Evaluating Economic Integration Initiatives - Case Study Example

Introduction

Intense globalization has triggered countries in various countries and regions to focus and begin making deliberations on economic integration. Initiates of economic integration have been seen within Europe, Asia and even in Africa. The needs and requirements of people are seemingly increasing as a result of the rapidly changing demographics. These change in demographics and the facilitation of trade by technological advancement has created a conducive environment for and made economic integration a necessity among many nations globally. Some initiatives geared towards economic integration have been were initiated a while back, but the integration is yet to materialize. This is because regional economic integration or international economic integration is an undertaking that is dependent on very many factors. For economic integration to be successful, the countries looking to engage in economic integration must have common objectives and the contribution of the involved countries must be relatively equal. In a case where one country has more to offer in the integration than its counterparts, that particular country may seclude itself from the integration or derail the integration initiatives. This paper will evaluate some economic integration initiatives that have been taken by countries in various regions. The evaluation will focus on one of the economic blocs, MINT, which involves Mexico, Indonesia, Nigeria and Turkey.

Economic integration initiatives

According to (Balassa, 2013), economic integration refers to a case where countries in the particular region or even countries that are not necessarily in the same region agree to lift some of the barriers to trade between them. The objective of this is to facilitate the easy transaction of business between the two or more countries involved in the integration agreement. The success or failure of the initiatives taken to facilitate economic integration can be evaluated based on various factors, but the objectives of the integration, the political and economic factors qualify as the biggest determinants of the integration. according to (Rodrick, 2000), since the concept of economic integration came to light and the initiatives to effect it started in various regions, only a few of the initiates have borne fruit and have been successful. One of the factors that have derailed the success of many of the economic integration initiatives is the lack of a common currency within the region. In most of the economic initiatives that have been propagated, the issue of what currency to use has been rather contentious (Rodrik, 2000). This is because there is no universally recognized currency that the countries can use, and the participants in the arrangement cannot agree that the currency of one of the participants is used as the common currency. Economic integration mainly looks at eliminating some of the barriers to trade such as tariffs, quotas and other stringent rules imposed on foreign traders or developers.

According to Adibe, (2014), one of the economic integration blocs that have been most successful and still is operational today is MINT, which is an integration between Mexico, Indonesia, Nigeria and Turkey. One thing that is important to note is the fact that economic integration allows the countries involved to enjoy synergy just as is the case when companies join efforts. This I because economic integration not only facilitates trading between the countries but also facilitates exchange programs to a large extent which helps boost the intellect capacity of the citizens of the countries involved and hence improved productivity. According to Cakir & Kabundi, (2013), BRIC, which is an economic bloc involving Brazil, Russia, India and China were in the spotlight in the year 2001 as most nations and economists speculated that it would become an economic power bloc. These speculations were rewarded as China, one of the member countries of the bloc realized immense economic growth between the year 2003 and 2008. MINT, which came into the spotlight in the year 2013, is now being regarded as an emerging economic power bloc, and this is evidenced by the success that its member countries have realized in their economies as a result of their involvement. It is no doubt that these four countries have diverse political and social standing. However, they share a few things in common in the economic sense (Roberts, 2011). The populations of these countries are growing rapidly, and the largest population comprises of the young persons. These young workers will propel the economies of these countries by facilitating increased growth rate as opposed to countries like China where the largest population of the working individuals is aged which means in time to come the growth of their economy will slow down.

Besides the demographic similarity between the countries, their geographical locations also place them at strategic positions that further suggest that they are likely to become an economic bloc to reckon with. Mexico is located right next to the United States, Indonesia stands at proximity china, turkey is located close to the European Union and Nigeria, on the other hand, might become Africa’s economic hub in the years to come (Baldwin et.al, 2006). Three of these countries are part of the G20 group of the developing and developed countries except Nigeria, which based on its recent economic performance may not be far off from becoming a member of the G20 as well. The four countries are counting on their young population to propel their economy by facilitating growth in the future. However, one major problem that faces these countries collectively is the effective way to realign their infrastructures to enable the young population to access reliable and productive employment and hence be in a position to effect meaningful growth within the countries. Other challenges that are rife in the member countries of MINT include corruption, religious disharmony, and the outbreak of communicable diseases that threaten the vision of these countries (Çakır, & Kabundi, 2013).

According to Durotoye, (2014), the member countries of MINT have benefited from this integration individually let alone the benefits they have realized as a bloc. Mexico, for instance, has realized vast advantages from this integration include benefits for the firms located in the country. For economic integration to be successful, the member countries must agree to deal with the ills prevalent within their states such as corruption and political instability. These factors if not handled by the member countries could disappoint the success of the integration. It is for this reason that major changes have been evident in Mexico both politically and economically. Mexico has been known to be a hub or drug cartels who for a long time have contributed greatly to the instability within the country and to curb this the president elected in 2012 Enrique Pena Nieto undertook to make certain structural reforms in an attempt to curb some of the illegal trades and cartels operating in the country. These reforms were effected in the education sector, financial sector, energy and on taxes (Rodrik, 2000). In further attempts to curb drug trafficking In Mexico, the administration arrested one of the individuals regarded as one of the drug kingpin moguls by the name of Joaquin Guzman.

According to Kalemli et.al, (2006), a stable political climate is pertinent to creating a favorable business environment. For a long time, the political scene in Mexico has been chaotic due to the ineffective police force and the influence of the powerful drug dealers. However, the arrest of Guzman, one of the renowned drug dealer in the country is an indication that the country’s administration is slowly refusing to bulge to the demands of these drug lords in an attempt to restore political sanity. Consequently, this means that the firms operating in the country enjoy a favorable working environment which is likely to boost the performance of these companies and the country’s GDP as well. A country whose political climate is extremely volatile and unstable and that lacks any semblance of political control may be secluded from an economic bloc. Therefore, given the promising prospects that MINT has a global perspective means that Mexico’s political administration will do whatever it takes to ensure the country remains a member of the bloc. It is possible that if Mexico was not a member of the bloc that it might still be lax to deal with the issue of drugs and cartels in the country. The competitiveness of companies can be largely derailed by a country’s political instability. This then means that due the restructuring of various institutions in Mexico including the political sector is likely to help increase the competitiveness of the companies therein (Çakır, & Kabundi, 2013). The increase in the performance of the firms in Mexico has already begun to show and this could be attributed to the ease of exchanging resources and ideas as facilitated by the economic integration.

Analysis

According to this research, countries cannot involve themselves in economic integration initiatives unless they fully understand what economic integration entails. This is because economic integration requires that participating countries lift certain rules and restrictions while engaging in trade with other member countries. There several factors that determine the success or failure of an economic integration initiative. One of these factors is the extent of correlation that the countries are looking to get into economic integration have. For instance, the chances that a developed country will get into economic integration plans with a developing country are low (Rodrik, 2000). If such integration occurs, the chances of its success in the long term may be minimal. One of the reasons that the MINT economic bloc to show great promise is the fact that the four countries involved have the same objective and their resources they are looking to exploit to advance their economies, that is, human resources, are similar regarding age bracket. According to Durotoye, (2014), the largest population of people holding gainful employment in countries like China and India are aged while the countries comprising the mint bloc have a larger young population which they are looking to utilize to facilitate their economic growth. The fact that the objectives of the four countries are parallel mean that this bloc could achieve great success.

The global economy is very dynamic which means that it keeps on changing now and then. As such, initiatives for economic integration ought to be regularly reviewed to ensure that the initially set objectives remain valid amidst the economic changes. Failure to perform a frequent review of these initiatives could see the initiative collapse or lose its significance. According to Roberst, (2011), the BRIC bloc for instance initiated in 2001 comprising of Brazil, Russia, India and China and which is now referred to as BRICS to incorporate South Africa has been very successful until recently. The success of these bloc was ultimately exhibited by the immense growth of the Chinese economy between 2003 and 200. However, the state of the economies globally has seen great revolution since then which means the objectives for which the integration was formed could have evolved as well (Qobo, 2013). The fact that this bloc has been having issues in the recent years could be an indication of lack of frequent review and certain reassessment factors pertinent to the success of the economy in the face of the rapidly changing economies.

The fact that regional economic integration initiatives are pioneered by the governments means that companies that are more aligned with the objectives and goals of the integration are the public companies. In most cases, the private sectors are left out in these plans despite the fact they contribute greatly to the success of a countries economy. As a matter of fact, the private sectors contributes as much as the public sector to a country’s GDP or even more. In deliberations of initiatives for economic integration, the public company representatives, and the government officials may be resistance to lessen certain trade restriction with good reason but which does not favor the economic performance of the country as such. The involvement of the private sector, on the other hand, would bring in a more independent mind that is mainly focused on the economic well-being of the country without being clouded by the political needs thereof (Roberts, 2011). It is important to note that much as economic integration may bring positive economic changes to the involved countries, the fact that countries seek to lessen trade restrictions among the involved countries could create loopholes that would allow the perpetration of illegal business. This therefore means that the countries involved in economic integration should take it upon themselves to ensure that goods exported to other member countries are not illegal to avoid future conflicts regarding violation of trust and freedom to the entrance to the other country. Given the vast developments in technology, growing need for companies to engage in geographically distributed projects and the intensified globalization, economic integration is almost becoming a necessity which will yield favorable results to countries involved in them (Rodrik, 2000)

Conclusion

The aim of these paper was to evaluate economic integration initiatives and show how beneficial it is to the countries involved by focusing on MINT, an integration initiative that involves Mexico, Indonesia, Nigeria and Turkey. The research has shown that these countries have major challenges that could derail the long-term success of the bloc such as corruption, political chaos, and disease breakouts. Some of these challenges are also evident in other countries as well. However, one the reasons that this integration bloc has realized some much success so far is because these countries have similar endowments especially regarding human resources. Furthermore, the economic capability of these countries is relatively the same. Initiating and maintaining economic integration initiatives successfully is not an easy task considering that they involve partnerships with countries whose political, social and religious beliefs vary by far. It is for these reasons that the countries need to identify a common objective and work towards. Frequent review of the initiative is necessary to ensure that it does not lose its relevance and validity over time given the changes in various socio-political and economic sectors.