A Chatham House report on the economies of the Horn of Africa

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Last month Chatham House issued a report with the title: “Hostage to Conflict: Prospects for Building Regional Economic Cooperation in the Horn of Africa”. Authored by Sally Healey, a former member of the British Foreign Office, it is a report on the economic dimensions of conflict and cooperation in the region and asks whether over the long-term the economic drivers of the region have the potential to transform the conflicts of the region or whether political stability is needed as a precondition for economic cooperation. The report essentially covers the countries of IGAD, the Intergovernmental Authority for Development which covers Djibouti, Eritrea, Ethiopia, Kenya, Somalia, South Sudan, Sudan and Uganda, though Eritrea’s membership is still suspended. IGAD, of course, is one of Africa’s Regional Economic Communities and provides the institutional framework for economic integration. It also covers security, and as the report notes, there can be divergences between economic links and the developmental pressures for closer economic integration, and the needs of regional security including tighter border controls and restrictions on the movements of goods and people. The report points out that formal intra-regional trade has remained low, but it also emphasizes the much closer social and economic cross-border ties and trading networks that exist particularly in pastoral areas and emphasizes their importance in Somalia. It underlines the ability of informal cross-border traders to continue operations and sees this as a resource for market-based cooperation and local economic security.

The report suggests that closer economic cooperation may be politically impossible for the moment but it underlines that the countries of the region remain bound together by history and geography, lending themselves to the possibilities of cooperation. The potential of transport corridors to ports, of managing water resources, of common management of pastoral rangelands and of improved energy resources, are detailed. It argues that IGAD should be developing policies more closely aligned to shared resource management and support for regional development. It suggests that a less state-centric approach to regional integration might be able to capitalize on existing cross-border relationships and open up their commercial potential, turning them away from illicit trading to provide a regional economic asset.

The report looks at the ties that bind the countries of the region together, the impact of distrust on security, and at the potential for greater economic integration. Central to its arguments are Ethiopia’s economic relations in the region. Ethiopia, it acknowledges, is “the most capable and at times formidable state, as an emerging regional economic and political power and, for the outside world, the most well-connected in development and diplomatic terms”.  It emphasizes that Ethiopia’s political and economic relations in the region “will remain critical to the prosperity and stability of the Horn.” Indeed, overall, the report notes that Ethiopia has registered an annual 10.1% economic growth in recent years. It indicates that the country’s exports have grown very rapidly in recent years, with their value increasing by 38% between 2008/09 and 2009/10. This growth in exports is due to the production of a much more diverse range of exports. Live animal exports for example earned the country US $91 million, and US $34 million in meat exports in 2009/2010 compared to US $0.2 million and US $1.7 million in 2000/2001 respectively. The report also demonstrates that Ethiopia is trading more vigorously with its neighbors, and suggests that the various dam projects now being built as part of the current Growth and Transformation Plan illustrate the scope to build infrastructure that can support regional development. As the plan stresses, power production envisaged from the hydroelectric schemes is far greater than Ethiopia’s own requirements. The plan indeed calls for future export of power to neighbors on a substantial scale as part of the longer-term regional development.

The report notes that greater priority has had to be given to security in some areas, something that was specifically increased by Eritrea’s adversarial approach to Ethiopia from the mid 1990s. This was also increased by the rise of Islamic militancy and terrorism, and the attempts of Al-Itihaad and the Al-Shabaab to reactivate Somali irredentism. That, in turn, has had an effect of economic development, and the endless conflicts in Southern Somalia have “denied economic opportunities to a whole generation of young men whose limited options make them ready recruits for militias or other illicit activities”, including piracy and other “war economies that flourish” in Somalia.

IGAD, of course, has played a more active role than other African Regional Economic Communities in peace and security activities. Its efforts were central in the Comprehensive Peace Agreement in Sudan (2005) and in the Mbgathi Peace process for Somalia (2004). It has also developed a unique “Conflict and Early Warning Response Mechanism” (CEWARN) designed to monitor low-level cross-border conflicts in pastoral areas, creating networks in three cluster areas linking pastoralists, government bodies and research institutes. It has had some considerable successes but it remains unable to tackle higher-level conflicts that threaten regional stability. The report argues that IGAD’s regional peace and security activities leave a lot to be desired but it also expects them to remain in place and increase over time.

At the end of the day, the report argues that much greater economic interdependence and integration could take place in the Horn of Africa if there was “a more benign security environment.” It emphasizes the importance of “public goods”, referring to commodities that benefit the community as a whole, as a means to build closer cooperation as part of IGAD’s strategy. It underlines the value of lively cross-border trade networks as part of a balanced approach recognizing the benefits of informal trade. It claims progress in peace-building at state level could be reinforced by cross-border peace-building measures, and this had implications for donors who should lay the foundations for future integration in such areas as environmental management, transport, energy and water management. Moves towards economic integration across borders, investment in an effective supportive infrastructure and a focus on impoverished border areas would go a long way towards creating “a more stable foundation on which economic drivers of cooperation and prosperity could thrive.”