Description:
This working paper assesses cross-border
economic integration in the Lower Congo region. It focuses
on the Kinshasa-Brazzaville conurbation, which is projected
to become Africa's largest urban area by 2025, and is
already serving as the gateway to large hinterlands. Despite
their size and proximity, formal economic exchanges between
the two cities are extremely limited. The volume of recorded
passenger travel between Kinshasa and Brazzaville
corresponds to about one-fifth of the volume of traffic
between East and West Berlin during the time of the Berlin
Wall, and formal trade volumes are derisorily small. As a
consequence, the authors find evidence of statistically
significant differences in retail prices, indicating
unexploited scope for cross-river arbitrage. Through a
survey of firms, they find that local traders perceive
substantial scope for increasing cross-border economic
activity if cross-river trade costs were reduced. Trade in
locally produced goods and by small firms would especially
benefit from such reductions. Existing high trade costs
mainly result from a lack of competition in cross-river
transport services, which are dominated by a duopoly of
state-controlled operators. High administrative border
costs, exacerbated by the presence of multiple government
agencies at the border, act as a further obstacle.
Liberalization of cross-river transport and customs reform
could yield large economic benefits for local producers and consumers.