TABLE OF CONTENTS
CHAPTER -ONE INTRODUCTION
1.1. Background of the Study
1.2. Statement of the Problem
1.3. Objectives of the Research
1.4. Research Questions
1.5. Methodology and Methods of Data Collection
1.5.2. Methods of Data Collection
1.6. Significance of the Study
1.7. Scope of the Study
1.8. Limitations of the Study
1.9. Organization of the Study
CHAPTER –TWO LITERATURE REVIEW: CONCEPTUAL AND THEORETICAL FRAMEWORK
2.1. Conceptual Framework
2.1.1. Conceptualizing Regional Integration
2.1.2. Levels of Regional Integration
2.1.3. Rationales for Regional Integration
2.2. Theoretical Framework
2.3. Literature Review
2.3.1. Global Experiences of Energy led Regional Integration
2.3.2. Energy Led Regional Integration in Africa
2.3.3. Energy Led Regional Integration in East and the Horn of Africa.
CHAPTER-THREE ETHIOPIA’S HYDROPOWER POTENTIAL AND CURRENT STATUS
3.1. Bird’s Eye View of Hydropower
3.2. Ethiopia’s Hydropower Potential.
3.3. Historical Overview of Hydropower Development in Ethiopia
3.4. Recent Efforts Made and Being Made in Hydropower Development
3.5. Hydropower Dams Under Construction
3.5.1. Grand Ethiopian Renaissance Dam
18.104.22.168. Historical and Technical Issues of Grand Ethiopian Renaissance Dam
3.6. Planned Hydropower Projects
CHAPTER - FOUR THE ROLE OF HYDROPOWER FOR REGIONAL INTEGRATION: THE CASE OF GRAND ETHIOPIAN RENAISSANCE DAM
4.1. The Role of Grand Ethiopian Renaissance Dam for Regional Integration
4.2. The Role of Grand Ethiopian Renaissance Dam in Maintaining Peace and Stability of the Region
4.3. Implications of Grand Ethiopian Renaissance Dam for Ethiopia
4.3.1. Social Implications
4.3.2. Economic Implications
4.3.3. Political Implications
CHAPTER- FIVE PROSPECTS AND CHALLENGES OF GRAND ETHIOPIAN RENAISSANCE DAM FOR REGIONAL INTEGRATION
5.1. Prospects of Grand Ethiopian Renaissance Dam for Regional Integration
5.2. Challenges of Grand Ethiopian Renaissance Dam for Regional Integration
CHAPTER- SIX CONCLUSION
APPENDIXES- 1. List of Key Informants
2. List of Interview Guide Questions
List of Tables
Table - 1: Schematic representation of the five stages of regional integration schemes
Table - 2: Ethiopia’s River basins with their hydropower potential
Table - 3: The harnessed hydropower plants with their installed capacity
Table - 4: Hydropower dams under construction
Table - 5: Planned hydropower projects for future utilization..
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First and for most, I would like to extend my heartfelt gratitude and appreciation to my advisor, Dr. Demeke Achiso, for his intellectual comments, constructive advises and careful suggestions throughout writing this thesis. My special thanks goes to all my key informants for their forbearance and informative responses to my questions as well as to all those who provided me with the necessary materials. I am also grateful for my entire families for their unyielding encouragement and support.
The commencement of Grand Ethiopian Renaissance Dam (GERD) on April 2, 2011 dictates significant change on the ground which challenges the hydro political status quo of the Nile basin. The construction of the dam facilitates discussion among states of the region over the impacts of the dam and the possibilities of future utilization of the River. Thus, this study attempted to investigate the role of GERD for regional integration. The researcher attempted to examine the role of GERD for regional integration in the Horn of Africa in view of challenges and prospects ahead. In addition, the study tried to analyze the role of GERD for maintaining peace and stability in the region and also its implications for Ethiopia. Methodologically, the research is based on a qualitative research approach. The study has used secondary sources. It also used primary data through in-depth interview with officials and experts from relevant institutions and authorities. The available sources are analyzed by using descriptive and explanatory research approaches. The major findings of the study reveal that GERD will be a catalyst for regional integration in the Horn of Africa through providing energy interconnection and creating economic interdependence among states of the region. The findings in this paper also suggested that GERD will be a catalyst for maintaining peace and stability in the region by enhancing economic interdependence and cooperative utilization of Nile water resources. The findings also indicated that the construction of GERD has social, economic and political implications to Ethiopia. The study highlighted the prospects of GERD for regional integration. Among others, Sudanese support for the dam; the signing of declaration of principles of GERD and the intensification of infrastructural interconnections among states of the region are some of them. Lastly, the study highlighted challenges ahead on GERD for regional integration. Among these mistrust among states of the region; the absence broader regulatory framework for hydropower trading; the nature of political regimes, and financial constraints for constructing the dam and also for establishing transmission grids are the most prominent ones. Generally, the findings of the study leads to the overall conclusion that GERD will foster regional integration through providing energy interconnection and economic interdependence among states of the region in spite of several challenges ahead.
Key Words: GERD, hydropower, regional integration, economic interdependence
CHAPTER - ONE INTRODUCTION
1.1. Background of the Study
Hydropower is the most common form of renewable energy, which plays an important role in global power generation covering more than 16% of global electricity production (IEA, 2010:1; IRENA, 2012:14). As compared with other sources of power, hydropower has unique features of lowest operating costs, longest plant life, environmental benefit, fast response and minimal emissions (IEA, 2010:2; IRENA, 2012:5; UN water report, 2014:100). Besides these unique features and its importance to electricity access, hydropower has modest contribution to regional cooperation and development (The World Bank Group, 2009:2). Moreover, energy integration has paramount significance in reducing costs and increasing the reliability of energy supply as well as leading to better economy (WEC, 2008:3; Verhoeven, 2013:8). Therefore, it could be concluded that hydropower, through promoting energy supply, has a great role to accelerate regional integration.
Energy led integration has been shown in different parts of the world. Accordingly, currently, there are around 40 projects to integrate energy markets in Latin America (WEC, 2008:4). In this regard, the bilateral agreement of electricity interconnection between Argentina and Brazil can be taken as one typical example in helping the integration process (WEC, 2008:5)
Electricity trading exists in North America, which is being operated within the framework of North American Electric Reliability Council (NERC) (Sparrow et al., 2002:2). In the Middle East also there is cross-border interconnection and power trading as part of electric supply system. In addition, there exist initiatives in areas of electricity for collaborative works such as Council of Arab Ministers Responsible for the Environment, Arab Countries Water Utilities Association (Granit and Lofgren, 2010:15). Majority of countries in Middle East have established interconnections with neighboring countries (Granit and Lofgren, 2010:15).
Although Africa has huge potential of hydropower resources, it has minimal share of the total world’s hydroelectricity (Belachew, 2013:5). Nonetheless, hydropower plants are being built in different parts of Africa so as to increase access to electricity and foster interconnections (IRENA, 2012:55). The expansion of hydropower plants increases interconnectedness among African countries by creating better integration and helping power exporters to earn more revenue from the sale of energy as well as by enabling the importers to get power supply at cheaper prices (Zerihun, 2014:19; IRENA, 2012:3).
Looking regionally, the principal means of electricity production in South African Development Communities (SADC) is hydropower, accounting for 67% of the total electricity generated (Chanakira, 2011:71). Cooperation in the region helps to promote reliability and security of energy supply which is on progress. Accordingly, SADC is providing framework of cooperative approaches to increase energy infrastructures and promote inter-country energy exchange (Chanakira, 2011:74). Thus, it can be taken as one example in areas of energy cooperation in southern part of Africa.
The western part of Africa also witnessed energy integration development. Accordingly, the government energy ministers of Economic Community of West African States (ECOWAS) officially launched West African Power Pool (WAPP) in 2000 (Sparrow et al., 2002:3). The WAPP project, which brings fourteen countries together, is now modeling the trading of electricity across borders, in order to optimize investment response to forecast electricity demand and population growth (Plunkett, 2004:25). The project is intended for better energy supply as well as integration within the ECOWAS area (Water for Energy and Agriculture in Africa, 2008:137). Moreover, the Manantali dam, on the Senegal River, is also another manifestation of regional integration project which is connecting Senegal, Mali and Mauritania (Water for Energy and Agriculture in Africa, 2008:137).
In North African countries, the rapid growth of energy demand and the supply structure generates considerable potential for regional energy trade (Santi et al., 2012:25). Though actual electricity exchanges in North Africa are limited, regional power interconnections are being built across North African countries. Countries are interlinked with transmission lines, though they are highly dependent on connection with Europe (Santi et al ., 2012:36).
Hydropower has long been the pillar of East Africa’s energy production capabilities (Quirke, 2012:2). Moreover, the Eastern Africa Power Pool (EAPP) in the eastern bloc targeted on assisting regional integration, promoting power supply and reducing cost of electricity (Ferrari et al., 2013:5; Ram, 2009:5). The region has the second largest potential in the continent and Ethiopia has the greatest potential in the region (Water for Energy and Agriculture in Africa, 2008:139). In this regard, Ethiopia has the second largest hydropower potential in Africa following Democratic Republic of Congo (DRC) (Verhoeven, 2013:6; IRENA, 2012:23).
The Horn of Africa has huge potential of hydropower which could enhance interstate relations among states of the region (Sisay, 2006:2; Verhoeven, 2011:7; Medhane, 2004:12). Ethiopia, being at the heart of the region, with huge potential of hydropower, has good opportunity to accelerate regional relations and cooperation among states of the region (Endalcachew, 2014:281; MoFA, 2014:4). The ongoing hydropower projects of Ethiopia have good promise to promote economic integration; electricity integration; infrastructural expansion; people to people relation, and latter political cooperation in the entire region (Endalcachew, 2014:284). Among others, hydropower exports of Ethiopia to Sudan and Djibouti could be best example in furthering regional relations (Healy et al, 2009:6). Thus, hydropower can enhance regional integration in the Horn of Africa.
Ethiopia is endowed with an aggregate capacity of 45,000 MW of hydro-electric power, which is enough to meet most of Sub-Saharan Africa’s current energy demand (Verhoeven, 2011:5). However, only a small portion of these resources has been utilized so far and less than a third of the nation’s population has access to electricity (Healy, 2011: 35). It is now believed that increasing access to modern energy is vital for poverty mitigation in Ethiopia as well as for demands of neighboring countries (Gilgel Gibe Affairs, 2008:5). The Ethiopian government is now providing utmost significance for harnessing the water resources to meet the ever increasing energy demand of the people (Healy, 2011:35). Accordingly, the government has been undertaking different hydro dam constructions aiming at meeting domestic energy demand and exporting electricity to neighboring countries notably; Sudan, Kenya and Djibouti (Gilgel Gibe Affairs, 2008:5; Healy, 2011:35; Medhane, 2004:124). This is part of the wider program of connecting nine regional countries to a single electricity grid by 2016 (Healy, 2011:35).
The most magnificent commitment of the government to utilize its water resources for the generation of power is manifested in the construction of GERD (Ferrari et al, 2013:3). Although the primary purpose of GERD is power generation, it can also benefit the downstream countries, mainly Sudan and Egypt, by removing silt and sedimentation, by regulating the water flow and by conserving water in Ethiopian highlands (Belachew, 2013:5). In addition, GERD will be the hub of clean and renewable energy supply by increasing Ethiopia’s electric supply by triple and exporting electricity to East and the Horn of African countries with cheaper prices. As result, it will be catalyst for people to people relation as well as trade between states of the region (Belachew, 2013:6; Endalcahew, 2014:284). GERD can play a pivotal role in boosting integration of the Horn of African countries (Endalcachew, 2014:282). Furthermore, the completion of GERD is a symbol of regional integration in the Horn of Africa (Belachew, 2013:11). Therefore, this study has attempted to examine the role of GERD for regional integration in the Horn of Africa.
1.2. Statement of the Problem
The Horn of Africa is one of the most politically unstable and volatile regions of the world (Kidist, 2009:7; Healy, 2011:1). The region comprises of Ethiopia, Somalia, Djibouti, Kenya, Eritrea, Sudan and South Sudan (Healy, 2011:1). The region is fragile due to failure of states to pursue rational policies and fragile nature of the region’s economy (Medhane, 2004: 4; Janneh, 2012:65). The region is linked both by shared history of conflict and weak economic ties (Healy, 2011:1). The region is also characterized by rapid population growth and urbanization which led to increasing need of electricity (Karekezi, 2009:5).
The Horn of Africa is not so far well endowed with fossil fuels. Only Sudan has been the sole oil producer in the region and began to export oil in 1999 (Healy, 2011:33). As a result, countries of the region highly rely on imported petroleum for their energy consumption (Karekezi, 2009:5). According to African Development Bank (2011:9), serious electricity deficit and high energy cost, inter alia, challenges regional integration in the region. The region’s development is constrained by lack of access to affordable and reliable power (Milas, 2013:5). Nonetheless, energy trading is becoming an important sphere of cross-border cooperation in the Horn of Africa (Healy et al., 2009:6). Hydroelectricity trading is one of several avenues by which the Horn of African states could bring about the necessary social and economic changes to move the region out of poverty (Jadot, 2013:1). Among others, hydropower exports of Ethiopia to Sudan and Djibouti could be best example (Healy et al., 2009:6). Hence, hydropower can play a pivotal role to regional integration of the Horn of African states.
Ethiopia gives top priority for the development of hydropower to lessen its dependence on expensive fuel imports and enhance its energy security (Healy, 2011:34). The Government is heavily investing on mega hydropower projects to provide the bedrock for the transformation of political, social and economic landscape of Ethiopia, and for the region (MoFA, 2014:2; Verhoeven, 2013: 5). Accordingly, Ethiopia launched an aggressive plan to utilize its water resources with a clear intent of transforming regional relations (MoFA, 2014:2; Verhoeven, 2013:6; Block and Strzepek, 2011:1). Ethiopia hopes in the long term to dominate the Horn through energy exports (Verhoeven, 2011:15). Consequently, Ethiopia planned to export electricity to Kenya, Sudan, Djibouti, Egypt, Eritrea, Yemen and other Eastern and Southern African countries (International Rivers, 2011:2).
GERD will made Ethiopia to be one of the main producer and exporter of power in Africa by satisfying the domestic energy demand and exporting energy to the Horn of African countries through regional interconnection system (MoFA, 2014:2; Ferrari et al., 2013:4; Belachew, 2013:5). To this end, Ethio-Sudanese transmission link is completed and Ethio-Kenya electricity highway construction is approved while also aimed to export to other countries of the region (REN21, 2013:38; Hathaway, 2008:8). Similarly, the following arrangements have already been made with neighboring countries to supply electricity. According to Ferrari et al.,(2013:9) and Hathaway (2008:8), “Ethiopia might export 200 MW to Djibouti, which would enable Ethiopia to pay for its port service at Djibouti, 500 MW to Kenya, which would enable Ethiopia to pay for its port usage at Mombasa, and 200 MW to Sudan which would enable Ethiopia to buy fuel oil from Sudan in exchange”. Moreover, GERD will also reinforce the EAPP (Ferrari et al., 2013:9).
Therefore, GERD will play a great role in facilitating regional integration in the Horn of Africa. Nevertheless, despite some literature argue about its positive contribution to the regional integration, no comprehensive study, with significant emphasis, is conducted as to the real significance of GERD in integrating countries of the region. Studies have not been conducted taking account of energy demand as well as supply of power to countries of the region. The available few literature in the area focused on the importance of Ethio-Sudan resource exchange in the region regardless of considering the rest countries in the region, for instance, Verhoeven (2011) and Medhane (2004). This necessitated the researcher to undertake the study.
1.3. Objectives of the Research
The overall objective of this research is to investigate the role of GERD for regional integration in the Horn of Africa. In view of this, the study has the following specific objectives. It is to;
- Analyze the role of GERD for regional integration.
- Assess the role of GERD for maintenance of peace and stability in the region.
- Explore the implications of GERD to Ethiopia.
- Examine the prospects of GERD for regional integration in the Horn of Africa.
- Explore the challenges of GERD for regional integration in the Horn of Africa
1.4. Research Questions
The following are the major questions that the study tried to address. What
- Will be the role of GERD for regional integration in the Horn of Africa?
- Will be the role of GERD for maintenance of peace and stability in the region?
- Implications GERD will have to Ethiopia?
- Prospects GERD will have for regional integration of the Horn of Africa?
- Challenges GERD will face in regional integration of the Horn of Africa?
1.5. Methodology and Methods of Data Collection
The study employed a qualitative approach. Qualitative research, as Dawson (2007:14) outlines, explores “attitudes, behavior and experiences through such methods as interviews or focus group discussions”. Qualitative approach is used to address research questions that require explanation or understanding of social phenomena and their contexts (Ritchie and Lewis, 2003:4). The question of ‘what’, ‘how’ and ‘why’ can be answered by using qualitative approach (Ritchie and Lewis, 2003:4). Moreover, qualitative research attempts to interpret phenomena in terms of the meanings people bring to them. In other words, qualitative research is basically interpretive in that it involves analyzing data and finally making interpretation or drawing conclusions about its meaning (Creswell, 2014:4).
The role of GERD for regional integration in the Horn of Africa can be clearly understood through examining written documents and conducting in-depth interviews with pertinent personalities. Moreover, the research objectives, as well as, means of data collection fall under the framework of qualitative methodology. Put differently, due to the nature of the study, it is qualitative methodology, which best guides for the accomplishment of the study.
1.5.2. Methods of Data Collection
The researcher utilized both primary and secondary sources to gather the necessary data on the study. Secondary sources like books, journal articles, reports, newsletters, official documents and internet sources have been used. In order to strengthen aspects of data provided by these writings, the researcher also used primary sources through in-depth interview. The researcher employed semi-structured type of interviews having open-ended questions as it allows for flexibility depending on the circumstances and more questions can be generated from the response of the interviewees. To this end, the researcher interviewed key informants from Ministry of Water, Irrigation and Energy; Ethiopian Electric Power Corporation; Eastern Africa Power Pool, and Office of National Council for the Coordination of Public Participation on the Construction of Grand Ethiopian Renaissance Dam. Moreover, the researcher also interviewed prominent experts from Addis Ababa University.
Purposive sampling technique has been used to select key informants. The researcher chose this technique since it enables the researcher to identify participants who have closer connection to and knowledge of the issue. Applying random sampling technique may result in selection of individuals who have no knowledge of the issue. As a result, necessary information may be missed and information gained may not enable the researcher to realize the purpose of the study. Hence, purposive/judgmental sampling technique is preferred to trace pertinent persons who can provide relevant information on the issue. In addition, snowball technique has been used.
1.6. Significance of the Study
The study may have a significant value to anyone who is interested in the role of GERD for regional integration of East and the Horn of Africa since the issue is not emphasized in the existing literature. The findings of the study may also contribute to the available scanty literature and helps for further researches on the subject. Moreover, the findings of the study could be used by policy makers for policy making purpose.
1.7. Scope of the Study
The study deals with the role of GERD for regional integration in the Horn of Africa. Hence, the study emphasizes on the role of GERD for regional integration. The study further gives due emphasis for the role of GERD for maintaining peace and stability in the region, and its implications for Ethiopia. Moreover, the study is delimited to the role of GERD for regional integration in the Horn of Africa.
1.8. Limitations of the Study
Since the issue under study is recent and ongoing, there was a difficulty of getting relevant information and materials. Therefore, the researcher has used various internet sources to compensate shortage of reading materials. Moreover, time constraint was one of the pressing challenges of the research, especially for collecting primary data and data analysis. Lastly, while the researcher tried to alleviate the shortage of reading materials, through in-depth interviews some of the institutions refused to give relevant information. Accordingly, the attempt of getting information from Ministry of Foreign Affairs, Eastern Nile Technical Regional Office and African Union has failed due to lack of cooperation.
1.9. Organization of the Study
The paper comprises six chapters. Chapter one is an introductory section, which provides the background, statement of the problem, objectives, research questions, methodology and methods of data collection, significance of the study, scope of the study, limitations of the study and organization of the study. Chapter two gives a highlight of relevant reviews of related literature and theoretical framework on major theme of the study. Chapter three provides major backgrounds of the study in both historical context as well as recent efforts made. The fourth chapter offers a major findings and analysis by raising the role of GERD for regional integration and maintaining peace and stability in the Horn of Africa. The chapter further discusses the implications of GERD for Ethiopia. The fifth chapter examines the prospects and challenges of GERD for regional integration. Finally, the sixth chapter dwells on Conclusion.
CHAPTER –TWO LITERATURE REVIEW: CONCEPTUAL AND THEORETICAL FRAMEWORK
This chapter discusses literature review and theoretical framework. First, it discusses the concepts of regional integration and related concepts followed by theories of regional integration are presented with an attempt to link with the topic under study. Lastly, the chapter gives due emphasis for the review of pertinent literature in the area of Energy led regional integration.
2.1. Conceptual Framework
This subsection discusses concepts of regional integration and other related concepts. In doing so, the subsection first discusses concepts of regional integration followed by levels of regional integration. Finally, the subsection briefly discusses the rationales of regional integration.
2.1.1. Conceptualizing Regional Integration
Regional integration is a discipline in International Relations which focuses on the actions of states in their complex relationships with each other (Slocum and Langenhove, 2004:2). Regional integration can be described as a dynamic process that entails a country’s willingness to share or unify into a larger whole (Slocum and Langenhove, 2004:2). It is a process in which states enter into supranational regional organizations in order to increase regional cooperation and diffuse regional tensions. Haas (1958:12) defined regional integration as a process “whereby political actors in several distinct national settings are persuaded to shift their loyalties, expectations, and political activities towards a new and larger centre, whose institutions possess or demand jurisdiction over pre-existing states”. Therefore, integration is a form of collective action among countries in order to obtain a certain goal (Slocum and Langenhove, 2004:6). This goal can be as grand as political unification, as in the case of the European Union (EU) or a free trade area, as found in the North American Free Trade Association (NAFTA). Lindberg (1970:650) also defined regional integration as an “evolution over time of a collective decision making system among nations. If the collective arena becomes the focus of certain kinds of decision making activity, national actors will in that measure be constrained from independent action”. Hence, regional integration is a series of voluntary decisions by previously sovereign states to remove barriers to the mutual exchange of goods, services, capital or persons. The common nature in all integrations is that a new common center is created out of prevailing autonomous units.
Regional cooperation and regional integration are often used interchangeably (UNECA, 2012; AEC; 2013). However, there is quite significant distinction between the two. Regional cooperation typically implies collective state action within defined confines controlled by participating governments (Babarrinde, 1999:7). Collective state action in this respect does not meant to usurp national authority or to displace sovereignty. This functional cooperation by member states entails minimal regional bureaucracy at best, and national governments are the gatekeepers between the national and regional levels (Babarrinde, 1999:7). Regional cooperation may not be rooted in distinctive organizations, but it always remains contingent on voluntary, unanimous and continuous decision making of its members (Schmitter, 2007:4). Entry into and exit to the arrangements is relatively costless, loyalty to the region remains minimal, legitimacy is based on voluntary compliance with collective decisions which is based exclusively on utility of outputs (Schmitter, 2007:4). Therefore, a collective effort at regional level is likely to be erratic, conditional and confined to pre-specified issues.
Regional integration, on the other hand, connotes a process of creating a larger political entity, whose institutions possess or demand jurisdiction over pre-existing national ones and the countries involved surrender some degree of sovereignty and act as a unit (Babarrinde, 1999:7; Lindberg, 1970:650). When regionalism switch from cooperation to integration, entry into and exit to the region became much more costly and latter may eventually become prohibitive, loyalty to regional identity seems to be more belatedly, but conformity to the norms can develop more rapidly even may go against the consent of sovereign national states (Schmitter, 2007:5). However, it should be noted that there is no precise point when regional cooperation becomes integration; since the process involves more of moving along a continuum ranging from economic isolation, through mercantile policy, to economic cooperation then to economic integration, and finally political unification (Olubomehin and Kawonishe, 2004:2).
2.1.2. Levels of Regional Integration
Regional integration schemes are famous ways in which regions embark on their integration (Madyo, 2008:10). These schemes are stepwise that could be manifested through different levels ranging from the simplest, Free Trade Area (FTA), to the most complex, political union (Hancock, 2009:3). The starting point is usually a FTA, followed by a customs union, a common market then an economic union and finally political union (Jonyo and Misaro, 2013:167). Thus, this sub section attempts to discuss levels of regional integration.
The first stage, FTA, is the suppression of discrimination in the fields of commodity movements among member states (Madyo, 2008:23). It occurs when nations jointly remove all trade restrictions amongst them, while retaining their freedom to pursue individual policies like early stages of European Economic Community or NAFTA (McDonald, 2005:25). At this level tariff and other trade restrictions between member states and third parties remain unaffected, and member countries are free to impose any level of tariffs against nonmember countries (Hancock, 2009:21). According to Schiff and Winters (2003:83), the interaction between member states reduce external tariff for three reasons; firstly, if tariff on member states are constrained to zero, the optimal level is closely competitive goals from other countries will be relatively low, so as to reduce trade diversion. Secondly, if there is trade deflection (i.e. the redirection of imports from other countries through the FTA member countries with lowest external tariff), high tariff countries lose tariff revenue. Thirdly, if duties on imports used to reduce exports to other members cannot be rebated, high import tariffs render exporters of the final goods uncompetitive.
The principal goal of FTA is to gradually achieve a state of perfect competition among industries of member countries (Schiff and Winters, 2003:84). For example, when establishing European Free Trade Area, its member countries agreed to promote a sustainable expansion of economic activity, full employment, increased productivity and rational utilization of resources. These ensured trades among member states take place in condition of far competition, and also contribute to the harmonious development and expansion of world trade (Hancock, 2009:21).
The second stage, customs union, is a cooperation that eliminates all trade barriers among member states and imposes a common tariff against nonmembers (McDonald, 2005:25). It is an upgrade of FTA but member countries must undertake joint external trade relations with non-members with common external tariff on goods from non member countries (Jonyo and Misaro, 2013:167; McDonald, 2005:25). Generally speaking, customs union combines the elements of FTA with policies of protection, since it provides freedom for movement of goods between member states, while on the other hand it protects the market within the union from competition with other countries (Jonyo and Misaro, 2013:167).
The aim of customs union is to distribute world income in favor of member countries through an improvement of terms of trade with the rest of the world, since it has common external tariff (Madyo, 2008:23; Schiff and winters, 2003:84). Customs union offer greater market integration and lower costs, but require more ongoing co‐ordination, which includes reconciling the interests of member states and then establishing continuing political arrangements in order to deal with subsequent adjustments (Hancock, 2009:22). Furthermore, customs union require member states to surrender autonomy, both in multilateral trade talks and the application of anti‐dumping measures and other forms of contingent protection (Schiff and winters, 2003:84). This implies that member states might end up with external trade barriers that are not nationally optimal from an economic and political perspective. In customs union overall economic integration might be hard due to the complexities ranging from national interests and resource distribution to members who are at different levels of development (Hancock, 2009:22).
The third stage, common market, is defined as a group of trading nations that permits (i) the free movement of goods and services among member nations; (ii) the initiation of common external trade restrictions against non‐members, and (iii) the free movement of factors of production across national borders within the economic bloc (Carbaugh, 2004:6). Common market, as a higher level of economic integration than a free trade area and a customs union, ensures that member states’ unity is strengthened and that there is harmonization and co‐ordination of policies and activities (Hancock, 2009:22). This is the reason that the first two levels of regional integration need to be attained before the next ones can be embarked on. In addition, member states should establish a common customs tariff and a common commercial policy towards third parties.
The primary reason for promoting factor mobility is that it will lead to a more efficient allocation of labor and capital within the economic bloc. In this stage of regional integration, both labor and capital will move from their least productive locations, as a result the bloc’s total level of production and income will be enhanced (Jonyo and Misaro, 2013:167). The harmonization and co‐ordination of policies are adequate responses to different trade policies and practices, but in a common market there needs to be a free movement of factors of production among member states (Schiff and Winters, 2003:215). Although member states may have different currencies, there is often a free convertibility between the currencies of partner countries. In addition, Hancock (2009:22) argued that the common market also implies that there will be free competition between productive units in member countries, since competition is healthy and important for better production.
The fourth stage, economic union, is a situation when countries that formed a common market completely unify and harmonize their monetary and fiscal policies (McDonald, 2005:26). Balasa (1961:8) described economic union as a common market in which national economic policies are harmonized in order to remove discrimination due to disparities in these policies. Jonyo and Misaro (2013:167) have defined it as a common market in which economic policies such as monetary, fiscal, social and countercyclical policies are unified and supra-national authority is setup to administer these policies and make binding decisions for member states.
The task of creating an economic union is much more difficult than the early three stages of regional integration (Madyo, 2008:27). This is mainly because a free trade area, customs union or common market results primarily from the abolition of existing barriers, but economic union requires an agreement to transfer economic sovereignty to supra- national authority (Hancock, 2009:22). At this stage member states agree to integrate all their economic activities and to undertake joint decisions in all aspects of economic development policies (Jonyo and Misaro, 2013:167).
The fifth stage, political union, occurs when two or more member states unite to form a sovereign nation under one federal or centralized institutional structure, for example, the unification of East and West Germany (McDonald, 2005:25). As per the argument of functionalism, political union is the ultimate goal which could be achieved through gradual process. In other words, the process of regional integration culminates at the stage of political union (Jonyo and Misaro, 2013:167). Political union is considered as the ultimate goal for most African states when considering regional integration arrangements (Hartzenberg, 2011:2).
Political integration becomes a matter of necessity when the level of integration gets deeper and deeper due to the need of giving up political autonomy, decisions related with agricultural policy, taxation rates and collection, community and regional development plans, and financing. All these issues need beyond economics, for instance, harmonizing domestic policy, and other foreign policies, as the EU has done. These deeper forms of integration often are signals intensions of political integration (Hancock, 2009:22).
Table 1: Schematic representation of the five stages of Regional Integration Schemes
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Source: El-Agara, Mohammed. (1999). Regional Integration: Experience, Theory and Measurement. Macmillan.
Regional integration generally involves complex web of cooperation between countries within a given geographical area. It demands harmonization of policies in such sectors as trade, investment, infrastructural development, as well as monetary and fiscal policies of member states. The overall objective is essentially to ensure stability and sustainable economic growth and development within the integrating area (McDonald, 2005:26). The success of any integration scheme be it FTA, customs union, common market, monetary union or even political union, enhances competition and efficiency within the integrated area, through increased specialization and generally ensures better allocation of scarce resources into the most productive areas (Jonyo and Misaro, 2013:167; McDonald, 2005 :26).
Countries can start with any of these arrangements but mostly begin by removing impediments to trade among themselves i.e. with free trade area and then introducing deeper and wider integration mechanisms. In the Horn of Africa different stages of integration currently coexist. In the formal sector, each country maintains its own import regime but has agreed on targets set by regional organizations such as Inter Governmental Authority on Development (IGAD), Common Market for Eastern and Southern Africa (COMESA) and East African Community (EAC), where progress has generally been slow (Healy, 2011:10). On the other hand, informal cross-border trade is essentially a free trade area with elements of a common market in the movement of labor and capital. This creates a localized common market in South Somalia, Northeast Kenya, Southeast Ethiopia, and in the Ethio-Somaliland border zone (Healy, 2011:10).
2.1.3. Rationales for Regional Integration
There are varieties of rationales for regional integration schemes. Baregu (2005:47) has put forward four rationales that lie behind the formation and sustenance of regional integration schemes; these are affection, gain, threat and power. According to him, it is through these rationales that we should turn to if we are to identify the reasons for implementation or non-implementation of integration agreements, as well as to explain the successes and failures in existing schemes. The affection rationale is essentially emotive. It refers to a situation where countries come into an integration arrangement because they have a lot in common and feel some bonds of affection. In Africa even though the affective rationale, common ‘African’ identity, is the central in defining the framework of the quest for continental unity; it lacks sufficient drive to push the integration process.
According to Baregu (2005:47), gain is the most famous rationale for initiation as well as for sustenance of regional integration schemes. Theories of regional integration are largely preoccupied with the economic welfare gains from trade within the different blocks or from without. However, the dynamics of regional integration is more than pure economic motives encompassing the broader political goals.
The shared perception of threat and the quest for collective security and protection is, perhaps, the strongest incentive toward integration (Baregu, 2005:48). This may arise from two distinct situations. One is when two or more countries find themselves locked in mutually threatening relationships and have to reach some compromise leading to peaceful coexistence. This is what lay behind the formation of the European Coal and Steel Community by France and Germany in 1951 (Alter and Steinberg, 2007:5). The other is when there exists a perception of a common external threat, in which countries come closer to enhance their capacity to defend themselves. This is what lay behind the formation of the North Atlantic Treaty Organization against the perceived threat from the Soviet Union and its allies. For Baregu (2005:48), it is this imperative that should inform regional integration in the third world once the countries concerned realize that globalization threatens their very continued existence. It is notable that regional integration in Africa has been largely driven by economic necessities with security holding the latter position (Oloo, 2007:7).
Power as rationale for regional integration refers to the situation where a regional hegemon forces the neighborhood into an integration arrangement (Baregu, 2005:49). This rationale of integration involves the existence of a relatively more powerful country in the region with the capacity and interest to pay the costs of hegemony by offering incentives for members to stay, and imposing sanction on those that may want to break away. This model has not gained ground in Africa because of lack of clear undisputable hegemon that can take lead in the process (Dehez, 2008:3). In general, the gain and threat imperatives will be critical for regional integration in Africa.
2.2. Theoretical Framework
This subsection discusses theories of regional integration with an attempt to link with the topic under study. Theories are discussed so as to show how they could be applied in the role of GERD for regional integration in the Horn of Africa. In doing so, first the theoretical assumptions are presented followed by an attempt to link with the topic understudy.
Classical realists argue, since the need to have more power is inherent in human nature, sates are constantly involved in a struggle to amplify their capacities (Griffiths, 2007:12). Neo realists also believe that the ultimate goal of states is to survive, and the sole means to realize this goal is to increase their power (Weber, 2005:16). This is basically due to the pervasive antagonism and anarchical nature of international system (Schmitter, 2007:1). For realists regionalism remains a difficult phenomenon to explicate since they believe that states establish regional institutions on simple basis than durable (Pedersen, 2002:677). Neo-realism in particular conceives the states as basically distrustful of each other and accords common institutions as marginal role (Pedersen, 2002:677). More importantly, Neo- realists’ are pessimist about the possibility of interdependence and cooperation, thus, argues that each state must rely on its own resource to survive and flourish (Rourke, 2007:25). In short it is might that makes right (Rourke, 2007:26).
In line with the realist assumption one can conclude that Ethiopian program for utilization of its water resources through constructing GERD as a precondition for strengthening its power economically and militarily to ensure its hegemonic power in the hostile region of the Horn of Africa and get an upper hand on the neighboring countries and to the region. According to the assumptions of realism, the construction of GERD is meant for increasing the military and economic capabilities of Ethiopia. Therefore, the construction of GERD is mainly for strengthening the economic and military capability of Ethiopia there by enable her to be hegemonic state in the Horn of Africa.
Liberalism, on the other hand, has an optimistic view towards possibility of creating harmonious relations among the states and argues that states must cooperate more fully to prevent various dangers and evils (Rourke, 2007:26). For liberalists, cooperation and interdependence among states can result in better advantage and reduces interstate competition (Burchill et al., 2005: 63). In addition, liberals believe that since states aspire for absolute gain, they are competent to cooperate in trade and other activities (Griffiths et al, 1999:109; Burchill et al, 2005: 65). Hence, they do have positive belief on states’ interest to make good relations and cooperation. The cordial relation of states can be hastened by trade exchange (Burchill et al, 2005: 63). As liberalists argue, cooperation will increase mutual benefit and peaceful interaction of states, and states are ready to do that (Griffiths et al, 1999:109). Thus, unlike realists, the creation of good relations and cooperation among sates is possible through trade import- export or give and take kind of relations.
Based on this theory one may assert that the construction of GERD and subsequent plan of electricity export to neighboring countries of the Horn of Africa have paramount importance to boost regional cooperation and regional integration based on mutual benefits. The construction of GERD will enhance electric trading among countries of the Horn of Africa which will foster regional cooperation and integration among countries of the region. The subsequent analysis of the issue under discussion clearly reveals which theory best explains the role of GERD for regional integration of the Horn of Africa. Therefore, GERD will be catalyst for regional integration by fostering economic interdependence among the Horn African States.
Functionalism is based on the assumption that the growing complexity of governmental systems leads to raise greatly the essentially functional, non political tasks confronting government (Dougherty and Pflatzgraff, 1990:431). It is argued that such tasks not only created demand for high trained specialists, but also contributed to the emergence of technical problems beyond national sate level whose solution lies in collaboration among technicians across states. Thus, factionalist theory stated that “the development of collaboration in one technical field leads to comparable behavior in other technical fields” (Dougherty and Pflatzgraff, 1990:432). In other words, the functional practice in one field of cooperation or integration is believed to generate functional collaboration in other areas. Functionalism theory of regional integration believes that successful cooperation in one functional setting would enhance the incentive for collaboration in other fields. To the extent that tasks in specific functional areas could be successfully completed, attitudes favorable to cooperation in other sectors developed.
In the long run, functionalism assumed the inevitability of socio- economic gradualism and the supremacy of welfare and technology over power politics (Pentland, 1973:86). Functional needs are presumed to have self-evident consequences for the scope, level and character of regional integration. The technical aspect of functions, according to this theory, is the basic element of integration process. This is mainly because of the belief that the tasks of integration give rise to collaboration among technicians, rather than political elites (Dougherty and Pflatzgraff, 1990:433). It views regional integration as a technical and nonpolitical nature, and implicitly believes that economics and welfare have a primacy which will and should guide policy. To this end, functionalism prescribed integration that was pragmatic, technocratic, flexible and nonpolitical. The functionalist stresses that “any discussion touching issues of ‘high’ politics is prejudicial to the integration of a region” and thus it is argued that an attempt at integration should start with ‘technical’ low politics (Tare, 1993:109). As integration bears fruit, experts and beneficiaries learn that integration can effectively be extended to other practical and non controversial needs.
Therefore, based on the assumption of functionalism, the construction of GERD will enhance trading relations among countries of the Horn of Africa. The construction of GERD, as Functionalists argue, will lead to socio- economic bondage in the long term that states of the region will get welfare and economic benefits. The economic benefit that could be gained from GERD, through hydropower trading, will enable states to cooperate in other fields. Furthermore, according to functionalism, the construction of GERD and subsequent plan of hydropower trading will enable states of region to get benefits which will enhance cooperation in other fields. Hence, one can argue that the construction of GERD will enhance regional cooperation and integration among states of the region by providing welfare and economic benefits.
D. Neo- Functionalism
Neo-functionalism posits that integration results from the need to shift specific functions away from exclusively state control toward supranational institutions (Mitrany, 1975:17). Neo- functionalism places major emphasis on the role of non-state actors especially, the “secretariat” of regional organizations involved and those interest associations and social movements that form at the level of the region in providing the dynamic of further integration. Member states remain important actors in the process (Moravcsik, 1993:475). They set the terms of initial agreement, but they do not exclusively determine the direction and extent of subsequent change.
The theoretical basis for Neo-functionalism was the concept of ‘spill over’, whereby initial steps toward integration trigger endogenous economic and political dynamics leading to further cooperation (Moravcsik, 1993:475). As integration progresses, the neo-functionalists expected a shift in loyalties to the new center which is called spillover effect. It is spillover which is the motor or dynamics of integration. Hence, for neo- functionalism regional integration is based on the extensive logic of sector integration (Lindberg, 1963:10). According to Lindberg, spillover refers to a situation in which a given action, related to a specific goal, creates a situation in which the original goal can be assured only by making further actions, which in turn create a further condition and a need for more action and so forth”(1963:10). For instance, according to Haas (1958:311), the founder of neo-functionalism, “Liberalization of trade within the customs union will lead to harmonization of general economic policies and eventually spillover into political areas and lead to the creation of some kind of political community”. Therefore, for neo functionalism, the realization of the original goals that prompted the first integrative step can be assured only if a chain process of further expansions of integrative actions is taken (Lindberg, 1963:10).
Neo-functionalists interpretation of the processes of regional integration focused on four dynamics; functional spillover, the formation of coalition (cultivated spillover), bureaucratization or de-politicization, and the formation of transnational interest groups (Hass, 1958:140). Neo-functionalists have been primarily concerned with the conditions of producing incremental progress. The main argument of the neo-functionalist is that “when certain sectors in the life of sovereign states are integrated; the process will sooner or later also involve interest groups and political parties” (Tare, 1993:113). It is further argued that for the integrative activities to be successful, the following two steps are essential.
One, that the sector which was chosen was important but not as controversial as to affect the interests of states or of the political entities; two, that the activity to be susceptible to expansion and larger than the sum of independent activities pursued by nation states (Tare, 1993:113).
In general, neo-functionalism provides more elaborate and broader perspective regarding integration. It deals with not only with the process and schemes of integration as the functionalists point out, but rather focuses on the interests and values to be defended and promoted by relevant actors of integrating entities, mainly based on “expectation of gain” from the activities and the process involved (Dougherty and Pflatzgraff, 1990:438). In their approaches, both functionalists and Neo-functionalists, however, consider the process of spillover where in a certain procedures and behavior occurring in a certain situations will lead to other situations (Sullivan, 1987:212).
Therefore, according to neo-functionalism, the construction of GERD will lead to hydropower trading among states of the region which will enhance integration and cooperation in electricity sector. This integration of electricity sector will have spillover effect in the other sectors. Neo-functionalism argues regional integration is achieved through sector integration. Therefore, the construction of GERD will enhance regional integration in the Horn of Africa by integrating electric sector that will have spillover effect in the other sectors.
Inter-governmentalism is a theory of decision making in international organizations. The theory rejects the concept of spillover that neo-functionalism proposes (Moravcsik, 1995:615). Inter-governmentalism regards integration as a function of negotiations between governments to produce cooperative agreements that evolve into further integration. It also rejects the idea that supranational organizations are on an equal level (in terms of political influence) as national governments (Moravcsik, 1995:616). The intergovernmental approach includes three tenets: First, member states care and pre-occupied with the protection of national sovereignty; second; the supranational institutions created are considered to be the “instruments” of member states and as result they serve only the interests of member states; and third, the focus is on the “grand bargains” between member states (Oloo, 2007:37). Thus, increases in international integration happen through treaty reform (not functional spillover or anything else). Inter- governmentalism is in many ways the antithesis to neo-functionalism. All of the focus is on the political leaders and national interest of member states.
Therefore, based on the assumption of inter-governmentalism, the construction of GERD will enhance trading relation among states of the region which could not have spillover effect in other aspects of relations. According to inter-governmnetalism, regional integration could be achieved through formation of different treaty organizations. Therefore, based on the assumption of this theory, the construction of GERD will improve trading relation among states of the region otherwise it could not achieve regional integration.
2.3. Literature Review
The basic goal of literature review is to trace key issues and develop themes relevant to the specific problems under study (Piantanida and Garman, 1999:98). In doing so, the review frames the problem of the study in its context. First, it starts with briefly looking at global experience of Energy led regional integration in historical context as well as recent efforts made followed by the energy led regional integration efforts in Africa. Lastly, energy led regional integration in East and the Horn of Africa is briefly discussed.
2.3.1. Global Experiences of Energy led Regional Integration
Regional cooperation in energy sector is increasingly becoming common phenomenon in every parts of the world (Chanakira, 2011: 64). Currently, regional cooperation in the energy sector is recognized as central to the attainment of energy security. The fundamental objective of major regional integration block is to promote sub regional energy cooperation and integration (Chanakira, 2011:64). The development of hydropower project can contribute to regional cooperation beyond securing energy and reducing the level of dependence of the country to traditional fossil fuels, poverty alleviation and ensuring sustainable development (Kumar et al., 2011:456). Cross-border interconnections can be facilitated partly by hydropower development, which can bring about broader cooperation between nations, improving business cases for large scale hydropower developments while reducing dependence on fossil fuels (Adams, 2013:2).
Regional electricity integration comprises a long process that involves the combined operation of power systems-generation and transmission grids as well as supporting policy related harmonization of electricity regulations, and accelerated integration of technology (Burgos, 2007:1). This requires transnational governance to ensure that energy is efficiently and fairly distributed. As such, countries need to work together to improve system-level of efficiencies and effectively balance supply with demand across large geographic region (Adams, 2013:2).
Regional energy market strategies vary; some countries rely on bilateral interconnections, while others operate on the basis of broader regional level of energy trading (Adams, 2013:2). As a result, regional energy cooperation is at different level among different regions of the world (Burgos, 2007:1). Accordingly, regional electricity cooperation and integration is accelerating in western hemisphere (Weintraub et al., 2007:5). However, the process of electricity integration differs both within and between countries, and processes are underway at different stages, and with different objectives (Burgos, 2007:1).
North America has the most active and integrated electricity market in the western hemisphere, with 51 multinational electricity transmission lines connecting three countries (Weintraub, 2007:7). However, electricity trade within them is remarkably differentiated by the amount of transaction between Canada and the United States of America, and trade between Mexico and United States of America (Burgos, 2007:11). The region’s energy trading is taking place under the structure of NERC (Sparrow et al., 2002:3). Canada and United States are both the key players in hydropower generation and exchange in the region (Adams, 2013:3). More of Canada’s hydropower generation is traded across the border with United States of America than with in Canada, forming the basis of mutually beneficial relationship between the countries (Weintraub, 2007:9). The hydropower export of Canada to United States of America displaced the thermal generation with renewable energy, which has driven the demand for hydropower from Canada as part of cross border energy trading (Adams, 2013:4).
Energy trading between Mexico and United States are limited due to short of cross grid interconnection, market harmonization and grid compatibility issues (EIA, 2007:12). According to North American Energy Working Group, a body created under the framework of NAFTA, there is a real need for comprehensive grid, which requires the development and update of current infrastructure to ensure supply reliability (Burgos, 2007:11). Generally, the trilateral electricity cooperation and integration with in North American countries is at its early phase and it requires major improvement to make the grid more comprehensive and to coordinate action toward infrastructure financing (Pineau et al., 2004:1468).
Central America contains untapped hydropower resources (ECA, 2010:2). In the region diverse projects are taking place in order to address electricity needs (Burgos, 2007:11). Among others, the Central American Electrical Interconnection System (SIEPAC) project is an initiative to create an integrated regional electricity market among six Central American countries; Guatemala, El-Salvador, Honduras, Costa Rica, Nicaragua and Panama (ECA, 2010:1). SIEPAC project is aimed at enabling potential gains from integration with establishing new regional transmission line and institutions to support a regional electricity market. In the region, Guatemala is interconnected with Mexico with the aim of facilitating the connection of Central American electricity market with the Mexican system (Ruiz-Caro, 2006:3). Furthermore, two interconnection projects; between Guatemala and Belize, and cross border electricity project between Panama and Colombia; are being studied to enhance the Central American regional electricity market (Burgos, 2007:11).
The electricity interconnection between Honduras and El Salvador strengthened regional collaboration in Central America region. This will facilitate the interconnection of Central American countries and will be favorable for the open market and the development of future schemes (Bartle, 2002: 1237). Costa Rica is the largest electricity consumer and the largest purchaser of imported electricity while Guatemala and panama are the main exporters (ECA, 2010:13). However, the existing transmission interconnections are weak and no direct interconnections in place between Hondurans and Guatemala (ECA, 2010:13).
The Latin America and Caribbean (LAC) have different experiences in regional energy integration (Vergara et al., 2013:25). This is because the region is composed of primarily a large quantity of isolated and widely dispersed small island states with low energy demand that creates great physical barriers and challenges for designing and installing electricity interconnection infrastructures (Burgos, 2007:13). However, Petro- Caribe treaty attempted to create virtual energy supply interconnections. In this connection, Venezuela leads by supplying subsidized petroleum products to several islands in reducing their energy production costs (Vergara et al., 2013:15). Furthermore, Trinidad and Tobago, in cooperation with Venezuela, are contemplating on the development of gas-pipeline interconnecting several eastern Caribbean islands (Burgos, 2007:13). In LAC, as a result of population and economic growth the region’s energy demand is forecasted to double its installed capacity to about 600GW by 2030, which will intensify regional energy integration in the region (Yapez et al., 2010:3; Vergara et al., 2013:5).
South America is the home of Amazon River, the largest river in the world (Sanchez and Practical, 2013:178). In the region, hydroelectricity is produced from large hydropower projects feeding in to the national grids. Accordingly, the region’s national electricity supply is highly dependent on hydropower, for instance, in Paraguay (96%), Brazil (87%), Venezuela (70%) and Colombia (75-76%) (Ruiz-Caro, 2006:5). In other countries too, such as Peru, Ecuador and Bolivia, large proportion of annual electricity consumption is derived from hydropower based sources (Sanchez and Practical, 2013:178).
The region is giving priorities for hydropower development so as to satisfy the energy needs of growing population and the growing economies of the region. As a result, states of the region devised joint hydropower development on international water sources which fosters cooperation among the riparian states (UNEP, 2007:54). Joint hydropower development of Itaipu dam, in the La Plata basin, developed by Brazilian and Paraguayan governments, is source of cooperation among the states and enhances hydropower led integration in the region (UNEP, 2007:55). Moreover, Yacyreta project is jointly developed by Argentina and Paraguay, while Salto Grande project is jointly developed by Argentina and Uruguay (Burgos, 2007:12). These joint hydro electric plants and cross country interconnections between Venezuela, Colombia and Brazil developed the region’s interconnection system (Ruiz-Caro, 2006:7).
Furthermore, MERCOSUR advocated for common energy policies within its member states under the premise that energy cooperation constitutes an essential step for the economic development and the integration process (Burgos, 2007:13; Pineau et al., 2004:1461). It is forecasted that by 2025 this group of nations will have a completely integrated electricity grid (Weintraub, 2007:17). However, regulatory differences and the state’s role in each system still appearing as the major constraints for integration in MERCOSUR (Pineau et al., 2004:1460).
Hydropower plays an important role in the energy production of central and eastern European region with a share of approximately 23% of the total installed capacity (Kiss, 2010:43). Electricity generation from hydropower makes a substantial contribution to meet the increasing electricity demand and is currently the most used source. Hydropower is one of the two energy sources for the region along with fossil fuel that is utilized by all central and eastern European countries for electricity generation (Kiss, 2010:43). In Europe, following commodity exchange agreements, electricity trading has contributed a lot for the success of European integration (Sparrow et al., 2002:1). Thus, it could be concluded that energy trading is among the factors contributed for European integration.
In Asia, the greater Mekong sub region comprising of Cambodia, Peoples Republic of China, Lao People’s Democratic Republic, Myanmar, Thailand and Vietnam established a program of sub regional economic cooperation which can enhance energy trading among member states (Kumar et al., 2011:490). Among others, Cambodia and Vietnam, Cambodia and Thailand have succeeded in implementing their bilateral electricity trading under the supervision of ASEAN Power Grid (APG), which aims to achieve sub regional cooperation through enhancing bilateral electricity trading (Poch and Tuy, 2012:161). Large scale hydropower projects are sources of large scale foreign exchange among riparian nations of Mekong River under the framework of ASEAN communities (Bakker, 1999: 216). Water resources assume a greater importance in fostering regional cooperation among Asian states, for instance, the hydropower exchange of Thailand, Lao People’s Democratic Republic and Cambodia is the best manifestation (Bakker, 1999: 216). Hydropower trading is the source of foreign exchange for Lao People’s Democratic Republic and Cambodia, and one of their only options for producing energy for domestic consumption (Bakker, 1999: 216).
In South Asia region, various feasibility studies are undertaken for realization of proposed inter-regional energy trade. The region’s electricity trading would emerge based on the expansion of power transfer links between Bhutan and India, and India and Nepal (Poch and Tuy, 2012:162). Furthermore, the establishments of new power transfer links between Bangladesh and India, India and Sri Lanka, and between India and Pakistan would further strengthen energy interconnections of the region (UNEP, 2007:55; Wijayatunga and Fernando, 2013:11). In this region, large scale hydropower development opportunities in Nepal and Bhutan are being actively pursued by both private and public sectors (Wijayatunga and Fernando, 2013:7). Given the limited domestic demand for electricity in Bhutan and Nepal, large scale hydropower developments in those countries can foster regional integration by enabling hydropower trading among states of the region (Wijayatunga and Fernando, 2013:10).
The most significant regional energy trade development has been the export of hydropower from Bhutan to India, in which Bhutan has been exporting 75% of its electricity generation to India since 1995(ESHA, 2006:7; Wijayatunga and Fernando, 2013:12). Indian and Bhutanese governments anchored long term hydropower purchase agreements (Wijayatunga and Fernando, 2013:12). Accordingly, India provides power during winter season to Bhutan when hydropower availability in the country is inadequate to meet its own needs. Furthermore, Bhutan is currently undertaking its hydropower developments, nearly 1,500MW, with the assistance of India is centered on three hydropower projects; Chukha (336MW), Kurichu (60MW) and Tala (1020MW) (Wijayatunga and Fernando, 2013:12). In addition, Mahakali River project, a joint hydropower dam between India and Nepal, has shown cooperation over international waters among states of the region (UNEP, 2007:55). Hydropower is used as a source of cooperation in the region, for instance, regional cooperation over water resources is central in defining Thailand’s relationship with its neighbors (Bakker, 1999: 216). Moreover, Asia is the most favorable region for exporting hydropower among states of the region (ESHA, 2006:7).
2.3.2. Energy Led Regional Integration in Africa
The idea of continental unity has long been recognized in Africa. The Lagos plan of action of 1980 was the first continent wide effort by Organization of African Unity (OAU) towards regional integration through forging a comprehensive unified approach to economic development (Tavares and Tang, 2011: 221). The plan adopted regional approach based primarily on collective self reliance for economic development of Africa and elaborated goals and tasks in detail and sector by sector (Tesfaye and Kennes, 2007:11). The drive towards regional integration was given a further boost in 1991 with the adoption of the Abuja treaty which came into force in 1994 to establish African Economic Community (AEC). The treaty provides the guiding principles and goals as well as region-wide framework to strengthen the integration agenda (Tavares and Tang, 2011:222; Tesfaye and Kennes, 2007:11).
The Abuja treaty is aimed at creating AEC in six phases over 34 years. The idea behind the six phases is that economic integration should first be consolidated regionally, through the creation of Regional Economic Communities (RECs) that would eventually merge together to form the AEC (Tavares and Tang, 2011:222; Olubomehin and Kawonishe, 2004:3). The RECs are expected to serve as the building blocks for the AEC (Sako, 2006:4). In the words of Article 88(1) of the Abuja treaty, the AEC “shall be established mainly through the coordination, harmonization and progressive integration of activities of RECs”. Hence, the progress by RECs is progress for and a step closer to the AEC. Currently, there are around fourteen RECs in Africa of which eight of them are recognized by African Union Commission as pillars of AEC (Edris, 2013:3; Hartzenberg, 2011:1). Furthermore, the birth of African Union (AU) is significant occasion marking progress towards the vision of enhanced cooperation and integration that is expected in the long run to lead economic and political union of the continent (Okhonimina, 2009:92).
African countries considered infrastructural interconnections as a basis of achieving regional integration (WEC, 2005: 11). Thus, African countries are working to link themselves in eight key sectors; trade, transport, communications, energy, agriculture, manufacturing, finance, human development and labor market (WEC, 2005:11). Although intra-African trade and Africa’s network of transportation infrastructures and services are still disjointed; the energy sector is showing sign of greater integration, particularly in the North and Southern Africa (WEC, 2005: 12).
African countries are making serious efforts to increase access to electricity by considering the huge and untapped hydropower potential and the growing electricity consumption, expected to grow at rate of 3.4% per year over the period from 1999 to 2020 (Kalitsi, 2003:4). These could be achieved through various means including the linking of their power systems and the creation of power pools (Kalitsi, 2003:4). Accordingly, five regional power pools have been established acting as specialized institutions of energy in respective RECs (Igbinovia and Tlusty, 2014:6; ICA, 2011:10). These are the Central African Power Pool (CAPP) for the Economic Commission for Central African States (ECCAS); the Comité Maghrébin de l’Electricité (COMELEC) for the Arab Maghreb Union (AMU); the EAPP for COMESA; the South African Power Pool (SAPP) for SADC, and the WAPP for ECOWAS (Igbinovia and Tlusty, 2014:6; ICA, 2011:10).
AU and New Partnership for Africa’s Development (NEPAD) are working in partnership with national, regional, continental and global organizations to promote a comprehensive program of regional integration in the energy sector (ICA, 2011:11). These involve the operationalization of regional power pools and development of opportunities to export Africa’s excess energy production capability to the rest of the world which can have win-win situation for stakeholders involved. To this end, AU and NEPAD are working in cooperation with continental organizations like African Energy Commission; Forum of Energy Ministers of Africa; the Union of the Producers, Transporters and Distributors of Electric Power in Africa, and UN energy. Moreover, AU and NEPAD are working with regional partners such as CAPP, WAPP, SAPP, EAPP and COMELEC (Igbinovia and Tlusty, 2014:6).
West African countries established WAPP in 2000 to enhance energy interconnection in the region (Ram, 2009:6; Igbinovia and Tlusty, 2014:6). Though there is a capacity shortage in the region, electricity is traded through bilateral contracts among states of the region. Under the framework of WAPP the power systems of Togo and Benin; Ghana and Cote d’Ivoire; Nigeria and Niger are linked in an interconnected grid (kalitsi, 2003:4). WAPP is also under consideration to link all 14 member states by 2018(Garrido, 2014:21). This is by developing regional hydropower projects and establishing interconnections among ECOWAS countries (Garrido, 2014:21). The peak energy demand of the region is forecasted to be 22,000 MW in 2020 which will foster energy trading in the region in a better way than actually taking place (Ram, 2009:6).
ECOWAS countries established Organization for the Development of River Gambia (OMVG), with the membership of Gambia, Guinea, Guinea Bissau and Senegal (Garrido, 2014:21). In the region, regional integration is initiated mostly on hydropower projects which have been implemented through the inter-state authorities such as Senegal River development organization, the equivalent on Gambia River, the Volta river authority or the one for the Niger River basin (Garrido, 2014:21). African development Bank(AfDB) has issued a $2.13 million grant to finance the study on electricity production and transmission to member states of OMVG with the aim of strengthening regional integration of member states in the energy sector, particularly in hydropower developments (NHI, 2007:13). To this end, the feasibility study of the Sambangalou hydroelectric project, on Gambia River, and the interconnection network project linking countries of the region have been conducted (NHI, 2007:13). The joint hydropower development of Manantali dam on Senegal River, funded by Mali, Mauritania and Senegal, has shown energy interconnection among states of the region (UNEP, 2007:54). Thus, joint hydropower development together with WAPP will promote hydropower led integration in the region.
SADC established SAPP, as specialized institution of energy, in 1995, with the aim of fostering energy integration among member countries (Sparrow et al., 2002:2; Ram, 2009:4). SAPP is playing an important role in stimulating regional cooperation, saving investment costs and expanding the grid system in the region (Sparrow et al., 2002:2). Hydropower is playing an important role in 12 SADC countries, and studies have demonstrated that more than 52GW of hydro capacity could be added in 10 of the countries (Bartle, 2002: 1233). Although SAPP has contributed for fostering regional integration, capacity shortage is a challenge facing SAPP in the regional integration process (Ram, 2009:4).
In the region, South Africa is becoming interconnected to power grids to supplement its growing energy demand and to reduce its fuel dependence by importing hydropower from grand projects of Mozambique and DRC (Mukheibir, 2007:2). Accordingly, Mozambique-Zimbabwe- South Africa (MOZISA) interconnection project was completed. South Africa already imports hydropower from the Cahora Bassa dam in Mozambique since 2000. Furthermore, South Africa planned to import power from the Mepanda Uncua site, located in Mozambique on Zambezi River downstream of Cahora Bassa (Mukheibir, 2007:6). NEPAD plans to establish interconnections between South Africa and DRC to enhance hydropower trading from Inga falls. This will also facilitate hydropower trading among Central and Southern African power pools (Mukheibir, 2007:6). However, interconnections with DRC would need to overcome a number hurdles. Among others, technical problems such as insufficient transmission capacity and line looses over long distance would need to be overcome to ensure reliability (Mukheibir, 2007:6
Central African countries established CAPP as specialized institution of ECCAS in charge of implementing and coordinating the energy policy (CAPP, 2011:3; Igbinovia and Tlusty, 2014:6). It was created in January 2004 covering 10 countries; Angola, Burundi, Cameroon, Central African Republic, Congo, DRC, Equatorial Guinea, Gabon, Sao Tomé Principe and Chad) (CAPP, 2011:3). By 2025, CAPP planed to develop the huge hydroelectric potential of central Africa to secure supplies of electricity in member countries and outside of ECCAS; to establish electricity interconnected highway; to setup a free exchange of electricity, and efficient and prosperous electricity market. The strategy focuses on interconnecting central African states and sharing abundant but unequally distributed energy sources (CAPP, 2011:37). The region’s hydropower potential is equivalent to 60% of the continent. DRC- Congo (Brazzaville) and Burundi-DRC-Rwanda are interconnected and electricity is traded through bilateral contracts (Ram, 2009:7; Mukheibir, 2007:6; Wright, 2014:2). Therefore, the bilateral electricity trading has a positive prospect for fostering regional integration in the region.
 SIEPAC is the acronym for the Spanish title: Sistema de Interconexión Eléctrica para los Países de América Central.
 MERCOSUR was established in 1991 with the objective of integrating the economies of Argentina, Brazil, Paraguay and Uruguay (Burgos, 2007:13).
 The eight recognized RECs are: the Arab Maghreb Union (AMU), the COMESA, the Community of Sahel Saharan States (CEN-SAD), the East African Community (EAC), the Economic Community of Central African States (ECCAS), the Economic Community of West African States (ECOWAS), the IGAD and the Southern African Development Community (SADC).
 AU and NEPAD action plan (2010-15). (n.d).advancing regional and continental integration in Africa.pp 5
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