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The United Nations Economic Commission for Africa (UNECA) is taking on board Landlocked Developing Countries (LLDCs) and Small Island Developing States (SIDS), alongside Least Developed Countries (LDCs) in addressing challenges that hamper the implementation of the African Continental Free Trade Area (AfCFTA).
The countries mentioned above constitute three categories of states facing unique realities and vulnerabilities, which have continued to impact their development, including prospects of meeting the Sustainable Development Goals, and in the case of Africa, the fulfillment of the aspirations embodied in the continent’s long term development vision, Agenda 2063.
LLDCs are characterized by a lack of territorial access to the sea and attendant geographical remoteness from world markets. Additionally, LLDCs face challenges linked to delays at border crossings, cumbersome transit and customs procedures, inefficient logistics systems, weak institutions, and poor infrastructure, which conspire to substantially increase the costs of transportation and other trade transaction for these countries in comparison to their coastal counterparts.
These prohibitive costs reduce competitiveness, diminish export profits, inflate the prices of imported inputs for manufacturing, discourage investment, and undermine LLDCs’ efforts to fully gain benefits from regional and global flows of knowledge, technology, capital, and innovation. They are also not able to fully tap into the benefits of trade such as investment, finance, technology, and services needed to further improve productive capacity in sectors such as agriculture, industry, and services that are needed for the structural transformation of their economies.
The development challenges faced by the LLDCs were exacerbated by the COVID-19 pandemic. The pandemic-related restrictive measures to cross-border and transit freight transportation acted as major trade bottlenecks resulting in excessive costs, supply chains disruptions, and increased transportation times for LLDCs.
The road transport sector was hit hard by the pandemic as trucks were stuck at land border crossing points due to closures or additional cross-border controls and checks and this affected the delivery of essential goods, such as foods, pharmaceuticals, medical supplies, and fuels to LLDCs. The COVID-19 pandemic, logistics, and supply chain disruptions, and a rise in additional border controls and documentation requirements are undermining export competitiveness and have set back progress on sustainable development in the LLDCs.
Furthermore, tepid global economic growth, rising inflation, skyrocketing shipping costs, supply chain disruptions, and elevated food and fuel costs are all compounding LLDCs’ trade and transit-related vulnerabilities. The infrastructure needs of the LLDCs are largely unmet. Addressing LLDCs’ high trade costs is fundamental for their integration into regional and global trade and for achieving sustainable development.
Similarly, SIDS face a host of challenges including their remote geography, which for many, result in high import and export costs for goods and services, as well as irregular international traffic volumes. SIDS have very narrow resource bases, which results in their heavy reliance on external markets for the supply of most of their needs, and many SIDS face negative trade balances. This makes SIDS vulnerable to external shocks such as the energy crisis and severely constrains their prospects of attaining sustainable development.
While there are several overlaps between the two groups of countries, SIDS are typically more vulnerable to external economic, environmental, and social shocks. It is estimated that SIDS are at least 35 percent more vulnerable to financial and economic shocks than other developing countries.
As a group, SIDS are especially susceptible to the effects of extreme weather and climate events, which have increased in frequency, intensity, and severity as a result of climate change. Due to low economic diversification, SIDS are heavily reliant on the service industry, particularly the tourism sector which counts for almost 30% of their GDP and makes them highly vulnerable towards shocks from events such as natural disasters and the COVID-19 pandemic.
In the wake of the pandemic, SIDS experienced an estimated fall in GDP of 9 percent in 2020, compared with a 3.3 percent decline in other developing countries. The United Nations (UN) World Tourism Organization estimates that it could take up to four years for international tourism, an essential source of jobs and livelihoods, to recover to 2019 levels.
Africa is host to a good number of these categories of states – sixteen LLDCs and six SIDS, many of which are LDCs – whose economic and social performance has implications for the overall development of the continent. For example, progress towards achieving the SDGs and Agenda 2063 has been mixed in SIDS and LLDCs, particularly among the most vulnerable populations. Against this background, there is growing consensus both on the continent and globally that if the mantra of ‘leaving no one behind’ is to become a reality, the needs of vulnerable groups of countries such as LLDCs and SIDS must be properly referenced and catered for in development agendas /frameworks at all levels.
Giving an overview of the Vienna Programme of Action at a workshop in Harare yesterday on “Leveraging the AfCFTA towards addressing the peculiar trade and development challenges of Africa’s LLDCs and SIDS”, Professor Gift Mugano (Ph.D.), an Adjunct Professor of Economics at the Durban University of Technology said African LLDCs are severely constrained by lack of territorial access to the sea, remoteness and isolation from world markets, cumbersome transit procedures, high transit costs, multiple border crossings, and inadequate infrastructure.
He alluded to the Vienna Programme of Action (VPoA) that was adopted at the Second United Nations (UN) Conference on LLDCs held in Vienna, Austria, in November 2014. The VPoA is also an integral part of the 2030 Agenda for Sustainable Development and Agenda 2063: The Africa We Want, of the African Union.
“The VPoA aims to address constraints and structural rigidities faced by landlocked developing countries through six mutually reinforcing priority areas: fundamental transit policies; infrastructure development and maintenance (transport, energy and ICT); international trade and trade facilitation; regional integration and cooperation; structural economic transformation; and means of implementation (UNCTAD, 2018, UN-OHRLLS and UNECA, 2019).
“Its overarching goal is to help landlocked developing countries achieve sustainable and inclusive growth and eradicate poverty,” Prof Mugano said.
He added that although notable progress was made in the implementation of the VPoA, the disruptions which were caused by the overlapping crisis of the COVID-19 pandemic and the war in Ukraine as well as external shocks emanating from climate change have resulted in a reversal of gains, especially in the areas of resource mobilization and progress towards the attainment of sustainable development goals (SDGs).
However, in some thematic areas such as international trade and trade facilitation; infrastructure development, and economic transformation, African LLDCs have not made significant progress as a result of a number of factors which inter alia include drought of funding, and the absence of robust industrial and investment policies.