Supporting Regional Economic Integrationand Cooperation

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ContentRegional Economic Integration – towards the regionalisation of the world economy . . . . . . . . . . . . . . . . . . . . . . . . 3

Types of Regional Economic Integration and Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Why do we support Regional Economic Integration? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

How do we support Regional Economic Integration? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

The way ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Current projects – regional economic integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Further reading and links . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Our goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Publisher:Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH

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T +49 (0) 61 96 79-0

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I www.gtz.de

Responsible:Ulrich Höcker

Editors:Franziska Jerosch, Ulrich Höcker

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Design:Nikolai Krasomil, www.design-werk.com

Eschborn, December 2008

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Regional Economic Integration – towards theregionalisation of the world economy

Over the past few decades Europe and its institutional

backbone – the European Union (EU) – have emerged as

the prime example of what seems to have become a

general trend towards the regionalisation of the world

economy. Since the 1990s there has been a steady ex-

pansion in the number and depth of regional integration

initiatives worldwide.

Besides the EU and the European Free Trade Association(EFTA), the North American Free Trade Agreement(NAFTA) was created in 1994 by Canada, Mexico andthe Unites States. Regional trade and integration agree-ments are also proliferating among transformation aswell as developing countries in Africa, South EasternEurope, Latin America and Asia. The creation of theSouthern Common Market (MERCOSUR), theAssociation of Southeast Asian Nations (ASEAN) FreeTrade Area (AFTA), and the Common Market ofEastern and Southern Africa (COMESA) are only someprominent examples of regional economic integrationagreements.

Regional integration can be seen as a multidimensionalprocess where constituent states interact in differentpolicy areas, including not only economic cooperation,but also foreign policy and security issues, social sectorsand a cultural dimension. Nevertheless, trade and theeconomy remain central aspects of most ongoing inte-gration schemes and the number of regional economic integration agreements is steadily increasing. Integratingregional markets is now widely seen as a political strategyto reap the benefits, and counter the negative impactsof globalisation both in the partner countries’ regionaland national poverty reduction strategies, and in severaldonor strategies.

Regional Trade Agreements notified to GATT/WTO by date of entry into force

Year

“Regional economic integration is a fundamental

part of national development strategies because

it smoothes the path to a gradual and harmonious

integration into the world economy.”

Pascal Lamy, European Commissioner for Trade (from 1999 to 2004), 2002No

. of

RTAs

1948

1954

1960

1966

1972

1978

1984

1990

1996

2002

2008

250

200

150

100

50

0

Source: WTO Regional Trade Agreements Gateway

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Types of Regional Economic Integration and Cooperation

In terms of coverage and depth, regional economic integration

follows markedly different patterns across the world and

between different sub-regional and regional integration

processes. For example, while economic integration in South-

East Asia has mainly been market or business-led, integration

in Europe has been accompanied and driven by a commen-

surate institution building process. Africa has mostly followed

the European model, which in terms of economic interaction

and institutionalisation is seen as the most advanced example

of regional integration today.

Regional economic integration arrangements increasingly gobeyond tariff-cutting exercises and include so-called deepintegration with ambitious agendas towards common policies.In this regard, the economic integration process is oftenexplained as a gradual process, evolving from trade prefe-rences to comprehensive economic integration as illustratedby the following stages: preferential trading arrangement;free trade area; customs union; common market; economicunion including a common currency. Progression throughthe consecutive stages would usually be seen as movingtowards closer and deeper integration.

However, not all economic integration initiatives followthese stages, nor is it economically or formally necessary to do so. The most prominent example is the EuropeanEconomic Community that skipped the first stage of theestablishment of a free trade area and started right from a customs union. In Western and Central Africa, someregions already used a common currency and only movedto a customs union later. Which path is taken is essentiallya question of the historical background and of who takesthe lead in the envisaged integration process. In Africa,governments usually are the key advocates of regional inte-gration, at times seemingly leaving behind private sectorand civil society in the undertaking while in Asia, marketor business-led integration sometimes lacks political back-ing and formal institutionalising.

“Deepening and broadening integration is one

important way to contribute to sustained rapid growth

and greater poverty reduction. The end result of

integration should be greater inclusiveness

among Asian countries, and Asian peoples.”

Haruhiko Kuroda, President of Asian Development Bank, 2005

2008 2010 2015 2016 2016 2018

The Southern African Development Community (SADC) Free Trade Area was launched in August 2008. SADC’s ambitions fordeeper integration in the future are outlined in the Regional Indicative Strategic Development Plan (RISDP) that sees theFTA as the first step towards the establishment of a customs union in 2010, a common market in 2015, a monetary unionby 2016 and a common currency by 2018.

Economic Integration as a gradual process: SADC’s economic integration agenda

FTACustomsUnion

CommonMarket

CentralBank

MonetaryUnion

RegionalCurrency

New developments throughout the world show that a morespontaneous process from within the regions, from civilsocieties of the constituent states themselves and also in-creasingly involving other actors like non-governmentalorganisations become more prominent proponents of inte-gration processes. This can be described as an integrationprocess from below which is important with a view to thedemocratic legitimisation of regional integration.

However, today the fundamental role of institutions in providing the governance framework for regional economicintegration has been widely acknowledged. Informal regio-

nalisation happening on the ground will increasingly needto be combined with the more formal approaches of proto-cols and treaties by top-level officials to ensure that a regio-nal economic integration process brings about tangible andsustainable development results to the region.

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From Economic Cooperation to Integration Regional markets can be integrated in different ways. The academic literature usually distinguishes between thenotions of regionalisation and regionalism. The first describes the market-led, empirically measurable process ofcross-boarder economic activities that can occur without much interference from the state. The latter describes a politically state-led driven process, which often entails economic integration and is basedon formal agreements and an accompanying institution building process, such as the integration process of the European Union or in SouthernAfrica by SADC.

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Trade Policy and Promotion in Central America

Project descriptionDonor: Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung (BMZ) Countries: El Salvador, Guatemala, Honduras Lead executing agencies: Centro para la promoción de la micro y pequeña empresa enCentroamérica (CENPROMYPE) Overall term: April 2004 to December 2008

Context: Six Latin American countries have negotiated the Central American Free Trade Agreement (CAFTA) withthe USA, which is expected to have positive impacts on their economies. CAFTA is now entering the implementationphase. Concurrently, the countries will start negotiations with the European Union. Within the scope of the regionalintegration association, the Central American Integration System (SICA), they will attempt to achieve harmonisation among themselves and establish a customs union.

However, the large number of multilateral, regional and bilateral trade agreements that are being prepared or havebeen concluded, poses a challenge to the small Central American countries. The economic ministries are under pressure to act, as they have to negotiate and administer the agreements. There is even more pressure on businesspersonswhose interests are directly affected. Often small and medium-sized enterprises encounter difficulties in assessing theconsequences of trade agreements, recognising opportunities and risks, and clearly expressing their concerns andbeing involved in the negotiation process.

Objective: Experts in private and public sector institutions in El Salvador, Guatemala and Honduras are sensitive to theinterests of small and medium-sized enterprises (SMEs) and consider them when reaching and implementing tradeagreements and national development programmes. The foundations are laid for stronger integration and harmonisa-tion of the economic framework conditions of these countries.

Approach: The project is implemented with the involvement of national partners and in close cooperation with theregional institution Centro para la promoción de la micro y pequeña empresa en Centroamérica (Promotion Centrefor Small and Medium Enterprises in Central America, CENPROMYPE) that is responsible in the Central AmericanIntegration System for promoting SMEs. The project pursues many regional and national activities. Among them areregional dialogue forums between the public and private sectors, where issues raised include free trade agreements,their results, implementation problems, and the opportunities and consequences for poverty reduction. At nationallevel, universities will hold postgraduate events on individual themes of regional and international trade and manage-ment training for urban and rural target groups. These will focus particularly on the increased use of relevant informa-tional instruments on foreign trade issues. Advisory services (such as on the European preference system, establish-ment of quality systems, and direct investments) and the use of international experts will provide additional stimulus.Here know-how will be provided by international organisations responsible for foreign trade issues (ITC, UNCTAD,CEPAL). The project especially tries to establish close ties with the European Union and its projects generally improvedonor coordination regarding trade issues. Application-oriented studies will accompany and sometimes augment thedialogues. Examples: foreign trade with Europe, product opportunities under CAFTA, involvement of CentralAmerica in the global market. Concrete measures in selected sectors (textiles, services, specialty coffee) will expandknowledge and experience on a pilot basis.

In 2007 project activities were closely linked with the new project “Sustainable Economic Development in CentralAmerica” and an additional component was added. This aims to establish a regional SME Committee with represen-tative structures in all six Central American countries in close cooperation with CENPROMYPE. This committeewas formed and strengthened to articulate and formulate the harmonised position of SMEs in the region duringnegotiations with the EU.

The project is part of the supraregional advisory project “Trade”, implemented by GTZ on behalf of the GermanFederal Ministry for Economic Cooperation and Development (BMZ).

For further information please contact: Mr Stephan Heieck, email: stephan.heieck@gtz.de

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Why do we support Regional Economic Integration?

The motivation for greater integration usually follows from

three distinct factors:

Integrating with neighbouring countries can help smallcountries in particular to overcome constraints arising from

small domestic markets. It allows them to reap the benefitsof scale economies, stronger competition and increaseddomestic and foreign investment. Economic integration cancontribute to pro poor growth by integrating labour marketsand lowering the barriers of investment for enterprises.Depending on their degree of formalisation and institu-tionalisation, regional economic integration processes can

create single market economies that are characterised forexample by common administrative and juridical procedures,a harmonised application of standards and norms or alignedrules for foreign investors. Creating these solid and effectiveframeworks for economic operators can help stimulate in-vestment. The role of integrated markets in promoting eco-nomic growth and development is enhanced if small econo-mies are integrated with well established ones as positivespillover effects (know-how and technological spillovers) aremore likely to occur.

Strategic gains are also important when the countries nego-

tiate as a unified group in multilateral trade agreements.The low capacity of many countries usually makes coopera-tion in international negotiations an attractive option, ascooperation can increase the countries’ bargaining powerand visibility.

Integration can further help provide or protect regionalpublic goods that cannot be effectively addressed indivi-dually but are best tackled in a cooperative framework.Developmental and environmental efficiency gains maythus arise from adopting a regionally integrated approachtowards the provision of regional public goods (like envi-ronment, water management, and migration, all of whichhave an impact on the economy). In this regard, economicintegration can also be an effective approach towards con-flict prevention by establishing ties with economic partnersin a region. For this reason regional economic integrationmay have the potential to complement ongoing efforts to support peace building, and regional good governanceinitiatives.

Increased regional and bilateral cooperation within emerg-ing economies can also be seen as a response to the slowprogress in multilateral trade regimes.

“Integration is not about paying assessed contributions.

The primary purpose of integration is uniting

our markets, uniting our natural resources and uniting

our human resources for greater potential.”

Yoweri Kaguta Museveni, President of the Republic of Uganda, 2008

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ChallengesOne of the most important challenges lies in finding the“optimal” institutional set-up for a region’s regional coope-ration or integration ambition. There is no one-size fits allbut there will be different solutions for different historicalsituations and different objectives to be achieved with

regional integration. It is important to acknowledge thatregional integration is a means and not an end in itself.Institutions have to serve the defined objectives and assistin overcoming the identified problems of market and ofcoordination failure. Regional integration processes involvemany players, and they are highly complex.

A country’s neighborhood matters: regional integration and growth spillovers “Spillovers of growth from across borders are among the main benefits of regional integration. In a more integratedeconomic space, the long-run growth prospects of countries become interlinked as markets of neighboring countriesbecome more accessible. Growth in neighboring countries enhances domestic growth, which benefits neighbors. Thisspatial multiplier enhances the rewards to good policy and contributes to convergence in living standards.

From 1970 to 2000, membership in a common regional trade agreement (RTA) among neighbors was associated with agrowth spillover of 13.6 to 15.3 percent, so every percentage point increase in the average growth rate of RTA partnersbrought a “growth bonus” of 0.14 percent to supplement domestic growth. Associated with this is a spatial multiplierof 1.14 to 1.18, with regional integration increasing the effectiveness of growth-promoting domestic policies by 14 to18 percent. In Europe and East Asia, where regional integration has been strongest, the benefits over the past fewdecades have been even larger. For these countries the average growth spillover between 1970 and 2000 was 15.3 to17.0 percent.”

Source: World Development Report 2009 "Reshaping Economic Geography”

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With regard to formal integration arrangements, there isoften a substantial gap between the aspirations expressed inthe treaties and the reality on the ground. The reasons aremanifold but are usually attributed to lack of commitmenttowards enhanced integration which results in lack of supra-national authority and weak regional coordination mecha-nisms such as secretariats. Inadequate or delayed implemen-tation of agreements is often associated with multiple andoverlapping membership, which is a common feature ofregional integration agreements in Asia and Africa. For strategic, economic or political reasons many countriesbelong to more than one regional integration arrangement.With deeper integration this leads to conflicting obligationsand loss of efficiency advantages.

Institutions would have to cater for the need to negotiateoutcomes between the various actors in a region. In somecases, mechanisms that ensure an equitable distribution ofthe costs and benefits of integration will be useful to over-come situations of political impasse to deeper integration.In many integration systems there is an imbalance of politi-cal and economic power among member countries.

Regional hubs can be driving forces that push economicdevelopment in a region by establishing horizontal linkagesor by attracting foreign direct investment directly or in-directly into the region. On the other hand powerful members of regional economic integration systems may be tempted to dictate both the speed and orientation of the integration process and impede a fair and equitabledistribution of benefits.

African Regional and Sub-Regional Integration Groupings

ECOWASGambia, Ghana, Cape Verde, Nigeria

MRU

Guinea, Liberia,Sierra Leone

UEMGA

BeninBurkina FasoCote d’Ivoire

Guinea BissauSenegal, Mali,Niger, Togo

COMESA

ComesaSeychellas

IGAD

SomaliaDjibouti

Eritrea susp.EthiopiaSudan

AMU

MauritaniaMaroccoTunesiaAlgeria

CEMAC

CameronCAR

GabonEquatorial

GuineaRep. of

Congo Chad

ECCAS

BotswanaSouth Africa

LesothoNamibia

MalawiMadagaskarMauritiusZambia

Zimbabwe

SACUSwaziland

SADC

Tanzania

EAC

UgandaKenya

Sao Tome& Principe

RuandaBurundi

AngolaDR Conga

Libya

Egypt

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Support to the EAC Integration Process

Project descriptionDonor: Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung (BMZ) Countries: Africa, transnational (located in Tanzania) Lead executing agencies: Secretary of the East African Community (EAC), Arusha (Tanzania) Overall term: January 2007 to December 2009

Context: Kenya, Tanzania and Uganda have cooperated in the East African Community (EAC) since 1996 – an earlierattempt at cooperation fell apart in 1977. In 1999 a new treaty was signed which entered into force in 2000. EAC aimsto achieve a Political Federation after going through the different stages of economic integration. The Customs Unionwas launched in 2005 with a transitional period of five years for implementation. To achieve deeper integration the EAC Secretariat needs sectoral, conceptual and financial support.

Objective: The shaping and coordination of the regional integration process by the EAC Secretariat is improved underthe participation of the regional economy and civil society.

Approach: The programme encompasses four components: (1) organisational development of the EAC Secretariat, (2)strengthening the Secretariat’s economic and socio-political competencies, (3) strengthening the advocacy competenciesof regional business associations, (4) dialogue with regional representatives of civil society. GTZ advises the Secretariat’smanagement and its specialist staff on sectoral, conceptual and institutional matters. GTZ supports capacity building ofthe EAC Secretariat in different areas. Among other activities the project offers advice on economic policy and integra-tion to improve the Secretariat’s competence in planning and implementing measures and strategies related to economicand social policies. Reports are prepared on controversial or unresolved technical and political issues. The EAC stafffurther receive on-the-job and advanced training. GTZ also finances external studies, workshops and seminars, andsupports the creation of mechanisms that enable the private sector and civil society to be actively involved in the decision-making process. Cooperation aims at strengthening the lobbying and policy dialogue capabilities of the regional businessassociations and civil society. The Private Sector project component aims at developing the role of the private sector as adriving force for regional development and competitiveness in East Africa. Since 2003 the East African Business Council(EABC) has been the main recipient of technical assistance under this component. A fifth component on strengtheningthe EAC Secretariat in the area of TRIPS and pharmaceutical production will commence in January 2009. Support ontax harmonisation or infrastructure building is given within the framework of other projects.

Results achieved so far: The programme enables the EAC to improve its performance by developing its capacitiesespecially at the Secretariat level, through development of expertise and training. A sound understanding of the currentprocesses and the ability to provide high quality advice is important especially when the Secretariat undergoes rapidchanges due to many new staff, and when important changes are to be implemented regarding the quality of the politicalprojects.

Requirements in 2007 included: the full membership of Rwanda and Burundi, the decision to introduce an East AfricanCommon Market in January 2010 and a customs union in January 2012, as well as the signing of an interim EconomicPartnership Agreement (EPA) between the EAC and the European Union (EU). GTZ remains the only developmentpartner to important East African business associations, and provides much needed advice on formulating sound regionalpolicies and concepts. Its main partner, the East African Business Council (EABC), has gained considerable strengthover the past few years of intensive cooperation and its membership has more than doubled. Cooperation with otherregional associations is developing and gaining momentum. EAC executives have often underlined how important it isto cooperate intensively with the East African civil society, particularly those organisations involved in the East Africanintegration process. The support programme has developed a soon to be implemented concept for cooperation withcivil society organisations within the framework of the EAC Secretariat.

For further information please contact: Gerhard Anger, Email: Gerhard.Anger@gtz.de

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GTZ, on behalf of German Development Cooperation, has been involved with regional economic cooperationand integration initiatives for many years and currentlysupports several initiatives throughout the world. Sub-regions in Africa, Asia, South-Eastern Europe and LatinAmerica are now at different stages of integration anddiffer in terms of regional scope and coverage of sub-jects.

While in some regions economic integration is closelyinterlinked with political integration and the establishmentof supranational institutions, in others state-driven integra-tion is still at a very low level with the private sector beingthe main driver of integration.

GTZ takes into account the specific needs of partners andregions and uses tailor made approaches and instruments inthe different sub- regions. Support targets actors at both

regional and national level and includes stakeholders from:the public sector – including officials and technical staff atregional secretariats or national governments –, the privatesector – represented by associations and chambers –, andcivil society organisations.

How do we support Regional Economic Integration?

“The history of the EU shows that regional cooperation

can be a success story. We wish to assist the African

regional organisations and the African Union in

establishing economic communities. The future of a

sustainable economic development on our neighbouring

continent lies in creating greater markets.”

Heidemarie Wieczorek-Zeul, Minister for Economic Cooperation and Development, 2007

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Governance and Reform Programme: Strengthening the SADC Secretariat

Project descriptionDonor: Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung (BMZ) Countries: Africa, transnational (located in Gaborone, Botswana) Lead executing agencies: Secretariat of the Southern African Development Community(SADC) in Gaborone, Botswana Overall term: July 2002 to June 2010

Context: The Southern African Development Community (SADC) promotes sustainable economic growth, socio-economic development and poverty eradication through deeper cooperation and integration. It aims to achieve progres-sive market integration to create a dynamic regional common market. It intervenes in the areas of peace and securitycooperation, democracy and good governance which are prerequisites for creating a common market. SADC providesregional public goods and services to create an enabling environment for a common market.

To improve the efficiency of SADC institutions, the heads of state initiated an institutional reform process in 2001.Key elements included the centralisation of regional coordination and technical functions of the SADC Secretariat,establishment of SADC National Committees, development of a sustainable SADC financing mechanism, and the formulation of a regional integration strategy focusing on poverty. In August 2003, the SADC heads of state approvedthe Regional Indicative Strategic Development Plan (RISDP) and the Strategic Indicative Plan for the Organ (SIPO),providing a strategic development framework for the region’s Common Agenda. In the context of deeper regional eco-nomic integration, SADC sees the Free Trade Area agreement, which was launched in August 2008, as a first steptowards establishing a customs union in 2010, a common market in 2015, a monetary union by 2016 and a commoncurrency by 2018.

The new Secretariat functions as a: (i) Think tank with the capacity to strategically advise and guide member states onthe implementation of the SADC Common Agenda; (ii) Principal regional coordinator of policies, strategies and pro-grammes for a deeper regional integration process; (iii) Provider of support services (legal, administrative, financial andprocurement) to technical directorates, and organiser of annual consultative conferences and meetings of the SADCdecision-making structures; (iv) Professional ‘programme manager’, that strategically plans and budgets, facilitates theimplementation process, monitors organisation programmes, and systematically reports on progress, in close coordina-tion and cooperation with SADC stakeholders.

The centralisation of functions within the Secretariat involved a paradigm shift from earlier institutional arrangements.However, it is apparent that the present Secretariat is unable to perform these functions due to institutional capacityconstraints and the lack of staff competences, following the SADC restructuring process.

Objective: The SADC Secretariat competently promotes the regional integration process according to RISDP priorities.

Approach: The Programme towards Governance, Reform, Effectiveness of the SADC Secretariat (ProGRESS) aims toimprove the capacities of the SADC Secretariat so that it can competently promote the regional integration and reformprocess to speed up the implementation of the poverty-oriented regional development strategy and improve the livingconditions of the poor in the SADC member states. ProGRESS encompasses five main capacity development compo-nents (1) strengthening the Secretariat’s policy development, managerial and technical capacities and staff competences;(2) institutionalising a RISDP Programme Management Cycle by developing and strengthening objective-orientedplanning, results-based monitoring, and reporting capacities and competences for RISDP implementation; (3) facilitat-ing regional trade policies and related macroeconomic issues; (4) supporting SADC dialogue with private sector repre-sentatives; and (5) improving the thematic and focal area coordination between the SADC Secretariat and the Inter-national Cooperating Partners, particularly in the area of trade facilitation and institutional capacity development.

ProGRESS supplements the complex SADC reform and Secretariat transformation process by providing advisory services,Secretariat staff training, coaching, and moderation, facilitation of high-level multi-stakeholder discussion forums andexpert think tanks, moderation of theme-specific task teams, studies, and the provision of financial resources to hireprofessional staff from within the SADC region. Sector-specific support is provided to accelerate and deepen the regionaleconomic integration agenda in line with the SADC Protocols on trade, and finance and investment.

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Results achieved so far: SADC’s institutional reform, and the formulation and prioritisation of the RISDP are mile-stones signifying a paradigm shift in SADC history. During the RISDP implementation all state and non-state actorscan take on new roles and responsibilities, negotiate viable compromises and agree on fair rules of the game. Thus, deeper regional cooperation and integration is critical to achieve accelerated growth, poverty eradication and sustainabledevelopment. Specifically, the project has contributed to the following achievements:

• SADC has a more focused governing and decision-making structure. It has a prioritised integration agenda and keyregional integration programmes are to be centrally coordinated and managed by the SADC Secretariat. A new andmore functional Secretariat organisational structure consistent with the Secretariat’s mandate and in line with SADCintegration priorities has been approved;

• the Integrated Committee of Ministers (ICM)has been replaced by six Ministerial Clusters to guide and accelerate the regional integrationprocess;

• the SADC Free Trade Area was launched inAugust 2008 and a high-level ministerial taskforce is working on accelerating the SADC economic integration roadmap. The SADCFinance and Investment Protocol has beendeveloped. More reliable data regarding tradeflow and macroeconomic convergence are electronically accessible for policy analysis anddecision-making;

• the Secretariat’s vision, mission and values have been developed and its core functions (as mentioned above) have been clarified;

• medium and short-term RISDP plans and budgets according to SADC’s priorities andlimited resources are available;

• the Secretariat now implements the Council decision to align the SADC Secretariat’s financial and human resources with priority areas and programmes of regional integration;

• the implementation of new management instruments has improved the Secretariat’s internal information, coordina-tion and communication (such as regular general staff meetings, induction programmes for newly recruited staff andmanagement team meetings). This has resulted in increased transparency and understanding of the Secretariats’ corefunctions and key business processes;

• a comprehensive SADC Secretariat Capacity Development Framework has been approved, and an institutional set-upto implement the Institutional Capacity Development programme is proposed.

For further information please contact: Helmut Müller-Glodde, helmut.mueller-glodde@gtz.de

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In many regions – especially in Africa – GTZ supportsregional secretariats or other regional entities with the man-date to oversee and foster economic integration in theregion. Such support aims at strengthening supranationalmanagement and the systematic planning of the integrationprocess to enable the respective regional entity to compet-

ently promote the regional economic integration andreform process. By strengthening inclusive policy-making,managerial and technical capacities as well as staff compe-tences, secretariats should be enabled to effectively promotetrade integration as well as macroeconomic cooperation, likemonetary and financial integration. The governance andreform programme “Strengthening the SADC Secretariat”is one example of how German technical cooperation intervenes at the regional level.

Our support further targets regional private sector and civilsociety organisations. There are often imbalances amongregional partners with regard to technical competencies,absorptive capacity and degree of organisation. GTZ’s sup-port therefore aims at promoting the perspective of theconventionally weaker voices of the poor and promotingactive participation of civil society organisations in shaping

the integration agenda. Enhancing organisational develop-ment and promoting informed dialogue and lobbying capa-bility helps the private sector and civil society to participatein regional decision-making. This is a focal area of supportof a German Development Cooperation’s project in theEast African Community (EAC) where cooperation aims at

strengthening the lobbying and policy dialogue capabilitiesof the regional business associations and civil society.

Fostering public-private dialogue ensures that the frame-work for economic integration is responsive to the business’and private sector’s needs. Various projects and programmes– such as the SADC or EAC programme – support suchdialogue between secretariats and government officials, andprivate sector representatives.

In fact, economic integration often begins as, and buildson, a natural process of business expansion through verticalintegration of production networks across countries. Invarious regions support therefore aims at promoting privatesector cooperation. The private sector component in theEAC programme is one example where cooperation aims atdeveloping the role of the private sector as a driving force

15

Support to Regional Economic Cooperation in Central Asia

Project descriptionDonor: Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung (BMZ) Countries: Kazakhstan, Kyrgyzstan, Tajikistan, UzbekistanLead executing agencies: Ministry of Industry and Trade in Kazakhstan, Ministry ofEconomic Development and Trade in Kyrgyzstan, Ministry of Economic Developmentand Trade in Tajikistan, Ministry of Foreign Economic Relations, Investments and Trade in UzbekistanOverall term: January 2005 to December 2014

Context: Inadequate framework conditions complicate economic modernisation as well as inter and intraregional trade inCentral Asia. Procedures on tariffs, quality standards, as well as trade and economic legislation do not correspond to theinternational standards. Protectionism in Central Asia shows different values according to the countries which try toprotect their own economy, and is opposed to the use of mutual advantages of trade. Consequently domestic Small andMedium-Sized Enterprises, especially export enterprises are not able to take advantage of their potentials.

Inadequate framework conditions complicate economic modernisation as well as inter and intraregional trade inCentral Asia. Procedures on tariffs, quality standards, as well as trade and economic legislation do not correspond tointernational standards and protectionism in many Central Asian countries is still high. Consequently domestic smalland medium-sized enterprises – especially export enterprises – are unable to take advantage of their trade potentials.Development of effective, administrative processes in the ministries and the departments responsible for regulation ofexport andimport operations that will lead to reduction of the bureaucratic burden of entrepreneurs, and an improve-ment of the investment climate in the countries of the region.

Objective: Structures for economic cooperation and trade are improved and regional trade volumes are increased byreducing non-tariff (administrative and technical) barriers.

Approach: The programme advises the relevant line ministries of Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan ontrade related issues. Administrative and technical barriers to trade are covered and regional exchange is promoted.Besides import and export procedures, the programme also analyses the countries’ reorganisation from the formerGOST-structure (Grossudartstweny Standart, the governmental standard for Russia and the CIS states) to a qualityinfrastructure based on modern international standards (ISO - International Organization for Standardization). Studies will be done to assess its costs and benefits.

Local and international experts collaborate on solutions specifically addressing individual country situations. Oneexample is the transfer of models for Single Windows and One-Stop-Shops to promote trade. These are worth imitatingon an international level as method to promote trade. Regarding the implementation of technical requirements the South-South-cooperation will especially be supported. The promotion of the organisational development of institutions byGTZ ranges from accreditation to certification. The partner will receive English training and learn to write businessplans. The significance of technical standards for producers, consumers and the environment will be highlighted to thepartners.

Results achieved so far: The first phase of the programme focused on analysing the situation and identifying the needfor action. Furthermore, it focused on building up the necessary confidence for cooperation and promoting regionalexchange. Consequently, GTZ supported the creation of cross-functional working groups in Kyrgyzstan and Tajikistan.These working groups indentified essential trade barriers and prepared corresponding solution proposals for implemen-tation. A programme website was created, listing export and import procedures and the required documents.

Links: www.trade-ca.org/

For further information please contact: Mr Jonathon Hornbrook, Email: jonathon.hornbrook@gtz.de

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Promotion of economic cooperation in the Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA)

Project descriptionDonor: Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung (BMZ) Countries: Brunei, Malaysia, Indonesia, Philippines (located in Manila/Philippines)Lead executing agencies: Senior officials of the four participating countries Partners: Different Clusters and Working Groups of BIMP EAGA, the BIMP EAGAFacilitation Center, BIMP EAGA Business Council (private sector) and AsianDevelopment Bank (ADB) Overall term: January 2005 to June 2011

Context: The Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA), an inter governmentalassociation fostering economic cooperation and integration, was founded in 1994. Its aim is to promote economic growthand narrow the development gap via trade, investment and tourism promotion within the sub-region and achieve fastereconomic coalescence than that provided for in the accord of the Association of Southeast Asian Nations (ASEAN).However, this process is still suffering from structural deficiencies, weak institutions, variable support from the govern-ments of the respective countries, a lack of financial backing, gaping chasms between rich and poor and underlying orclearly evident security problems. To date, BIMP-EAGA has not succeeded in generating noteworthy new dynamicsand relevant economic interregional trade flows.

Objective: The GTZ Project aims to strengthen relevant public and private sector institutions in the sub-region to pro-mote sustainable economic cooperation in the areas of cross-border trade, investment and tourism” (objective of thefirst phase, 2005-2008). The objective of the second phase has been slightly adjusted: “Cross-border trade cooperationof the sub-regions in BIMP-EAGA is significantly extended” (2009-2011).

Approach: It concentrates on four key intervention areas:

1) Supporting private sector bodies in BIMP-EAGA, in its advisory and representative role to create an enabling environment for companies to benefit from business opportunities provided by the sub-regional arrangement.

2) Strengthening sub-regional public sector organisations (like the Facilitation Center) to facilitate and coordinate decision-making processes, the delivery of promotional services as well as the monitoring of programmes and activities.

3) Enhancing intergovernmental agreements for the facilitation of trade, investment and tourism as well as constructive cooperation with ASEAN.

4) Strengthening cross-border trade, investment and tourism by applying the Value Chain Approach following theGTZ ValueLinks® methodology in sectors such as tourism, halal products, oil palm and seaweeds.

GTZ advises the existing BIMP-EAGA cluster and working groups, political leaders, trade associations and in somecases individual enterprises on cross-border trade, investment and tourism and economic development issues. One areais the private sector, considered the driving force for economic growth, Support is further provided to establish mecha-nisms to foster public-private dialogues. GTZ works in close collaboration with the Asian Development Bank (ADB).

Results achieved so far:

1) Working with the BEBC and its focal points in the four countries, the Project has contributed to the institutionalstrengthening of sub-regional private sector organisations. It provided technical advice in areas like BusinessDevelopment Services promotion, organisational development and policy advocacy.

2) The Project has contributed to the institutional strengthening of the BIMP-EAGA Facilitation Center. The center has been suported in its strive for legalisation, by supporting strategic planning and enhancing coordination among government agencies and with the private sector.

3) The Project has provided technical services to analyse and address institutional issues arising in inter-country coordination regarding connectivity and CIQS issues. Linkages with ASEAN have also been strengthened.

4) Economic cooperation in the sub-region has been strengthened through the application of the Value ChainApproach (Valuelinks®). The Project provided technical consultancy services with regard to sub-sector analysis, strategyformulation, action planning and implementation, (including facilitation of market-oriented measures to strengthenvalue chain linkages), and spread its benefits equitably among the value chain players.

For further information please contact: Dr Peter Richter, Email: Peter.Richter@gtz.de

for regional development and competitiveness. The EastAfrican Business Council (EABC) has been the main recipient of technical assistance under this component.Where trends towards deeper integration have yet to occur,a pragmatic approach to foster cross-border trade and in-vestment flows is needed. This is done in the BIMP-EAGAproject (see box page 16), which aims at strengtheningcross-border trade, investment and tourism by applying the Value Chain Approach.

However support does not necessarily have to be providedat regional level but can be provided to national govern-ments. The national level forms the basis for regional eco-nomic integration, as governments and administrationshave to incorporate treaties and regulations into nationallegal and administrative procedures. Supporting nationalministries and administrations to implement what has beendecided at regional level is crucial to realise the integrationprocess.

In addition, we often see a lack of participation of smallerand weaker countries in the integration process due to thelack of technical expertise or power imbalances. Fosteringcapacity development for smaller and vulnerable countriesis crucial to ensure that the integration process benefits allparticipating countries. GTZ therefore assists in developingcompensation mechanisms to promote equal benefit sharingamongst all participating countries.

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GTZ has gained much valuable experience in supportingregional economic integration and cooperation initiatives.Taking into account the different stages of integration processes in Africa, Latin America, South-Eastern Europe orAsia we use tailor made approaches in different sub regions.We promote a constant reflection on the approaches andinstruments applied and enable an exchange of best practicesamong GTZ staff, partners and different stakeholders.

In this regard, GTZ has reinforced its efforts to incorporateregional economic integration and cooperation in its in-stitutionalised knowledge management and promotes dia-logue between GTZ staff as well as with other donors andpartners on how to optimise support.

In line with the Paris Declaration and to ensure coherenceof regional and national policies and support provided atdifferent levels, GTZ seeks to intensify dialogue betweennational and regional partners and the donor community.

The regional dimension has also received particular atten-tion in the framework of the EU Aid for Trade Strategyand the EU has committed to increase its collective expen-diture on trade related assistance to ÛEuro 2 billion peryear. GTZ will remain committed to provide technicalsupport to regional economic integration and cooperationinitiatives.

The way ahead

Trade within the same geographical region can often be

more conducive to diversification, structural change

and industrial upgrading than overall trade.

UNCTAD 2007, Trade and Development Report

Current Projects – regional economic integration and cooperation

No. 6 and 7(see page 19)

No. 1 to 5(see page 19)

No. 8 to 10(see page 20)

No. 11 to 13(see page 20)

19

“The basic rationale for deeper integration of the Asian economies

is its potential to drive sustained, broad and inclusive growth,

thereby reducing poverty and raising living standards across the region.”

Haruhiko Kuroda, President of Asian Development Bank, 2005

20

Title

Management AdvisoryServices to the ECOWASCommission

Advisory services for the East AfricanCommunity (EAC)Secretariat

Governance and reform programme:Strengthening the SADC Secretariat

Pan-African ReformProcesses in the Fieldof Agro-businessDevelopment(NEPAD/CAADP)

Promotion of fiscal har-monisation in EAC GoodFinancial Governance

Sustainable economicdevelopment in Central America

Trade Policy andPromotion in Central America

1

2

3

4

5

6

7

Country

Benin, Burkina Faso, Côte d’Ivoire,Gambia, Ghana, Guinea Bissau, Cape Verde, Liberia, Mali, Niger,Nigeria, Senegal, Sierra Leone, Togo

Kenya, Tanzania, Uganda, Burundi,Rwanda

Angola, Botswana, DemocraticRepublic of the Congo, Lesotho,Mauritius, Malawi, Mozambique,Namibia, Seychelles, Swaziland,Tanzania, South Africa, Zambia,Zimbabwe

Sub-Saharan Africa

Kenya, Tanzania, Uganda, Burundi, Rwanda

El Salvador, Nicaragua, Honduras,Guatemala, Costa Rica

El Salvador, Guatemala, Honduras

Africa

Latin America

Lead executing agency

Commission of Economic Communityof West African States (ECOWAS) inAbuja, Nigeria

Secretary of the East AfricanCommunity (EAC) in Arusha,Tanzania

Secretariat of the Southern AfricanDevelopment Community (SADC) inGaborone, Botswana

African Union, NEPAD (New Partner-ship for Africa’s Development)Secretariat inMidrand/Johannesburg,South Africa and RECs

Secretary of the East AfricanCommunity (EAC) in Arusha,Tanzania

Central American Centrum of SMEpromotion with headquarters (CEN-PROMYPE) in San Salvador, CentralAmerican Bank for EconomicIntegration (BCIE) with headquartersin Tegucigalpa, Honduras

El Salvador, Guatemala, HondurasCentro para la promoción de lamicro y pequeña empresa enCentroamérica (CENPROMYPE) inSan Salvador

Current projects – regional economic integrationand cooperation

21

Title

Information Services forSmall and MediumEnterprises (SME) tomake use of TradeOpportunities in South Asia

Promotion of RegionalEconomic Cooperation in Central Asia

Promotion of economiccooperation in theBrunei-Indonesia-Malaysia-PhilippinesEast ASEAN GrowthArea (BIMP-EAGA)

Open Regional Fund forForeign Trade Promotionin South East Europe

Private Sector Promotionin South Caucasus

Open Sectoral Fund forLegal Advise inSoutheast Europe

8

9

10

11

12

13

Country

Sri Lanka, Nepal, Pakistan,Afghanistan, India, Bhutan,Bangladesh, Maldives

Kazakhstan, Kyrgyzstan, Tajikistan,Uzbekistan

Brunei, Indonesia, Malaysia,Philippines

Albania, Bosnia and Herzegovina,Kosovo, Croatia, Macedonia,Montenegro, Serbia

Armenia, Azerbaijan, Georgia

Albania, Bosnia and Herzegovina,Kosovo, Croatia, Macedonia,Montenegro, Serbia

Lead executing agency

Secretariat of the South AsianAssociation of Regional Cooperation(SAARC) in Kathmandu, Nepal.

Partner ministries in Kazakhstan,Kyrgyzstan, Tajikistan, Uzbekistan

Senior officials of the four partici-pating countries

Ministries of the SOE-countries

Ministries in the three partnercountries

Ministries of the partner countrieswhich are responsible for the lawreform project

Asia

Eastern Europe / Caucasus

22

Baldwin, Richard (2006): Multilateralising regionalism.Spaghetti Bowls as building blocs on the path to global freetrade.

De Lombarde, Philippe (ed.) (2006): MultilateralismRegionalism and Bilateralism in Trade and Investment.Dordrecht.

UNCTAD (2007): Trade and Development Report 2007.Regional cooperation for development

UNU - Comparative Regional Integration Studies/GARNET Network of Excellence: Regional IntegrationKnowledge System www.riks.garnet-eu.org/Home.5.0.html

World Bank (2008): Reshaping Economic Geography.World Development Report 2009. Washington.

WTO Regional Trade Agreements Gateway:www.wto.org/english/tratop_e/region_e/region_e.htm

Further reading and links

23

Wirtschaft und Beschäftigung | EconomicDevelopment and Employment

Creating growth – defeating poverty Economic growth is a fundamental requirement for thedevelopment of a country. For companies to invest and aneconomy to grow, stable environments, efficient institutions,functioning markets and access to sustainable financial services are all required. GTZ assists its partner countries inimproving their economic framework conditions, removingbureaucratic obstacles and establishing suitable promotionalstructures.

Through dialogue between public and private actors, wedevelop comparative advantages and initiate multisectoraleconomic flows. We advise on economic policy questionsand work with our partners to develop solutions for privatesector promotion, and local, poverty-centred financialsystems to give everyone an opportunity to share in econo-mic growth. We realise that economic growth is created bypeople. This is why we begin with viable vocational trainingconcepts, which communicate the right competences fordynamic economic development, tailored to needs and withstrong practical relevance. Integrating as many populationgroups as possible into the economy is the only way toensure that growth has a broad effect and is sustainable. With its knowhow, GTZ makes an active contribution tothe full realisation of its partners' economic potential in away which is not only profitable but also socially and eco-logically acceptable. We create opportunities. For all.

Deutsche Gesellschaft für TechnischeZusammenarbeit (GTZ) GmbH

GTZ is a government-owned corporation with internationaloperations. We work on behalf of the German FederalGovernment and other public and private-sector clients.We offer viable, forward-looking solutions for political,economic, ecological and social development in a globalisedworld. Through these activities we support complex reformand change processes – sometimes under difficult conditions.To improve living conditions sustainably.

We are GTZ – Partner for the Future. Worldwide.

For developing countries, the most important challenge is to translate recent gains

into lasting progress through successful integration into the global economy.

At the regional level collective and coordinated responses can offer additional possibilities

for improving growth and structural change in the globalizing world.

By working together more closely and building on common and complementary interests,

partners in the same geographical region can significantly strengthen their efforts

to meet the challenges of globalization.

Ban Ki-moon, Secretary-General of the United Nations, 2007

Our goals

Deutsche Gesellschaftfür Technische Zusammenarbeit (GTZ) GmbH

Dag-Hammarskjöld-Weg 1-565760 Eschborn/GermanyT +49 (0) 6196 79-0F +49 (0) 6196 79-1115E info@gtz.deI www.gtz.de