Ivorians have a lot of catching up to do
I’M in Abidjan, wondering where Ivory Coast gets its pulse from. Its recent history is dominated by civil war, which left it with negative economic and developmental consequences.
Given the strong economic links with the rest of West Africa, the spillover effects stifled regional economic growth. Cross-country empirical econometric analysis shows that, on average, being a neighbour of a failing state reduces one’s growth rate by about 0.6 percentage points a year.
Ivory Coast has five neighbours: Ghana, Burkina Faso, Mali, Guinea and Liberia, and free trade and movement of people has been encouraged since the ’50s.
According to Paul Collier in his book The Bottom Billion: Why the poorest countries are failing and what can be done about it, civil war tends to reduce a country’s growth by around 2.3% a year, so a typical seven-year war leaves a country around 15% poorer.
The UN Development Programme has done work on the effects of the Ivorian crisis. Some are straightforward, such as reduced trade and a drop in remittances. Others are difficult to quantify. For instance, the instability in Ivory Coast increased perceptions of political and economic risk in the entire region, scaring off foreign investors. In February 2011, Ivory Coast defaulted on a $29-million eurobond interest payment. The bonds had been placed only in April 2010. As a result, yields on Ghana’s eurobonds jumped from less than 6.3% to more than 6.8% in four days.
Despite its turbulent past, Ivory Coast wants to return to its glory days. In 2012, the investment community endorsed President Alassane Ouattara’s reconstruction programme, pledging $8.6-billion — double the amount requested — to improve infrastructure.
Air Côte d’Ivoire was relaunched in 2012, with Air France holding a stake. The return of the African Development Bank to its headquarters after it abandoned the country for 11 years because of civil war sent a strong signal that Abidjan is “back as the commercial heart and economic centre of West Africa”, as someone who attended the reopening of the bank said. The flow of investment from French construction firm Bouygues, oil companies such as Tullow and Lukoil, and South Africa's Standard Bank indicates the country is turning the corner.
The World Bank’s Doing Business report ranked Ivory Coast one of the 10 best reformers in 2014 and 2015. By 2020, the Ouattara government wants the country to be an “emerging economy” alongside South Africa and Nigeria as opposed to a “frontier market”. Economic growth has been robust, buoyed by private consumption and infrastructure investment. Growth of around 8% has been supported by a national development plan, which has
I’d describe it as moving forward, looking back
boosted structural reform and the business climate.
Discussions about the Ivorian economy with locals remind me of my discussion with Greek friends about their economy before the 2008 crisis. I’d describe it as moving forward, looking back. Ivorians never miss a chance to remind you of their former greatness. Nothing wrong with being proud of one’s country, but the price of greatness is responsibility.
Since the late ’90s, intraWest African Economic Monetary Union trade losses were estimated at just under $10-billion. That means that if Ivory Coast had been stable in that period, intrabloc trade could have been 60% higher. I hope Ivory Coast will ensure it never sees another war.
Leoka is an economist at Argon Asset Management