Unleashing potential of local businesses: Expert urges gov’t to implement market-friendly reforms.

This is one of the key recommendations contained in a flagship report of a study published recently by a think tank, Cameroon Economic Policy Institute, CEPI. 

The study focused on the impact of the African Continental Free Trade Area, AfCFTA, and the Economic Partnership Agreement, EPA.

The study found out that both trade agreements are beneficial to the Cameroonian economy, but underlined that there is a need to implement market-friendly reforms to unleash the potential of local businesses.

Explaining the report, the founder and Executive Director of CEPI, Henri Kouam, said if Cameroon were to strictly implement the AfCFTA agreement, it would enhance its Gross Domestic Product, GDP, from US$1,478.34 million in 2020 to US$1,794.79 million by 2030.

“When both agreements are applied, we observe a GDP increase from US$918.93 million in 2020 to US$1,102.29 million in 2030, which represent GDP growth rates of 2.40% and 2.45% respectively,” the Executive Director pointed. 

He further explained that as far as the AfCFTA agreement is concerned, Cameroon will experience no additional export to EU countries but for a rise in its exports rate towards other African nations. 

The rise is projected at US$14.01 million for agriculture sector, US$63.43 million for industry sector and US$1.01 million for services sector. The economic consultants further noted that the study showed Cameroon’s exports will increase from both EU and Africa sides if both agreements are fully implemented. 

“These prices shift down under the EPAs as well as the AfCFTA, the highest decrease of -12.62% being recorded under the EPAs in the industry sector. Cameroonian Exports to Africa,” he said.

The study also showed that foreign commodities become cheaper on the domestic market compared to local products and consequently will positively affect household’s consumption and their well-being aftermath. 

In addition, he indicated that imports from EU under EPAs increased by US$323.19 million and decreased by US$241.82 million under AfCFTA and US$118.92 million for both policies. 

With EPAs already in application, Kouam said AfCFTA will help mitigate losses from EPAs while providing innovative development perspectives.

“The AfCFTA negatively affect domestic demand but importantly, we note a deeply increase in the demand of services of 49.84%. This result brings to our attention the fact with AfCFTA, Cameroon being open to the rest of African countries, its inhabitants will shift their demand curve toward the other countries according to their preferences,” he enlightened. 

The report revealed that everything being equal, trade liberalisation contributes to lowering prices.  

According to the economic expert, if any exogenous shock occurs from the international market, “they would probably jeopardise this fall in local prices since, both domestic and foreign commodities will experience the same inflation as currently observed around the world”. 

He elucidated that in the scenario of falling prices, households would increase their consumption. 

“Unfortunately, we note that only the consumption of industrial commodities increases under the EPAs scenario with an increase rate of 0.13%, those of agricultural and services sectors being set to -0.04% and 0.08% respectively,” he said.

Kouam went on to add that Cameroon households have a limited elasticity demand which has been modelled in mixed proportions by a Linear Expenditure System utility function of Stone-Geary.  

With 30% of the population living below the poverty line, the study underlined that free trade has the potential to boost prosperity for all. 

 This article was first published in The Guardian Post Edition No:3249 of Friday October 04, 2024