Trade & Economic Development: The Role of the Maritime Industry

There is no doubt in my mind that one of the ways a country or continent can develop economically is through trade. Also, with 90% of goods moved around the world being done via water, the maritime industry plays a very vital role in economic development through trade.

The maritime industry today is way different from what it was centuries before. New parties have been introduced, status quos have been changed and already existing parties have taken on new and more complex roles. Today, the efficiency of seaports, customs, shipping and logistics are the heartbeat of the maritime industry and also determines a country or continents competitiveness on the global market.

If we (Africa) understand the how much the maritime industry can contribute to poverty reduction and our desperate need for economic development and global integration, we will approach it with great respect and do anything to make it highly efficient. I don’t think we understand.

Take for example seaports. In the 19th and some parts of the 20th century, there was not much pressure on seaports to improve efficiency because attention was on reducing high shipping costs. Now that shipping costs have been reduced, seaports are now being forced to improve efficiency in order to make maritime transport as a whole cheap and reliable. These pressures have changed the whole port industry. Today, ports are not perceived as tools that governments use to control whatever flows in and out of their countries. Ports are now perceived as:

1. A country’s gateway to the global market in terms of imports and most importantly exports.
2. Nodes (Joints) in the global supply chain of global businesses
3. Interfaces which connect different forms of transport. (Mainly road, rail and sea)

These definitions of seaports have totally changed the nature of seaports and the manner in which they operate. These days, seaports are required to be provide quick and flexible services and even other value added services such as warehousing. It is beautiful when you read about the efficiency of other ports such as port of Antwerp, Rotterdam and Hamburg. I’m not saying African ports are totally inefficient (Maybe they are), what I’m saying is if we really understand the depth and significance of the maritime industry we will do a lot to make sure that it functions with no impediments.

Africa Cannot Compete

There has been a lot of “noise” about Aid for Trade, preferential treatment and special “access to markets” schemes by developed countries and international organizations simply to help African countries benefit economically from trade. Initiatives such as the African Growth and Opportunity Act (AGOA) have been born and to some extent have helped developing countries of Africa. But I don’t think that is the solution to increasing Africa’s contribution to world trade. I don’t think that these initiatives are tackling the root causes of our poor contribution. Let me outline just 3 problems I think are very fundamental.

1. Transport costs in Africa are twice as high as the world average.
2. Corrupt customs officials and outdated, long and burdensome customs procedures
3. Delays at border crossing points.

Problems such as these erode the economic benefits that Africa gains from preferential treatment offered by developed countries. Over the past few years developed countries have reduced their import tariffs simply to help African countries have access to their markets. But prices of African exports are still high because of other costs added by non – tariff barriers. Because of these non – tariff barriers, Africa cannot compete on the global market. The continent has been marginalized and left voiceless in international trade negotiations because of her inability to integrate herself in the world economy.

I don’t think Africa will be able to increase its share in global trade if these fundamental problems are not identified and solved. No amount of preferential treatment or AGOA will increase our 3% contribution. No amount of WorldBank or United Nations can solve it either. The solution must be born from Africa, the solution must be African. How can Africa reduce its high transportation costs? How can Africa modernize customs operations and improve port efficiency? How can Africa help its numerous Small and Medium Scale Enterprises (SME’S) access wider markets and produce cost efficiently? These are the questions we should be asking if we want to benefit economically from trade.

Introduction

Hello, my name is Nortei Neku Ocran. If you can’t pronounce it just call me Sam. I graduated from Ashesi University College in Ghana (http://www.ashesi.edu.gh/) in December 2007. Ashesi has changed my life. Today, I find myself thinking of ways I can contribute to the development of my continent Africa.

I created this blog because I believe that one way Africa can develop economically is through trade. Africa currently contributes barely 3% to global trade and this prevents her from reaping the economic benefits that are gained from actively participating in global trade. This blog (as the name suggests) is basically to discuss various ways by which Africa can increase its share in global trade.

The main causes of Africa’s little contribution to global trade stem from Africa herself. The solution to our poor contribution is not only reduced tariffs by developed countries or simply adopting policies that have worked elsewhere. The solution will require a lot more in order to prevent problems such as Outdated customs procedures, High transport costs and Lack of transparency in import and export procudures.

Many problems have been identified as the causes of Africa’s poor contribution, but the purpose of this blog is not to simply repeat the problems and play the blame game but to lay foundations for research and implementation of efficient and effective trade policy measures in an attempt to enhance economic development in Africa. It is essential that African countries understand the fundamental and unique nature of their problems in order to generate unique solutions rather than adopt solutions that have succeeded elsewhere in the world.

Some of the issues that will be discussed include: Customs Modernization, Trade Facilitation, Small & Medium Scale Enterprises Development (SME Development), Challenges of Landlocked Countries etc.