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Kenyan govt to raise local revenue to 25% to curb external borrowing
Kenya will increase domestic resource mobilisation efforts from 19 to 25 percent of GDP in the next five years in order to cut on its high public debt.
Speaking during the launch of the Africa Foresight report compiled by The Brookings Institute, African Economic Research Consortium and Kenya Institute for Public Policy Research and Analysis at a Nairobi hotel yesterday, National Treasury cabinet secretary Henry Rotich said the government is going to adopt blended financing to cut external loans.
“We are going to intensify domestic revenue collection, seal illicit financial flow gaps and develop investment products for the diaspora population as part of blended finance strategy to minimize reliance on borrowing,” Rotich said.
He revealed that the state is in plans to tap into the informal sector to increase its tax bracket.
He said it will increase efficiency in curbing illicit financial flows in its plan to increase domestic revenue to 25 per cent of GDP.
“We are already working with KRA to assist county governments to collect enough revenues and stop dependence on exchequer funding. We are also banking on public private partnership to fund our infrastructural projects.”
Kenya has borrowed heavily in the past 10 years to finance infrastructure projects including geothermal energy, roads and the ongoing construction of the Standard Gauge Railway, pushing public debt to Sh4.5 trillion by end of last year.
The Africa Foresight report which was unveiled for the first time proposed blended finance, big bond and diaspora bond as a way the continent can source funding for economic growth.
Last financial year, it was at 2.2 per cent due to low commodity revenues brought about by drought.
Former CBK governor Njuguna Ndung’u urged African states to come up with favourable policies to enhance regional trade and attract investors in order to rejuvenate the Africa Rising aganda that has since lost steam.
He said Africa should emulate Asian tigers like Singapore and ride on technology and agriculture to grow its manufacturing sector.
“Realizing a future of African self reliance will require concerted support for sustainable development financing,” Brookings Institute director Brahima Coulibaly said.
“With external financing conditions likely to worsen due to low commodity revenues, possible sovereign downgrades and rising global interests, it will become imperative for African countries to enhance domestic resource mobilization,” Coulibaly said.
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tralac’s Daily News Selection
The Executive Council of the African Union officially opened today: download the speeches by H.E. Moussa Faki Mahamat (Chairperson of the AUC) and Ms Vera Songwe (Executive Secretary of the UNECA)
Botswana to sign Tripartite Free Trade Area Agreement (30 January)
New estimates for direction of trade statistics (IMF)
In March 2017, the IMF published an upgrade of its Direction of Trade Statistics (DOTS) dataset. This paper documents the new methodology that has been developed to estimate missing observations of bilateral trade statistics on a monthly basis. The new estimation procedure is founded on a benchmarking method that produces monthly estimates based on official trade statistics by partner country reported at different times and frequencies. In this paper we describe the new estimation methodology. Additional data sources have also been incorporated. We also assess the impact of the new estimates on trade measurement in DOTS at global, regional, and country-specific levels. Finally, we suggest some developments of DOTS to strengthen its relevance for IMF bilateral and multilateral surveillance.
How to stop Africa’s new rising debt from turning into a tragedy (Devex)
At present there are no internationally agreed mechanisms for vital issues such as transparency in issuing new debt, and for fair and transparent arbitration mechanisms if a country defaults. The consequences of these challenges are therefore twofold. First, countries can take on debt under opaque circumstances, as recent cases in Mozambique and Congo have illustrated. Second, if a country does default, it is vulnerable to unfavorable restructuring terms that can allow the private sector to profit from its debt crisis, as happened in Argentina. Perhaps a little late, the IMF has updated their Debt Sustainability Framework to reflect new risks for use in 2018. Improved transparency for debt sustainability was at the top of the agenda for the IMF, G-20, and U.N. Conference on Trade and Development in 2017, yet no country took the lead to form a compact. Commercial lenders have been the ones to act, with Credit Suisse initiating a Transparent Lending Covenant, under which banks will voluntarily disclose lending information online. While this is a welcome positive step, it is not enough. The opportunity is three-fold: [The author, Fiona Robertson, is a policy officer for development finance at the ONE Campaign]
2018 Agility Emerging Markets Logistics Index: logistics executives see big year ahead for emerging markets (Agility)
In Agility’s annual survey of more than 500 supply chain industry professionals, nearly two-thirds agree with the International Monetary Fund’s 2018 emerging markets forecast of 4.8%-4.9% GDP growth. That would mark the fastest expansion for emerging markets since 2013 and a second consecutive year of higher growth for developing economies, which have slowed dramatically since a 7.4% GDP gain in 2010. The survey of global logistics executives is part of the 2018 Agility Emerging Markets Logistics Index, an annual snapshot of industry sentiment and ranking of the world’s 50 leading emerging markets by size, infrastructure, transport connections and business climate. The rankings of the top four markets – China, India, UAE and Malaysia – remained the same year-on-year. Egypt surges six spots to No. 14 — the largest jump by any country in the 2018 Index – and rockets up 26 places to No. 21 in the separate category ranking countries’ business conditions, or Market Compatibility. Bangladesh (23) and Uruguay (25) both leapfrogged four spots in the overall rankings. Nigeria, Africa’s largest economy, tumbled to No. 31 from No. 24 a year ago. In spite of its potential, Nigeria ranks next-to-last in infrastructure and transport connections, or Market Connectedness, and 46th in business climate. South Africa dropped three places, to 24. [Transport is not gender-neutral]
Mauritius Maritime Week 2018: Mauritius geared to become a key maritime hub in the Indian Ocean, says PM (GoM)
Government is determined to have world class transportation systems, logistics and facilities for the sustainable growth of Mauritian economy. To this end, it is investing massively for the infrastructural development of the Port Louis Harbour into a preferred maritime hub offering a spectrum of associated services in the Indian Ocean. The Mauritius Maritime Week, the Prime Minister underlined, is set to showcase the Port-Louis Harbour as an integrated platform for five main sectors, namely, container transhipment, bunkering, cruise tourism, seafood and ancillary port services. With regards to the quay extension project, Prime Minister Jugnauth recalled that it has enabled to position Mauritius as a full-fledged transhipment hub and major shipping lines have already expressed their interest to increase their container transhipment volumes.
Regional carbon pricing for international maritime transport: challenges and opportunities for global geographical coverage (World Bank)
This paper compares the relative performance of various regional measures for carbon pricing based on the following criteria: jurisdictional basis, data availability, environmental effectiveness and avoidance strategies, impact on competitiveness, differentiation for developing countries, and incentives for reaching a global agreement. The main finding is that, if carefully designed, a cargo-based measure that covers the emissions released throughout the whole voyage to the cargo destination presents various advantages compared with other carbon pricing schemes. These advantages have been largely ignored in the literature. [World’s first electric container barges to sail from European ports this summer]
Kenya-East Africa: UK to inject Sh30bn to ease cross-border trade (The Star)
The UK government is set to inject £211 million (Sh30 billion) to support the second phase of infrastructure projects in measures to ease cross-border trade between Kenya and her neighbours. Mordaunt pledged £60 million (Sh 8.7 bn) to fund sustainable urban economic development partnership in 10 rapidly growing towns in Kenya. The money will go towards urban economic planning, investment climate reforms and attracting private sector investment. UK has also invested £8 million (sh 1.16 billion) through the World Bank to assist the Government of Kenya in the development of more Special Economic Zones, private-public partnerships and select counties on doing business reforms.
An international framework for eco-industrial parks (UNIDO)
Published jointly by the World Bank Group, UNIDO, and GIZ, the framework recognizes the growing importance of what are variously called industrial parks or areas, special economic zones, and export processing zones. While these zones deliver important economic benefits, they also have the potential to concentrate negative environmental and social impacts, such as pollution, greenhouse gas emissions and poor labour standards. Developing and emerging economies seeking to increase industrial output need to decouple economic growth from environmental and resource inefficiency to meet wider social objectives. Eco-industrial parks, or EIPs, can create a more sustainable operating environment for firms to compete, and create jobs through efficient use of resources and greater productivity, while also enabling investors to achieve their social responsibility goals. Extract:
There are currently a number of complementary tools and processes to assist governments and industrial park stakeholders to progress in the implementation of inclusive and sustainable industrial development. However, a consolidated and targeted framework for EIPs is largely lacking at the international level. Countries and industrial park stakeholders are increasingly requesting “standards” or benchmarks for ensuring that envisioned industrial developments are sustainable and meet the spirit of an EIP. An innovative approach is to set “minimum requirements” or “sustainability performance standards” for industrial parks, covering legal compliance as well as socio-economic, environmental, and management aspects. Such standards provide benchmarks for assessing existing industrial parks, planning retrofitting measures for existing parks, or better planning new industrial parks with the end goal of driving inclusive and sustainable industrialization.
Despite record levels of short-term optimism in the global economy, CEOs worldwide report heightened levels of anxiety regarding the business, economic, and, particularly, the societal threats confronting their organisations. PwC’s 21st CEO Survey sheds light on this seeming contradiction and the factors contributing to CEOs’ anxiously optimistic outlook on 2018 and beyond. Extract:
The record jump in positivity with regard to global economic growth does not translate into an equivalent leap in confidence in their own organisation’s 12-month prospects, however. Regionally, it’s a mixed bag with North America, Latin America, Central and Eastern Europe, and Asia-Pacific reporting higher levels of ‘very confident’, and the rest of the world moving in the opposite direction. Still, North America is the only region where a majority of CEOs demonstrate the highest possible level of confidence in their company’s revenue growth prospects over the next 12 months. This divide is quite striking. While the rest of the world is cautiously optimistic, North American CEOs have never been more sure of their company’s near-term prospects. Just last year, only 39% reported that they were ‘very confident’; that figure jumps to 53% this year. The last time North American CEOs were this exuberant was in 2007, the year before the global financial crisis. When we look at the geographic markets CEOs are turning to for growth, again, North America, specifically the United States, tops the chart; 46% of global CEOs consider it one of the three most important countries for growth, followed by China at 33%. Germany strengthens its hold on third place, with one in five CEOs considering it an important growth market. [South Africa CEO survey: The biggest threats to growth in South Africa]
Bring human rights to discussion tables and into decisions at Davos, UN experts urge
In particular, the experts underscored the need for Governments and businesses to act in accordance with the UN Guiding Principles on Business and Human Rights by respecting the rights of workers across supply chains and avoid business operations that cause or contribute to adverse human rights impacts. The Working Group on Business and Human Rights was established by the Geneva-based Human Rights Council in 2011.
JPMorgan plans expansion into Ghana and Kenya (Business Daily)
JPMorgan Chase & Co plans to expand its African presence into countries including Ghana and Kenya, Chief Executive Jamie Dimon said in an interview on Wednesday. “You’ll see us open in some countries we are not in, in Africa you’ll be hearing about some of that stuff,” Dimon told Bloomberg Television on the sidelines of the World Economic Forum meeting in Davos, Switzerland.
Achieving universal and affordable Internet in least developed countries (ITU)
The world’s least developed countries are narrowing ‘digital divide,’ and with millions of people now taking advantage of smart phones and other digital devices, keeping up this momentum can put their societies on the fast track to sustainable development, the UN said on Wednesday. This report (pdf) provides insights into the great strides that LDCs have made in regard to information and communication technology access, and the opportunities that ICTs offer in addressing severe structural impediments to sustainable development in this group of countries. By the end of 2017, the number of mobile-cellular subscriptions is expected to increase to about 700 million, with a penetration of 70%. Currently, more than four out of five people in the LDCs have access to a mobile-cellular network. ICTs have led to significant development outcomes in LDCs, in particular in the areas of financial inclusion, poverty reduction and improved health. This report shows that LDCs have also made great progress towards achieving universal access to and affordability of the Internet. Several LDCs are also on track to largely achieve SDG Target 9.c by 2020. In 2016, close to 60% of the population in LDCs was covered by a mobile broadband network and, in a growing number of LDCs, mobile broadband services have become relatively affordable. At the same time the report highlights some variations among the LDCs.
Today’s Quick Links: WAEMU: IMF conclude 2018 discussions on common policies for member countries Rwanda makes progress in implementing the Malabo Declaration Ethiopia vows to support AU’s single African air transport market What it means for Rwanda to gain global certification powers SADC in 2018: consolidating stability and sustainable development 2018 Environmental Performance Index: summary |
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32nd Ordinary Session of the Executive Council of the African Union kicks-off
African nations are concerned with the theme of this year and through our collective efforts and actions we can win the fight against corruption, says AUC Chairperson Moussa Faki Mahamat.
The 32nd Ordinary Session of the Executive Council of the African Union (AU) officially opened today at the African Union Headquarters in Addis Ababa, Ethiopia, under the theme: “Winning the Fight against Corruption: A Sustainable Path to Africa’s Transformation.”
In his opening remarks, the Chairperson of the African Union Commission, H.E. Moussa Faki Mahamat commended the quality work done by the Permanant Representatives’ Committee (PRC) with the view to establish appropriate conditions conducive to the success of this meeting of the Executive Council. He further commended the encouraging level of contribution to the Peace Fund aimed at consolidating peace efforts within the continent.
The AUC Chairperson expressed the hope that by 2020 AU will be able to finance itself at 100% if we maintain this trend of increasing interest by the Member States willing to contribute substantively on peace keeping in Africa. The Chairperson underlined that the AU Commission can pursue this commitment and resolution and will rely on Member States to support the trend of self-financing.
With reference to the theme of the year, Mr. Mahamat said that the stated figures in different reports of experts show that the resources deviated from Africa through corruption if they were to be invested in development will avert and avoid us to rely on external assistance which is only a support to the potential of the continent.
He added that the Report of the High Level Panel on Illicit Financial flows from Africa shows that corruption accompanied by the Illicit financial flows puts the loss of more than $50 billion a year. The Chairperson reiterated that all African nations are concerned with the theme of this year and through our collective efforts and actions we can win the fight against corruption.
On the issue of institutional reforms, the Chairperson said that the Reform Implementation Unit is already at work. A report to that effect is being examined following the Report of H.E. Paul Kagame to be presented during the Summit for consideration.
Chairperson Mahamat expressed satisfaction on the broad consensus on the need to insure financial independence through the application of 0.2% levy on eligible imports. He stressed that it is an issue of dignity and decision making sovereignty.
“Without its independence Africa is nothing. With its independence it can be everything,” added the Chairperson. Mr. Mahamat welcomed the Kigali decision regarding the financing of the Union by Ministers of Finance of 10 (which will become 15) to address the difficulties and ambiguities.
Finally, Mr. Mahamat announced that there are three (3) strategic flagship projects in the Agenda that will be launched during the Summit: The Continental Free Trade Area (CFTA); The Free Movement of Persons and Goods; and Implementation of Yamoussoukro Decision on the Single Market and Liberalization of Air Transport in Africa. He said that all these projects call for political mobilization, expertise, talent, intelligence and motivation.
The Executive Secretary of the United Nations Economic Commission for Africa (ECA) Ms. Vera Songwe, in her remarks, noted that the only lasting and winning formula for independence and for a transformed Africa is that we collectively conquer corruption as it is preventing sustainable development.
The Chairperson of the Executive Council, the Minister of Foreign Affairs of the Republic of Guinea, H.E. Mr. Mamadi Touré, thanked the AUC Chairperson for outlining the key focus areas for the Executive Council. He stressed the need for the Council to accelerate the implementation of the AU financing and the continental free trade area to expedite Africa’s self-reliance in order to improve living conditions.
The opening ceremony of the Executive Council meeting took place in the presence of former OAU Secretary Genral H.E. Salim Ahmed Salim, H.E. Mr. Thomas Quartey, Deputy Chairperson of the AU Commission (AUC), Commissioners of the AUC, AU Organs officials, representatives from the diplomatic corps, the international community, civil society, private sector, invited guests and the media among others.
In its deliberations over the coming two days, the Executive Council is expected to discuss the AU budget, review various reports, consider the draft decisions of the Assembly as well as prepare the agenda of the Assembly among other matters.
The Executive Council’s adoption of the various Decisions and Declarations would be forwarded to the Assembly of the Heads of State and Government holing at its 30th Ordinary Session Summit on 28-29 January 2018.
Fight against corruption critical for Africa’s sustainable development, says ECA’s Songwe
Corruption has held Africa back for far too long and it’s time to nip the scourge in the bud, says Ms. Vera Songwe, the Executive Secretary of the Economic Commission for Africa (ECA).
In a robust inaugural address to the 32nd Ordinary Session of the African Union Executive Council, Ms. Songwe said Africa’s economic potential can be unlocked by ending the cancer of corruption.
“The injustice of corruption brought to life within our institutions is more powerful than any other injustice we as Africans could face,” she said.
“But it is within our remit to repair this cancer, that is why I applaud the African Union for taking on this theme as the main battle cry of the union for the next year.”
The ECA Chief said the only logical and winning formula for true independence and for a transformed Africa was that the continent collectively conquered corruption.
“Where is the Africa we want when our youth do not believe their leaders and their institutions to deliver what they need most, when that social contract is broken,” Ms. Songwe asked.
“How can we get the Africa we want when women in rural Africa cannot get access to land and collateral to feed their families and ensure good health for their kids, because of corruption?”
She continued: “How can we get the Africa we want when we let billions leak out of the continent only to spend time begging for minimal sums because of corruption?”
“We are at a cross road – the youth are waiting, desperate and anxious for what path the leaders gathered here today will allow them to chart. That is why the topic of corruption or anti-corruption is so appropriate.”
The ECA Chief said the successful implementation of Agendas 2030 for sustainable development and 2063, Africa’s 50-year development plan, required substantial financial resources, most of which must be mobilized from within the continent.
“What this means is that the continent cannot afford to continue to suffer from the kinds of financial leakages it has had to contend with over the past several years through various forms of corrupt acts and practices,” said Ms. Songwe.
She added: “Placing the fight against corruption at the top of the agenda of our continental organization is a step in the right direction considering that nearly half of the population on the continent believes that our governments have either failed or been unable to properly address the complex and wide-ranging impacts of corruption on resource mobilization, resource allocation and development outcomes on the continent.”
Despite inroads, she said, corruption remained endemic - threatening the region’s transformation and sustainable development.
ECA efforts to help Africa combat graft
Ms. Songwe said the ECA has over the years worked with the African Union and the African Development Bank to design and support anti-corruption programs.
“We continue to support the APRM process and the work on Illicit Financial flows. We are also working increasingly with governments to improve their tax and customs processes,” she said.
ECA dedicated its fifth edition of its flagship report, the African Governance Report on the measurement of corruption, with a particular focus on the international dimensions of the scourge. Following this publication, ECA has partnered with the African Union’s Advisory Board on Corruption (AUABC) to initiate a conversation on developing an African-led and African focused measurement of corruption.
This has been within the framework of the longstanding collaboration between ECA and the AU Advisory Board on Corruption, which saw the two institutions develop and roll out a five-year anti-corruption program. The program produced a number of outputs including a Model Anti-Corruption Law, and a youth essay competition, intended to groom youth ambassadors to champion the fight against corruption on the continent.
“On behalf of the ECA team we pledge to support the African Union Commission and all the member states in enacting policies which could address the issue of corruption,” she said.
These includes working with member states to strengthen their legal and institutional frameworks in the fight against corruption; improving fiscal transparency and good financial governance, including improving the public procurement system, contract regime, tax system, and strengthening institutional audit and oversight capacity; supporting Citizens’ participation in areas like budget tracking and monitoring, performance of public enterprises, and the delivery of social services should be encouraged; and supporting the implementation of the AU Convention on Preventing and Combating Corruption including strengthening the capacity of the AU Advisory Board on Corruption.
African Union Chairman Moussa Faki Mahamat emphasized the union was ready to tackled corruption, adding the Pan-Africa body should have financial independence. Ms. Songwe and Mr. Mahamat also spoke about AU reforms, self-financing and the Continental Free Trade Area (CFTA).
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Rwanda makes progress on continental agric plan
Rwanda got the highest score, on Agricultural Transformation in Africa, and emerged 2017 Best performing country in implementing the seven commitments of the June 2014 Malabo Declaration.
The country scored 6.1 out of 10 when the 3.94 benchmark was set as the minimum score for a country to be on track of achieving the Malabo targets by 2025. Rwanda is followed by Ethiopia, with 5.3.
The report, which is part of the designed Biennial Reporting Mechanism, was done by the African Union Commission and the New Partnership for Africa’s Development (NEPAD) Agency together with the Regional Economic Communities (RECs) and Member States, in collaboration with other partners.
“We wish to acknowledge the tremendous efforts made by all Member States, despite the numerous challenges faced to increase readiness for providing individual quality country reports, and we particularly wish to acknowledge efforts of the Republic of Rwanda for reporting highest performances in 2017 for achieving the Malabo Declaration,” reads part of the report.
The Malabo Commitments were translated into seven thematic areas of performance such as enhancing investment finance in agriculture; ending hunger in Africa by 2025; halving poverty by 2025 and upholding the Comprehensive Africa Agricultural Development Programme (CAADP).
It also includes inclusive agricultural growth and transformation; boosting intra-African trade in agricultural commodities and services; enhancing resilience of livelihoods and production systems to climate variability and other related risks; and strengthening mutual accountability to actions and results.
The Comprehensive Africa Agricultural Development Programme was adopted by the African Union Assembly of Heads of State and Government in 2003 in Maputo, Mozambique as the flagship programme of the African Union for agriculture and food security.
It sets broad targets of 6 per cent annual growth in agricultural GDP (output), and allocation of at least 10 per cent of public expenditures to the agricultural sector.
Commenting on the report, the Minister for Agriculture and Animal Resources, Dr Gerardine Mukeshimana, stressed the importance of agriculture in poverty eradication in Africa.
While the country needs to improve agriculture financing, the minister highlighted Rwanda’s major areas of improvement including policy, gender, foreign investment, and crops irrigation.
Overall, Africa did not perform well in implementing the commitments for agriculture advancement with many countries failing to even get the minimum required score.
“This performance implies that we are not progressing well in line with our wish as a continent, to be the bread basket of the world. It requires countries to put in more efforts,” said Mukeshimana.
The minister said the areas that Rwanda needs to focus on include fighting malnutrition especially stunting among children, which stands at about 38 per cent.
“We still have a long journey to make to address stunting. That is why these days, the Government put in more efforts in providing free nutritious fortified flour for porridge to vulnerable children and expectant mothers, as well as promoting several programmes for milk, and egg production from small livestock to fast-track eradication of malnutrition among children,” she said.
According to the chairman of Rwanda Youth in Agribusiness (RYAF), Jean-Baptiste Hategekimana, by end of February, there will be over 1,000 university graduates in agriculture sector to help farmers [under an internship programme].
Currently, the organisation has close to 1,300 members grouped into five clusters namely crop production, livestock production, agro-processing (animal and crops), other agro-services, which include packaging, inputs, extension services, mechanissation, among others, and information communication technologies (ICTs) for agriculture.
“We still need to take bold steps forward. We need more innovations, more inventions, and agriculture diversification,” he told The New Times.
More efforts needed to increase agric funding
Rwanda’s agriculture financing stands at 7.5 per cent.
Hategekimana said access to finance is still a challenge which affects implementation of youth’s agricultural and livestock projects.
“Youth do not have collateral, and own no land. If you ask them for collateral, you are hindering their business,” he said.
The minister said that they are currently working with the Ministry of Finance and Economic Planning to develop a comprehensive programme on agriculture financing.
According to information from the Ministry of Finance and Economic Planning, about Rwf11.5 billion was allocated on seeds and fertilisers in line with developing rural areas in 2017/2018 fiscal year.
About 1,367 hectares of land will be covered under hillside irrigation, while 3,106 hectares of marshlands will also be irrigated.
Equipment to help farmers irrigate crops on 5,844 hectares will be provided this year, officials say.
African Union to launch the Africa Agriculture Transformation Scorecard; towards achieving agricultural transformation
The African Union will, during the Assembly of the AU Heads of State and Government, launch the Africa Agriculture Transformation Scorecard (AATS) and present the Inaugural Biennial Report on the Implementation of the June 2014 Malabo Declaration on Accelerated Agricultural Growth and Transformation for Shared prosperity and improved Livelihoods.
The AATS, the first of its kind in Africa, captures the continent’s agricultural progress based on a pan-African data collection exercise led by the African Union Commission’s Department of Rural Economy and Agriculture (DREA), NEPAD Agency and Regional Economic Communities (RECs) in collaboration with partners, which has gathered data on up to 43 indicators.
The AATS tracks progress in commitments made by AU Heads of State and Government through the Comprehensive Africa Agriculture Development Programme (CAADP) and the Malabo Declaration to increase prosperity and improved livelihoods for transforming agriculture.
The AATS captures 23 performance categories and 43 indicators for each of the 55 AU Member States. The indicators chosen to track the performance categories were defined on the basis of the strategic objectives derived from the Malabo Declaration.
In the Malabo Declaration, AU Member States committed to report on a biennial basis, the progress in achieving the 7 commitments of the Declaration with the first report to be presented at the 30th AU Assembly of Heads of State and Government.
Preceding this, the “Inaugural Biennial Report on the Implementation of the June 2014 Malabo Declaration on Accelerated Agricultural Growth and Transformation for Shared prosperity and improved Livelihoods,” was endorsed by Ministers of Agriculture during the 2nd Specialized Technical Committee on Agriculture, Rural Development, Water and Environment that was held in October 2017 in Addis Ababa, Ethiopia.
“No other agriculture evaluation tool in Africa’s history has ever brought together the AU, all the continent’s regional trade organisations, the private sector, the international development community and all African governments to build Africa’s agriculture and agribusiness markets,” said DREA’s Director Dr. Godfrey Bahiigwa.
“The aim is that the AATS will encourage performance across AU Member States, and also provide a tool that can be used by every actor engaged in agriculture, across governments, the private sector, and non-state actors.”
In 2017, the AUC conducted and facilitated 6 training sessions respectively in West (in French and English), East, Central, Southern and North Africa regions, with 156 national experts trained including CAADP Focal Persons, Monitoring and Evaluation Specialists and Statisticians from Ministries of Agriculture and other line ministries.
Almost all AU Member States participated in the training and familiarized themselves with the Malabo Declaration, targets and indicators, and the biennial review reporting format, which has further embedded the culture of mutual accountability in Africa.
The work that has gone into delivering Africa’s most comprehensive agricultural data set has been enormous, but with this new tool set, the AUC has delivered on the Heads of State’s mandate to create tools which, when implemented, will take Africa’s economic growth to a next level.
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Botswana to sign Tripartite Free Trade Area Agreement
Signing of the COMESA-EAC-SADC Tripartite Free Trade Area (TFTA) Agreement to take place on 30 January 2018
The Minister of Investment, Trade and Industry of Botswana, Honourable Vincent T. Seretse will be signing the Agreement establishing the Common Market for Eastern and Southern Africa - East African Community - Southern African Development Community (COMESA-EAC-SADC) Tripartite Free Trade Area (TFTA) on the 30th January 2018 at Ministry of Investment, Trade and Industry in Gaborone at 0830 hours.
The Tripartite Free Trade Area comprise of 26 countries from the three (3) Regional Economic Communities of COMESA, the EAC and SADC. The Tripartite Free Trade Area consists of a combined population of nearly 625 million people and a total Gross Domestic Product (GDP) of approximately US$1.3 trillion, accounting for almost half the membership of the African Union and 60 percent of the Continent Gross Domestic Product.
Background
COMESA, the EAC and SADC agreed to negotiate a Tripartite Free Trade Area (TFTA) amongst themselves at the First Tripartite Summit in October 2008 in Kampala. Negotiations were launched by the Heads of State and Government on 12 June 2011, and on 10 June 2015 in Sharm El Sheikh, Egypt, the COMESA-EAC-SADC TFTA was officially launched.
Twenty four of the 26 member states have signed the Declaration Launching the TFTA and 21 member countries have signed the TFTA Agreement. These countries are Angola, Burundi, Comoros, Democratic Republic of Congo (DRC), Djibouti, Egypt, Kenya, State of Libya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Tanzania, Uganda, South Africa, Swaziland, Zambia and Zimbabwe. The Agreement requires 14 ratifications to enter into force. So far, only Egypt and Uganda have both signed and ratified the Agreement.
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SADC in 2018 – Consolidating stability and sustainable development
An eventful year awaits southern Africa in 2018 as the region intensifies efforts to deepen economic integration and achieve sustainable development and stability.
The region is set to strengthen efforts to implement programmes and projects aimed at meeting various key milestones, including those on infrastructure development and industrialization.
In line with the theme of the 37th SADC Summit held in South Africa in August 2017, member states are expected to pursue programmes and projects aimed at promoting industrial development in the focus areas of agro-processing, mineral beneficiation and pharmaceuticals.
The 2017 summit of SADC heads of state and government was held under the theme “Partnering with the Private sector in developing industry and regional value-chains”.
During the coming year, countries in the region are expected to create a mechanism for the involvement of the private sector in the roll-out of the economic integration agenda.
Public-private partnerships are regarded as a viable model for attracting investment for public projects by allowing governments to have more access to additional capital and off-balance sheet financing.
The year 2018 will mark the second year of the implementation of the Costed Action Plan of the SADC Industrialisation Strategy and Roadmap, 48-year blueprint that outlines proposals on transformation of the region from a resource-based economy to one that is driven by innovation and high industrial productivity.
The Costed Action Plan on Industrialisation, approved by the SADC Extraordinary Summit in Swaziland in March 2017, allocated about US$100 million for coordination of the industrialisation agenda at the level of SADC Secretariat and member states over the 15-year period extending from 2015-2030.
It seeks to establish a coherent and synergistic implementation scheme containing strategic options and general policies towards the progressive attainment of time-bound targets set out in the strategy and roadmap.
The action plan aims to create an enabling environment for sustaining industrial development as a driver of economic transformation; and establish an enduring alliance for industrialisation consisting of the public and private sectors as well as strategic partners.
Strategic interventions proposed under the action plan include an improved policy environment for industrial development, increased volume and efficiency of public and private sector investments in the SADC economy, creation of regional value chains and participation in related global processes, as well as increased value addition for agricultural and non-agricultural products and services.
In order to improve the operating environment, there are plans to develop and operationalise a Protocol on Industry by 2020, which should lead to the development of industrialisation policies and strategies at national level.
Where member states already have such policies and strategies, these should be reviewed and aligned to the industrialisation strategy and roadmap.
To encourage the creation of regional value chains and participation in global processes, the region has identified five priority areas in which the value chains can be established and for which regional strategies should be developed by 2020.
These are in the areas of agro-processing, minerals beneficiation, consumer goods, capital goods, and services.
A detailed value chain study is proposed for specific products or services in the priority areas.
As part of the process of promoting value-chain participation, there are plans to develop model legislation and regulations for intra-SADC agro-processing, minerals beneficiation and other manufacturing activities and services.
A related and complementary activity expected to be undertaken during the coming year will be operationalisation of the proposed SADC University of Transformation, the brainchild of King Mswati III of the Kingdom of Swaziland.
The university will be a regional institution to train citizens in innovation and entrepreneurship as part of efforts to transform southern Africa into an industrialised region.
Swaziland has offered to host the training institution and pledged to offer scholarships to 300 students – 20 each per member state for the initial intake.
The SADC Council of Ministers resolved at its last meeting held in South Africa in August 2017 called on ministers responsible for education and training; and science, technology and innovation in member states to expedite the finalisation of the preparatory work for the operationalisation of the university.
The minister are expected to submit proposals to council at its next meeting in March 2018.
On energy development, SADC is set to establish a regional Inter-State Natural Gas Committee that will be charged with ensuring the inclusion and promotion of natural gas in the regional energy mix and with facilitating “an increase in universal access to energy as well as industrial development in SADC.”
According to the SADC Energy Monitor launched at the 36th SADC Summit in Swaziland in 2016, the contribution of gas to the regional energy mix is still very minimal, accounting for a mere 1.3 percent of the total power generation mix.
The low share of natural gas in the regional energy mix belies the fact the southern Africa has some of the largest deposits of gas in the world.
The east coast of the SADC region has emerged in the past few years as one of the brightest spots on the global energy landscape, with large natural gas finds in Mozambique and Tanzania.
Exploration has taken place in other SADC member states although the exact amounts of reserves are unknown for these countries.
New offshore natural gas finds along the Mozambique coast are expected to be a “game changer” for the country and the southern African region. The country has estimated recoverable natural gas reserves of between 15 trillion and 30 trillion cubic feet (tcf), enough to meet one year’s gas consumption by the United States.
Tanzania has also identified natural gas reserves of more than 10 tcf from its deep-water offshore region.
Efforts will be stepped up towards ensuring that the first-ever surplus electricity-generation capacity time experienced by SADC last year in over a decade is maintained through the commissioning of new power generation projects.
The Southern African Power Pool (SAPP) has already indicated that it will commission an average of 5,000 megawatts (MW) per year over the next six years.
Southern Africa has experienced surplus electricity generation capacity of around 900MW since the beginning of last year.
The surplus is partly due to a slowdown in the South African economy but also the result of the coordinated approach in implementation of the SADC energy programme, which has seen a number of new power plants commissioned over the past few years.
With regard to gender development, SADC will celebrate 10 years since the adoption of the SADC Protocol on Gender and Development. The protocol was revised in 2016.
The region is expected to take stock of achievements made and challenges encountered during past decade.
Agriculture and food security will remain a top priority for SADC following a slow start to the agricultural season.
At the continental level, the SADC region will work with other regional economic communities to conclude efforts to operationalise the Tripartite Free Trade Area (TFTA) as well as establish the Continental Free Trade Area (CFTA).
The TFTA is an enlarged market covering 27 countries in eastern and southern Africa involves the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and SADC.
At least 24 of the 27 countries have signed the agreement to establish the TFTA, which aims to facilitate the smooth movement of goods and services across borders, as well as allowing member countries to harmonize regional trade policies to promote equal competition.
Negotiations for the CFTA were expected to conclude by the end of 2017. However, various challenges affected the discussions, and expectations is that concrete agreements will be made during the year.
When operational, the CFTA will bring together all 54 African countries, creating a combined population of more than one billion people and a combined Gross Domestic Product of more than US$3.4 trillion
On environmental issues, the region will begin the process of reviewing achievements and challenges in the implementation of the Strategic Action Plan (RSAP IV) on Integrated Water Resources, Development and Management (2016-2020).
As SADC recognises the importance of sustainable use and management of the environment in the fight against poverty and food security, the region is set to assess the domestication of the SADC Protocol on Environmental Management for Sustainable Development of 2014.
Namibia will host the 38th SADC Heads of State and Government Summit in August. At the summit, President Hage Geingob of Namibia will take over the SADC chair from his South African counterpart, Jacob Zuma.
The annual summit will also mark the first time that the newest member of SADC – the Union of Comoros – will participate at this high-level regional meeting.
Comoros was formally admitted into the SADC at the 37th SADC Summit held in August in Pretoria, South Africa, taking the membership of SADC to 16.
Buoyed by the relative peace and political stability that has been obtained in the region for the past few years as well as the smooth transition of power experienced in three member states last year – Angola, the Kingdom of Lesotho and Zimbabwe – the SADC region will seek to maintain the same peaceful and tolerance atmosphere in 2018 when at least four countries hold elections.
The Democratic of Congo, Madagascar, Mozambique, the Kingdom of Swaziland and Zimbabwe are scheduled to go to the polls this year.
Mozambique has set 10 October as Election Day for its sixth municipal polls, while the DRC has announced 23 December for its general elections.
The other three countries – Madagascar, Swaziland and Zimbabwe – are yet to pronounce Election Day.
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Eco-industrial parks emerge as an effective approach to sustainable growth
Three development organizations have joined forces to create a new framework defining the key elements of eco-industrial parks, setting up a common understanding of how to promote economic growth, while protecting the environment, workers and the public.
The framework is laid out in a new report, An International Framework for Eco-Industrial Parks, intended as a guide to policymakers and practitioners on the critical elements that will help governments and the private sector establish economically, socially and environmentally sustainable eco-industrial parks.
Published jointly by the World Bank Group, the United Nations Industrial Development Organization (UNIDO), and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), the framework recognizes the growing importance of what are variously called industrial parks or areas, special economic zones, and export processing zones.
While these zones deliver important economic benefits, they also have the potential to concentrate negative environmental and social impacts, such as pollution, greenhouse gas emissions and poor labour standards. Developing and emerging economies seeking to increase industrial output need to decouple economic growth from environmental and resource inefficiency to meet wider social objectives.
Eco-industrial parks, or EIPs, can create a more sustainable operating environment for firms to compete, and create jobs through efficient use of resources and greater productivity, while also enabling investors to achieve their social responsibility goals.
“Although industrial areas are key drivers worldwide for industrialization and economic development, only by means of well-defined performance requirements can we better plan, monitor and safeguard the sustainability of these industrial areas,” said GIZ’s Raghu Babu Nukala, a leading professional on environmentally friendly industrial production in India.
The EIP framework describes the minimum expectations for eco-industrial centers across four categories:
- Park management performance
- Environmental performance
- Social performance
- Economic performance
As a baseline, EIPs must comply with all applicable local and national regulations. They must also meet the broader minimum expectations set out within this framework.
The Director of UNIDO’s Department of Environment, Stephan Sicars, emphasized that UNIDO promotes mainstreaming of EIPs because, as is seen in countries such as Denmark, France, Japan, and the Republic of Korea, among many others. “Such parks have significant potential for unleashing inclusive and sustainable industrial development.”
EIPs have increasingly been recognized as an effective tool to overcome challenges related to inclusive and sustainable industrial development within the scope of Sustainable Development Goals (SDGs) and Paris Agreement targets.
World Bank Group Industry Solutions Practice Manager, Jose Ernesto Lopez Cordova, said the publication represents “a clear message from the main international players on a common approach. It will now be critical to roll out the framework with the objective of making industries and industrial parks more competitive and sustainable.”
“By coming together, our three organizations aim to pave the way for creating a common vision for eco-industrial parks, which countries can use and modify according to their own needs,” said Ceyla Pazarbasioglu, Senior Director of the Bank Group’s Finance, Competitiveness and Innovation Global Practice (FCI). “We hope this common framework fills the current void in the understanding of eco-industrial parks and encourages their development on a global scale.”
“This EIP framework aims to strike a balance between meaningful and achievable performance requirements,” says Etienne Kechichian, Senior Private Sector Specialist for the World Bank Group. “The requirements need to be meaningful to make a difference in key areas, but they cannot be so high that parks with some successful initiatives can’t qualify as EIPs.”
Also contributing to the report was the Carbon Trust, a firm that works with client organizations and companies to accelerate the transition to a low-carbon economy. The partners in producing the report are committed to applying the EIP framework to projects and programs worldwide and encourage partners and stakeholders to apply the EIP requirements in their industrial park planning. By applying a common international EIP framework, the development community can move toward more inclusive and sustainable industrialization.
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World’s most vulnerable countries on track to achieve universal Internet access by 2020 – UN report
The world’s least developed countries are narrowing ‘digital divide’, and with millions of people now taking advantage of smart phones and other digital devices, keeping up this momentum can put their societies on the fast track to sustainable development, the United Nations said on Wednesday.
“It is vital that all stakeholders – governments, civil society, the private sector and UN system – continue to build momentum through collaboration and sharing of innovative solutions,” highlighted Fekitamoeloa Katoa ‘Utoikamanu, the top UN official for least developed and other vulnerable countries, launching a new report on universal and affordable Internet.
“Least developed countries with a strong government commitment, recognizing the importance of digital technologies for national development, and backed by enlightened policy and regulatory actions including steps to develop skills, can achieve universal and affordable access to the Internet,” added Houlin Zhao, the Secretary-General of the UN International Telecommunication Union (ITU).
The report, Achieving universal and affordable Internet in least developed countries, also states that the progress augurs well for the implementation of the 2030 Agenda for Sustainable Development, as well as the Istanbul Programme of Action, which charts a development course for least developed countries.
A key highlight of the progress is the launch of third generation (3G) mobile telephony and data services in all 47 countries in that category as well as over 60 per cent of the population there covered by a 3G network. Overall, four in five people in these countries have access to mobile-cellular network.
These improvements are already having a positive impact in areas including financial inclusion, poverty reduction and better health services.
Furthermore, the anticipation that these countries will achieve (on average) 97 per cent mobile broadband coverage, making Internet prices relatively affordable by 2020 can translate into strong, home-grown innovation; new business opportunities; and more improvements health and education services, added Ms. ‘Utoikamanu, the UN High Representative for Least Developed Countries, Landlocked Developing Countries and Small Island Developing States.
While the picture is largely positive, there are some gaps which need to be overcome, find the report, including address issues related to limited capacity in information and communication technology (ICT) skills and wider socio-economic matters such as education levels and gender equality.
Corrective action, according to report, can include fostering competition, infrastructure, taxation policies, education and developing ICT sector plans.
The 47 least developed countries represent the most vulnerable segment of the international community. They comprise more than 880 million people – about 12 per cent of world population – but account for less than two per cent of world gross domestic product (GDP) and about one percent of global trade in goods.
The report, which also measures progress in these countries against Sustainable Development Goal target 9.C on universal and affordable access to the Internet is a joint undertaking by the Office of the Office of the UN High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (OHRLLS); and ITU.
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tralac’s Daily News Selection
Underway in Nairobi: Review and Validation Meeting for the EAC Draft Regional Framework
US Trade and Investment with Sub-Saharan Africa: download evidence at yesterday’s hearing by Stephen Lande (Manchester Trade), Florizelle Liser (Corporate Council on Africa), Lawrence Lieberman (Boston Agrex), Ambassador Mninwa J. Mahlangu (Embassy of South Africa), Dédé Ahoéfa Ekoue (Embassy of Togo)
Davos 2018 updates:
(i) Day 2 Live feed
(ii) WEF reports: (i) Harnessing the Fourth Industrial Revolution for life on land (ii) Innovation with a purpose: the role of technology innovation in accelerating food systems transformation (iii) The known traveller: unlocking the potential of digital identity for secure and seamless travel
(iii) Tech revolution will see ‘serious winners and losers’: SA’s Rob Davies. There will be “serious winners and losers” as a result of the Fourth Industrial Revolution and South Africa needs to be properly prepared and positioned to reap the benefits, or be saddled with the negative consequences. This was according to Trade and Industry Minister Dr Rob Davies who said that emerging technologies have the capacity to benefit humanity in all sorts of ways, “reducing low-skilled back-breaking useless toil and replacing it with something more satisfying”. But Davies, who is part of the South African delegation in Davos for the WEF, warned that “in a world with inequalities, this requires high levels of technological literacy. “We could be facing serious winners and losers and people are saying we don’t know yet. We don’t know yet what the job implications are going to be. Lower skilled people are going to find it more difficult to get jobs, small businesses may find it easier to enter markets because the technology required may require less sunken capital to get into a line of activity.”
(iv) Rwanda showcases drone technology at WEF 2018. Speaking at the forum, Rwanda’s Minster for ICT Jean de Dieu Rurangirwa, said that Rwanda is aiming at nurturing the drone industry and put in place infrastructure and policy framework to accelerate its adoption. “Building on the success of Zipline’s blood delivery technology, we are working to nurture a drone industry. As we look to the future, we will continue to put in place the infrastructure and policy frameworks that accelerate the adoption of emerging technologies to transform people’s lives,” he said. Murat Sonmez, Head of the Center for the Fourth Industrial Revolution, said that Rwanda’s leadership in co-designing policy frameworks around drone use could be a model for other countries that want to accelerate adoption of the technology. “Rwanda is one of the first countries to partner with the Forum in this space. The Government of Rwanda’s leadership in co-designing agile policy frameworks around the use of drones, could be a model for other countries that want to accelerate adoption of this game-changing technology,” he added. [Rwanda could become a model for drone regulation]
(v) Nigeria’s manufacturing sector ready for international investors – Osinbajo. The Buhari administration working with the private sector, is determined to boost the Nigerian manufacturing sector and will be engaging with international partners and friendly nations to realize that goal, according to Vice President Yemi Osinbajo. According to a statement by his spokesman, Laolu Akande ,Prof. Osinbajo was speaking yesterday at the ongoing World Economic Forum in Davos, while meeting with a delegation of the Japan External Trade Organization, led by Mr Hiroyuki Ishige, the organization’s Chairman and CEO. “Nigeria and Japan should be doing more, far more based on the existing long relationship and trade between both countries,” the Vice President stated while noting that this would be to the mutual benefits of both countries.
President Museveni: State of EAC Address
The President, who was addressing the 2nd Sitting of the 1st Session of the 4th Assembly, reiterated that the region stood to gain much more as a unified front. “This integration is not about the leaders but the people who produce wealth”, he said. “Why do we talk about hunger while in Uganda, for example, we have a huge crop of maize – about 5 million tonnes capable of sufficiently meeting our needs?” the President pondered. “We need a situation where all producers in the Partner States are able to freely sell their produce. I have in the past for example contributed to the prosperity of Kenyan farmers in Mbarara where I purchased their (Kenya Co-operative Creameries) milk. This is the kind of thing I am talking about”, he added.
President Museveni also called for the region to effect better use of the existing common natural resources for its own prosperity citing Lake Victoria as a case in point. “This among other resources should be managed on an East African basis and we have the ability to manage the resources collectively - so such may save us in future for East Africa’s destiny”, the President remarked. The President cited the EPA talks with the EU as key adding that negotiating as a unified EAC bloc was instrumental. “The likes of China India, EU and Russia are large – and powerful. Our strength lies in bargaining ‘collectively’. I am duly hopeful – we shall.”
Egypt and the IMF:
(i) 2017 Article IV Consultation. Revisiting the legacy of Egypt’s development model: Capitalizing on its initial successes, the reform agenda needs to be broadened. A dynamic private sector and market-driven resource allocation were essential preconditions for the growth transformations enjoyed by emerging economies over the past five decades. It requires a reorientation of the state to focus on the provision of a stable macroeconomic environment and the efficient delivery of public goods. This needs to be complemented with reforms that improve the business environment and promote private sector development. A limited set of reforms has high potential to alleviate the key bottlenecks to growth in a relatively short time. These include: a modernized regulatory framework to create a level playing field for all; enhanced competition in input and product markets; greater trade integration and the removal of non-tariff barriers; improved access to finance and land; strengthened governance, transparency, and accountability of SOEs; and labor market reforms.
(ii) Selected Issues report. The private sector in Egypt has been less dynamic than in peer countries: Egypt’s private sector is relatively small compared to other EMs. Firms’ entry density (as measured by the number of newly registered limited liability firms per 10000 working-age people) has been low. Based on World Bank (2015), it was about 1 against 24 on average across other countries. Associated with relatively low exit rates, Egypt’s firms’ turnover has been low compared to peers in the past. Few Egyptian firms export: Only about 5% of Egyptian firms are exporters (EBRD (2017)). Total exports of goods and services to GDP ratio averaged 15% since 2000 against 42% in MENAP EMs and 27% in other EMs. Manufacturing exports account for about 53% of total goods exports in 2015 against 38% in 2000. However, according to the African Development Bank, Egypt’s manufacturing exports are less sophisticated than those of EM peers and they remain concentrated in a few products. Services exports are dominated by tourism which has been severely affected in the last few years.
Shedding light on electricity utilities in the Middle East and North Africa: insights from a performance diagnostic (World Bank)
The electricity sector in the Middle East and North Africa is in the grip of an apparent paradox. Although the region is home to the world’s largest oil and gas reserves and has been able to maintain electricity access rates of close to 100%in most of its economies, it may not be able to cater to the future electricity needs of its fast-growing population and their business activities. Primary energy demand is expected to rise at an annual rate of 1.9% through 2035, requiring a significant increase in generating capacity. Investments have not been rising fast enough to meet that requirement.
Nigeria: Most substandard goods to Africa not from China, says envoy (Vanguard)
China says most substandard goods that come into Africa are not from it, as widely claimed. Deputy Chinese Ambassador, Mr Lin Jing told newsmen in Abuja that the Chinese government had taken measures to clamp down on businesses involved in producing substandard products in that country. “We do not offer this kind of substandard products but it happens and we know that it has not only happened with manufacturers in China. This also happened with factories in other south eastern Asian countries because there are lots of factories that can supply products at a very low price because the labour cost is much lower than it is in China. I am saying that lots of factories could be established in other countries and in my personal experience, lots of substandard products are not being shipped from China.” The envoy also said that discussions held with the Chinese community in Nigeria had shown that the “Chinese business circle has not been directly involved in transporting all these substandard products”.
Indonesia set to deepen trade relations with Africa (Leadership)
As part of its efforts to increase business cooperation with Africa, Indonesia has decided to host African countries on a two-day “Indonesia-Africa forum” billed to take place on 10 – 11 April, 2018 in Bali Nusa Dua Convention Centre, Nusa Dua, Bali, Indonesia. [Statement by foreign minister Retno LP Marsudi]
Nigeria: Income tax (country-by-country reporting) regulations 2018 (Deloitte)
The Regulations are part of the implementation plans under Action 13 of OECD’s Base Erosion and Profit Shifting project. This is also a follow-up to Nigeria’s signing of the Multilateral Competent Authority Agreement for the automatic exchange of Country-by-Country reports in January 2016, which was subsequently ratified by the Federal Executive Council in August 2016. The CbCR Regulations provide guidance to multinational enterprises on their reporting obligations to Federal Inland Revenue Service in relation to their group income, taxes paid, and other indicators of their group economic activity. These information will enable FIRS perform high-level transfer pricing risk assessment as well as evaluate other BEPS related risks. [Federal Government issues revised guidelines for export expansion grant scheme]
USTR releases annual reports on China, Russia’s WTO compliance
China and Russia have failed to embrace the market-oriented economic policies championed by the WTO and are not living up to certain key commitments they made when they joined the WTO, the US Trade Representative said in annual reports released today on each country’s compliance with WTO rules. The reports, delivered to Congress, are required by law and assess China’s and Russia’s implementation of their respective WTO commitments. China became a member of the WTO in 2001 and Russia joined the WTO in 2012. Selected highlights of the 2017 annual report on China’s WTO compliance:
EU modernises its trade defence instruments (Europa)
The international trade committee of the European Parliament endorsed the political agreement reached between the Commission, the Council and the European Parliament on 5 December 2017 on the modernisation of the EU’s trade defence instruments. Trade Commissioner Cecilia Malmström said: “Today’s resoundingly positive vote means that the EU is one step closer to having the necessary tools to tackle unfair trading practices quickly and effectively. Together with the recently-agreed changes to our anti-dumping methodology, the EU’s toolbox of trade defence instruments will be even better suited to deal with global challenges. I now look forward to the speedy adoption of this decision by plenary of the European Parliament. The EU stands for open and rules-based trade, but we must ensure that others do not take advantage of our openness. The EU stands ready to defend its industry and workers from unfair competition.”
Trans-Pacific Partnership revived after 11 nations agree to trade deal – without US (The Guardian)
The Trans-Pacific Partnership trade pact, which had been on life support since Donald Trump’s withdrawal of the US a year ago, has finally been resuscitated. The 11 remaining countries are expected to sign an amended agreement on 8 March in Chile, Australia’s trade minister, Steve Ciobo, has confirmed.
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WEF: Tech revolution will see ‘serious winners and losers’ – Davies
There will be “serious winners and losers” as a result of the Fourth Industrial Revolution and South Africa needs to be properly prepared and positioned to reap the benefits, or be saddled with the negative consequences.
This was according to Trade and Industry Minister Dr Rob Davies who said that emerging technologies have the capacity to benefit humanity in all sorts of ways, “reducing low-skilled back-breaking useless toil and replacing it with something more satisfying”.
But Davies, who is part of the South African delegation in Davos for the World Economic Forum (WEF), warned that “in a world with inequalities, this requires high levels of technological literacy.
“We could be facing serious winners and losers and people are saying we don’t know yet,” he said. “We don’t know yet what the job implications are going to be. Lower skilled people are going to find it more difficult to get jobs, small businesses may find it easier to enter markets because the technology required may require less sunken capital to get into a line of activity.”
Davies cited the recent WEF report Country Readiness for Future of Production which listed South Africa at 45th in the world and first in Africa, just ahead of Egypt in 46th place.
“We are in the category called nascent,” Davies said.
Davies said that in terms of the BRICS countries, South Africa followed China which placed fifth, India and Russia which were 30th and 35th respectively, and Brazil which was 41st.
“There are a whole lot of things the reports cite which we take pretty seriously. Where we are good is on science and innovation and adoption of technologies, where we are not so good is on maths literacy, science education and skills development which I think we all already know.
“Government is looking at the implications of these technological changes and ensuring that our country is as prepared as it can be so that we can reap the benefits, while minimising the challenges. And there will be challenges and disruptions, there will be challenges because that is what this technology is all about. So we are learning about that.”
The WEF 2018 theme is a Shared Future in a Fractured World, and Davies said “many of those fractures derive from digital technologies that we need to wake up to”.
He cited the recent examples of sports brand Adidas moving some of its production back to its home base of Germany from low-wage economies in Asia “because they said artificial intelligence and 3D printing had reduced the cost of production more than the low wages”.
He added: “Amazon has launched a shop that is not just self-service tills, but no till at all. You walk in with an app, you take the stuff, you walk out and they charge your account. Now what is going to happen to people who are shop tillers? Many of our jobs are in service sectors and the whole sale and retail trade. What is going to happen?
“We have to smell the coffee and know that this is happening and we have to be prepared for it,” he said. “If we don’t, we are going to reap more of the negatives than the positives.”
“There are some really, really big questions that we are grappling with and will be grappling with in the decades ahead,” he said. “We need skills development and the right kind of skills.”
Davies said one of the WEF sessions he attended on Tuesday spoke of university students in Singapore who are studying English literature but being required to also do a course in digital literacy as part of their study programme.
“These are the things we are going to have to grapple with as we move ahead,” he added.
“How do we measure it to see how we can increase our performance and our preparation.”
Manufacturing Transformation Set to Create a Two-Speed World
A new report launched on 12 January 2018 by the World Economic Forum reveals that only 25 countries are in the best position to gain as production systems stand on the brink of exponential change.
Recognizing the impact of the Fourth Industrial Revolution and emerging technologies on new production systems and business models, the Readiness for the Future of Production Report 2018, developed in collaboration with A.T. Kearney, provides a snapshot of today’s global production landscape along with potential responses.
The new framework is made up of two main components: Structure of Production, which measures a country’s scale and complexity of production; and Drivers of Production – the key enablers that position a country to capitalize on the Fourth Industrial Revolution to transform production systems. Recognizing that each country has its own unique goals and strategy for production and development, participants are assigned to one of four archetypes: Leading (strong current base, high level of readiness for the future); High Potential (limited current base, high potential for the future); Legacy (strong current base, at risk for the future); or Nascent (limited current base, low level of readiness for the future).
Helena Leurent, Head of the Future of Production System Initiative of the World Economic Forum, said: “Our work seeks to shape a future where new technologies in production systems help unlock human potential, tackle and solve challenges that have previously been insurmountable, and where all benefit. This report is intended to catalyse discussion between public and private sectors on the factors and conditions required, inform the development of modern industrial strategies, and define areas of collaborative action.”
Along with further qualitative analysis, the initial assessment reveals eight main findings:
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Global transformation of production systems will be a challenge, and the future of production could become increasingly polarized in a two-speed world. The 25 countries in the Leading archetype account for over 75% of global manufacturing value added (MVA), while 90% of the countries from Latin America, Middle East, Africa and Eurasia fall into the low level of readiness.
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Different pathways will emerge as countries navigate the transformation of production systems. Advanced manufacturing will not be the chosen path for all: some may seek to capture traditional manufacturing opportunities in the near term, while others will pursue a dual approach, or prioritize other sectors altogether.
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All countries have room for improvement. No country has reached the frontier of readiness, let alone harnessed the full potential of the Fourth Industrial Revolution in production. While there are early leaders to learn from, these countries are also still navigating the early stages of transformation.
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Common challenges within each archetype indicate potential future pathways for Leading, Legacy, High Potential and Nascent countries. Countries can learn from each other, while pursuing their own unique strategy.
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Technological advancement brings the potential for leapfrogging, but only a handful of countries are positioned to capitalize. Lagging countries can potentially enter emerging industries at a later stage without the legacy costs of earlier investment, but only if they have the right set of capabilities and develop effective strategies for capturing leapfrogging opportunities most relevant to them.
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The Fourth Industrial Revolution will trigger selective reshoring, nearshoring and other structural changes to global value chains. Emerging technologies will change the cost-benefit equation for shifting production activities and, ultimately, impact location attractiveness. All countries must develop unique capabilities to make them attractive production destinations and capitalize on these shifts.
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Readiness for the future of production requires global, not just national, solutions. Globally connected production systems need not only sophisticated technology but also standards, norms and regulations that cross technical, geographical and political boundaries, to release efficiencies and make it easier to do business across global value chains.
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New and innovative approaches to public-private collaboration are needed to accelerate transformation. Every country faces challenges that cannot be solved by the private sector or public sector alone. New approaches to public-private collaboration that complement traditional models are needed to help governments quickly and effectively form partnerships that unlock new value.
Johan Aurik, Managing Partner and Chairman of A.T. Kearney, said: “In a changing production landscape, each country will need to differentiate itself, capitalize on competitive advantages and make wise trade-offs in forming its own unique strategy for the future of production. Given the speed and scale of changes occurring in the environment, the new diagnostic and benchmarking tool can help raise awareness and sharpen a country’s response.”
Shaping the Future of Production System Initiative
This report is a key contribution to the World Economic Forum System Initiative on Shaping the Future of Production. The initiative brings together global leaders and decision-makers in seeking to address how the transformation of production systems, from R&D to the consumer, can drive innovation, sustainability and employment, to benefit all people.
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Hearing on U.S. trade and investment with sub-Saharan Africa: Recent developments
The U.S. International Trade Commission (USITC) has launched an investigation to examine U.S. trade in goods and services and investment in Sub-Saharan Africa (SSA).
The investigation, U.S. Trade and Investment with Sub-Saharan Africa: Recent Developments, was requested by the U.S. Trade Representative in a letter received on October 23, 2017. The USITC expects to deliver the report to USTR by April 30, 2018.
As requested, the USITC – an independent, non-partisan, fact-finding federal agency – will:
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provide an overview of U.S. exports to and imports from SSA of goods and services, identifying the sectors and countries in which U.S. exports and imports have increased the most, in both value and percentage terms, and the principal factors behind such growth;
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provide profiles of seven (7) SSA economies – Cameroon, Côte d’Ivoire, Ethiopia, Kenya, Mauritius, Nigeria, and South Africa – describing these countries’ macroeconomic environment, and trade flows and foreign direct investment (FDI) with the United States;
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provide a summary of recent developments in regional integration efforts in SSA, including progress on negotiations of the Continental Free Trade Area (CFTA);
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describe U.S. imports of goods from SSA countries under the African Growth Opportunity Act (AGOA), as well as summarize strategies by AGOA countries to increase trade with the United States;
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perform a qualitative and, to the extent possible, quantitative assessment of the non-crude petroleum sectors and SSA markets that present the greatest potential for growth in U.S. exports and imports of goods and services, as well as FDI flows; and
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discuss exports of goods and services from U.S. small and medium-sized enterprises (SMEs) to SSA and the challenges faced by U.S. SMEs exporting to the region.
The USITC held a public hearing in connection with the investigation on January 23, 2018. Selected testimonies are available to download below and on the USITC website.
Testimony of Stephen Lande, Manchester Trade Limited, Inc.
No one should feel complacent about the USG [United States’ Government] economic position in Africa. The US has been replaced by China as the number one trader with Africa since AGOA went into effect. In fact US trade with Africa has shown negative growth in recent years. Since the imports do not paint an accurate picture since they include oil exports which have been declining drastically due to increasing use of oil shale in the United States, the paper cites exports. US goods exports to Africa fell from $38.09 billion in 2014 to $22.28 billion in 2016. China’s exports to Africa, meanwhile, have increased, from $13.22 billion in 2005 to $103.19 billion in 2015 – more than five times that of the United States.
In this regard, the request to the USITC for a quantitative and qualitative analysis of economic performance under AGOA is very timely. The request stated that as the Administration works to encourage fair and reciprocal trade with our African trading partners, it is important to have information on where we are succeeding in African markets, where we have the greatest prospects for increased trade and investment, and the factors that could impede that progress.
In the five minutes allotted to Manchester Trade, I will identify the areas where this greatest prospect for increased trade and investment and the factors that impede the progress.
First, AGOA is an undeniably effective instrument for accomplishing this. Wow – Thanks to the effective management and the assurances of continuity of the program by USTR specifically the three Assistant USTRs since AGOA was implemented at the beginning of this century and the support provided by the USTR themselves during this period, AGOA maintains unprecedented support on the Hill and in Africa. The Assistant USTR ensured that AGOA was kept up to date developing three enhancements to the bill and ensuring Hill support by meticulously administering the program as Congress intended. The commitments of Ambassador Robert Lighthizer and his predecessor, Ambassador Michael Froman to AGOA was vividly demonstrated when the former in the midst of launching NAFTA negotiations devoted four or five days to travel to Togo and the latter challenged travel agents by traveling from a WTO Ministerial in Bali, both to attend AGOA Forums with the principle objectives of exchanging with their African counterparts on how to deepen the program in ways which assures that it also provide benefit for the US and respected the conditions of Congress.
The result is that AGOA is on firm footing in the United States and Africa as witnessed by the fact that just last week at a time when many US trade initiatives are being questioned (TPP, relations with China and other deficit countries, NAFTA and the network of US FTAs which it spawned and even the formerly sacrosanct WTO) the US Congress in about three days passed legislation to enhance AGOA when questions were raised about US commitments to the continent. Whereas, the European Union programs beginning with Lome preferences with its restrictive origin rule and its efforts to gain reverse preferences in violation of WTO rules and extending into its Economic Partnership Agreements through unheard of threats to remove preferences (it did for the Cong, Gabon, and Nigeria) from non-LDCs refusing to sign and discriminate in favor of European imports over those from many African countries as well as the United States. In fact, African leaders have been trying to put a moratorium on implementation of such programs until they complete the continental FTA and to avoid discrimination against exports from countries providing unilateral preferences or otherwise assisting Africa. Just contrast African reluctance to agree to EPAs and the desire for the moratorium with the enthusiasm shown by Africans in developing AGOA implementation plans.
Previous witnesses have presented data which demonstrate the success of AGOA in the trade field. The basic successes have been in two key areas. One was South Africa where an economy in the process of transition from apartheid to multiracial cooperation has been able to take advantage of the access offered to increase key exports to the United States.
The most important accomplishment in exportation for all of Sub Saharan Africa has been in the garment area. Here new industries were brought to four least developed and developing country – industries which did not exist before AGOA apart from some production by independent enclave within South African borders. Africa was not part of the global supply chain for clothing.
Under AGOA, two least developed countries (Lesotho and, Madagascar) and two developing countries (Kenya and Swaziland) were able to enter world class manufacture of clothing. Two additional least developed countries will soon join this list because of surging exports – Ethiopia and Tanzania. One can trace few similar experiences under unilateral preference programs.
However there has been a second success of AGOA which is not apparent from studying trade statistics. The emphasis of the program on working with AGOA beneficiaries to support their efforts to introduce policies for good governance particularly regime which welcomed foreign investment. The result has been quite impressive. With strong US support, African countries have taken the lead in strengthening democratic systems going as far as military intervention to replace leaders overturning legitimate electoral processes. One recent example much appreciated by worker in Swaziland and US labor union has been using AGOA eligibility as a tool to work with the Government of Swaziland to develop a labor policy consistent with ILO norms. In terms of attracting foreign investment, policy directions are changing, reforms are being undertaken and conducive regulatory environments are being created to unlock private investments. SSA continues to be the region implementing the highest number of refonds according to the World Bank Doing Business 2018 report.
However, there are still some impediments to AGOAs having the transformative impact on Africa and significantly deepening relations between the continent and the United States as originally envisaged by its initial sponsors. To put in the current vernacular, these impediments make difficult implementation of policies which would make both Africa and the United States great.
The USTR request calls for the USITC to identify markets that present the greatest potential to increase exports of African products under AGOA. The request also requests the USITC to identify non-crude petroleum sectors and SSA markets that present the greatest potential for U.S. exports of goods and services and for U.S. foreign direct investment (FDI).
One of the disappointments of AGOA until ng ow has been the failure to integrate Africa into global manufacturing chains beyond garments. With the exception possibly of footwear in Ethiopia, there has been little movement into other supply chains. However, unlike what occurred in the Far East and somewhat in Mauritius, production and assembly of more sophisticated components in such areas as i.e., electronics, toys, have not occurred. This is particularly disappointing since as China moves up the production ladder, many of their operations are becoming uneconomic to carry out there but are moving into close-by Asian areas rather than to Africa.
This even though African countries have devoted much resources to developing export processing zone and their accompanying legal framework and located them in areas with sufficient infrastructure to be competitive they have not attracted non-apparel assembly. Often, they are located at air or seaports or on transportation corridors. They are often self-equipped with sources of power or located close to power generating facilities.
In other areas garments became the growth point for attracting other supply chains since one was able to draw on its managerial and labor work force. Although this has not occurred in Africa yet, these possibilities still exist.
Why has Africa been able to penetrate the global supply chains for garments but not in other manufactures. An impediment is the arcane nature of some of the origin rules of AGOA. These origin rules do not promote the incorporation of African components in supply chains. Also, often the components do not meet the requirements that at least 35 percent of their direct cost of processing must be carried out in African value-added which due to what is excluded from its calculation is s equivalent to about fifty percent of the total value of the product. To be frank, the special third country fabric rule has enabled Africa to participate in the value chain for clothing manufacture but the absence of any special origin rule for non-garment assembly has prevented the development of this industry.
Until now, one has been concerns about suggesting any improvement in AGOA in the current atmosphere toward trade liberalization since if one tried to modify the program it could be terminated or reduced in benefits. The recent outpouring of support for AGOA due in some part to the judicious implementation of Congressional conditions for eligibility now allows such enhancements to be considered without fear of reduced benefits. To promote non-garment supply chains to locate in Africa, we suggest that a special origin rule be added to AGOA designed to attract them. The suggested rule would reduce duties on products produced through global supply chains containing identifiable African inputs even if the product is finished in third countries. The duty reduction would be equivalent to the percentage of the value represented by the African components incorporated in the manufacturing process. Current origin rules require the final stage of production to take place in Africa. In the past, the possibility of fraud specifically claiming that a product contained eligible African value-added would have made it impossible to administer such programs. However, record keeping required for supply chains particularly to show where and from what components are produced to meet life cycle requirements addresses the fraud problem.
This step would also help make America great. As we all know, a key objective of the policy of the Trump Administration is to bring high paying jobs back to the United States. However, to be competitive there is a need for components where the US is no longer competitive to be produced elsewhere.
For the moment, the United States has no choice but to rely largely on China for such components. This need will increase significantly if and when the Administration’s efforts are successful to bring high value-added manufacturing back to the United States. The USG and its manufacturers would appreciate the opportunity to rely on Africa for such components rather than on China. In fact, there is no question that it would be a win to rely on African rather than Chinese production. The major goal of Chinese industrial policy is to become the number one world economic power. One tool that China uses is to force US companies producing components in China to move their whole production there. This is no possibility that a similar scenario would unfold in Africa.
Such economic processing zones can also be used to incorporate US produced components in African production both for African markets and for third countries. As occurred in all successful countries, there will be efforts to develop what the Nigerian’s call national champions. Automobile production is such an example. In NAFTA, one of the key objectives is to replace third country components with those from the United States. Economic Processing Zone can be used to import sophisticated US components to replace those Africa buys from third countries.
There are other recommendations as well as to how to ensure that AGOA better promotes truly reciprocal trade with the United States. In the few short moments remaining to me, let me mention them. Of course, we would be pleased to expand them during Q’s and A’s or in a supplemental submission to the Commission.
Current and potential AGOA beneficiaries in sub Saharan Africa number 75 million consumers. With an increasing proportion of the African population being composed of the Middle Class and with the burgeoning youth dividend in Africa thirsting for US branded consumer goods, there is a great potential for US exports. However, Sub Saharan Africa is subdivided into 49 economies, most of which are too small to support world class US distribution chains which is based on economies of scale and mass distribution. Thus, US exports would increase as African economies increasingly integrate with each other. Thus, it is not surprising that USTR asked for the USITC to provide a summary of recent developments of regional integration efforts in sub-Saharan Africa, including progress on the negotiation of the Continental Free Trade Agreement. Progress is quite amazing with the CFTA expected to be launched this year, COMESA has been in the forefront of such effort ad I am sure that its representative can provide further details about progress in negotiation not only towards CFTA but towards the formation of the Tripartite agreement bringing together the three-regional grouping in eastern and southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC). AGOA can promote by focusing more on regional communities both as AGOA Implementation plans are being implemented and by working with the communities to facilitate exports to the United States.
There continues to be much discussion as to the best way that AGAO can evolve from being a unilateral to an increasingly more reciprocal program once the current legislation expires in 2025. With US and third country of African efforts, integrated economic communities can be able to negotiate with the US. Although the Trump Administration has a predilection to negotiate with individual countries, this model may not work in Sub-Saharan Africa given their number and the fact they themselves are integrating. Although differences in economic situations among African countries exist, they can be recognized through what is called variable geometry under which liberalization is phased in at different rates depending on development levels.
Finally, AGOA can be an effective tool for opening African markets, specifically removing impediments to US exports. Instead of relying on the current system which is based on threat of removal or reduction of access under AGOA, why not add to AGOA implementation a section which also emphasizes cooperation by all Parties in increasing two-way trade. One can utilize the existing system of Trade Investment Framework Agreements (TIFAs) to implement such a plan. Withdrawal and or limitation would remain a possibility but only if this new mechanism could not work. One issue which could be addressed is mutual concerns about the use of EU negotiating tactic to force preferences deleterious to some US and African objectives.
Finally, one should make sure that US investment promotion programs are linked to AGOA implementation. The private sector should play the primary role here, a subject I would like to explore if there was more time.
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IMF Executive Board 2017 Article IV Consultation with the Arab Republic of Egypt
Egypt: Time to entrench growth and make it more inclusive
Egypt’s economy is recovering, supported by prudent macroeconomic policies and initial bold reforms aimed at addressing the major challenges that have confronted the economy in recent years. The task now is to deepen reforms to raise economic growth further, make it last, and spread its benefits to Egypt’s rapidly growing population and its youth and women, the IMF says in its latest economic health check.
After more than a year since the launch of the economic reform program, GDP growth is strengthening and inflation is declining. The government trimmed the budget deficit, tourism revenues and remittances are increasing, and the country’s foreign exchange reserves have been rebuilt. The floating of the pound and the initial steps to improve the business climate have helped boost growth.
“This macroeconomic turnaround at home and the supportive global economic environment provide a unique opportunity to carry the reform momentum into areas that have historically been hard to tackle. Deep and lasting structural reforms are needed to create jobs as speedily as needed for Egypt’s growing population,” said Subir Lall, head of the IMF team for Egypt.
Below are the IMF’s key recommendations.
Making stability last
Egypt must entrench the stability attained thus far. This entails preserving the flexibility of the exchange rate and further reducing inflation. The government should also continue to lower the budget deficit to contain public debt. For this purpose, the IMF suggests:
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Collecting more revenue to pay for much-needed social services and to invest in education, health, and infrastructure. Reducing tax exemptions, making the tax system more progressive (richer people pay progressively more in taxes), and making tax administration more efficient will facilitate this process. Revenue could grow by 4 percent of GDP in the medium term as a result, analysis in the report suggests.
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Eliminating most fuel subsidies, which benefit mainly the rich, and allowing fuel prices to change in line with costs: This would protect the budget from movements in global oil prices and the exchange rate, and safeguard priority spending on social programs and necessary infrastructure.
Helping low-income families
Although economic stabilization is critical, Egypt also needs to protect its lower-income families. This requires continuously improving the efficiency of social assistance by reducing price subsidies and expanding better-targeted cash transfer programs such as Takaful and Karama to free up resources for those who need them most, while avoiding the buildup of unsustainable public debt.
Letting the private sector flourish
Egypt’s growing population needs about 700,000 new jobs every year, which is possible only if the private sector becomes the main engine of growth. For that to happen, the state – which has a prominent role in the Egyptian economy – needs to step back from certain sectors and make room for the private sector to invest and grow.
To this end, priorities include ensuring fair competition for private companies in the markets for their inputs and products, improving the governance and transparency of state-owned enterprises, reducing the perception of corruption, improving access to financing and land, and integrating more women and youth into the labor market.
Context
Egypt launched a reform program when its economy faced rising imbalances that led to weakening growth, high public debt, a widening current account deficit, and declining official reserves. To support the homegrown reforms, in November 2016 the government initiated an IMF-supported arrangement to restore the stability of the country’s finances and promote growth and employment, while shielding lower-income households from the adverse effects of the changes. On December 20, 2017, the IMF Executive Board approved the third installment of the three-year, $12 billion Extended Fund Facility.
Selected Issues paper
Unlocking higher and more inclusive growth
Like some other emerging market economies, Egypt faces the challenge of raising growth and creating more jobs to improve the living standards of its young and growing population. The analysis in this paper shows that past growth was characterized by a suboptimal allocation of the factors of production and a lack of dynamism in the private sector. By identifying the main constraints to private sector-led growth and higher employment generation, it suggests policies to further shift Egypt’s economic model towards increased private sector participation and integration into global value chains.
To this end, reforms should aim at removing the distortions to the optimal allocation of resources in the economy and equip the labor force with the skills needed to benefit fully from future job opportunities. These reforms would also help better integrate women and youth into the job market. The authorities have embarked on a reform program to address these challenges and important steps have already been taken. Improved macro-stability and a strong political commitment to reforms present an opportunity to further structural reforms that intensify private sector-led growth and job creation and strengthen trade integration.
Growth, Private Sector, and Labor Market Diagnostic
Growth in Egypt in past decades has been characterized by an inefficient use of production factors. Per capita growth decomposition3 shows that capital deepening (measured by the capital- labor ratio) was the main driver of GDP growth over the last two decades. It explained about 80 percent of total real per capita GDP growth during the 1990s and 2000s. However, the high contribution of capital to growth was not explained by high investment. The investment-to-GDP ratio has been stable around 15 percent over the last 15 years, lower than in EM Middle East, North Africa, Afghanistan, and Pakistan (MENAP) and in other EMs at 26 and 33 percent respectively over the same period. In addition, over most of the period, it was not associated with total factor productivity (TFP) gains, suggesting that investment was not efficiently allocated to improve within-sector productivity or contribute to structural change through a reallocation towards more productive industries. In fact, TFP contribution to growth became negative during the 2000s, contrasting with EM peers where TFP gains were a major source of growth. The lack of competitiveness of the Egyptian economy was also reflected in the negative contribution of the external sector to growth over the last few years. At the same time, labor utilization contribution to per capita growth, measured as the change in the employment-to-population ratio, was close to 0 during the 1990s and 2000s. It contributed negatively to per capita growth over 2011-14 (-2.5 percent) highlighting that Egypt was not able to absorb its growing population into employment.
The private sector in Egypt has been less dynamic than in peer countries. Egypt’s private sector is relatively small compared to other EMs. Firms’ entry density (as measured by the number of newly registered limited liability firms per 10,000 working-age people) has been low. Based on World Bank (2015), it was about 1 against 24 on average across other countries. Associated with relatively low exit rates, Egypt’s firms’ turnover has been low compared to peers in the past.
Private sector investment is below peers and innovation and use of technology are limited. Private investment to GDP ratio was 11.4 percent over 2000-16, close to 7 percentage points below other EMs. Egypt had benefited from strong FDI inflows during the 2000s. Net foreign direct investment (FDI) amounted to 4.3 percent of GDP annually on average over 2000-10 above other EMs (1.6 percent for EM MENAP and 2.9 percent for other EMs). However, this declined to 2.3 percent on average over 2014-17. Additionally, FDI inflows were mostly concentrated in real estate and extractive industries (75 percent of total FDI), which limited positive spillovers to the overall economy. Egypt scores less well than peers on the Global Competitiveness Index for business sophistication, innovation and technological readiness, below EM peers in MENAP and outside the region. According to the 2016 World Bank enterprises’ survey (WBES), less than 15 percent of Egyptian firms had been engaged in innovations to products or processes during the three years preceding the survey. Only 6 percent of firms declared having engaged in formal Research & Development in the previous fiscal year.
Few Egyptian firms export. Only about 5 percent of Egyptian firms are exporters (EBRD, 2017). Total exports of goods and services to GDP ratio averaged 15 percent since 2000 against 42 percent in MENAP EMs and 27 percent in other EMs. Manufacturing exports account for about 53 percent of total goods exports in 2015 against 38 percent in 2000. However, according to the African Development Bank (2012), Egypt’s manufacturing exports are less sophisticated than those of EM peers and they remain concentrated in a few products. Services exports are dominated by tourism which has been severely affected in the last few years.
Egypt’s economic model hasn’t generated enough jobs. The employment elasticity of growth is relatively low. Activity has been concentrated in capital rather than labor intensive industries. Young firms appear to be more dynamic and create more jobs but they face constraints to expansion and remain small. Seventy percent of private non-agricultural employment is concentrated in micro, small and medium enterprises according to Al-Madhi and Nawar (2014). The sectors that have generated most jobs, such as retail trade, construction and transportation have mostly done so in the informal sector. In many cases, these jobs have been characterized by low quality and low productivity.
Constraints to Higher Private Sector-led Growth
While the build-up of macro-economic imbalances constrained growth in the period following the Arab Spring, the previous section suggests that growth has more broadly been limited by persistent structural constraints. This section identifies factors that have constrained the role of the private sector in the economy in the past. These include difficulties to start and exit a business, lack of competition in several key sectors, perceptions of corruption, constrained access to finance and land, lengthy customs procedures and non-tariff barriers, skill mismatches and labor market segmentation, and macroeconomic instability. The section that follows highlights that some of these constraints are currently being addressed by the authorities’ reform program.
In past decades, difficulties to start a business and a rigid exit framework have limited the emergence of young dynamic firms. The time and cost of starting a business are cited regularly as a top constraint for investors. At the most recent Egypt Euromoney conference, 50 percent of polled participants identified bureaucratic barriers to starting a business as the main constraint to foster a start-up culture in Egypt. However, based on the latest Doing Business survey, Egypt has shown progress and now performs better than other EMs. The insolvency regime in Egypt is also constraining and might deter investment and entrepreneurship. According to the Doing Business indicator, the cost of resolving insolvency is high compared to other EMs. Burdensome regulations have constrained firms’ activity and development but progress to streamline processes has been seen more recently. Based on the 2016 WBES, it takes about 32 days to obtain an operating license, down from 70 days in the 2013 WBES and 56 days to obtain a construction-related permit down from 90 days in 2013.
The lack of competition has distorted the allocation of factors in the economy. Several sectors remain protected and dominated by the public sector or a few politically connected private sector firms. The public sector is particularly involved in extractive industries, manufacturing and the financial sector. Based on official national account statistics, it accounts for 30 percent of total GDP. Even during the period of liberalization in the 2000s, several sectors remained closed to foreign investment, including aviation, engineering services, certain activities in the energy sector, steel, aluminum production, construction, insurance and fertilizers. This has generated a concentration of markets among a few players that are insulated from competition. The lack of competition has reduced firms’ efficiency and limited the emergence of new more productive firms, reducing productivity, growth and job creation. For example, using data for the period 1996-2006, Schiffbauer and others (2015) estimate that the entry of connected firms into previously unconnected sectors was associated with a significant decline in the aggregate employment generation of the sector over the period of study.
The public sector and connected private firms have also tended to benefit disproportionately from governments’ subsidies. Some government entities enjoy benefits that put private sector competitors at disadvantage such as subsidized inputs (energy) or tax exemptions. For example, based on Schiffbauer and others (2015), only 8 percent of all firms but 45 percent of connected ones operate in energy intensive sectors. This has led to a suboptimal allocation of production factors and government resources to energy intense sectors to the detriment of labor intensive activities.
Perceptions of corruption may have constrained private sector’s development. Perceptions-based corruption indices show high levels of perceived corruption in Egypt compared to most regional peers and other emerging market economies. The perception of corruption is likely to have discouraged domestic investment and constrained growth, in light of findings in the literature. About 70 percent of firms surveyed in the 2016 WBES identify corruption as a major constraint up from about 50 percent in 2013.
Access to finance is low in Egypt and limits firms’ development. Based on 2016 WBES, only about 12 percent of surveyed Egyptian firms have a bank loan or a line of credit and use banks to finance working capital. About 25 percent of Egyptian firms surveyed in the 2016 WBES report access to finance as a major obstacle compared to about 30 percent in 2013. Indeed, credit to the private sector is low in Egypt, at 34 percent of GDP. Historically, the banking sector has concentrated its lending to the government, and private sector credit is mostly directed to a few large firms.
Transport infrastructure compares well with peers but connectivity could be improved. Egypt ranks in line or above EM peers on the quality of infrastructure on the Global Competitiveness Index. However, additional investment is needed to further improve transport infrastructure and ensure a good connectivity between ports, airports and markets through well connected roads and railroads networks. The Global Infrastructure Outlook (G20 Initiative) estimates Egypt’s cumulated investment gap in transport infrastructure over the next 10 years at USD 70 billion, about 27 percent of current GDP. The lack of an integrated strategy for multi-modal transport logistics have constrained investment and increased the domestic cost of transporting products to markets. Despite important needs and potential, FDI in transport infrastructure and agribusiness logistics (e.g., storage facilities) has been limited by the lack of an integrated strategic and regulatory framework.
Engaging in international trade has been constrained by regulatory bottlenecks and the erosion of external competitiveness. Prior to the float of the currency, the appreciation of the Egyptian pound in real terms weighed on Egypt’s external competitiveness. In addition, regulatory bottleneck and barriers to trade have made private sector-led trade integration more difficult. Egypt scores 42 over 100 on the distance to frontier indicator for trading across borders in the World Bank Doing Business. Custom procedures are lengthy, and are perceived to lack predictability, which impacts negatively on the time and cost of exporting and importing. Egypt scores 3.7 over 7 in the World Competitiveness sub-index on burden of custom procedures. Nonetheless, some progress has been achieved in recent years. Based on the 2016 WBES, it now takes 14 days to obtain an import license, down from 20 days in the 2013 WBES. While tariffs barriers were reduced significantly in the 2000s, non-tariffs barriers remain widespread. Based on WTO data, Egypt has 274 non-tariff measures, primarily technical barriers to trade and sanitary and phytosanitary measures. All this contributed to limit FDI and trade and thus the productivity gains that could have been derived from deeper integration.
Policies to Foster a Dynamic and Productive Private Sector
The Egyptian authorities’ reform program aims to foster private sector-led growth and job creation. To achieve this, Egypt needs to increasingly shift its economic model towards more private sector participation and integration into global value chains. It needs to promote the emergence of a pool of young and dynamic firms that create jobs, invest, and raise productivity.
Recent progress in restoring macro-stability present an opportunity for higher private sector investment and growth. Over the last few years, the Egyptian authorities have engaged in an ambitious reform program aimed at restoring macro-stability, improving external competitiveness and promoting private-sector led growth and job creation. On the fiscal side, they are moving ahead with a consolidation program based on rationalizing and re-prioritizing expenditures and raising revenues. They have implemented the civil service law which aims to contain the public sector wage bill, hiked energy prices to gradually eliminate the energy subsidy bill and started to improve the targeting and quality of social spending. They have also implemented the value-added tax with a broader coverage and a higher rate than the previous sales tax. On the monetary and exchange rate side, the Central Bank has liberalized the exchange rate, eliminating FX shortages and the overvaluation of the pound, which had been identified as a major constraint on the economy’s competitiveness in the past, and it has rebuilt its foreign exchange reserves. All of this has contributed to restore market confidence and ongoing reforms are starting to bear fruit. GDP growth rebounded to 5 percent in Q4 of 2016/17 and there are signs of a rebalancing of growth from consumption to net exports. The fiscal deficit has started to narrow and public debt is expected to start declining in the coming years. Thanks to adequate monetary tightening, inflation has also started to slowdown.
The authorities are taking steps to streamline the role of the state in the economy and improve governance. They have started to implement reforms in specific sectors, notably by creating independent regulators. Key steps have been taken in the energy sector and initiatives are ongoing in the health sector and are planned in the transportation sector. The authorities are also planning to publish a report on state-owned enterprises, including their financial performance, activities, ownership, organizational structure and audited reports to improve SOEs’ governance, transparency and accountability. They are also planning to divest stakes in 5 to 6 public entities over the next two years to improve governance and financial management and promote private sector’s participation in some economic activities.
Structural reforms recently implemented by the authorities to improve the business environment are encouraging. The authorities have already taken steps to reform the regulatory framework to improve the business environment. They have enacted a new industrial licensing law which aims at easing the time and cost of starting a business. It reduces the number of entities involved and the number of procedures required to obtain licenses to operate businesses. These reforms are starting to bear fruit and the number of newly established companies increased by 36 percent year-on-year over January-August. They are also planning to take measures to streamline import and export requirements. Some measures have also been taken to improve access to land, including centralizing the allocation and management of land allocation under one entity. As a result, the government has granted close to 70 percent more industrial land in 2016/17 than over the previous 8 years. The authorities have also revised the Investment law to strengthen the protection framework for investors and streamline processes and they are planning to revise the Insolvency and Procurement laws next year. They are also taking measures to support SMEs, including the revision of the Companies law (to include single person companies) and measures to foster financial inclusion.
However, more is needed to achieve higher sustainable growth rates and generate jobs in the private sector. Reforms should aim at providing a stable, predictable and fairly implemented regulatory environment conducive to private sector activity, removing bottlenecks to higher private sector investment, notably in terms of access to finance and land, promoting domestic connectivity and integration into global value chains. With restored macroeconomic stability and the adequate structural reforms, Egypt has the potential to attract much higher FDI and develop private sector activity in the tradable sector to achieve higher job creation and investment, improve productivity and raise potential growth. Reforms should be directed at:
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Providing an adequate and stable regulatory regime that guarantees a level playing field for all business participants. The authorities should build on reforms that are already in progress and ensure that additional regulatory changes are in line with international best practices, notably the Insolvency and Procurement Laws which are in the process of being revised. The authorities also need to ensure that legislative reforms aimed at creating a level playing field are adequately implemented and do not suffer from capture by specific interest groups. For this, the executive regulations associated with legislative changes should be clear and transparent. Better coordination among different state entities, headed by a dedicated unit, would help improve the consistency and efficiency of governments’ policy implementation. Additional reforms could aim at strengthening competition, notably by strengthening the role of the Egyptian Competition Authority (ECA).
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Improving institutions and governance. Important steps to reduce corruption could include reforms to build greater capacity and accountability in the public administration and improve transparency and information to all citizens. In all economic sectors, setting up independent regulators would reduce the scope for corruption and unequal treatment between public and private sector operators. In addition, more needs to be done to improve SOEs and other public entities’ governance to reduce the distortions between public and connected firms and other private sector firms, improve transparency vis-à-vis citizens, level the playing field by providing transparent information to private sector participants on market opportunities and SOEs’ activities, and improve SOEs’ financial viability.
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Removing constraints to higher investment by the private sector, notably regarding access to finance and access to land. Regarding access to finance, fiscal consolidation will generate space for higher private sector credit. Large public sector deficits have crowded out an important share of bank financing that could otherwise have gone to productive private firms. The authorities reform program should contribute to generating space for bank lending for higher private sector investment. In addition, strengthening credit bureaus and collateral registry systems would help include small firms that lack access to finance. Regarding access to land, clarifying land ownership between different state entities would help simplify access. Land allocation could also benefit from a more open and competitive process. Competitive bidding processes and publication of land sales and the use of the proceeds would improve transparency, reduce distortions and generate more revenues for the state. Simplifying property registration could also help stimulate investment and the use of property as a collateral.
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Developing better connectivity to improve products market efficiency. Fiscal consolidation and the reorientation of public spending away from generalized subsidy will free up space for higher public investment. In this context, it will be important for Egypt to have a sound framework in place for the prioritization, selection and appraisal of public investment projects. It should also develop an integral long term public investment strategy to improve Egypt’s domestic and international connectivity and create a favorable environment for the private sector that reduces transaction costs and foster access to new markets. To promote private sector investment in infrastructures and logistics, Egypt also needs to develop a sound supervisory framework for overall connectivity infrastructure.
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Promoting trade integration. The transition to a flexible exchange rate regime and a monetary framework focused on controlling inflation will help preserve external competitiveness and offers opportunities for higher trade integration. In addition, other measures, to strengthen the benefits of integration into global value chains should include removing legal barriers to FDI and trade barriers (including non-tariff measures).
At a time when Egypt is implementing policies to promote private sector’s growth and job creation, targeted policies can help ensure that youth and women are not excluded from these new employment opportunities. Policies should be directed at improving the functioning of the labor market and ensure that Egyptians entering the labor force are equipped with the skills needed by employers and that women face equal opportunities to take on jobs.
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President Museveni delivers State of EAC Address to EALA
The President of Republic of Uganda and Chairperson of Summit of EAC Heads of State, H.E. Yoweri Kaguta Museveni, is rooting for all efforts towards an effective integration of the continent. To this end, the Head of State wants the EAC region to go full throttle and unite the markets for prosperity of the people.
The President, who was addressing the 2nd Sitting of the 1st Session of the 4th Assembly, reiterated that the region stood to gain much more as a unified front. “This integration is not about the leaders but the people who produce wealth,” he said. “Why do we talk about hunger while in Uganda for example, we have a huge crop of maize – about 5 Million tonnes capable of sufficiently meeting our needs?” the President pondered.
“We need a situation where all producers in the Partner States are able to freely sell their produce,” President Museveni remarked. “I have in the past for example contributed to the prosperity of Kenyan farmers in Mbarara where I purchased their (Kenya Co-operative Creameries) milk. This is the kind of thing I am talking about,” he added.
The Head of State said fraternity of the people of East Africa was another key area capable of fast tracking integration. He remarked the populace in the EAC region were severally either linked by either culture, language or history. The President therefore maintained that socio-economic development was very key in the integration dispensation.
President Museveni also cited strategic security as key in integration. “Africans need to solve their own problems – in this world you cannot survive if you are weak – and this is of our own making. Why can’t we make Africa strong,” President Museveni stated and called for the continent to speak with one voice. He remarked that United States of America President Donald Trump had albeit in inappropriate language, told Africans the truth.
President Museveni also called for the region to effect better use of the existing common natural resources for its own prosperity citing Lake Victoria as a case in point. “This among other resources should be managed on an East African basis and we have the ability to manage the resources collectively – so such may save us in future for East Africa’s destiny,” the President remarked.
The President hailed the EAC forefathers for their vision in uniting the region way back in the 1960s and said the collapse of the envisaged Union led to some of the present-day challenges and catastrophic events. “In Uganda for example, we could not have had the Idi Amin challenge – had we succeeded in forming a unified government. The genocide in Rwanda for example, could also not have happened – if there was a unified an East African Community union.”
The President cited the Economic Partnership Agreements (EPA) talks with the European Union as key adding that negotiating as a unified EAC bloc was instrumental. “The likes of China India, EU and Russia are large – and powerful. Our strength lies in bargaining ‘collectively’. I am duly hopeful – we shall.”
The President lauded and congratulated the Speaker of EALA, Rt Hon Martin Ngoga for his election and said he was content the principle of rotation had been maintained. “I recall already Kenya, Uganda and United Republic of Tanzania had already benefited from the Speakership – while Republic of Burundi has the position of the Secretary General in the EAC.”
The President maintained that the oversight role of EALA was key and assured the Speaker of his support. He further congratulated all Members for attending the Session.
He maintained that EALA was core to the integration process. “I cannot miss your invitations – he said in response to the Speakers remark, who lauded him for attending all previous events of the Assembly. I will keep coming,” he added.
In his welcome remarks, the Speaker of the EALA, Rt. Hon Ngoga Karoli Martin, noted that the Sitting was taking place at an irreversible time in the regional integration process.
He remarked that EALA was keen to finalise work started by the predecessors (3rd Assembly) on operationalization of the finance and administration of the Assembly, which he said, would help to improve efficiency as it executes its mandate.
The Speaker maintained that the region needed to remain strong and resilient on the continent and said the implementation of the pillars of integration would go a long way in realizing the same.
The EALA Speaker maintained the region stood proud of the gains realised under the Customs Union and the Common Market and cited the impending Monetary Union as the logical culmination of the integration efforts as it seeks to harmonise fiscal policies leading to a single currency unit.
He further called for the swift address of challenges the region was facing. “To this effect, we should continue to address challenges in order to secure EAC’s future for posterity. Some of the areas include stamping out the NTBs and the need to enhance free movement of goods, labour and services. We need to venture into new areas of integration and consolidate those we have agreed upon. We have to play special attention to areas that have impact to our young people notably one education area and equal fees,” he said.
At the Plenary, the Assembly has the following notable business:
The EAC Oaths Bill, 2017.
The vote of thanks was delivered by EALA Member, Hon Dr Anna Itto.
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tralac’s Daily News Selection
Reminder: The USITC hearing, US trade and investment with Sub-Saharan Africa: recent developments, is scheduled to take place today in Washington.
The Gambia’s Trade Policy Review started today at the WTO: access the documentation
The World Economic Forum Annual Meeting started today: Live Blog. Profiled WEF reports: (i) Towards a reskilling revolution (ii) Eight futures of work: scenarios and their implications (iii) The new production workforce: responding to shifting labour demands (iii) Global Future Council on International Trade and Investment: strategic brief on misconceptions around trade balances
World Economic Outlook: January update (IMF, pdf)
The growth pickup in Sub-Saharan Africa (from 2.7% in 2017 to 3.3% in 2018 and 3.5% in 2019) is broadly as anticipated in the fall, with a modest upgrade to the growth forecast for Nigeria but more subdued growth prospects in South Africa, where growth is now expected to remain below 1% in 2018-19, as increased political uncertainty weighs on confidence and investment. [IMF’s Maurice Obstfeld: The current economic sweet spot is not the “new normal”]
UNCTAD Investment Trends Monitor: global FDI slipped in 2017
Global flows of FDI fell by 16% in 2017 to an estimated $1.52 trillion, down from a revised $1.81 trillion in 2016, according to the latest UNCTAD Global Investment Trends Monitor (pdf). FDI to developing economies remained stable, at an estimated $653 billion, 2% more than the previous year. Flows rose marginally in developing Asia and Latin America and the Caribbean, and remained flat in Africa. Developing Asia regained its position as the largest FDI recipient region in the world, followed by the European Union and North America. “The decline of global FDI flows is in stark contrast to other macroeconomic variables, such as GDP and trade growth, which saw substantial improvements in 2017,” James Zhan, Director of UNCTAD’s Investment Division said. “Upward synchronization of the trends in 2018 is probable, but risks are abundant.”
World Employment and Social Outlook: Trends 2018 (ILO)
The World Employment and Social Outlook: Trends 2018, a flagship report by the ILO, examines employment and social trends for the world as a whole and for each region, and analyses structural transformation and implications for future job quality. The projected fall in the 2018 global unemployment rate would also mark a turnaround after three years of rises, and would remain essentially unchanged in 2019, according to the report. However, with a growing number of people entering the labour market to seek employment, the total number of unemployed is expected to remain above 192 million in 2018, and that number would likely grow by 1.3 million in 2019. Extract from the executive summary (pdf):
The world continues to experience diverse trends in employment outcomes. Developed countries are expected to enter their sixth consecutive year of decreasing unemployment rates, falling to 5.5% in 2018, the lowest rate since 2007. Yet many countries continue to report high rates of labour underutilization, with large shares of discouraged workers and growing incidence of involuntary part-time employment. By contrast, emerging countries have experienced a significant increase in unemployment rates between 2014 and 2017, driven by major economic downturns, in part due to the commodity price slump in many large economies, such as Brazil and the Russian Federation. The year 2018 marks a turning point, as the unemployment rate is expected to fall to 5.5% (from 5.6% in 2017), which would translate into an increase in the number of unemployed in emerging countries of around 0.4m in 2018 and 1.2m in 2019.
Mauritius-India: CECPA to provide platform to address any barriers in trade (GoM)
The third round on the resumption of discussions between Mauritius and India on the Comprehensive Economic Cooperation and Partnership Agreement was launched yesterday in Mauritius. Both India and Mauritius are willing to finalise a Joint Study Report which will set the basis and the parameters for the negotiations and enable the start of negotiations on two different chapters - trade in goods and trade in services. The CECPA has four pillars which form the basis of negotiations, namely trade in goods, trade in services, investment and economic cooperation. The work agenda comprises: consultations on Trade in Goods and Services including sub working groups on sanitary-phytosanitary measures; technical barriers to trade and rules of origin as well as the way forward.
Mauritius largest source of FDI in India, says RBI (Economic Times)
Mauritius was the largest source of foreign investment in India, followed by the US and the UK, according to a census by the Reserve Bank. Singapore and Japan were the next two sources of FDI, said the Census on Foreign Liabilities and Assets of Indian Direct Investment Companies 2016-17, released by RBI today. “Mauritius was the largest source of FDI in India (21.8% share at market value) followed by the USA, the UK, Singapore and Japan whereas Singapore (19.7%) was the major ODI destination, followed by the Netherlands, Mauritius, and the USA,” the census said (see (Tables 5 and 6). Extract: The manufacturing sector accounted for nearly half of the total FDI at market prices; ‘information and communication services’ and ‘financial and insurance activities’ were the other major sectors that attracted FDI ( see Tables 7 and 8). Total sales, including exports, of foreign subsidiaries in India increased by 18.7% during 2016-17 whereas their purchases, including imports, increased by 20.1% (see Tables 10A and 10B).
JSC Russian Export Centre joins Afreximbank as shareholder
The shareholding, which became effective on 29 December 2017, followed discussions between the Bank and Russian officials during which the two sides explored ways of cooperating to take advantage of the numerous opportunities for trade and development between Russia and the African continent. With the new partnership, the two entities have already started working actively on joint projects in a number of African countries, focusing mainly on mining and transport infrastructure. REC is owned by the State Corporation Bank for Development and Foreign Economic Affairs (Vnesheconombank [VEB]).
Kenya: Mombasa set to get Dubai-like free port (Business Daily)
The 1,000-acre Mombasa re-export gateway will initially handle 100,000 vehicles annually, Treasury secretary Henry Rotich estimates in a draft Budget Policy Statement released on Friday. The state-owned facility is tipped as one of the flagship projects that the government is banking on to raise the 2018 export earnings by 10% and 20% annually by 2022. “We intend to strengthen trade facilitation programme,” Mr Rotich says in the draft BPS. The Mombasa FTZ is conceived to serve the landlocked states under Comesa. All the vehicles on transit will be moved directly from Kilindini seaport to the FTZ from where they can be evacuated by railway or roads to the final destination. Mr Rotich says 500 motor vehicle inspectors will be trained this year and stationed at the facility to ease clearance. That means the vehicle owners will no longer have to incur demurrage charges faced by home-bound imports that have to undergo lengthy clearance including obtaining number plates. BPS Pointers: (i) Section 2.2 “The Big Four” Economic Plan. “The Big Four” Plan of the Government for the FY 2018/19 and over the medium term are discussed as follows: Supporting Value Addition and Raising the Share of Manufacturing Sector to GDP to 15% by 2022 (see page 25). (ii) Section 2.3 Enablers for the “The Big Four” Economic Plan (see page 35).
Is open skies the magic wand that will drive African airlines’ competitiveness? (New Times)
Experts indicate that at the moment, airlines that are best positioned to dominate African skies are often based in Europe or the Middle East, urging countries in Africa to support and embrace the open-skies policy being pushed by the African Union. “An open skies policy would help modernise the air travel industry in Africa, and provide an incentive to airlines from the continent and elsewhere to fly more freely, helping to boost the demand, increase frequencies, and help turn key cities like Kigali into aviation hubs,” he says. But Macheras says that there needs to be a priority for African carriers if they are to compete with global airline giants. “Africa has the potential to grow various aviation hubs. However, airlines also need to create more partnerships with airlines that do domestic air transport to ensure seamless connections to secondary cities. Such partnerships can help make the entire air travel process ‘easier’ and, therefore, more attractive for passengers flying to, from and around the continent,” he adds. [NEPAD: The Single African Air Transport Market ( pdf Brochure (1.95 MB) ), African Union Commission gears up to launch highly-anticipated Single African Sky, Nigeria restates commitment to single African air transport market]
Nigeria: FG hires consultants to probe minerals sector’s revenue leakages (Punch)
The Federal Government on Monday inaugurated 100 consultants to probe revenue leakages in the mines and minerals sector of the economy between 2012 and 2017 in an exercise titled: ‘Revenue Optimisation and Verification Project’. The minister said the Revenue Optimisation and Verification Project would seek to confirm the adequacy of royalty remittances made by the various operators in the mining industry. He stated that the consultants were mandated to collect and analyse data from 2012 to 2017 in the course of their work, thus giving the government an opportunity to demand and receive accruals due to it from the referenced period.
Assessment of food security early warning systems for East and Southern Africa (World Bank)
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Trade Policy Review: The Gambia
The first review of the trade policies and practices of the Gambia takes place on 23 and 25 January 2018. The basis for the review is a report by the WTO Secretariat and a report by the Government of the Gambia.
Report by the Secretariat: Summary
The Gambia has maintained its generally open trade and investment regime since the last TPR in 2010. The main trade policy reform has been the adoption of the five-band ECOWAS Common External Tariff (CET) from 1 January 2017.
The Gambia is the smallest country on the African mainland. It ranks among the poorest countries in the world, with a per capita income of less than US$500 and approximately half of the population of two million living below the poverty line (US$1.25 / day).
The Gambia has weathered the global financial crisis relatively well, recording solid economic growth in the period 2007-10 (averaging over 5.6%). However, real GDP growth has been considerably weaker, averaging 2.9% in the period 2010-16, owing to mismanagement of public finances and mounting public debt, compounded by external shocks.
The Gambia’s new Government is facing a series of economic challenges, particularly in the area of public finance. The State continues to have an important role in the economy; virtually all state-owned enterprises are in financial distress. High government borrowing combined with tight monetary policy conditions, resulting in very high interest rates, has crowded out the private sector. While the country is open to foreign investment, economic growth has been hampered by weaknesses of the business environment, including a complex tax system and infrastructure bottlenecks. Foreign direct investment (FDI) flows to The Gambia have been volatile, and remain far below levels preceding the global financial crisis.
The Gambia’s economy relies mainly on services (66% of GDP in 2016) as the main driver of growth, and a volatile, drought-prone agriculture sector (21% of GDP in 2016). Remittances and international aid play an important role in sustaining the economy. In the services sector, tourism contributes about 16-20% of GDP and has been the largest foreign exchange earner, albeit in a difficult environment (due to an Ebola outbreak in neighbouring countries). Wholesale and retail trade is also a major services sector of the economy (about 25% of GDP), reflecting the contribution of re-exports (mainly textiles), which accounted for about 70-80% of total exports in recent years. The manufacturing sector (about 5-6% of GDP) caters largely for the small domestic market. The fisheries sector contributes about 2% to GDP. A moratorium on the industrial fisheries was lifted in May 2017.
The Gambia’s merchandise imports far outstrip exports. The export base is very small (US$19.1 million in 2015), consisting mainly of groundnuts and fish. The main trading partners for exports are the European Union, Viet Nam, India and China; imports come mainly from the European Union, West Africa (Côte d’Ivoire and Senegal), Brazil and China.
The Gambia deposited its instrument of acceptance of the Trade Facilitation Agreement on 11 July 2017. The Gambia is a member of the least developed countries (LDC) and African, Caribbean and Pacific (ACP) groups, the African Group, the G-90, and the “W52” sponsors. In the period under review, The Gambia provided some 20 notifications to the WTO, although some notifications (e.g. domestic support in agriculture) are outstanding.
The WTO and the Economic Community of West African States (ECOWAS) trade regime provide the basic parameters for The Gambia’s trade policies. The Ministry of Trade, Industry, Regional Integration, and Employment (MOTIE) is responsible for formulating and coordinating trade policy. Some of the trade policy programmes and plans, including on agricultural policy, have expired or may benefit from a review of direction.
In January 2017, The Gambia implemented – with a two-year delay – the new five-tiered ECOWAS Common External Tariff (CET). Except for goods covered by the ECOWAS Trade Liberalization Scheme (ETLS), which enter duty free, The Gambia applies the CET to all of its trading partners (including other ECOWAS members) at present, without any exceptions or supplementary protection measures allowed under ECOWAS regulations. All imported goods are subject to the ECOWAS Community levy and the African Union levy.
For The Gambia, the change from the national customs tariff (2010) to the ECOWAS CET is a major tariff reform, entailing adjustments in the customs duty rates for nearly two thirds (4,000) of all tariff lines. The ECOWAS CET classification consists of essential social commodities (dutyfree); essential commodities, raw materials, and capital goods (rate of 5%); intermediate products (rate of 10%); consumer goods (rate of 20%); and specific goods for economic development (rate of 35%). Overall, the implementation of the new ECOWAS CET means a small tariff cut for the Gambian economy. The simple average applied MFN tariff rate of the CET (12.3%) is lower than that of the Gambian customs tariff of 2010 (14.1%), and a wider range of products is now classified as inputs (essential commodities, raw materials, and capital goods), which have had their tariffs reduced to 5%. The highest average tariffs apply to live animals and meat (24.1%, up from 15.2%), and clothing (20%). However, the ECOWAS CET is considered problematic in a number of sectors from the point of view of competitiveness and food security.
None of the ECOWAS CET rates exceeds The Gambia’s tariff bindings, but there is a large gap between the average bound rate (103.4%) and the average applied MFN rate (12.3%). Most tariffs on agricultural products are bound at a ceiling rate of 110% (some 90% of all agriculture tariff lines), while the binding coverage of non-agricultural tariff lines is low (0.7% of total nonagriculture tariff lines). This reduces the predictability of the tariff regime, although in practice the ECOWAS CET is effectively the bound customs tariff for The Gambia with a commitment to apply these rates on an MFN basis.
The Gambian customs procedures with respect to customs valuation, rules of origin, and transit are governed by ECOWAS rules. The Gambia has notified the WTO that its laws, regulations and administrative procedures are in line with the provisions of the WTO Agreement on Customs Valuation. The Inter-State Road Transit Scheme of ECOWAS was implemented in The Gambia in July 2013. The Gambia uses ASYCUDA++ as its customs management system.
Most goods can be traded without any restrictions. Although it is difficult to establish an exhaustive inventory of non-tariff measures applied by The Gambia, some import prohibitions and restrictions are maintained, mainly for reasons of national security, to protect public morals, and to ensure compliance with international commitments. Nonetheless, The Gambia has notified the WTO that it does not maintain an import licensing system. It has never used trade contingency measures.
In general, export procedures are similar to those applied to imports. The Gambia does not levy export taxes, except on precious metal scrap and waste. It has imposed, from time to time, export bans on timber.
The Gambia Investment and Export Promotion Agency (GIEPA) is responsible for investment and export promotion, administering the Special Investment Certificate (SIC) scheme and the export processing zone near Banjul International Airport. SICs offer a range of incentives (with minimum FDI of US$250,000 in priority sectors and areas).
Customs duties, excises, and VAT are the Government’s principal sources of revenue. They fall mainly on imported goods since the domestic industrial base is very small. Imported goods destined for re-export are also subject to customs duties and import taxes. A VAT regime was introduced in January 2013 (replacing the sales tax), which is applicable to all taxable goods and services at a standard rate of 15%. However, substantial import duty and tax exemptions have been granted on imports of capital and intermediate goods to safeguard the competitiveness of the economy.
Selected products and services are excisable. The taxation system differs between imported and domestically-produced goods. Excise “duties” apply to certain locally-produced goods and telecommunications services; the rates are ad valorem. Imported goods are subject to excise “taxes”; the rates are specific for some products and ad valorem for other items. Whether or not there is differential treatment between imported and locally-produced goods depends on the price of the product. However, it would appear that there is differential treatment for used cars.
The Gambia has made progress in the area of standards and technical requirements. The Gambia Standards Bureau (TGSB) became operational in 2011 and has since promulgated 33 standards, most of them directly adopted from international standards. The TGSB participates in the ECOWAS Standard Harmonization process (ECOSHAM). There are currently no technical regulations in force. Regarding SPS measures, a new Food Safety and Quality Act entered into force in 2011, followed by the establishment of a Food Safety and Quality Authority. The animal health and plant protection regimes, on the other hand, appear to be obsolete and require modernization with international assistance.
Competition rules are governed by the Competition Act of 2007, with The Gambia Competition and Consumer Protection Commission (GCCPC) as the enforcement agency. The GCCPC has been taking a more active role with investigations followed by remedial actions, and market studies, notably in the rice and sugar markets.
The Gambia has reformed its government procurement regime in line with international best practice, according to the authorities. The Public Procurement Authority Act was amended in 2014, and an Independent Complaints Review Board has been established to handle disputes. The procurement thresholds remain unchanged; no procurement valued above the thresholds is allowed unless prior approval has been obtained from the Authority. The approval for projects valued at more than D 10 million now rests with the Major Tender Board. International competitive tendering may only be used if the goods, works, or services are not available at competitive prices and conditions from at least three suppliers in The Gambia.
The Gambia amended its Industrial Property Act in 2015, extending the protection period for patents from 15 years to 20 years; introducing provisions to ensure conformity with the Madrid Protocol relating to the international registration of marks; and increasing the penalty against infringements. The African Regional Intellectual Property Organization is the substantive examiner for patent and utility model applications. Geographical indications are protected as collective marks.
With regard to developments in the services sector, the banking sector is liquid and profitable, according to the authorities. Nevertheless, banks tend to be overly exposed to government debt, which may increase risks in the long run. Most banks are foreign-owned. The payments system, including the clearing and settlement infrastructure, has been modernized through technical improvements. The telecom infrastructure has been substantially upgraded, with the establishment of the African Coast to Europe submarine cable landing station in 2012 and the completion of a nationwide fibre-optic backbone network in 2015. The new National Information and Communication Infrastructure Policy 2017-2025 aims at technology neutral regulatory environment and more affordable broadband access in the country. Two out of four mobile carriers are foreign-owned.
About half of the Gambian population relies on subsistence farming and a few cash crops (mainly groundnuts) for their livelihood. Yet, the country is a net food importer by a wide margin, being vulnerable to drought and other natural disasters. The agriculture sector also suffers from under-investment and low productivity. Most of the country’s rice needs (the main staple) are imported, but the Government has ambitious plans to increase production with the aim of becoming self-sufficient in rice.
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Mombasa set to get Dubai-like free port
Mombasa is set to get a free trade zone (FTZ) for motor vehicles this year in a policy move that could create thousands of new jobs for traders and service providers.
An FTZ, such as the world renowned Dubai, is a re-export gateway where goods in transit are temporarily stored to avoid strict customs regulations and lengthy administrative procedures that home-bound imports face.
The establishment of such a facility in Kenya – almost four years after the Cabinet gave its nod to the plan – means vehicle imports destined to other markets in the region will first be received and sorted in Mombasa.
Goods in such a customs haven only get taxed when they end up in the local market. The country benefits from the job opportunities created for citizens and from collecting cargo handling fees.
The 1,000-acre Mombasa re-export gateway will initially handle 100,000 vehicles annually, Treasury secretary Henry Rotich estimates in a draft Budget Policy Statement (BPS) released on Friday.
The State-owned facility is tipped as one of the flagship projects that the government is banking on to raise the 2018 export earnings by 10 per cent and 20 per cent annually by 2022. “We intend to strengthen trade facilitation programme,” Mr Rotich says in the draft BPS.
The Mombasa FTZ is conceived to serve the landlocked states under the Common Market for Eastern and Southern Africa (Comesa). All the vehicles on transit will be moved directly from Kilindini seaport to the FTZ from where they can be evacuated by railway or roads to the final destination.
Mr Rotich says 500 motor vehicle inspectors will be trained this year and stationed at the facility to ease clearance. That means the vehicle owners will no longer have to incur demurrage charges faced by home-bound imports that have to undergo lengthy clearance including obtaining number plates.
The Cabinet approved the plan to set up FTZ in February 2014, allowing the industrialisation ministry to start planning for the hub.
Apart from motor vehicle re-exports, the ministry has been mulling over FTZ to handle electronics, machinery and building materials.
Mombasa County has also been planning set up its own FTZ with Governor Hassan Joho setting aside cash from as early as 2013/2014 for land purchase.
The FTZ model established Dubai as a distribution hub for re-exports such as electronics, motor vehicles and machinery destined to other countries around the world.
The Comesa bloc is already the single-largest export destination for Kenya’s goods accounting for 35 per cent of Sh578 billion worth of goods exported in 2016.
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African Union Commission gears up to launch highly-anticipated Single African Sky
The African Union Commission is set to launch the first AU Agenda 2063 Flagship project, the Single African Air Transport Market (SAATM), in Addis Ababa, Ethiopia, on 28th January 2018 as a historic event at the African Union Summit, nearly two decades after the adoption of the 1999 Yamoussoukro Decision.
Speaking ahead of the launch event, Dr. Amani Abou-Zeid, Commissioner for Infrastructure and Energy at the African Union Commission, said: “With preparations continuing on schedule, the launch of the Single African Air Transport Market will spur more opportunities to promote trade, cross-border investments in the production and service industries, including tourism resulting in the creation of an additional 300,000 direct and two million indirect jobs contributing immensely to the integration and socio-economic growth of the continent.”
The Commissioner stated that the aviation industry currently supports eight million jobs in Africa and hence SAATM was created with the aim of enhancing connectivity, facilitating trade and tourism, creating employment, and ensuring that the industry plays a more prominent role in the global economy and significantly contributing to the AU’s Agenda 2063.
“The AU Summit will also see the adoption of the regulatory text of the Yamoussoukro Decision, that is, the competition and consumer protection regulations that safeguards the efficient operation of the market,” the Commissioner added.
An exhibition billed “Flying the AU Agenda 2063 for an integrated, peaceful and prosperous Africa” will be unveiled to mark the launch, as well as ribbon cutting and the inauguration of the commemorative plaque.
So far, 23 African countries out of 55 have subscribed to the Single African Air Transport Market whereas 44 African countries signed the Yamoussoukro Decision.
“The African Union Commission, under the leadership and personal commitment of H.E. Moussa Faki Mahamat, has been playing a key coordinating role in the establishment of the Single African Air Transport Market and advocacy to AU Member States, who have not yet committed to the solemn commitment, to do so,” the Commissioner intimated.
The African Union Commission (AUC), the African Civil Aviation Commission (AFCAC), the International Civil Aviation Organization (ICAO), the International Air Transport Association (IATA) and the African Airlines Association (AFRAA) are also advising African countries to open their skies for enhancement of connectivity and efficiency of air services in the continent.
“As the first of the 12 African Union’s Agenda 2063 flagship projects to be launched, the implementation of SAATM will pave the way for other flagship projects as the African Passport and enabling the Free Movement of People, the Continental Free Trade Area (CFTA),” Commissioner Abou-Zeid stressed.
The Declaration on the establishment of a Single African Air Transport Market, as a flagship project of the AU Agenda 2063, was adopted by the African Union (AU) Assembly in January 2015.
Immediately thereafter, eleven (11) AU Member States declared their Solemn Commitment to establish a Single African Air Transport Market through full implementation of the Yamoussoukro Decision of 1999 that provides for full liberalization of market access between African States, free exercise of traffic rights, elimination of restrictions on ownership and full liberalization of frequencies, fares and capacities.
To date, the 23 Member States that have adhered to the Solemn Commitment are: Benin, Botswana, Burkina Faso, Cabo Verde, Congo, Cote d’Ivoire, Egypt, Ethiopia, Gabon, Ghana, Guinea, Kenya, Liberia, Mali, Mozambique, Niger, Nigeria, Rwanda, Sierra Leone, South Africa, Swaziland, Togo, and Zimbabwe.
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EAC Secretary General calls for implementation of critical activities in 2018
East African Community Secretary General, Amb. Liberat Mfumukeko, has called for serious prioritizing of the available resources to ensure critical activities in the integration process are implemented by the EAC Secretariat in 2018.
Amb. Mfumukeko noted that 2017 had been a challenging year for the EAC and singled out the first and second quarters of the 2017/2018 Financial Year, adding that the Community had experienced serious financial challenges during this period.
The Secretary General outlined the tremendous achievements made in the EAC integration process in 2017 despite all the challenges as follows:
Single Customs Territory
He disclosed that the main priority was to attain the full roll-out of intra-trade and imports regime under the Single Customs Territory. Most important was the operationalization of 10 One Stop Border Posts, three (3) of which were officially launched with the most recent being the official launch of the Mutukula One Stop Border Post (OSBP) located on the Uganda/Tanzania border in November last year after Holili/Taveta and Rusumo.
Common Market
Partner States continued to facilitate free movement of goods, services, labor and capital and accord rights of establishment and residence to firms and citizens from other Partner States. Last year, the Non-Tariff Barriers (NTBs) Act, 2015 was assented by all the Partner States and regulations to operationalize it were developed.
Also a total of 104 standards were approved by Sectoral Council on Trade, Industry, Finance and Investment (SCTIFI) in June 2017 as East African Standards and 108 international standards endorsed for adoption by the Partner States in accordance with the EAC procedures. This brings to date, the cumulative total number of harmonized standards to 1,428 for the period 2000 to June 2017. In addition to this, negotiations of Mutual Recognition Agreements for Land Surveyors were concluded.
Amb Mfumukeko disclosed to the staff that in 2017, the Secretariat, in close collaboration with Partner States continued the fight against NTBs in the region. Partner States assented to the EAC Elimination of Non-Tariff Barriers Act 2017. The Act was gazetted and published. During the same year, a draft Export Promotion Strategy 2018-2023 was developed and is now ready for consideration by all stakeholders.
For 2018, the SG urged Partner States to finalise the regulations for successful implementation of the EAC Elimination of Non-Tariff Barriers Act 2017 and intensify monitoring of trade flows along EAC common borders.
Energy and Infrastructure
The Secretary General said that the EAC adopted its Energy Security Policy Framework, making it the first regional economic community to adopt an Energy Security Policy Framework in Africa. This framework aims at providing regional guidance to Partner States in the management and mitigation of the challenges in energy security. The Partner States have acknowledged that energy is pivotal to the regional integration agenda and have therefore set ambitious development plans prioritizing the energy sector.
On Infrastructure, he said the EAC was able to secure funding amounting to US$1.5 million from the AfDB for studies for the Masaka-Mutukula / Bugene-Kasulo road (Tanzania-Uganda). This is in addition to the 2.2 Million USD which was secured for the ongoing studies of the Multinational road projects.
In addition, the Tripartite Transit Transport Programme amounting to 18 million Euros was launched during the 1st Tripartite Sectoral Ministerial Committee on Infrastructure (TSMCI) meeting held in October 2017
Industrialization
Amb Mfumukeko disclosed to the staff that in 2017 EAC launched the EAC Industrial Competitiveness Report. The report was developed to provide direction as the EAC seek to attain the industrialization goals of the Community by expanding market opportunities for the industrial sector in the region and improving the competitiveness of the region, in line with the EAC Industrialization Policy and Strategy.
Gender
EAC registered a key milestone with the enactment of The EAC Gender Equality, Equity and Development Bill, by the 3rd Assembly 2016 early last year. The Bill gives effect to the Treaty for the Establishment of the East African Community and the African Charter on Human and Peoples’ Rights as it expressly prohibits all forms of exploitation, cruel, inhuman or degrading traditional practices
Agriculture Sector
The Secretary General disclosed that the EAC Regional Agriculture Investment Plan was validated. The Plan seeks to catalyze the realization of the EAC Comprehensive Africa Agriculture Development Programme (CAADP) goals in five investment thematic areas, namely: Increasing regional agricultural production and food supply; Enhancing food utilization; Promoting agribusiness, value addition and agro-industry; Promoting sustainable natural resource use and management, and; Strengthening capacities of EAC regional agricultural institutions.
Meanwhile, Amb Mfumukeko talked about the elapsing of the 4th EAC Development Strategy 2011-2016, adding that the preparation of the 5th EAC Development Strategy was at an advanced stage.
He thanked Development Partners for their continued support in 2017 and called for improvement in coordination of projects and communication of results for all projects funded by the Partnership Fund.
The 2018 New Year’s message to staff was also attended by the EAC Deputies Secretary General in charge of Finance and Administration hon. Jesca Eriyo, Planning and Infrastructure Eng. Steven Mlote, Productive and Social Sector, Hon Christophe Bazivamo and Political Federation, Mr. Charles Njoroge. The EAC Director General Customs and Trade, Mr. Kenneth Bagamuhunda was also in attendance.
New Year Address to Staff by Amb. Liberat Mfumukeko, EAC Secretary General
16 January 2018, Arusha
Let me begin by welcoming all of you back to work after the end of year Break. I am hoping that you rested well and had a nice time with you your families. I am happy to see all of you back, and we should thank the almighty GOD for seeing us through, I personally don’t take it for granted. I take this opportunity to wish all of you a very fruitful 2018. Now that we’re a few days into the New Year, it’s good to look ahead and think about what this year may bring us.
I am happy that we are starting this New Year on a good note, with the 4th East African Legislative Assembly in place. As you are aware the 4th Assembly members were sworn in December last year. The 4th Assembly has their work cut out – as we strive to make up for the lost time. The Assembly must also embark on the backlog of work in terms of key pieces of legislation that were not completed by the 3rd Assembly. There are about 13 pieces of legislation, which shall need to be completed and enacted. The region shall be looking at EALA to deliver especially on legislation that will anchor and fortify the pillars of integration. I further congratulate the 3rd Assembly for their laudable contribution and note that over the five-year period, the Assembly passed 30 pieces of legislation, over 80 reports and over 100 resolutions.
I must admit that 2017 was a challenging year for all of us at EAC, and especially the first and second quarters of financial year 2017/18 where we experienced serious financial challenges. I want to thank all of you for bearing and coping with these challenges, I was touched that staff could use their own resources to travel and support EAC activities for reimbursement when funds become available. This is a show of not only commitment and passion but also maturity and desire to contribute to the integration process. Because of this most activities were still implemented uninterrupted and as scheduled. We shall work together to ensure there are enough resources to run the affairs of the community. The reality of the matter is that partner states are slow in disbursing their commitments, as at end of December only 40% had been disbursed, this calls for serious prioritizing of the available resources and ensure critical activities are implemented. We also need to avoid wastage at all costs.
I want to refer you back to the circular of May 2016, where it was directed that all meetings should start on Tuesdays and meetings should not last for more than four days. Colleagues tough times call for tough measures. I am sure we can still achieve a lot, with the resources available. This summit will be addressing the issue of alternative financing mechanisms and I can assure you that a lasting solution will be found. We should not be discouraged by our challenges, as one great man T. Harv Eker said “if you want to make a permanent change, stop focusing on the size of your problems and start focusing on the size of you.”
There were notable achievements in 2017 despite all the challenges. Under the Directorate of Customs, our main priority was to attain the full roll-out of intra-trade and imports regime under the Single Customs Territory. To this end a number of achievements were recorded in 2017. Most important was the operationalization of 10 One Stop Border Posts, 3 of which were officially launched, the most recent being the official launch of the Mutukula One Stop Border Post (OSBP) located on the Uganda/Tanzania border in November last year after Holili/Taveta and Rusumo.
Under the Common Market pillar, Partner States continued to facilitate free movement of goods, services, labor and capital and accord rights of establishment and residence to firms and citizens from other Partner States. Last year, the (non-tariff barriers) NTBs Act, 2015 was assented by all the Partner States and regulations to operationalize it were developed. Also a total of 104 standards were approved by SCTIFI in June 2017 as East African Standards and 108 international standards endorsed for adoption by the Partner States in accordance with the EAC procedures. This brings to date, the cumulative total number of harmonized standards to 1,428 for the period 2000 - to June 2017. In addition to this, negotiations of Mutual Recognition Agreements for Land Surveyors were concluded and are now awaiting signing.
In 2017, the Secretariat, in close collaboration with Partner States continued the fight against NTBs in the region. Partner States assented to the EAC Elimination of Non-Tariff Barriers Act 2017. The Act was gazetted and published. During the same year, a draft Export Promotion Strategy 2018-2023 was developed and is now ready for consideration by all stakeholders. In the area of standards, we harmonized, approved, and gazetted 106 East African Standards for the most commonly traded goods like Textiles and apparel, leather and leather products, Cereals and pulses, Oil Seeds, Fats and Oils, Packaging, Nutrition and Foods for special dietary uses. We are hoping that in 2018, Partner States will finalise the regulations for successful implementation of the EAC Elimination of Non-Tariff Barriers Act 2017 and intensify monitoring of trade flows along our common border.
In Energy and Infrastructure, EAC registered notable achievements. In Energy, EAC adopted its Energy Security Policy Framework, making it the first regional economic community to adopt an Energy Security Policy Framework in Africa. This framework aims at providing regional guidance to Partner States in the management and mitigation of the challenges in energy security. The Partner States have acknowledged that energy is pivotal to the regional integration agenda and have therefore set ambitious development plans prioritizing the energy sector.
In Infrastructure, we were able to secure funding amounting to 1.5 Million USD from the AfDB for studies for the Masaka – Mutukula / Bugene – Kasulo road (Tanzania/Uganda). This is in addition to the 2.2 Million USD which was secured for the ongoing studies for the Multinational road projects: Nyakanazi – Kasulu – Manyovu / Rumonge – Bujumbura road (Tanzania/Burundi), Lusahunga – Rusumo / Kayonza – Kigali road (Tanzania/Rwanda) expected to be completed by March, 2018. In addition to this, the Tripartite Transit Transport Program amounting to 18 Million Euro was launched during the 1st Tripartite Sectoral Ministerial Committee on Infrastructure (TSMCI) meeting held in October 2017
In the Industry Sector, last year EAC launched the East African Community Industrial Competitiveness Report. This report is the first of its kind. It was developed to provide direction as we seek to attain the industrialization goals of the Community of expanding the market opportunities for the industrial sector in the region and improving the competitiveness of the region, in line with the EAC Industrialization Policy and Strategy.
The Gender Sector also registered a key milestone with the enactment of The EAC Gender Equality, Equity and Development Bill, by the 3rd Assembly 2016 early last year. The Bill gives effect to the Treaty for the Establishment of the East African Community and the African Charter on Human and Peoples’ Rights as it expressly prohibits all forms of exploitation, cruel, inhuman or degrading traditional practices.
In the Agriculture Sector, the EAC Regional Agriculture Investment Plan was validated. This Plan seeks to catalyze the realization of the EAC Comprehensive Africa Agriculture Development Programme goals in five investment thematic areas, namely; Increasing regional agricultural production and food supply; Enhancing food utilization; Promoting agribusiness, value addition and agro-industry; Promoting sustainable natural resource use and management; and Strengthening capacities of EAC regional agricultural institutions.
As you are aware, the Monetary Union is the third pillar in the EAC Integration process, which is expected to be in place by 2024 with the introduction of a common currency and the establishment of a regional Central Bank. In 2017, EAC Secretariat worked with Partner States and other stakeholders in laying the foundation for the Monetary Union. In April 2017, Bills for the establishment of the EAC Monetary Institute and EAC Bureau of Statistics were cleared by the EAC Council of Ministers and forwarded to EALA for enactment. The progress made so far indicates that the 2024 timeline for the establishment of the Monetary Union is achievable.
You all know that the 4th EAC Development Strategy 2011-2016 has elapsed and the work for preparing a succeeding Strategy is underway. It is worth noting progress made so far in the preparations for the 5th EAC Development Strategy that will guide operations of the Community over the medium term period to 2020/21. The Draft Strategy that has been developed in consultation with all stakeholders, notably the EAC Partner States, and Development Partners has undergone most of the requisite reviews and validations and its currently due for approval by the Council of Ministers and eventual adoption by the Summit of Heads of State scheduled for next month, February 2018. To this end, I wish to take this opportunity to applaud the team that led the preparation of this important document for the Community for the work well done so far. It is my sincere hope that this new Strategy will propel the pace of integration for the Community over the plan period.
The proposed 5th Development Strategy if implemented fully, will be a game changer in the region. It will contribute to eradication of poverty, improved health care and enhance the education standards. The overall objective is to build a stable and prosperous East Africa, and be a middle income region. My dear colleagues let us all invest our energies both physical and intellectual to ensuring that we achieve the objectives.
2017 also marked the year in which EAC passed the ISO audit. This is a great success. Also we were able to finalize and recruit 36 new staff in established positions, which facilitated a smooth handover from exiting staff who had completed their tenure. We also experienced an increase in the involvement and participation of the Republic of South Sudan in EAC meetings especially via video conferencing. We were also able to finalize on the EAC Digitization Policy that will create a standard for information sharing in all organs and institutions and partnering ministries.
The East Africa Court of Justice also experienced great progress in the last year. This included an increase in the number of cases filed and determined which is a show of confidence the residents of East Africa have in the Court. It has also taken on board an additional judge from the Republic of South Sudan and in this calendar year an addition sub-registry will be opened in Juba.
Since April 2016 the Secretariat has been undergoing administrative and institutional reforms aimed at cutting down on costs and reducing wastage in its expenditure. I am happy to report that during last year the Community reported significant reductions in traveling expenses including expenditure on air tickets and DSA for both EAC Staff and Partner States delegates and other participants in EAC meetings. These reductions have helped the Community to adapt to the overall financial constraints it has been facing. To be specific in FY 2015/16, the expenditure on travel i.e. tickets, DSAs, accommodation amounted to 19,073868, in 2016/17 the expenditure was 11,047,292. Colleagues this a reduction of close to USD 8 million, I want to commend all of you for embracing and implementing the changes geared to cutting costs. I urge you all to continue in the same spirit because we have to all play our part, As Barrack Obama put it when addressing congress “change will not come if we wait for some other person or some other time. We are the ones we’ve been waiting for. We are the change that we seek.”
For the last two years, we were able to enhance partnership with the development partners, which culminated in the renewal of financing agreements and approval of programmes for over 250 million US Dollars. In addition to this, the European Union approved 60 Million Euros worth of projects under the 11th EDF Regional Indicative Programme (RIP) which includes support to LVBC and LVFO. This demonstrates the confidence and trust that the development partners have on EAC. I want to sincerely congratulate the staff who participated in submitting convincing funding proposals and contributing efficiently to negotiations with development partners. I want to particularly single out Dr Stanley Sonoiya who has constantly and consistently engaged Development partners and is always submitting proposals for funding new projects. Please let us clap for him. Their efforts and skills are needed more than ever as our ambition is to raise more funds for the achievement of critical projects.
I also want to thank the Development Partners for their continued support. We need to improve on our coordination of projects and communication of results. A projects coordination unit has been operationalized, we are working on making it fully operational.
We have also as part of the achievement, developed a roadmap to fast track integration of the Republic of South Sudan and I acknowledge the support by GIZ to this end.
What I have mentioned are just a few of our achievements. I wish to sincerely thank each of you for your contributions, which made it possible for us to make these achievements despite all the challenges we faced as Community. 2018 is also not going to be easy especially noting that amongst other things, we need to intensify our efforts in preparing for the implementation of the 5th Development Strategy. The clock is also ticking on the finalization of the implementation of the Customs Union, Common Market and the Monetary Union Protocols. This will require all of us to use our time wisely and move forward as decisively and swiftly as we can so as to accelerate activities geared towards this. The Executive management is particularly concerned about the tendencies of some staff being absent from office without clearance, and also not observing working hours as stipulated in the staff rules. In 2018 I call for personal discipline and respect to working hours. We need to ensure that East Africa Continues to be at the forefront of integration, and growth and this can only be made possible through continued dedication and teamwork. I wish to reiterate my cooperation and support to all of you in 2018.
I acknowledge that last year we had introduced some measures aimed at enhancing our interaction and internal communication. I am happy to note that some of them have been implemented most notably joint tea sessions on Thursdays. I wish to commend the Human Resources department for this and urge you to keep up the spirit. In the same vein, I realize that a number of measures have still not been implemented but I wish to assure you that we will strive to implement them during this year. I am specifically directing the Human Resources and Administration Department to ensure that we have quarterly staff meetings to enhance our interactions. I also encourage directors to have frequent meetings at directorate level to enhance teamwork and collectivity. I realize that there is need for a lot of awareness creation of our achievements both internally and externally, I therefore wish to direct the Communications Department to introduce a system that will ensure that this is done on a regular basis.
Further, this year we are looking to ensure:
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Enhanced cohesion and dialogue among staff, towards this we shall increase the consultative meetings by having quarterly staff meetings, annual all staff retreat, departmental/directorate team meetings, EAC Family and sports days. A schedule for this year will be circulated by Administration Department. To start off this I am announcing that there will be a meeting on 2nd February for all Executives, Directors and Heads of institutions.
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Short term staff: I acknowledge the critical role that is played by our short term staff. There are functions in EAC that are totally reliant on short term staff. Despite their contribution I am always touched by some of their predicaments and especially when it comes to renewal of contracts. I therefore direct the DHRA to ensure that the contracts are renewed in good time to avoid situations where they go without salaries. I have also noted that the colleagues are issued with three months and six months’ contracts and therefore making it difficult even to plan for their lives or even access financial support. To address this scenario, on 12th of January this year, I wrote to the DHRA directing that short term staff be issued with one year contracts, unless there is a challenge on funds. DSG (F&A) has assured me that this will be implemented with effect from next financial year starting July 2018. The phenomena of short term staff is not unique to EAC. Organisations such as UN, AU and even COMESA rely so much on short term staff to deliver their mandate. This matter should be given due review and consideration.
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The completion of job evaluation and workload analysis exercises to ensure that our structures are in tandem with our strategy;
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Strengthen inter-organ/institutional collaboration and co-operation and more team building exercises;
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Improve processes, systems and infrastructure to provide high levels of efficiency, quality, and cost effectiveness by building the capacity of the Governance structure, EAC Management and Staff including going paperless. The IT department has already developed a proposal towards this.
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Strengthen and transform EAC’s culture of excellence and facilitate strategic partnership to attain the EAC goals through training and improved performance;
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Strengthen the procurement function to ensure financial Rules and Regulations are adhered, procurements are promptly completed and suppliers. I paid on time. I am reiterating on the need to implement the March 2017 circular on procurement which was aimed at smoothening the procurement process.
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Completion of ICT strategy and Strengthen the network and sharing of information among EAC Organs, Institutions and Coordinating Ministries through integrated ICT systems.
I wish to conclude by thanking Members of the Summit, the Council of Ministers, the Permanent secretaries for their individual and collective leadership; further I want to thank Heads of EAC Organs and Institutions; all Staff of the East African Community; and all our Partners for the commitment, dedication and support to EAC.
I once again wish all of you good health and a successful 2018. Happy New Year and God bless you all!
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The current economic sweet spot is not the “new normal”
As the year 2018 begins, the world economy is gathering speed. The new World Economic Outlook Update revises our forecast for the world economy’s growth in both 2018 and 2019 to 3.9 percent.
For both years, that is 0.2 percentage points higher than last October’s forecast, and 0.2 percentage points higher than our current estimate of last year’s global growth.
This is good news. But political leaders and policymakers must stay mindful that the present economic momentum reflects a confluence of factors that is unlikely to last for long. The global financial crisis may seem firmly behind us, but without prompt action to address structural growth impediments, enhance the inclusiveness of growth, and build policy buffers and resilience, the next downturn will come sooner and be harder to fight.
Every government should be asking itself three questions today. First, how can we raise economic efficiency and output levels over the longer term? Second, how can we support resilience and inclusiveness while reducing the likelihood that the current upswing ends in an abrupt slowdown or even a new crisis? Third, how can we be sure to have the policy tools we will need to counter the next downturn?
Near-term prospects
Looking first at where we are now, how do we see the world economy in the near term?
The primary sources of GDP acceleration so far have been in Europe and Asia, with improved performance also in the United States, Canada, and some large emerging markets, notably Brazil and Russia, both of which shrank in 2016, and Turkey. Much of this momentum will carry through into the near term. The recent U.S. tax legislation will contribute noticeably to U.S. growth over the next few years, largely because of the temporary exceptional investment incentives that it offers. This short-term growth boost will have positive, albeit short-lived, output spillovers for U.S. trade partners, but will also likely widen the U.S. current account deficit, strengthen the dollar, and affect international investment flows.
Trade is again growing faster than global income, driven in part by higher global investment, and commodity prices have moved up, benefiting those countries that depend on commodity exports.
Even as economies return to full employment, inflation pressures remain contained and nominal wage growth is subdued. Financial conditions are quite easy, with booming equity markets, low long-term government borrowing costs, compressed corporate spreads, and attractive borrowing terms for emerging market and developing economies.
Explaining the upturn
The current upturn did not arise by chance. It began to take hold in mid-2016 and owes much to accommodative macroeconomic policies, which supported market sentiment and hastened natural healing processes.
Monetary policy has long been and remains accommodative in the largest countries, underpinning the current easy global financial conditions. Even though the United States Federal Reserve continues to raise interest rates gradually, it has been cautious, having wisely responded to the turbulence of early 2016 by postponing previously expected rate increases. The European Central Bank has started to taper its large-scale asset purchases, which have played a critical role in reviving euro area growth, but has also signaled that interest-rate increases are a more distant prospect.
Moreover, fiscal policy in advanced economies has, on balance, shifted from contractionary to roughly neutral over the past few years, while China has provided considerable fiscal support since its growth slowed at mid-decade, with important positive spillovers to its trade partners. In the U.S., of course, fiscal policy is about to take a markedly expansionary turn, with complex effects on the world economy.
Not the “new normal”
Our view is that the current upturn, however welcome, is unlikely to become a “new normal” and faces medium-term downside hazards that likely will grow over time. We see several reasons – to some extent reflected in our medium-term growth projections – to doubt the durability of the current momentum:
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Advanced economies are leading the upswing, but once their output gaps close, they will return to longer-term growth rates that we still expect to be well below pre-crisis rates. While we project advanced-economy growth of 2.3 percent in 2018, our assessment of the group’s longer-term potential growth is only about two-thirds as high. Demographic change and lower productivity growth pose obvious challenges that call for major investments in people and research. Fuel exporters face especially bleak prospects and must find ways to diversify their economies.
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The two biggest national economies driving current and near-term future growth are predictably headed for slower growth. China will both cut back the fiscal stimulus of the last couple of years and, in line with the stated intentions of its authorities, rein in credit growth to strengthen its overextended financial system. Consistent with these plans, the country’s ongoing and necessary rebalancing process implies lower future growth. As for the United States, whatever output impact its tax cut will have on an economy so close to full employment will be paid back partially later in the form of lower growth, as temporary spending incentives (notably for investment) expire, and as increasing federal debt takes a toll over time.
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As important as they have been to the recovery, easy financial conditions and fiscal support have also left a legacy of debt – government, and in some cases, corporate and household – in advanced and emerging economies alike. Inflation and interest rates remain low for now, but a sudden rise from current levels, perhaps due to procyclical policy developments, would tighten financial conditions globally and prompt markets to re-evaluate debt sustainability in some cases. Elevated equity prices would also be vulnerable, raising the risk of disruptive price adjustments.
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Despite rising growth in Europe, Asia, and North America, there is less good news in the Middle East and Sub-Saharan Africa; the latter area weighed down by the weakness of its larger economies. Low growth, driven in part by adverse weather events and sometimes combined with civil strife, has sparked significant outward migrations. Improvements in some large Latin American economies are notable but aggregate growth in the region will be weighed down this year by continuing economic collapse in Venezuela.
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Even though the recovery has lifted employment and aggregate income from crisis lows, voters in many advanced economies have soured on political establishments, doubting their ability to deliver broadly shared growth in the face of tepid real wage gains, reduced labor shares in national income, and rising job polarization. A turn to more nationalistic or authoritarian governance models, however, could result in stalled economic reforms at home and a withdrawal from cross-border economic integration. Both developments would harm longer-term growth prospects, to the detriment of those who have already fallen behind over the past few decades. Levels of inequality are high in emerging market and low-income economies, and carry the seeds of eventual future disruptions unless growth can be made more inclusive.
Policymakers must face the challenges
Perhaps the over-arching risk is complacency. While the current conjuncture might appear to be a sweet spot for the global economy, prudent policymakers must look beyond the near term.
No matter how tempting it is to sit back and enjoy the sunshine, policy can and should move to strengthen the recovery. Now is the time to build policy buffers, reinforce defenses against financial instability, and invest in structural reforms, productive infrastructure, and people. The next recession may be closer than we think, and the ammunition with which to combat it is much more limited than a decade ago, notably because public debts are so much higher.
An upswing so broad also furnishes an ideal moment to act on a range of multilateral challenges. These include countering global financial stability threats, including cyber-threats; strengthening the multilateral trading system; cooperation on international tax policy, including the fight against money laundering; and promoting sustainable development in low-income countries. Of especially urgent importance is to fight irreversible environmental damage, notably from climate change.
Against a backdrop of common priorities, the optimal policy mix differs across countries depending on cyclical considerations and available policy space:
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In advanced economies where output is close to potential, still-muted wage and price pressures call for a cautious and data‑dependent monetary policy normalization path. However, where unemployment is low and projected to decline further, such as in the United States, a faster pace of policy normalization may be required if inflation were to pick up more than currently anticipated. In advanced economies where output gaps persist and inflation remains below the central bank target, continued monetary accommodation is desirable. Fiscal policy in both cases should focus on medium-term objectives – including public investment to boost potential output and initiatives to raise labor force participation rates where gaps exist – while ensuring that public debt dynamics are sustainable and excessive external imbalances are reduced. Where fiscal consolidation is needed, its pace should be calibrated to avoid sharp drags on growth, while orienting policy toward boosting the quality of public health and education, and protecting the vulnerable, including those that may be adversely affected by structural transformation.
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In emerging market economies, improved monetary policy frameworks have helped lower core inflation, which provides scope for using monetary policy to support demand should activity weaken. Fiscal policy is generally more constrained by the need to gradually rebuild buffers, especially in commodity-dependent emerging market and developing economies. With the recent respite provided by the cyclical rebound in commodity prices, policymakers should guard against the temptation to defer reforms and budgetary adjustments for later. Exchange rate flexibility can complement domestic policy settings by preventing sustained misalignments in relative prices, facilitating adjustment to shocks, and curtailing the buildup of financial and external imbalances.
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The policy challenges for low-income countries are particularly complex, as they involve multiple, sometimes conflicting goals. These include supporting near-term activity; diversifying their economies and lifting potential output to maintain progress toward their Sustainable Development Goals; building buffers to enhance resilience, especially in commodity-dependent economies grappling with a subdued outlook for commodity prices; and tackling high and rising debt levels in many cases. Policy initiatives should continue to focus on broadening the tax base, mobilizing revenue, improving debt management, reducing poorly targeted subsidies, and channeling spending into areas that lift potential growth and improve the livelihoods of all (infrastructure, health, and education). Efforts to strengthen macroprudential frameworks and greater exchange rate flexibility would improve resource allocation, reduce vulnerabilities, and boost resilience.
Cooperative multilateral effort remains vital to safeguard recent momentum in global activity, strengthen medium-term prospects, and ensure the benefits from technological progress and global economic integration are shared more widely. Priority areas include continuing the financial regulatory reform agenda; avoiding competitive races to the bottom in taxes, labor, and environmental standards; modernizing the rules‑based multilateral trade framework; strengthening the global financial safety net; preserving correspondent banking relationships; curbing cross-border money laundering, organized crime, and terrorism; and mitigating and adapting to climate change.
Regional growth forecasts
The aggregate growth forecast for the emerging markets and developing economies for 2018 and 2019 is unchanged, with marked differences in the outlook across regions.
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Emerging and developing Asia will grow at around 6.5 percent over 2018-19, broadly the same pace as in 2017. The region continues to account for over half of world growth. Growth is expected to moderate gradually in China (though with a slight upward revision to the forecast for 2018 and 2019 relative to the fall forecasts, reflecting stronger external demand), pick up in India, and remain broadly stable in the ASEAN-5 region.
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In emerging and developing Europe, where growth in 2017 is now estimated to have exceeded 5 percent, activity in 2018 and 2019 is projected to remain stronger than previously anticipated, lifted by a higher growth forecast for Poland and especially Turkey. These revisions reflect a favorable external environment, with easy financial conditions and stronger export demand from the euro area, and, for Turkey, an accommodative policy stance.
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In Latin America, the recovery is expected to strengthen, with growth of 1.9 percent in 2018 (as projected in the fall) and 2.6 percent in 2019 (a 0.2 percentage point upward revision). This change primarily reflects an improved outlook for Mexico, benefiting from stronger U.S. demand, a firmer recovery in Brazil, and favorable effects of stronger commodity prices and easier financing conditions on some commodity-exporting countries. These upward revisions more than offset further downward revisions for Venezuela.
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Growth in the Middle East, North Africa, Afghanistan, and Pakistan region is also expected to pick up in 2018 and 2019, but remains subdued at around 3½ percent. While stronger oil prices are helping a recovery in domestic demand in oil exporters, including Saudi Arabia, the fiscal adjustment that is still needed is projected to weigh on growth prospects.
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The growth pickup in Sub-Saharan Africa (from 2.7 percent in 2017 to 3.3 percent in 2018 and 3.5 percent in 2019) is broadly as anticipated in the fall, with a modest upgrade to the growth forecast for Nigeria but more subdued growth prospects in South Africa, where growth is now expected to remain below 1 percent in 2018-19, as increased political uncertainty weighs on confidence and investment.
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Growth this year and next is projected to remain above 2 percent in the Commonwealth of Independent States, supported by a slight upward revision to growth prospects for Russia in 2018.
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Global foreign direct investment slipped in 2017
Promoting foreign direct investment (FDI) for development remains challenging as global flows in 2017 fall in contrast to other macroeconomic variables.
Global flows of FDI fell by 16% in 2017 to an estimated $1.52 trillion, down from a revised $1.81 trillion in 2016, according to the latest UNCTAD Global Investment Trends Monitor.
“FDI recovery [from the 2008 financial crisis] continues to be on a bumpy road,” UNCTAD Secretary-General Mukhisa Kituyi said.
“While FDI in developing countries remained at a level similar to the previous year, more investment in sectors that can contribute to the Sustainable Development Goals is still badly needed. Promoting FDI for sustainable development remains a challenge.”
A slump in FDI flows to developed countries (-27%) was the principal factor behind the global decline. A strong decrease in flows was reported in Europe (-27%) as well as in North America (-33%), mainly due to a return to prior levels of inflows in the United Kingdom and the United States after spikes in 2016.
This decline was tempered by an 11% growth in flows to other developed economies, principally Australia.
FDI to developing economies remained stable, at an estimated $653 billion, 2% more than the previous year.
FDI inflows: global and by group of economies, 2005-2017
(Billions of US dollars)
Developing Countries
Flows rose marginally in developing Asia and Latin America and the Caribbean, and remained flat in Africa. Developing Asia regained its position as the largest FDI recipient region in the world, followed by the European Union and North America.
In economies transitioning from a planned to a market economy, FDI declined by 17% to an estimated $55 billion, mainly due to a drop in the Russian Federation and lacklustre inflows across most of the rest of the Commonwealth of Independent States.
Abundant Risks
“The decline of global FDI flows is in stark contrast to other macroeconomic variables, such as GDP and trade growth, which saw substantial improvements in 2017,” James Zhan, Director of UNCTAD’s Investment Division said. “Upward synchronization of the trends in 2018 is probable, but risks are abundant.”
The UNCTAD Global Investment Trends Monitor also showed that, after three years of growth, cross-border mergers and acquisitions (M&As) declined in 2017. M&A growth had already slowed in 2016, and went on to contract by 23% in 2017, to $666 billion. However, this still represented the third-highest level since 2007.
Preliminary data on the value of announced greenfield FDI projects show a decline of 32% to $571 billion, or 17% in number of projects, their lowest level since 2003. If confirmed, the drop in greenfield project announcements would be a negative indicator for the longer term.
Of particular concern is the near halving of the value of project announcements in developing economies, although the fall in project numbers was limited to 23%.
Value of cross-border M&As, 2007-2017
(Billions of Us dollars)
Higher economic growth projections, trade volumes and commodity prices would normally point to a potential increase in global FDI in 2018.
However, elevated geopolitical risks and policy uncertainty could have an impact on the scale and contours of any FDI recovery in 2018.
In addition, tax reforms in the United States are likely to significantly affect investment decisions by US multinationals, with consequences for global investment patterns.