27 May 2016
By Degol Hailu, Senior Advisor and Chinpihoi Kipgen, Research Associate, UNDP
The target of Agenda 2063 of the African Union is to see: “intra-Africa trade growing from less than 12% in 2013 to approaching 50% by 2045”. To meet this target, intra-regional trade not only needs to grow, but the sophistication of the products traded must be enhanced.
For instance, from 1965 to 1990, intra-regional trade among the Asian Tigers plus China, Indonesia, Japan and Malaysia averaged 29% of their total trade. Intra-regional trade actually grew at a slightly higher average rate of 18% per year compared to 15% for extra-regional trade (trade with countries outside the group). Currently, extra-regional trade from this group of countries is just 1.7 times greater than intra-regional trade. Moreover, as a result of developed regional value chains and industrial networks, intra-regional imports of intermediate goods represent more than 50% of total imports.
Intra-regional trade between the Asian countries also grew in sophistication. Today, manufactured goods make up about 70% of the total trade. Intra-regional trade in high-skill and technology intensive manufactures is among the highest in the world, accounting for 50% of regional trade.
Can African economies achieve such remarkable integration? The good news …