Report No: 78283 and acs2876
Annex B: Assessment of Economic and Financial Impact of Enugu-Bamenda Road Improvement
Download 450.43 Kb.
|
- Navigate this page:
- Annex C: Official Unofficial Payments along the Onitsha-Bamenda Corridor
Annex B: Assessment of Economic and Financial Impact of Enugu-Bamenda Road ImprovementAccording to the African Development Banks’ appraisal report, the following benefits are to be derived from the reconstruction of the road between Enugu and Bamenda:81
In our opinion, these projections are both pessimistic in that they allow for only a 15 percent increase in traffic. This may be because road conditions were somewhat better in 2007 than they are today. In any case, given the substantial amount of trade that takes place over other routes that are in very poor condition, the creation of an improved road with the reduction in transport costs and times envisioned should cause a very substantial amount of traffic to be diverted to the improved road. With the Western part of Cameroon being a strong agricultural production area and urban areas on the Nigerian side being major commercial centers for agricultural products but also major production areas for manufactured goods, it seems that a 15 percent increase in traffic is a low estimate. Table 9 in the text of this report estimates, instead, a fourfold expansion from these two sources. This growth will partially depend on a reduction in the number and cost of control points and here the projection of a decrease from 30 to 2 points seems optimistic. However, a comprehensive plan to address this issue and the related political economy constraints has not yet been developed and commitment seems to be lacking. A comprehensive and realistic reform plan will be needed to meet these projections. Regarding the simplification at the border, the plan foresees the creation of a joint border post which will be entrusted, on concession or lease, to a private or semi-private structure, and will be paid for by a fee charged to transport operators, equal to about 3% of current transport costs. However, such a mechanism has so far failed to deliver the expected improvements at the Cinkassé border between Togo and Burkina Faso. Annex C: Official & Unofficial Payments along the Onitsha-Bamenda Corridor
Annex D: Benchmarking Cross-Border Trade between Cameroon and NigeriaWe use an African centered cross-country gravity model to assess the actual level of trade between Cameroon and Nigeria with respect to its potential. This empirical framework allows us to categorize bilateral export relationships as over-traders or under-traders, depending on the comparison between realized bilateral export values and the model’s prediction of bilateral flows. For this exercise, we regress bilateral exports of each Sub-Sahara Africa country with all trading partners in 2009 (using mirror data82) on the following bilateral characteristics: distance, contiguity, common language, colony, common colonial power, and GDP. We also incorporate three innovations to the standard gravity model. First, a measure of remoteness is computed by summing distances weighted by the share of GDP of the destination in world GDP. This is to take note of the fact that relative distances matter greatly, alongside absolute distances. Second, we control for zero trade flows with the use of Heckman sample selection correction method. When observations with non-existent bilateral trade are dropped, as OLS does, our dependent variable is not really measuring bilateral trade, but trade contingent on an existing relationship. An important variable left out of the model therefore is the probability of being included in the sample, i.e. having a non-zero trade flow. To the extent that the probability of selection is correlated with GDP or distance, this has the potential to bias OLS estimates. Third, we address heterogeneity of firms, following the Helpman, Melitz, and Rubinstein (2008) approach, controlling for firm heterogeneity without using firm-level data by utilizing the fact that the features of marginal exporters can be inferred from the export destinations reached. Our exclusion restriction is a dummy indicating if a pair of countries were the same country at some point in time; arguably this variable should explain the existence of trade relationships but not the level of bilateral exports. With these steps, the gravity results are better grounded on modern trade theory. The equation we estimate in the second stage of the Heckman procedure follows. 
Where Results are depicted in Figure 1.It shows all bilateral trade relationships with annual exports larger than $1,000 USD (light grey dots). If an observation is above (below) the 45-degree line, the observed export relationship is more (less) than what the gravity model predicts and the exporter is said to be over-trading (under-trading) with its trading partner. Additionally, if the observation is above (below) the band parallel to the 45-degree line, the exporter is said to be significantly over-trading (under-trading). Nigeria-Cameroon bilateral trade relationships are market by a black X and labeled according to their 3-digit ISO codes. Controlling for size of the trading partners, trade frictions, sample selection, and firm heterogeneity, this analysis suggests that Cameroon significantly under-trades with Nigeria whereas Nigeria significantly over-trades with Cameroon.
This result is heavily influenced by oil exports from Nigeria to Cameroon. Estimating the gravity model excluding oil exports, we find that for both Nigeria and Cameroon cross-border trade is significantly lower than its potential (figure 2). This finding implies that the observed non-oil export value of Nigeria’s exports to Cameroon in 2009 are less than 8% of its potential level. Accordingly, Cameroon’s export value to Nigeria are less than 2% of its potential level. These results are robust to estimate the gravity for years before 2009 as well as to estimate a worldwide gravity model, as opposed to a African centered model.. Table 1 presents the estimated gap between realized values and their potential for the period 2006-2009.
However, although use of a gravity model allows evaluating bilateral trade relationships based on robust empirical relationships, an important caveat must be noted when applying this analysis to Africa. Informal cross-border trade is fundamental to understand trade relationships in Africa. According to UNECA (2010)83, unreported cross-border trade fells into five main categories: unprocessed products (most primary commodities, such as cereals, roots and tubers, oil-seed, leguminous seed, livestock and fisheries), artisanal products (mainly products worked in animal skin, masks and statues of vegetal origin, trunks of wood and stone, necklaces, clothing made of traditional cloth, among others), pharmaceutical products (mainly antibiotics, analgesics, and sedatives), and products for re-export. This important unreported trade is of course not captured in the gravity model and partly, which means that potential trade, as well as actual trade, for African countries is substantially underestimated. Because of this, actual trade between Cameroon and Nigeria would still likely be substantially less than potential trade if correct trade data were used to estimate both. This suggests the existence of large barriers to cross-border trade between the two countries. The large and significant gap between realized trade flows and their potential levels indicates the existence of trade costs related to border-related issues, transport, behind-the border issues, and compliance with different product regulations. These costs may be sector-specific or economy-wide and they may also impact differently Cameroon and Nigeria. Directory: curated curated -> Concept stage curated -> Concept stage curated -> Republic of Côte d'Ivoire Urbanization Review curated -> Report No: aus11011 Central America curated -> Report No. 94474-pk fiscal Disaster Risk Assessment Options for Consideration curated -> Environmental and Social Management Framework for the Costa Rica Telecommunications Sector Modernization Project curated -> Environment Impact Assessment For Jiangxi Shangrao Sanqingshan Airport Beijing Guohuantiandi Environmental Technology Development Center. Ltd. Oct. 2012 Content curated -> Growth through Innovation An Industrial Strategy for Shanghai By Shahid Yusuf Kaoru Nabeshima April 22nd, 2009 curated -> Report No: 70178. People's Republic of China Download 450.43 Kb. Share with your friends:
|
is the value of exports from country 
to country 
in year 2009. We define distances between country-pairs 
as the “great circle” distances between the respective capitals. Besides controlling for the level of each partner’s GDP, we control for remoteness of the destination country (
. 
are dummy variables that are equal to 1 if countries share a border, language
have ever had a colonial link, or had a common colonizer after 1945, respectively. 
is the standard inverse mills ratio which takes into account the possible selection bias given that we also observed bilateral flows with positive exports. The last cubic polynomial takes into account the fact that firms participating in international trade are highly heterogeneous in terms of characteristics and outcomes.
