Chapter

9 The Role of Regional Institutions in Achieving NEPAD’s Goals

Author(s):
Saleh Nsouli
Published Date:
September 2004
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Author(s)
Charles Konan Banny

Let me start by touching upon a number of salient features of NEPAD, which the African authorities have identified as crucial for jointly addressing the growing underdevelopment of Africa. Next, I want to share what I view as the main reasons for having the regional integration institutions serve as the cornerstone of NEPAD. Finally, in light of the experience gained by the Central Bank of West African States (BCEAO), I shall suggest ways in which these regional institutions may best contribute to fulfilling the goals of this new strategic approach toward achieving sustainable development in Africa.

To begin, in what specific way does NEPAD justify the hopes that have been placed in this new initiative? Historically, Africa’s relationships with the rest of the world have not been based on mutual interests and goals. The first new feature of NEPAD is that it establishes a partnership that differs markedly from past relations. NEPAD is predicated on recognition of mutually shared benefits of development in Africa. The rest of the world has good reason to support our development efforts because Africa has substantial growth potential and immense resources. When solvent, our continent’s internal market will offer outlets for foreign products. For the same reason, Africa is setting the stage for more rapid social and economic growth and thereby laying claim to a more prominent role on the international political and economic scene. Our goal is to move away from the traditional pattern of cooperation, which relied chiefly on the generosity of bilateral partners at the expense of a clear definition of common objectives. Accordingly, the new NEPAD partnership departs from the humanitarian approach to cooperation and instead favors an increased degree of stakeholder accountability with a view to mutually beneficial results. NEPAD cannot attain its fundamental goals unless each stakeholder in the new partnership feels accountable for achieving results that can be measured against clearly defined criteria.

The second distinctive feature of NEPAD is a clean break from existing development strategies. Efforts were made in the latter half of the 1980s to pursue the economic rehabilitation of Africa through structural adjustment programs, special donor assistance programs, and debt relief measures. Still, at the onset of the third millennium, one of the greatest challenges facing African countries and their foreign partners is how to accelerate growth and reduce poverty in Africa.

Significantly, the development strategy promoted by NEPAD reflects a long-term, market-oriented approach focused on the structural reform of Africa’s economies. It encompasses a new conception of the state’s role, based on increasing ownership of development projects and programs, as well as promotion of the private sector; and it stresses the importance of enhancing the quality of economic policies. A dozen sectors identified as holding the key to sustainable development in Africa will participate in this strategy.

Why should regional integration institutions serve as the cornerstone of NEPAD? In my view, the first argument in favor of this strategy resides in our new approach to development, reflecting our ongoing commitment to integrating African countries into the world economy by expediting regional integration.

Indeed, in its conceptual framework, NEPAD is moored to three successive anchors—national, regional, and the continent-wide. It follows that the NEPAD initiative cannot be operational at the top two levels of the pyramid unless it has been properly implemented at the national level. This is especially vital in the priority areas of infrastructure development, as well as in building human capacities, achieving good governance, fighting corruption, and, in particular, promoting peace and democracy. Furthermore, we must revitalize the partnership between the public and private sectors at the national level, and we need to redefine the role of the state with a view to ensuring the rehabilitation and stability of the business environment.

I see a second reason for basing NEPAD’s implementation on regional integration institutions. The quest for economies of scale, increased intra-African trade, and the greater stability provided by the integration process argue in favor of such an approach in a globalized environment. Furthermore, in recent years a global consensus has emerged regarding the need for a full-scale review of the international cooperation strategy, with a new focus on regional institutions. In its latest incarnation, which places greater reliance on rapid regional integration, this strategy has focused on maximizing country ownership of development programs and projects.

A third rationale is the need for effective assessment and monitoring of NEPAD’s implementation. I believe that the initiative will succeed to the degree that the primary stakeholders can exercise self-discipline as well as mutual supervision of macroeconomic policy in the context of clearly codified mechanisms accepted by all. Peer review of performance and policies will help identify, assess, and disseminate best practices; track progress achieved in the attainment of objectives; encourage governments to abide by agreed-upon rules, principles, and codes; and identify institutional constraints that must be rectified if the goals of NEPAD are to be achieved.

As befits their supranational status, regional integration institutions are by definition better suited to perform this function with the necessary speed and efficiency. Furthermore, the BCEAO experience sheds light on the vital issue of how best to design a framework for peer review of policies implemented in a continent-wide context.

If, as I have just indicated, the regional integration institutions should serve as the cornerstone of NEPAD, how can these institutions best help to fulfill the goals of this new philosophy of African development? To answer this important question, I shall illustrate by discussing BCEAO’s experience with regional cooperation in a key area, namely, currency as a common public good.

For roughly 40 years, BCEAO has been conducting a common monetary policy among the member countries of the West African Monetary Union (WAMU). In addition, BCEAO manages the banking system and exercises banking supervision through a uniform banking law, a common prudential framework, and a regional banking commission. The BCEAO also ensures the observance of collective regulations governing the external financial relations of member countries. The BCEAO thus plays a decisive role in strengthening monetary integration and financial stability within WAMU, particularly by enhancing the quality of financial information and monitoring banking risks. In this connection, BCEAO has made a vital contribution to the preparation of a uniform system of accounts for banks and the adoption of legislation to combat money laundering and the financing of terrorist activities.

Within its sphere of competence, BCEAO provides multilateral surveillance for all member countries. This has allowed BCEAO to instill effective monetary discipline, reinforced by constant yet amicable peer pressure in the conduct of monetary policy. This overall framework has yielded impressive results, particularly as regards the inflation rate (which averaged 4.1 percent a year over the period 1980–93). Furthermore, following the change in currency parity in 1994, when prices rose an extraordinary 30.7 percent, the efficient exercise of collective discipline helped bring price behavior back to its long-term pathway as early as 1996. The inflation rate thus averaged 2.7 percent a year between 1996 and 2001. This performance has largely been the result of the quarterly monetary reviews of the zone by the finance ministers of the union, as well as the quality of the regional supervision provided by the regional central bank, coupled with amicable peer pressure. The peer pressure has been consistent and realistic, but also firm.

However, in 1994, in view of the difficulties that the member countries experienced in strengthening the economic fundamentals of their common currency, action was taken to broaden the scope of the common currency policy to encompass the whole economy. This led to the establishment of the West African Economic and Monetary Union (WAEMU), whose aim is to expedite economic growth and enhance regional development. The need to ensure the viability of the WAEMU area prompted a decision to make the convergence of economic policies and performance a priority. Accordingly, a mechanism for the multilateral surveillance of macroeconomic policies and performance was established in 1996, supported by a convergence, stability, growth, and solidarity pact, which took effect on January 1, 2000. Notwithstanding the domestic and external shocks that have assailed the WAEMU economies, encouraging progress has been made in the first three years of the mechanism’s implementation. The WAEMU countries need to press ahead with this convergence process, enhance macroeconomic stability, and bolster the regional integration that currently holds the key to NEPAD’s success.

The lessons I would like to draw from this brief but immensely enlightening period in our history fall into five major categories:

  • The sense of shared destiny and partnership afforded by the community-based framework, which rallies member countries around specific, well-targeted objectives that can be easily monitored

  • The existence of mechanisms to ensure regular dialogue among government officials and the representatives of community-wide institutions, which allows for continual fine-tuning

  • The awareness of a set of rules freely agreed upon

  • The strict observance of the cardinal rule of solidarity and equality of treatment among the member countries, which gives the WAEMU its cohesiveness; and, last but not least

  • The indirect pressure that possible sanction by the market exerts upon the conduct of economic policy, even if the available penalties are not imposed.

The experience acquired over time by regional integration institutions, accustomed to managing common public goods in various countries, has a critical role to play in ensuring the fulfillment of NEPAD’s objectives. Integration is now a fact of life. This initiative is thus a worthy one; it is based on consensus, and it is timely because Africa, with its vast untapped resources, is genuinely committed to overcoming economic stagnation and contributing to the common good by participating in the market globalization process.

If they are to make a decisive contribution to the development of NEPAD, regional integration institutions must strengthen their institutional framework and enhance their freedom of initiative and their autonomy—in short, their independence—which will be duly reflected in good governance and the accountability of their leadership.

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