TEXT OF A PAPER PRESENTED BY SAM COOKEY JR. PRESIDENT OF THE WEST AFRICAN ENTERPRISE NETWORK AT AN INTERNATIONAL CONFERENCE ON PROMOTING AFRICAN INTEGRATION AND ADDRESSING THE DEBT BURDEN HELD IN ABUJA 16 MAY 2005
PROTOCOLS 1
It is a pleasure to be able to contribute at this Conference on “Promoting African Integration and addressing the Debt Burden” a forum put together by the NEPAD Business Group and the African Business Roundtable. ABR, with the support of the ECOWAS Secretariat, and the West African Enterprise Network. I have been asked to speak on ‘Enhancing the Business Environment in West Africa’ within this first technical session on Regional Integration in West Africa. As we reminisce on 30 years of ECOWAS, I would like to draw your attention to one aspect of the business environment that is crying for change. I have chosen to focus on ‘The Impact of Bureaucracy on regional Competitiveness’.
In pursuit of integration, many Protocols have been signed, but alas, it seems a lot more has been said than has been done. We have now reached a stage, where, it is clear, we must convert Rhetoric to Reality. This is very much a shared responsibility and I propose to highlight the importance of, and urgent need for a new partnership between the Public and Private sectors 2.
Forums like this have often addressed the economic indicators, and I think they are very important. They give us an opportunity to question ourselves. Why did we want integration? Do we still want it? What options do we have? How far should we go? What does integration really mean for business? Do we really have enough business to do with each other or is this some pipe dream of bureaucrats in our Capitals? What does it mean for the Public Sector? For Public policy formulation? For the day-to-day process of government? These are broader questions, and beyond the scope of my contribution today. 3
Whatever the answers, we can all agree that, whatever the Vision we have, we expect that it will lead us to change our societies from the current poverty with which we are surrounded, to better conditions and standards of living. These objectives have been captured in the Millennium Development Goals (MDG). I will not go into these here except to say that this conference falls largely under the eighth goal – to develop open trading and financial systems and further to ‘address developing countries’ debt problems….’ Our countries yearn for deep economies and broad based development. We have seen over the years that our economic and GDP figures do not always translate to better conditions for the population. It is hoped that the achievement of these business environment objectives will lead to eradication of poverty, with other MDG indices in health and well being 4.
Earlier today in my welcome remarks I made some distinction between the Private Sector components, the large multi-nationals on the one hand, and the indigenous businesses on the other. Although we all fall under the description ‘Private Sector’ our needs do not always coincide. The interests of a large multi-national dominating a single sector contributing over 70% of a country’s GDP will differ significantly from those of the local equity company. This distinction is important – one of the things I wish to draw attention to today is that the history of our Public Sector is very closely tied to the needs of these trading, and later technical conglomerates. At the moment, depending on whose statistic you use, trade within the region runs at about 8 to 12 percent of our total business volume. Presumably the rest of business is with the ‘old trading partners’ and the Public Sector practice and methods have not really been challenged in facilitating this.
I have also used the term ‘indigenous business’ intentionally. Most people who make a distinction tend to classify the large multinationals on the one hand and then the ‘Small and Medium Enterprises’ SME, on the other. More and more indigenous business will not be SMEs. Indeed if we are successful at our objective of enhancing Regional Business, then the indigenous companies will be sizeable corporate bodies. It interesting to note that the largest contract that the construction firm Julius Berger has got in Nigeria has recently come, not from Government, but from an indigenous company. As business diversifies, the indigenous companies including the SMEs will employ a lot more than the 5% of the population now involved in typical mono product economies. In order to be successful in enhancing the growth of regional business the Public sector in each country must be aware of and responsive to the needs of a growing and very important element of the Private Sector 5.
Emergent local business needs to compete nationally and internationally to be successful. It needs a refocused and re-oriented Public Sector. I would like to demonstrated this by quickly looking at what bureaucracy can do to competitiveness of local companies. We all agree, I am sure, that we require a stable business environment. I one cannot predict the price of cement or steel, one cannot fix the price of delivering your building to you internally, in each country, we must have in place the right economic and physical infrastructure. Without this we cannot produce a climate conducive to significant domestic investment. The Public sector is the key instrument to achieve this stable environment needed to improve our lives here to lower out costs – it is not an abstract objective. 6.
The Public sector is part of our competitiveness. What are we, the Private Sector producers competing on? Who are we competing with? Who is buying? What are we bringing to the ‘market’? With the Internet now the worldwide resource centre we have new opportunities to do business. How then does the Public sector affect our competitiveness? 7 Do they realise that they too are in competition? 8 That their role is pivotal to the success of their ‘country’ brand or our Regional ‘brand’? 9
Today in this short presentation I will skip fuller examination of the impact of Public Sector interface on Production on Market development and costs in general, and look at a small case study of a company in Ghana shipping goods to Nigeria. I am happy to see from the programme that a speaker before me will be speaking on ‘Implementing the ETLS Scheme’. I am sure he will cover the ETLS qualification and approval process All I will say here is that the process involves all stakeholders in the Public sector, Integration Ministries. Finance Ministries Customs etc and involves local verification in each country of applicants’ production I will also mention that when approval is granted all the interested parties are informed and the name of the company the approved products and their tariff codes are issued to all ports of entry in the ECOWAS. You would think this would translate to a ‘green’ lane for regionally manufactured goods. Certainly the fast lane was the intention 10
Here then is the story of one of our members. The Company, which manufactures in Ghana, obtained ETLS approval for its range of products in 2004 and quickly moved to fulfil orders from Nigeria. On the face of it, when a regional manufacturer supplies a regional customer, they have a competitive advantage over other international suppliers, equivalent to the duty rate. In this case, the duty rate is 25%, so officially, the regional customer, (Nigerian in this case) should get a bargain! In addition, shipping takes just one day from Ghana, so given the same manufacturing time, the regional company should be able to deliver two to three weeks earlier than the one from, say, Turkey Competitive advantage!! The company got a significant order and went ahead to produce the playground equipment, for export to Nigeria. Enter stage right, Public Sector bureaucracy!
The goods were shipped from Accra and arrived in Lagos on December 9th 2004. Now under the local ‘rules’, although the approved products, their codes and details have been supplied to all ports of entry the company must still apply to the Finance Ministry in Abuja for authority to import under the scheme. Amongst the items to be included in the application is the ‘Bill of Lading’ – in other words, the goods must have been shipped Allowing for obtaining other necessary documents. Certificate of Origin, etc, the application was submitted on 16 December. One would think this was a routine matter, perhaps for statistical reasons. Whatever the content of this approval how long do you think it should take? If you assumed the two weeks shipping from father lands, it would be reasonable to have the approvals available for clearing as the ship arrives? As I speak this morning, in mid May 2005, the approval for duty free import of goods so registered has not been approved. The goods remain at the port? Force Majeure indeed. 11
We have other examples, A member wishing to start an airline charter company from Ghana needed approvals. The aviation authorities required, as part of the process, to inspect the aircraft that is to be used to operate the service. Arrangements were made for the aircraft, which is in service in the USA, to be ‘grounded’ for the day booked for the assessment. At the last minute, the inspectors could not make the date. For them, it was a matter of saying sorry, we cannot make it’. For the company applicant, it meant $250,000 in charges for that day, and the prospect of another similar payment to arrange the next revised date. Is this the impact our Public sector intends? 12
What is the impact on a business? Two vital components of business competitiveness are price, and delivery time. In the first case bureaucracy has negated all competitive advantage in every area. The supplier has made contractual commitments based on a known production time, known short shipment time, and assumed zero tariff. Those contractual commitments are not only frustrated by the delayed process, but have raised all sorts of costs. Container demurrage costs, costs of visits, phone calls and interaction with the Ministry in Abuja, possible damage to the products through improper storage and handling, costs in extensions to insurance, and validity dates of other documents. With these open-ended costs, can the business be competitive? Or profitable? What about the reputation of the supplier? In this situation would they expect to win additional orders? What turnover can a company produce when its goods are ‘hanging’ in the ports for extended periods? Who has won? 13
If we are to pay more than lip service to the growing real business in our countries and in the region, we urgently need to make a real paradigm shift in the Public Sector. What can be so complex in endorsing an application for import of products, especially when the relevant Ministry was part of the approval process? The real GDP deserves a Public Sector able and willing to rise to the challenge of enhancing private business. It is their business to make our business possible and profitable. Public servants must understand the bigger picture that the file in front of them, or worse still, hidden in their drawer, means a lot more than a lot of paper – it is a sign of our mutual success. They must shorten turn around times in their interaction to match the real speed of modern business.
When our regional products sell, and we win market share over companies in other countries it is a success for our economy Internal productivity is the key to our future, and we need to mature and conquer our national and regional markets as preparation for bigger international business. The Public sector is supposed to tweak our performance like a good trainer, not create impossible obstacle courses. In the end, if we cannot build institutional capacity we can have neither a successful and sustainable business environment, nor aspire to effective regional integration.
When we look at the impact of the correct intervention in the telecommunications sector in Nigeria, we see the broad based boost it has given to the ‘real GDP’ People are in business. The Government has made many times more money from the telecommunications sector in the last three years, in taxes of the major telecommunications companies, as well as a host of other indigenous businesses, than it ever made when it attempted to dominate that sector as the major player. This is what the Private Sector expects – we expect the Public sector to stimulate the key sectors and create room for business. For instance, similar significant attention, given now to long-term money for real estate financing, will produce a similar response in the construction sector one of the largest employers of labour. 14
The Public sector must change orientation, and give meaning to true ‘Partnership for Development’. We require a true commitment to using ‘Business’ as a tool for development. They must address the gap between policy formulation and the implementation process. During the rest of the conference, it would be useful to agree on what must be done, on firm actions to be put in place on an agreed timescale. The WAEN Network will be happy to be involved in processes and platforms needed to engage this institutional spark. In those days, they ended their letters, with the words, ‘I remain, Sir, your obedient servant’. It is our prayer that after each forum like this, they will be determined to re-focus on serving their Public, the ‘real GDP’, the Private sector.
Mr. Chairman, Your Excellencies, distinguished Ladies and Gentlemen, Thank you for your attention.
Sam Cookey Jr.
President, WAEN Nigeria Network
Abuja, Nigeria 16 May 2005
