The World Bank Board of Executive Directors approved today a total of US$29.9 million for Mauritius, Mozambique and Seychelles to support their efforts to collaborate and create regional reforms that will improve the trading environment within Africa. Today’s funding comprises a US$10 million International Development Association (IDA) credit to Mozambique and two International Bank for Reconstruction and Development (IBRD) loans of US$14.9 million and US$5 million to Mauritius and Seychelles, respectively.
“The above countries recognize the perverse effects of barriers to trade, and they’ve agreed to collaborate in the implementation of reforms aimed at removing those barriers,” said Mark Lundell, World Bank Country Director for Mozambique, Mauritius and Seychelles. “This initiative is built on an increasing body of knowledge on the barriers that continue to restrict trade in goods and services in Africa and the economic benefits of deeper economic integration between African countries.”
The project will support the Accelerated Program for Economic Integration (APEI) that will help to improve the policy environment for trade in APEI countries. The program will focus on removing barriers to trade, promoting trade in services, and boosting resources to facilitate trade.
“This innovative project supports the countries in jointly removing barriers to trade which impact heavily on poor people,” said Anabel Gonzalez, Senior Director for World Bank Group Trade and Competitiveness Global Practice. “The more rapid economic integration that this partnership between Mozambique, Mauritius, and Seychelles seeks to achieve will open up new regional markets, improve competitiveness and create jobs.”
Reducing non-tariff barriers that stifle regional markets in food products will increase incentives for production and increase food security in the region. Opening up regional trade in services in areas such as transport is expected to increase competition and drive down transport prices. Increased risk management at borders, and stronger coordination among border agencies will reduce dwell time, and hence costs at borders. Improved access to trade information through trade portals will reduce the scope for rent seeking and corruption related to trade which impinge particularly heavily on small traders, many of whom are women. Finally, reducing the costs to import inputs and export final goods will make companies more productive and competitive. It will increase market size for operators, allowing companies to benefit from economies of scale, and generate new opportunities for investment.
The APEI is an initiative of five countries and the financing approved today is part of a two-series to support the initiative. This first operation supports Mozambique, Mauritius and Seychelles while the second will go on to include Malawi and Zambia as well. The initiative is expected to facilitate trade across the region and has the potential to facilitate the emergence of regional supply chains in the continent.
“This initiative supports African countries’ growing realization of the need to improve regional trade, which remains extremely fragmented in the continent,” reminded Ahmadou M. Ndiaye, World Bank Director for Regional Integration. “For example, completing border compliance procedures takes an exporter in the region 108 hours and $542 on average, compared with a global average of 64 hours and $389. This reminds us of the need to press ahead with trade reforms as supported by our own World Bank regional strategy for Africa.”