Module 5: Globalization and Regional

Integration

Instructor: Dr. Peter Semiono (PhD)

What is Globalisation?
• Globalisation is one of the contested topics in social sciences, possibly
because it is a complex and multifaceted phenomenon thusly,
multiple definitions, and a wide range of powers and effects have
been ascribed to it.
• The intensification of worldwide social relations linking distant
localities in such a way that local happenings are shaped by events
occurring many thousands of miles away and vice versa(Anthony
Giddens,1991).
• Is the process of broadening and deepening of interaction and
integration of individuals, capital, labour and between nation-states
at global scale(Rugumamu,2005).
Intro…
• Generally, the process of increased interconnectedness and
interdependence among countries (state and non-state
actors) in the areas of politics, economics and culture
featured with cross-border flow of good and services,
people, ideas, capital, finance and technology.
Economic Dimension

• Globalisation has encouraged more trades and increased the flow of

capital among nations.
 e.g. businesses can seek their funding from foreign banks that offer
the most competitive interest rate.
 MNEs have more flexibility to operate as well as locate their
operations in any countries that offer advantages
 e.g. cheaper labour cost or closer proximity with the customers.
Socio-cultural aspect

 Nowadays, communication, mass media and information exchange

between states and non-state actors have been raised.
 Communication barriers have been reduced: people from different
culture, life style, and society have more understanding of each
other.
 Internet helps people to communicate easier and to find the
information (such as news, fashion trend, education).
 More cooperation in education(scholarship and exchange programs)
and health and medical facilities
 Political Dimension
 Political tension is no longer individual problems between
conflicting nations.
 Conflict in the Balkans causes more refugees in Germany and in
the UK
 These problems can only be addressed by international co-
operation.
 A lot of collaborate institution among countries to strengthen the
political collaboration UN, EU, and G7
Environmental Dimension

 Evolution of the internationally coordinated practices and

regulations (often in the form of international treaties) regarding
environmental protection.
 Intensifying, deepening and expansion of global uniformity and
connectedness in regular environmental management practices.
 Building consensus and negotiating agreements, tackling global
problems such as ozone layer depletion, toxic waste, loss of forests
and species, and air and water pollution.
 Institutions: UNEP, World Meteorological Organization and UNEP
established the Intergovernmental Panel on Climate Change (IPCC)
Factors & Drivers

ICT
Economic Liberalization
Role of MNCs
Global Governance institutions
(UN, IMF & World Bank).
Capital and investment
movement
 Origin of Globalization

 Though contested but many scholars associate globalization with the

development of capitalism in the Western Europe
 Four phases can be distinguished:
1. Phase I: Mercantilism or mercantile capitalism
(1450s-1850s). i.e. Slave trade.
2. Phase II: The period of internationalization of capital
(1850s to 1950s). i.e. Colonization period.
3. Phase III: Period of neo-colonialism (1960s to mid
1980s).
4. Phase IV: Modern Globalization (Mid 1980s to date)
 Phase IV: Modern Globalization (Mid
1980s to date)
In this phase there is massive trans-nationalization of
capital, the removal of regulatory and other barriers
to flow of goods, capital and finance across national
boundaries.
This process is aided by revolution in ICT and the role
of Bretton Woods Institutions
 EFFECTS OF GLOBALIZATION TO DEVELOPING
COUNTRIES’ ECONOMIES
Assumed positive impacts includes:
1. Simplification of movement of goods and services.
2. Improvement of health and education services.
3. Facilitates transfer of technology
4. Facilitates foreign direct investment (FDI) flow.
5. Increase in productivity: Due to capital flows and
technology transfer associated with globalization
process.
6. Facilitate democratization and good governance
processes through political globalization.
7. Economic growth and poverty reduction: through
participation in global trade and investments.
8. etc
 Negative impacts of globalization

1. De-industrialization : Due to opening up borders for

products from industrialized countries.
2. Increase in inequality between countries and within
countries
3. Marginalization in trade and investment
Most of developing countries have small share in global trade
and investments.
Developed countries are major investors and major recipients
of investments.
According to African Investment Report (2016), in 2014, FDI
flow into Africa accounted for 8% of global FDI flow.
In 2017, the whole of the African Union accounted for
approximately 3 % of the world’s trade in goods valued in USD.
4. Increase in cross-border crime
5. Erosion of sovereignty
6. Economic marginalization: Developing countries
depend on a few primary goods for which demand and
prices are externally determined.
7. Cultural domination
8. Brain drain
9. Resource exploitation through Foreign Direct
Investments (FDIs)
10. Environmental degradation
11. etc
GLOBALIZATION AND DEVELOPING
COUNTRIES’ FUTURES
 What should be done?
1. Promote intra-African trade
Intra African trade is very important for the economic
development and integration of the continent.
However, the share of Intra African trade in Africa’s total
imports and exports remains rather low: on average 13 % for
intra-imports and 17 % for intra exports over the period 2010-
2017.
The largest destination markets for AU goods, are China
(13%), followed by India and the United States (7 %
each), followed by France, Spain and Italy (6 % each).
Source: African Union Commission (2017)
2. Localized economic development paradigms,
models, strategies and policies.
3. Strive to increase and strengthen the voice of
African governments in international bodies.
4. Making the task of poverty eradication more
indigenous.
5. Avoid debt accumulation and the debt burden.

6. Control brain drain on the human capacity.

7. Investment in human capital
8. Adopt a proactive approach to globalization: so
that the challenges it poses and the benefits it
offers can be foreseen and planned for.
9. Address institutional capacity needs: (i.e.,
create and/or strengthen institutions that are
change-oriented, outward-looking and able to
interact meaningfully with global actors).
REGIONAL INTEGRATION
Definitions of key terms:
Integration
In ordinary language, the term ‘integration’ means t
o bring parts of an object into a complete whole.
In development literature integration is defined as
the coordination of development activities within a
country for the purpose of enhancing development
process.
Regional integration
It is a process whereby two or more nations
within a particular region undertake policies that
result into greater mutual interdependence.
It is a process of eliminating restrictions on
international trade, payments, and mobility of factors
of production.
Regional (economic) cooperation
Regional economic cooperation is an ad hoc (unplanned
or impromptu) and temporary arrangements between
nations.
It differs from regional (economic) integration in that
regional economic integration involves agreements that
are more permanent and planned.
 STAGES OF REGIONAL (ECONOMIC) INTEGRATION
• Balassa (1961) explains five degrees or stages of
economic integration:
• (a) Free trade area
• (b) Customs union
• (c) Common market
• (d) Economic (Monetary) union
• (e) Political Union
• (a) Free Trade Area (FTA)
• FTA is an agreement in which member countries
eliminate tariff and non-tariff barriers to member states
but there is no common external tariff to non-members.
• Tariff refers to a tax or duty to be paid on a particular
import or export.
• (b) Customs Union (CU)
• A customs union is a form of integration that eliminates
tariff and non-tariff barriers among member states and
in addition imposes common external tariffs to non-
member states.
• (c) Common Market (CM)
• In this stage member countries eliminate tariff and non-
tariff barriers among themselves, introduce common
external tariffs and in addition allow free movement of
factors of production e.g. labour and capital.
• (d) Economic (Monetary) Union
• Economic union has all features of CM but in addition,
there is harmonization of economic policies.
• It may involve introduction of common currency hence
Monetary Union.
 (e) Political Union
• It involves:
• (i) Member states have common political authority. It
may involve formation of political federation.
• (ii) Member countries coordinating aspects of economic
and political systems.
• (iii) Members accept a common stance on economic
and political policies regarding non-member nations.
Stage Features
Free trade area (FT) Removal of tariffs among
members
Customs Union (CU) FT + Common external tariff

Common market (CM) CU + Free movement of

Capital and Labour
Economic Union (EU) CM + Common economic
policies and institutions
Political Union EU + Common political
authority
Note
Preferential Trade Area (PTA) is sometimes added as
a first stage of regional integration.
 It is a trading bloc that gives preferential access to
certain products from the member countries.
This is done by reducing tariffs but not by abolishing
them completely.
 ADVANTAGES OF REGIONAL ECONOMIC INTEGRATION

i. Growth of intra-regional trade

ii. Welfare improvement through trade creation
• Trade will improve welfare by enabling citizens to
access goods and services from cheapest source.
iii. Promote efficiency in production through competition
and complementarities among member states.
iv. Creation of larger markets
• Market enlargement further allows firms to exploit the
economies of scale more fully.
• Economies of scale refers to a proportionate savings in
costs gained by an increased level of production.
v. Helps to overcome the problems associated with
smallness: e.g. lack of capital to finance large
development projects.
vi. Promotes competitive capacity of small countries
• REI offers a place for firms to learn how to compete. Also
larger economic blocs have a larger potential to compete
than individual small states.
vii. Attract foreign investments due to large market size.
viii. Improve bargaining power
• REIs may enable countries to stand in multilateral
negotiations (e.g. World Trade Organisation- WTO) with at
least more stronger bargaining power.
ix. The creation of an appropriate enabling environment
for private sector development
x. The development of infrastructure programs in support of
economic growth and regional integration.
xi. The development of strong public sector institutions and
good governance;
xii. Contribution to peace and security in the region
xiii. The strengthening of the region’s interaction with other
regions of the world
 Why countries participate in Regional Integration?
i. Economics arguments: Allows harnessing of economies of scale
as hence economic grow and provides positive incentives to
managing cross-border resources for mutual benefits…rivers,
lakes, oceans and exploiting regional synergies etc.

ii. Political arguments: Views regionalism as the best means of

promoting the positive political norms of democracy, human
rights, rule of law and political inclusion; and enhancing regional
bargaining power vs other extra-regional actors
iii. Security arguments: Views regionalism as best mechanisms of
addressing common security threats such as terrorism,
climate change etc and building mutual trust, security
confidence; enhancing political cooperation and reducing
regional security rivalries.

iv. Cultural arguments: portrays regionalisms of the best

mechanism of cultivating regional collective consciousness,
fighting against cultural chauvinism, and promoting and
cerebrating regional togetherness.
• Regional Integration in Africa
• An early phase of integration started during the first
decades of independence.
• The Lagos Plan of Action, (an initiative of the
Organization for African Unity, adopted by the heads of
states in 1980) further promoted the need for REIs.
• The proposed framework was for African integration
into pan-African unity and continental industrialization
by the division of the continent into REIs.
• Three regional integration arrangements were
supported by the Economic Commission for Africa:
• 1. Economic Community of West African States
(ECOWAS)
• 2. Common Market for Eastern and Southern Africa
(COMESA),
• 3. The Economic Community for Central African States
(ECCAS), and later, the Arab Maghreb Union (AMU).
• Currently there are several REIs including:
 The East African Community
• The Treaty establishing the East African Community
was signed by the Heads of governments of member
states on November 30, 1999 in
Arusha, Tanzania, and came into force on July 7, 2000. It
was formally launched on January 15, 2001.
• Economic Community of West African States (ECOWAS)
• ECOWAS is a regional group of about 15 countries, and it
was established in 1975.
• Its mission involves mainly promoting economic
integration in all fields of economic activity, particularly
industry, transport and telecommunications.
• The Common Market for Eastern and Southern Africa
(COMESA)
• COMESA was founded in 1993 as a successor to the
Preferential Trade Area for Eastern and Southern Africa
(PTA) which was established in 1981. COMESA formally
succeeded the PTA on 8th December 1994.
• Southern African Development Community (SADC)
• The SADC was created from the Southern African
Development Co-ordination Conference (SADCC) in August
1992 when the heads of state met in Windhoek, Namibia to
sign a declaration and treaty establishing the new SADC.
• Arab Maghreb Union (AMU)
• The treaty for establishing AMU was signed on February
17, 1989 in Marrakech, Algeria.
 Challenges Facing Regional Integration In Africa
i. Low volume of African intra-trade
ii. Overlapping in membership (competitive regionalism)
iii. Competition in trade from Multilateral corporations
iv. Dependency syndrome
v. Technological backwardness
vi. Dysfunction of the institutions of governance and
under- performance
vii. Imperialists manipulation
viii.Insufficient conceptualization of the integration
projects among common people.
ix. Lack of political will i.e. weak leadership resolve to
fully rally behind the strategy and limited financial
commitment.
x. Unwillingness to cede power to regional Secretariat
to make binding development policy decisions
xi. Weak conflict-settlement mechanisms
xii. Disproportionate share of gains and costs
 End of Topic

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