Promoting growth and reducing poverty through regional infrastructure

7 December 2015 12:30 - 15:00 GMT+00
Round-table
Chair:

Dr Dirk Willem te Velde-Senior Research Fellow and Head of IEDG, ODI

Panel:

Emerging research findings:

Comments:

·         Frank Matsaert- CEO, Trademark East Africa  (via VC)

·         Tom Pengelly- Managing Director, Saana and Director, External Secretariat APPG-TOP

·         DFID (tbc)

Description

The current emphasis in international debates on reducing trade costs has led to major investments in regional infrastructure. Previous analysis of regional infrastructure for trade facilitation shows the difficulties in attributing and disentangling the impact of infrastructure on growth and poverty reduction. Very few analyses focus specifically on the regional dimension of infrastructure. And most analysis cover the direct or static effects, rather than indirect effects.

During this event, emerging findings from a DFID funded research project entitled Regional infrastructure for trade facilitation – impact on growth and poverty reduction will be presented involving ODI and other researchers. The findings are the result of a series of research papers and case studies aimed at employing innovative methods in answering the following questions:

  • What are the channels of impact and what is the evidence about the effects of regional infrastructure on trade facilitation on growth and poverty reduction?
  • Are there any potential risks to the poor and vulnerable?
  • How can policy enhance positive effects and mitigate the potential negative effects?

This roundtable will hear from the research team followed by a range of comments.

A light lunch of sandwiches will be provided between 12.30 and 13.00.

If you are interested in participating, please RSVP to Mobolaji ([email protected]) before Thursday 3 December 2015. As space is limited, you may be placed on a waiting list if the event becomes over-subscribed.

Summary

The meeting was attended by ODI staff, TradeMark East Africa, Saana Consulting, ECDPM, KPMG, the UK Aid Network, Cambridge Economic Policy Associates, the Bretton Woods Project, Crown Agents, the Independent Commission for Aid, the Ghana High Commission and the Federation of East African Freight Forwarders Associations, as well as a number of independent participants.

Dirk Willem te Velde (Head of the International Economic Development Group, ODI and Director of the Supporting Economic Transformation programme) introduced a panel composed of:

·      Marie-Agnes Jouanjean, Research Fellow, ODI and principal investigator

·      Ben Sheperd, Principal, Developing Trade consulting and author

·      Frank Matsaert, CEO, TradeMark East Africa

·      Tom Pengelly, Managing Director, Saana Consulting and Director, External Secretariat APPG-TOP

Dirk Willem te Velde, Senior Research Fellow at ODI, began the meeting by explaining the origin of the report, which aims to understand the wide range of impacts (both direct and indirect) that RITF can have on growth and poverty reduction. The study uses a broad definition of RITF to encompass all the possible types of infrastructure (soft and hard).

The first presentation by Marie-Agnes Jouanjean, Research Fellow at ODI and the research leader on the RITF project, highlighted the importance of focusing on the regional dimension of infrastructure, particularly given the small scale of most African economies and the presence of regional, rather than national, value chains and markets. In summarising the conclusions of the study, she highlighted both the direct impact of hard infrastructure on growth and poverty as well as the complementarity between the hard and soft components of infrastructure. The study found that RITF can have strong impacts on growth and poverty reduction; and that these effects are mostly indirect. Any reductions in trade costs resulting from regional infrastructure development initiatives need to be passed through to final consumers and households in order to ensure that growth and poverty reduction objectives are achieved.

The second presentation by Ben Shepherd, Principal of Developing Trade Consultants Ltd, focused on networks. He argued that trade economics largely misses the importance of networks and connectivity, despite the reality that many industries work as network industries, and networks are crucial to get goods in and out of countries. Therefore, networks should be considered when planning the development of both the hard and soft components of regional infrastructure. Networks can support the generation of regional spillovers of economic activities and the creation of value chains. This is particularly important for landlocked countries, and implies that a regional approach to infrastructure development is appropriate for Africa.

Key Comments

Many participants praised the report for bringing together old and new evidence on RITF. They were particularly impressed with how the report opens the path to new, more informed discussion on these topics, and how it identifies topics for further research. The comments and remarks made during the workshop were focused around the following key topics:

Ability to integrate trade and infrastructure projects

Tom Pengelly, Managing Director of Saana Consulting, noted that the report played a key role in emphasising the link between trade facilitation and hard and soft infrastructure. These issues are often analysed separately in developing countries, and he believed that the report does a good job of integrating the two. In his view, the division between hard and soft infrastructure is reflected in the work donors do, as they traditionally specialise in one or the other (usually multilateral donors focus on hard infrastructure, and bilateral donors on soft infrastructure). This is changing, and the report can promote the change by emphasising the importance of an integrated approach.

Originality of the research

The report was praised by participants for bringing some innovative concepts to the forefront. In particular, Frank Matsaert (TMEA) explained that the use of regional value chains as a tool for analysis was very valuable. He also noted that the study’s use of networks and connectivity for economic growth is a key area of interest for TMEA – since a single intervention in one area can affect the entire network.

Use of report findings for improved planning and coordination of development projects

Many participants emphasised how the findings of the report could feed into the design and planning of development projects. In particular, it was felt that the large trade and private sector development facilities, such as TMEA, should incorporate the findings of this report. Echoing this view, Tom Pengelly added that a new TradeMark Southern Africa programme is currently being designed and will draw on the RITF study when shaping the programme. Many felt that it would be useful to translate the report’s main findings into a practical toolkit to be used by development practitioners. In Tom Pengelly’s view, a key starting point will be convey the headline points from the research to policymakers, which can then be used to motivate specific programmes and initiatives.

Value chains

The report highlighted how the analysis of value chains at a regional level is very important to understand trade in a region. East Africa is a clear example of that, with garments/textiles value chains spreading across the region.

Planning of infrastructure projects

It was noted that regional infrastructure generates benefits across a region, while national infrastructure can also benefit neighbouring countries. Therefore, the question was raised who should have the responsibility to plan for the development of such infrastructure – is it for the countries who host the infrastructure, or those who benefit? Ben Shepherd felt that regional infrastructure can generate regional spillovers and, therefore, called for coordinated planning. Sheila Page, Senior Research Associate at ODI, expressed caution by arguing that it is not the same thing to say that regional infrastructure matters and to call for a regional approach to the development of regional infrastructure. The report leaves this question open for further research.

The importance of getting policies right

The report emphasises how some of the poor and marginalised groups might lose, and some others might win, from RITF. It argues that this does not mean that the development of regional infrastructure is positive or negative for these groups, but rather that adequate policies should be put in place to address these issues as they arise, in order to ensure that marginalised groups benefit from regional infrastructure development.

The role of the private sector

Ben Shephard noted that RITF is not only important for large companies, but is also beneficial for SMEs. This has important implications for employment generation and poverty reduction.

Most of the successful initiatives that we see in improving trade logistics originate from the private sector. Businesses and firms often come up with innovative solutions to business issues, which are then taken over by the government. Therefore, the key policy questions are: (i) How to ensure that the private sector is adequately involved in the policy making process? And (ii) How can government systematically scale up from private sector initiatives to public programmes?

Greater involvement by the private sector could also support the implementation of laws and regulations. In many cases, the private sector is not adequately consulted when policies and rules are designed and, therefore, these might not comply with what the private sector needs.

Commenting specifically on investment, Tom Pengelly emphasised the importance of private sector investment as well as the possibility of utilising concessional finance and aligning this form of finance with opportunities.

Issues of coordination in planning and development of regional infrastructure

Frank Matsaert argued that if regional spillovers are important, then there is a strong case for coordination (for example from donors) in the development of regional infrastructure. Marie-Agnes Jouanjean concurred that coordination is important, particularly in terms of bringing regulators and the private sector together (as highlighted in the example of warehouses in Kenya in the RITF report). Dirk Willem te Velde noted that coordination is hard work, and will require the involvement of a broad range of actors.

Selecting borders for the night light analysis

Commenting specifically on the border analysis in the RITF paper that uses night light data, Sheila Page emphasised the need to be careful about looking at individual borders. This is because some borders are deliberately placed in areas where there is very little activity. In this context, she advocated care in selecting borders rather than using a map of all of West Africa.

Where to focus and at what scale?

In raising specific questions stemming from the research findings, the audience asked whether the focus should be on soft or hard infrastructure and what individual firms can do.

Ben Shepherd mentioned that while the scale of interventions in trade is typically large, there is significant scope for micro interventions to address connectivity issues related to the distance between where people live and regional markets.

Ben Shepherd also explained that logistics costs remain very high in Africa, and suggested that lots more needs to be done to reform markets for logistics services.