A Common External Tariff for ECOWAS: An old article in USAID’s Frontlines

April 19th, 2009

7 More West African Countries Cut Tariffs, Boost Trade Pact Many countries in West Africa used to levy more than 100 different levels of tariffs on imports, a holdover from the colonial era. The levy could be miniscule, double the value of the product, or some amount in between. But now the number of tariffs and their value are declining under new policies supported by USAID trade advisors. In late May, the Economic Community of West African States (ECOWAS) approved a plan to progressively implement a common external tariff (CET). The agreement will increase the number of West African countries in the CET from eight to 15. The plan will lower tariffs and reduce costs for importers. The Agency helped ECOWAS adopt the CET through the ECOTrade Project, which boosts the business climate. Along with freer intraregional trade, the CET is laying the foundation for a 15-country West African customs union and places ECOWAS among only a dozen customs unions in the world. “The implementation of the CET for West Africa will increase economic regional integration and is a critical step for establishing a free trade area in the region,” said Jeremy Strauss, the trade and investment advisor with USAID’s West Africa Regional Program (WARP). Map showing new CET countries in West Africa-Cape Verde, Ghana, Guinea, Liberia, Nigeria, Sierra Leone, and The Gambia—and existing CET countries-Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, Togo. “While the benefits of free trade areas are the subject of continued debate, the work has resulted in unprecedented cooperation in trade, fiscal, and customs policy by ECOWAS members. Such collaboration is critical to removing obstacles to doing business in the region.” Implementation of the ECOWAS treaty had been stalled for years. Beginning in 2000, however, the competitive global economy spurred country leaders to act. The European Union had also announced that it would negotiate future aid and trade agreements only with customs unions, not individual developing countries. The ECOWAS heads of state moved to expand the CET. The CET simplifies the structure of tariffs, with a top bracket of 20 percent on finished goods, 10 percent on intermediate inputs, 5 percent on basic necessities and raw materials, and no tariff on social goods such as medicines and publications. The CET should also provide cost certainty for traders, speed customs clearance, reduce fraud and bribery, and promote greater transparency. Bridging the French-English divide in West Africa will be another tangible benefit of the ECOWAS CET. “The result of our efforts will be that enterprises will take advantage of increased opportunities in the region and beyond,” Strauss said. ”It will also strengthen the ECOWAS member states’ negotiation skills for agreements among themselves and with third parties such as the European Union and WTO [World Trade Organization].” The tariffs should be fully harmonized by the end of 2007 so that goods entering any of the 15 ECOWAS countries will be assessed at the same rate. ECOTrade is implemented through a cooperative agreement with USAID partners IBI-International Business Initiatives and the Associates for International Resources and Development (AIRD)

This article came out in September 2005. I enjoyed working with ECOWAS and the guys from AIRD. I miss USAID.


Mobile Banking in Emerging Markets: Africa, others…

April 18th, 2009

Mobile banking is the beginning of the end for the great informal sector in Africa. When people can move money around with their mobile phones, everyone will be able to have a bank account. It will be easier to pay utility bills, repay loans and establish a cash flow history. Governments may even be able to tax people on informal income via a percentage of transactions.

Day Two in my new office at the US Embassy in Accra 2007 provided the pleasure of discussing wireless solutions, mobile banking and anthropology with Mark Davies of Busy Internet. Mark has been involved in a number of Internet and software companies since the 90’s. Some have been extremely successful. He’s one of the more imaginative people I’ve met in African business. He has been developing SMS messaging software for groups of small businesspeople. We were discussing how these applications can create value for producers, traders and other entrepreneurs. But will people in West Africa spend their time reading SMS messages that pile up on their cellphones even if the messages are useful? Can they be expected to pay for such a service? For money…well.. I was trying to work out a business model for such a product.

For three years, I supervised a project that sought to increase regional trade in West Africa in agricultural products by introducing people to computers, use of better market information and SMS messaging. The hypothesis is that people will use these tools to discover new customers, new opportunities, new suppliers and to facilitate transactions.

This hypothesis is good enough, but new systems and tools, microcredit and various financial services for the poor are only successful if they understand and capitalize on the anthropological aspects that determine acceptance or rejection. From my brief experience running a microfinance bank, I am sure I could look at any microfinance bank in any country and develop and profile, behavior and style of interaction that would characterize a successful loan officer or customer service person, perhaps different profiles would net different types of customers. Likewise, other factors of the customer experience in a particular location could be evaluated to determine success or failure. The acceptance of mobile banking and other mobile business tools will depend on similar factors.

If I were to walk through Agbogbloshie market in Accra and guess the best set up for a peoples’ bank, I’d collocate the branches with Coke bottle shops or cellphone kiosks.

Post your mobile banking experiences in developing economies.

Check out Esoko to get some ideas about how mobile applications can be done. Of course, targeted, simpler mobile phone-based applications are likely more appropriate than Web-focused applications for users in Sub-Saharen Africa. The PC is key for more complex tasks like setting up tailored messages for SMS groups, and moving enterprises past the microenterprise level of complexity.