REGIONAL INTEGRATION

A regional organisation could be defined as a grouping of countries, in most cases neighbouring countries, into an organisation in order to address a particular issue: economic development; the management of their common resources such as lakes, rivers; the management of plagues with potential consequences beyond a country. Economic issues constituting the main problem in almost all societies, it is also the main stake of regional integration. In fact the world is slashed into pieces of regional groupings with membership overlapping at times owing to double membership of certain members. However this enthusiasm toward integration can not hide the relative and mitigated success of regional integration. If excluded the European Union, ASEAN, NAFTA regional integration has offered little compared to the fruits awaited. Jarle Moen distinguishes between ‘once-and-for-all-benefits and dynamic benefits of integration in third world countries.

For many LDCs especially those with very small domestic markets, regional economic integration may offer a valuable experience, helping the transition to a more balanced economic development and a more open economy. Within the integrated, both quality and marketing techniques can improve and promote diversification and export production at a larger stage without compelling these countries to face the awkward effects of the liberalised market as the tendency seems to be. Integration can also increase the market size and, where economies of scale are present, reduce the cost per unit. This could benefit both producers and customers in the integrated market. For customers, it makes it possible to purchase goods at their real prices, since a competition among more than one regional economic actor (producer or distributor) would have as a consequence the obligation to offer the best prices possible. Also in a larger market, partners outside the integrated region would find it interesting for them to invest in such a region so as to take advantages of the discriminatory policies put in place to safeguard the region’s industries. According to Thomsen (1994) host country market size is one of the strongest determinants of where foreign firms invest. One has to take into account the fact that an investment from a developed country in a developing country is accompanied by a substantial transfer of technology.

Once achieved, regional integration will boost the members’ countries bargaining power in the international community. A power which can easily increase with cartelisation. Countries belonging to a regional organisation tend to present the same features, for instance they could belong to the same climatic belt, central Africa for instance and southern African countries. This geographic situation can enable such countries to bargain with additional strength in what they produce best on which they could expect better returns on sales thereby reach a situation of absolute gains.

REFERENCES

MOEN Jarle: Trade and Development: is South South Cooperation a Feasible Strategy? London School of Economics 1994 MYRDAL Gunmar: An International Economy, London: Routledge and Kegan Paul TODARO Michael: Economics for a Developing World, New York: Longman 1992 KRUGMAN Paul ‘Is Free Trade Passé?’ Economic Perspectives, vol 1 pp 131-144