, GNB, MLI, MRT, NER, NGA, SEN, SLE, TGO

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    National legislation identified as implementing liberalisationNotes: * Not yet in operation ** No, but evidence of effective liberalisation

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    Professional services Degree of opening and common rules in

    WAEMU countries (accountants, architects, medical and dental)

    GATS commitments: CIV, SNG, CPV, GAM, SLE Regional and bilateral agreements for

    recognition of qualifications Conclusion:

    Extend common rules to all ECOWAS countries scope for more commitments due to de facto

    openness subject to limitations such as registration with a professional associations

    Need to closely involve professional associations in consultation and regulatory audit

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    Telcommunications Significant liberalisation across region in past 10

    years Growth of mobile phone market & advent of internet Regulatory integration reality: WAEMU will

    implement common rules for market access & end to monopolies

    ECOWAS common future rules agreed for future but still divergence across countries

    Only CDI, SGL, CPV, GAM, GHA, NGA have GATS commitments but many limitations such as exclusive rights, equity caps etc.

    Other countries de facto open in many areas already Key sector: Needs regulation in line with investment

    strategy how many licenses can a market support Independent regulation & competition llaws

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    Telecommunciations Key sector for economic performance and overall

    development. Directly and indirectly influences the profitability of majority of trade activities

    Mobile penetration in West Africa almost 40 percent. Revolution for trading & mobile banking (less than 10 percent have access to banks)

    Number of Internet service providers and websites as increased sharply! But limited reach to population in landlocked countries & expensive

    Regional level cooperation on regulatory issues Economic literature suggests mode 3 commitments for

    value added services (internet etc) Strengthen infrastructure investment!

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    Construction services General openness suffers from national treatment

    restrictions (procurement, joint venture) Ban on land ownership in some countries a huge

    deterrant Permits, authorisations, qualifications requirements

    restrictive But: Common rules in WAEMU have opened region Actual level of openness in BEN, BF, GUI, GUIB,

    MAL, MAUR; SGL high which could be translated into commitments

    Actual presence of European and Chinese companies very high

    Very difficult to assess the actual market situation and regulatory picture in this sector

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    Construction Many small construction companies, majority of big

    projects taken by few However, main contractors use a lot of subcontracting

    in the sector Lack to access to credit, unfavourable tax regime,

    corruption Specialization by sector and size of projects Trade-off between discriminatory public procurement

    or market access rules and quality and availability of service needs taken into account to ensure safe buildings

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    Distribution services

    Very few existing commitments in GATS

    De facto a high level of presence of foreign operators

    Lack of formal rules in sector make it hard to assess full status quo

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    Financial Services: Banking Essential for all other sectors In West Africa only 10 percent of population has access

    to the banking sector (much lower in rural areas). Foreign banks have wide range of good quality services Fierce comp