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AfDB to work with African Central Banks to increase national savings
The African Development Bank (AfDB) and the Governors of Central Banks in Africa have resolved to strengthen cooperation on a range of issues to curb illegal financial outflows, bolster measures to improve tax collection and exchange information to improve monitoring of domestic financial markets.
The AfDB has also agreed to work with the Governors of the respective Central Banks on incentives to enable them deepen the financial markets using new technologies and innovations. The partnership is also expected to ease access to global markets that would enable more countries to issue long-term sovereign bonds.
AfDB’s Senior Vice-President Charles Boamah told a special session of the Central Bank Governors at the 52nd AfDB Annual Meetings in India that measures to curb the illicit outflow of finance from Africa remain weak and should be addressed.
“There are clearly big challenges which contribute to illicit financial flows. To boost the domestic financial resources, we need major tax reforms and reforms in the global capital markets. There are tremendous efforts that the AfDB is exerting externally and there may be more retail measures required,” Boamah told a session on Boosting Domestic Resource Mobilisation to Finance African Transformation,” on Wednesday, May 24.
AfDB considers every opportunity to assist African countries to raise finances locally for their economic and social development projects is important, but only if countries implement measures to improve tax collection, said Boamah. New measures should also aim to increase national savings.
Speaking on domestic resource mobilization, John Panonetsa Mangudya, Governor of Zimbabwe’s Reserve Bank, stressed how export incentives and subsidies for producers of export goods helped to stimulate production and export volumes while measures were taken to cushion the market from the rising dollar.
He explained that though Zimbabwe had resorted to the use of the U.S. dollar as its local currency, the rise of the dollar in recent months led to more expensive prices for the Zimbabwean exports. He hailed the AfDB’s support for agriculture and urged the World Bank to follow suit.
Second Deputy Governor at the Bank of Ghana, Johnson Asiamah, stressed that promoting the fixed-income financial markets, which include income from bonds and interests and the issuance of a Diaspora Bond with 15-20 year repayment period, were among domestic fundraising measures being considered.
“We are in the preliminary stage of issuing the Diaspora Bond and would be interested in learning more. We are also putting a premium on how to formalize our financial sector by bringing on board more players from the informal financial sector through our digital payment systems,” Asiamah said.
The Governor of the Central Bank of Gambia, Bakary Jammeh, noted that The Gambia was seeking urgent cash injection from the AfDB to recover from a political impasse earlier this year. He spoke of declining import cover and diaspora remittances.
Meanwhile, AfDB has pledged joint measures and coordination with the Central Banks to support effective management of the foreign currency remittances from African expatriates and migrant workers who regularly send money home.
The AfDB has started implementing projects with countries in Africa to deal with currency risks and stability which is often associated with huge losses suffered by major producers and exporters.
Boamah said the Bank was prepared to work with banks on collective investments to cover the currency risks, measures to enhance financial technology and the AfDB’s landmark lending to the agriculture sector to further enhance raising of local funds for development.
In a speech, the Vice-Governor of the Bank of the Democratic Republic of Congo (DRC), Jules Bondombe, expressed fears that measures being implemented by the Central Banks had largely failed to stop large sums of money from leaving the continent through illicit transactions.
“We are compelled to grant tax incentives to mining companies and as you know, the DRC economy is mostly dependent on the mining sector. We are creating avenues for the flight of capital,” Bondombe said.
He urged the AfDB to help with measures to stop the flight of capital in his country, currently estimated at US $10-15 billion.
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The G20 ‘Compact with Africa’ is not for Africa’s poor: The Finance Framework
A key pillar of the G20 Africa Partnership is the ‘Compact with Africa’ (CwA), an initiative within the G20’s finance track, coordinated by the German Federal Ministry of Finance.
In its resolution adopted by G20 finance ministers and central bank governors in Baden-Baden, the G20 has acknowledged “its special responsibility to join forces in tackling the challenges facing the poorest countries, especially in Africa”[1]. The ‘Compact with Africa’ initiative aims to boost private investment and investment in infrastructure in Africa. To this end, the World Bank, the International Monetary Fund and the American Development Bank have produced a joint report ( pdf The G-20 Compact with Africa: A Joint AfDB, IMF and WBG Report (1.65 MB) ), which proposes a catalogue of instruments and measures designed to improve macroeconomic, business and financing frameworks as a way to boost investment[2]. The document is a dense, well-argued and documented text, albeit written in fairly technocratic language.
The CwA Financing Framework aims at increasing the availability of financing at reduced costs and risks, with a focus on long-gestation infrastructure projects. It targets in particular pension funds and life insurers. These institutional investors are characterized by the long-term nature of their balance-sheet liabilities, which enables them to invest in infrastructure projects with long gestation periods. They would indeed make a very good fit for funding Africa’s infrastructure. Projected to reach $100 trillion by 2020, institutional investors (pension, funds, life insurers and sovereign wealth funds) would need to invest one percent of their annual new inflows to fund Africa’s infrastructure gap, estimated at $ 50 billion per year.[3]
The CwA makes some important ideological presumptions. First, it is solely driven by the Anglo-Saxon financing model with a focus on direct securities (equity and bond) markets rather than bank-based financial intermediation, which has underpinned (Continental) European and East Asian economic and social development. Second, the CwA Financing Framework is silent on the important role that the public and semi-public sectors may have played in early stages of development via mandatory public pension plans (East Asia) or not-for-profit financial cooperatives (such as agricultural credit unions). Third, it is silent on the “financing gap” (also known as the MacMillan gap), which has come to indicate that a sizeable proportion of economically significant SMEs cannot obtain financing from banks, capital markets or other suppliers of finance. The MacMillan gap requires an important role of public development institutions and public policies in tackling underlying market imperfections. Lastly, it seems that the German Ministry of Finance that commissioned the CwA report in the first place has missed a unique chance to bring in the specific German history of bank-based intermediation, of rural credit unions and of public infrastructure push in the context of late industrialization. This would indeed be relevant for the African context.
Instead, the CwA Financing Framework consists of three linked components to tap the global pool of private finance: The first peddles blending instruments and facilities – the use of public or philanthropic funds to attract additional investments from private sector actors into development projects – to lower African country risk to private investors (the new Private Sector Window under the IDA18 replenishment is mentioned explicitly); the second aims at support of domestic debt markets and at a more supportive global regulatory environment; the third aims to promote new public infrastructure investment funds, such as Managed Co-Lending Portfolio Program (MCPP) initiated by The International Finance Corporation (IFC), part of the World Bank Group.
Because most African countries remain poor, they are not considered creditworthy. Even though the African Development Bank (AfDB) has 54 member countries, of which only 17 are not eligible to African Development Fund (AfDF) funding, most countries have a per capita income below an operational cut off (fiscal year 2015-2016: $1,215). Recent Brookings forecasts project that the number of people living in extreme poverty (the headcount of those falling below $1.90) will rise in 19 African countries by 2030.
Table 1: Eligibility to access AfDF funding (Number of countries (out of 54 total))
Creditworthiness to sustain AfDB financing
|
|||
|
|
No
|
Yes
|
Per capita income above the AfDF/IDA operational cut-off
|
No
|
30 AfDF-only
|
3 blend-eligible
|
|
Yes
|
4 AfDF-Gap
|
3 AfDB-only
|
Apart from general investment barriers, common project risks for infrastructure investments need to be considered in the African context. These include: completion risks (failure to complete the project on time and on budget); performance risks (the risk that the project fails to perform as expected on completion, maybe due to poor design or adoption of inadequate technology); operation and maintenance risks (relates costs, management and technical components and obligation to provide a specific level of service); financing risk (which may arise from an increase in inflation, interest rate changes etc.); and revenue risks (which relates to the possibility of the project not earning sufficient revenues to service its operating costs and debt and leave adequate return for investors).
Legal, regulatory and institutional challenges of Private-Public Partnerships (PPPs) should not be underestimated in the context of Africa’s low-income countries. Long-term commitments in the infrastructure sector depend on a set of legal, regulatory and institutional frameworks. From the time of project preparation, to bidding and finally operation, the regulation of PPPs requires an independent regulator and the handling of disputes by an independent judiciary. Other institutional prerequisites are property and collateral registries, reliable accounting and reporting procedures, tested and reliable foreclosure mechanisms. The longer the term of contracts and the larger the funding commitments, the more important such ‘basic’ institutional and legal infrastructure becomes. Moreover, fiscal contingencies of PPPs could burden weak public finances in countries where debt tolerance has proven low. In particular when privately financing large infrastructure projects in immature markets, there is a risk that private returns come at the expense of long-term fiscal costs (contingent liabilities).
Table 2: The infrastructure funding escalator
Steps
|
Step 1
|
Step 2
|
Step 3
|
Step 4
|
Step 5
|
Major funding source
|
Government
|
Step 1 + Aid Grants + Concessionary
|
Step 2 + Banks loans + leveraged private funds
|
Step 3 + Private Equity + Project Bonds
|
Growing role institutional investors
|
Source: based on Della Croce, Fuchs, & Witte (2016); see text. |
To a large extent long-term funding of infrastructure in Africa is provided circumventing the intermediation process altogether, including via foreign direct investment. As for low-income Africa, the CwA’s focus on an important role for private institutional investors to fund the infrastructure gap lacks realism: Most African countries are at the first two steps of the Infrastructure Funding Escalator, where public investment and concessionary aid remain the major funding sources.
The first component of the CwA Financing Framework pins high hopes on blended finance and leveraged finance via development finance institutions (DFIs). Table 3, however, shows that private funds mobilized by DFIs seem to have shied away from the ‘Bottom Billion’ (to paraphrase Paul Collier). Within the group of countries attracting blended finance investments, LICs generally (not just in Africa) receive much less on a per country basis compared with other developing countries[4]. LICs obtained, on average, US$60 million of private investment per country between 2012 and 2014; the equivalent figures for other developing countries were six times higher – US$352 million for LMICs and US$404 million for UMICs. Little of blended finance and of foreign direct investment (FDI) goes to low-income countries compared to ODA, as both categories of private-sector flows seem to favour middle-income countries. Despite policy efforts to mobilize private finance through official DFIs, they so far have represented a small fraction of the flows directed to low-income Africa.
Table 3: Allocation of FDI, ODA and DFI mobilized funds per income group in Africa (mean percentage shares during 2012-2014)
Income Group
|
FDI
|
ODA
|
DFI mobilized
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Low Income
|
4
|
30
|
5
|
Lower MIC
|
22
|
43
|
51
|
Upper MIC
|
70
|
47
|
19
|
Data for country-allocable investments only; residual went to high-income group Source: Development Initiatives based on OECD and UNCTAD data. |
Three commitments addressed to partner countries are derived from the first component: support ongoing de-risking initiatives; support various de-risking instruments (IDA18 Private Sector Window, AfDB’s PSF; support the further refinement of a commonly accepted set of principles for ‘blended finance’. This is more of a self-promotion of the World Bank and the AfDB than a helpful commitment for low-income Africa. In reality, new AfDB initiatives have had a low uptake, especially in low-income Africa. A study finds that the growing complexity and fragmentation of private-sector mobilization initiatives created my multilateral development banks seems confronted with “little awareness or understanding of these private sector mechanisms and initiatives” on the ground[5].
The second component of the CwA Financing Framework calls for domestic debt market development, as already exist in Egypt, Nigeria and South Africa. The CwA document is well aware (in some paragraphs, at least) of capacity constraints that impede Africa’s securities market development. To be sure, there has been limited progress in developing markets for long-term finance on the continent. Except for South Africa the depth of equity and bond markets falls far short of the capitalization and liquidity of financial markets in other developing regions, despite recent issuance of Eurobonds and local currency bonds in some places. The largest and most important segment across financial sectors in Africa is the banking system, not an ideal source of intermediation for long-term finance, given the maturity transformation of banks’ short-term liabilities and consequent risks.
To avoid currency mismatches in private and public balance sheets, local currency bond market development is primordial. Most poor countries do not borrow in their own currency, which has time and again triggered debt crises as a result of strong currency depreciation (as currently observed in African commodity exporting countries). Substituting external, foreign currency debt with domestic, local currency debt may increase rollover and interest rate risks because of shorter maturities of the latter; this implies it will have to be refinanced more frequently and possibly at a higher rate. Ghana is an example of the risks involved: In the recent decade, Ghana had issued three Eurobonds with tenors between 10 and 12 years, whereas the average tenor of its local currency bonds at issuance was about two years only; moreover, their yields stood at no less than 23% in 2014.
Four commitments addressed to partner countries are derived from the second component: introduce an appropriate regulatory and supervisory framework; establish over-the-counter trading as well as custody and settlement mechanisms to minimise costs and risks for debt securities; support the development of pensions funds, life insurance companies and mutual funds to develop a domestic institutional investor base; implement ‘sound’ debt management policies. I have major doubts whether scarce African government resources are really best employed by facilitating an Anglo-Saxon system of direct securities markets, and what the risks are in terms of fraud and gambling.
The CwA finance framework tries to put the cart before the horse, especially for LICs in Africa, by trying to appeal to institutional long-term finance. It ignores the financing model of successful development that has been largely based on public infrastructure preceding industrial development, corporate savings via retained earning, rural credit associations and bank-based finance. It also ignores the risk of debt sustainability linked to blended finance, especially as multilateral development banks are reducing the share of concessionary finance, including to African countries with a long default history.
Low domestic savings levels, weak government finances and a low debt tolerance militate against forcing foreign private debt and contingent fiscal liabilities upon countries where infrastructure deficits are most blatant. The risk of lasting current account deficits, which are mostly financed privately, is that they tend to end with balance-of-payments crises. Many African countries have benefited from comprehensive debt restructuring and relief efforts in recent decades, but since 2010 countries have accumulated foreign debt again as raw material prices weakened, growth slowed and concessional debt was replaced. Both investors and Africa’s governments should consult the Joint World Bank-IMF Debt Sustainability Framework for Low-Income Countries before raising the finance they need to meet the SDGs, including through grants when the ability to service debt is limited.
Helmut Reisen, who now runs the consulting firm ShiftingWealth, has been Head of Research of the OECD Development Centre. He is also an Associate Fellow at the German Development Institute and a Professor at the University of Basel.
[1] http://www.bundesfinanzministerium.de/Content/EN/Standardartikel/Topics/Featured/G20/2017-03-30-g20-compact-with-africa.html
[2] The report benefited from contributions by Professor Paul Collier (Oxford University), Richard Manning (Oxford University), and Ulrich Bartsch (German Ministry of Finance).
[3] Kappel, Pfeiffer & Reisen (2017). Compact with Africa: fostering private long-term investment in Africa. GDI Discussion Paper 13/2017. Available at https://www.tralac.org/news/article/11628-compact-with-africa-fostering-private-long-term-investment-in-africa.html/.
[4] Tew & Caio (2016). Blended finance: Understanding its potential for Agenda 2030. London: Development Initiatives. Available at http://devinit.org/post/blended-finance-understanding-its-potential/.
[5] Bertelsmann-Scott, Markowitz & Parshotam (2016). Mapping current trends infrastructure financing in low-income countries in Africa within the context of the African Development Fund. SAIIA, Johannesburg.
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tralac’s Daily News Selection
A strong set of event pointers, launches introduces today’s news selection:
Today, is African Border Day: a message from AUC Peace and Security Commissioner, Ambassador Smail Chergui
Today, in Nairobi: ICC’s World Trade Agenda Day event. Organised in partnership with the Qatar Chamber of Commerce and Industry and KEPSA, World Trade Agenda day places the spotlight on Africa and the how trade can fuel economic growth across the continent. [A brief summary of yesterday’s ICC/IBA conference in Nairobi]
Today, in New York: UNCTAD’s side event at the UN Oceans Conference will address challenges imposed by international food standards. [Resources: Downloads, commentary by Max Bankole Jarrett, Africa Progress Panel]
Today, in Brussels: European Development Days (7-8 June) on the theme, Investing in Development
Launched, yesterday in Monrovia: High Level Panel on Migration in Africa. President Ellen Johnson Sirleaf underscored the misconception about African migration, especially the numbers that want to go beyond the boundaries of the continent. For example, according to recent data, more than 82% of people who migrate in Africa do so - on the continent, going from one country to another. She said in West Africa, 70% of the people migrate within the region while the lowest data shows that in East Africa the percentage is lower, at 47%. According to the same research - only 12% of African migrants want to reach Europe, with 6% going to other continents. President Sirleaf stressed the need for these numbers to be looked at closely and interpreted to form the basis of migration policies. “In as much as local economic and political conditions may sometimes lead to xenophobic spurs or total rejection, African people generally accept migrants, she indicated.”
Intellectual property and the public interest (WTO)
This document has been submitted by the delegations of Brazil, China, Fiji, India and South Africa for discussion at the Formal Meeting of the TRIPS Council (13-14 June 2017). The sponsors of this communication invite Members to share their national experiences and examples of using compulsory licenses. The information exchange could serve to enhance understanding of Members on various grounds available for issue of compulsory licenses and problems faced by Members while using them. Guiding questions:
The Maghreb Union is one of the world’s worst-performing trading blocs (WEF)
The Maghreb, in Northern Africa, is the perfect example of a region whose countries have been unable to find their way to a deeper integration. Only the most basic level of cooperation exists between the region’s five countries - Algeria, Libya, Mauritania, Morocco and Tunisia - despite the fact that the Maghreb Arab Union was created more than 25 years ago with the aim of building a powerful economic bloc in the region. The region’s potential is enormous, especially if its countries can work together. However, trade between the Maghreb countries represents just 4.8% of their trade volume, according to the United Nations Economic Commission for Africa - and it represents less than 2% of the sub-region’s combined gross domestic product, according to the World Bank. This region is one of the lowest-performing trading blocs in the world. Here are five ways to change that:
Catherine Grant: Do we have the vision, courage and passion to recognise the potential of SADC? (Tutwa)
South Africa takes over the chair of SADC later this year in August. This will be a chance for the government to push an agenda that reinvigorates regional economic integration. There is always much said by our leaders about the importance of creating a regional market that encourages the development of Southern Africa as a whole but in reality there are still significant gaps between the commitments on paper and the actions of SADC Member States. A colleague with a long history of working in support of regional integration, Gideon Phiri, posed the following questions at a recent workshop on SADC hosted by the Centre for Conflict Resolution in Cape Town. To paraphrase, Gideon asked – do we have the vision, courage and passion to realise the dreams of regional integration in Southern Africa? Based on my own experiences of working in the region I use these three concepts below to explore the outstanding challenges of implementation of the regional agenda in SADC.
Belarus-Africa Forum: Afreximbank sees Africa advancing to centre of global trade
Dr Benedict Oramah, President of the African Export-Import Bank, said Africa required partners but not those that were merely interested in selling consumption goods to it or that saw the continent as a “beverage” economy, only good at producing low priced and volatile commodities. Describing Belarus as the kind of partner Africa needed, Dr Oramah that the country presented an immense opportunity as a source of affordable investment goods needed for development, citing its factories that churned out tonnes of heavy equipment and tractors and its expertise in mining and ICT. He announced that Afreximbank and the Development Bank of Belarus had put in place an $800 million Belarus-Africa Trade and Investment Finance Facility to provide trade and project financing and risk cover for African and Belarusian entities to support trade between Africa and Belarus.
The role of trade restrictions in promoting local manufacturing in South Africa’s motorcycle industry (TIPS)
South Africa’s motorcycle industry is waning while other emerging markets are expanding their production activity, usage and trade performance, and are developing integrated value chains for motorcycles. South Africa is a net importer of motorcycles and imports have been declining for the past five years. No local manufacturing is taking place and the domestic industry relies solely on imports. The industry is small in global terms with the number of registered motorcycles at around 366 000 units as of 2015, which is less than 1% of the global share and the number of new registrations is on the decline. The number of industry participants is also dwindling as more local dealers, distributors and importers of motorcycles close down operations. One of the main reasons is a policy change that came into effect in 2013. [The analyst: Sithembiso Mtanga]
East Africa: New study makes case for regional automotive industry (New Times)
Eighty-five per cent of the vehicles in the region are imported or bought used and only about 15% brand new, with an average fleet age ranging from 15 to 20 years. This presents a potential for a regional motor industry, a new study indicates. The study, conducted by BDO East Africa Advisory Services, a firm contracted by the EAC and JICA, indicates that in order to ensure development of automotive industry in the region, a realistic development path is needed. The study, which lists a number of policy recommendations, is helping the EABC make a stronger case for the region to develop its own automotive industry. Andrew Mold, officer-in-charge of sub-regional office of the UNECA, said the car industry is an extremely important one from the point of view of catalyzing the industrialisation of the region, simply because it is an industry with intense linkages across the economy. “It is also a pretty demanding industry in terms of quality standards, and creating a product that will be both economical and attractive to consumers. Global competition in the car industry is intense,” he said. “The good news is that average incomes have been growing quite quickly in EAC over the last 10 to 15 years, making the region a more attractive proposition for establishing an EAC-wide industry for motorcycles, motor vehicles and lorries.”
ECOWAS: Regional public and private sector representatives meet on investment
Over 70 public and private sector representatives from 15 ECOWAS Member States converged in Lagos (6 June) for a three-Day ECOWAS Investment Policy and Promotion Workshop. The workshop is meant to shape discussions on the role of an open investment policy and a conducive investment climate in the attraction of investment from investors’ perspectives. This workshop is a follow up to the inaugural technical workshop on Improved Business and Investment Climate in West Africa, held in Dakar (18-19 June, 2015).
South Africa: Opposition again scuppers Border Management Authority Bill’s adoption (News24)
After most of the Democratic Alliance and Economic Freedom Fighters MPs left the National Assembly chamber, only 188 MPs voted - six against and 182 for adoption. They were 13 MPs short of the quorum of 201 of the 400 MPs. “The numbers are not making it. So the decision is postponed, again,” deputy speaker Lechesa Tsenoli said. The bill was before the House on 11 May, when the opposition walked out. It seeks to establish one centralised authority to handle all matters involving South Africa’s ports of entry, including policing and customs.
Port rail connectivity and agricultural production: evidence from a large sample of farmers in Ethiopia (World Bank)
Agriculture remains an important economic sector in Africa, employing a large share of the labor force and earning foreign exchange. Among others, transport connectivity has long been a crucial constraint in Africa. In theory, railways have a particularly important role to play in shipping freight and passengers at low cost. However, most African railways were in virtual bankruptcy by the 1990s. Using a large sample of data comprised of more than 190,000 households over eight years in Ethiopia, the paper estimates the impacts of rail transport on agricultural production.
Preventive diplomacy and trans-boundary waters: yesterday’s UNSC debate
Pointing to the Organization for the Development of the Senegal River as an example, Oumar Gueye, Senegal’s Minister for Fisheries and Maritime Economy, said his country, Guinea, Mali and Mauritania had drafted a water charter based on principles of sharing responsibilities and resources, from environmental protection to ensuring access. President Macky Sall was now working towards modernizing the organization and accelerating efforts on a range of projects that promoted cooperation and inclusivity, with a view that the river was a hyphen and not a border between the countries sharing the river basin. Tekeda Alemu (Ethiopia) said riparian States had negotiated the Nile River Basin Cooperative Framework Agreement for almost 13 years, and it was now signed by six States and ratified by three others. Although there were clear differences between upstream and downstream States, it was of utmost importance that a mechanism was in place for dialogue, anchored in the principle of mutual understanding and respect. Such bilateral and regional governance mechanisms should be allowed to develop and consolidate. Internationalizing such issues would not be helpful, and would instead complicate matters, he warned.
Today’s Quick Links: Nigeria: (i) Cross River signs trade agreement with China’s Shaanxi Province, (ii) Ministers solicit Corporate Council on Africa for greater FDI inflow 13th CAADP Partnership Platform: Stronger accountability needed on continental commitments on agriculture Aflatoxin Control in Africa: Africa loses an estimated $670m in lost export trade Josefa Sacko, AU Commissioner for Rural Economy and Agriculture, warns against food import bill Lesotho’s elections: SADC EOM’s preliminary statement At Ocean Conference, UN agencies commit to cutting harmful fishing subsidies Launched: OECD’s latest Economic Outlook Christine Lagarde: Protecting education and health spending in low-income countries Senators Coons and Roberts introduce bipartisan bill to help companies design and manufacture in America |
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Intellectual property and the public interest
This document has been submitted by the delegations of Brazil, China, Fiji, India and South Africa for discussion at the Formal Meeting of the TRIPS Council, taking place on 13-14 June 2017
The Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement of the World Trade Organization (WTO) established minimum standards of protection that each government has to give to the intellectual property of fellow WTO Members. Each of the main elements of protection is defined, namely the subject matter to be protected, the rights to be conferred and permissible exceptions to those rights, and the minimum duration of protection. WTO Members have the flexibility to design their national intellectual property (IP) systems within the minimum standards set by the TRIPS Agreement, in cognizance of a country’s economic, developmental and other objectives, including public health.
The TRIPS Agreement attempts to strike an appropriate balance between the interests of rights holders and users. Article 7 of the TRIPS Agreement entitled “Objectives” recognizes that the protection of intellectual property should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of users and producers of technological knowledge and in a manner conducive to social and economic welfare and to a balance of rights and obligations. The search for a balance between the need to protect IPRs to provide incentives for R&D on the one hand and, on the other hand, to address concerns about the potential impact of such protection on the health sector – in particular its effect on prices – has been an important consideration in the WTO’s work.
The TRIPS Agreement also recognizes that the principles of IP protection are based on underlying public policy objectives. Article 8 of TRIPS Agreement entitled “Principles” states that WTO Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement. Article 8 (2) further states that appropriate measures may be needed to prevent the abuse of IPRs by right holders, or to resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.
In furtherance of the objectives and principles of TRIPS enshrined in Articles 7 and 8, a number of safeguards or flexibilities have become an integral part of the TRIPS framework. These flexibilities can be used to pursue public health objectives. However, to implement these flexibilities, action is needed at the domestic level by incorporating them into national IP regimes keeping in mind each country’s individual needs and policy objectives. Key TRIPS flexibilities include transition periods for LDCs (extended by the WTO until 01 January 2033), differing IP exhaustion regimes, refining the criteria for grant of a patent (patentability criteria), pre-grant and post-grant opposition procedures, as well as exceptions and limitations to patent rights once granted, including the regulatory review exception (“Bolar” exception) to facilitate market entry of generics, compulsory licences and government use.
For pharmaceutical patents, these flexibilities have been clarified and enhanced by the 2001 Doha Declaration on TRIPS and Public Health. WTO Members have the flexibility to interpret and implement TRIPS provisions in a manner supportive of their right to protect public health. Another new flexibility was added by the Doha Declaration, which was put into practice in 2003 by the WTO with a Decision enabling countries that cannot manufacture medicines themselves, to import pharmaceuticals made under compulsory licences. In 2005, Members agreed to make this decision permanent through a Protocol Amending the TRIPS Agreement, which entered into force on 23 January 2017 after two thirds of Members accepted it. The amendment provides legal certainty that generic versions of patent-protected medicines can be produced under compulsory licences specifically for export to countries with limited or no pharmaceutical production capacity.
Many governments have not used the flexibilities available under the TRIPS Agreement for various reasons, such as capacity constraints or political pressure from states and corporations mentioned in the UN Secretary-General’s High Level Panel Report on Access to Medicines. Moreover, even where some developing countries used the flexibilities available to them under the TRIPS Agreement to address public interest objectives through measures which are fully consistent with the TRIPS Agreement, these attempts have been challenged legally as well as politically. Political and economic pressure placed on governments to forgo the use of TRIPS flexibilities violates the integrity and legitimacy of the system of legal duties and rights created by the TRIPS Agreement, as reaffirmed by the Doha Declaration.
A slew of regional trade agreements containing “TRIPS plus” standards of IP protection and enforcement have the potential to significantly affect the policy space available for effective and full use of the TRIPS flexibilities. The most common “TRIPS plus” provisions in free trade agreements (FTA) that affect the pharmaceutical sector are: the definition of patentability criteria; patent term extensions; test data protection; the linkage of regulatory approval with patents and enforcement of IPRs, including border measures. Such provisions can delay market entry of generics and increase prices of medicines. Investor-State disputes under regional or bilateral investment protection agreements are also emerging as significant threats to the use of TRIPS flexibilities in the public interest.
Ironically, the abovementioned challenges to the use of TRIPS flexibilities to further the public interest objectives underlying IP protection, have been occurring in spite of the emergence of laws and jurisprudence in developed countries that seek to limit the scope of IP protection and enforcement. For example, in the Myriad Genetics (2013) case, the US Supreme Court had ruled unanimously that naturally occurring genes cannot be patented, even if they are isolated. In 2003, the US Federal Trade Commission had proposed tightening the non-obviousness standard, in order to limit the grant of unwarranted patents.
There is a growing concern about an imbalance between intellectual property and the public interest. With regard to health technologies, for example, patents and related monopoly rights in test data, without sufficient use of balancing exceptions and limitations to protect the public interest, permit companies to maintain high prices and exacerbate crises of access around the world, where many patients cannot afford medicines, and force governments with finite health budgets to ration care. Increased copyright protections create similar problems of access to knowledge goods, limiting the ability of many people around the world to access print, audio, or visual works of education or entertainment that we take for granted. These are only a few examples of the problem. There is a need to pursue a development-oriented approach towards formulating IP laws and policies rather than pursue an iconoclastic approach of IP for development.
More than 20 years after the adoption of the TRIPS Agreement, there is a need for discussion in the TRIPS Council on the relationship between IP and the public interest and to broaden the understanding of how the IP system can be more responsive to public interest considerations. While this issue is very pertinent for developing countries, it has also been a topic of significant policy debate even in developed countries. During the course of the meetings of the Council for TRIPS in this year and later, WTO Members could exchange views and experiences on measures within the IP system that they have adopted to promote the public interest, including but not limited to compulsory licensing, patentability criteria, IP and competition, and Bolar exception. For the 13-14 June 2017 meeting of the Council for TRIPS, the sponsors of this communication invite delegations to share their experiences on the use of compulsory licenses for accessing health and other technologies.
Compulsory Licensing
Compulsory licensing occurs when a government allows someone else to produce the patented product or process without the consent of the patent owner. Article 31 TRIPS lays down a set of conditions for issuing compulsory licenses of patents. The Doha Declaration on the TRIPS Agreement and Public Health states that, “Each Member has the right to grant compulsory licenses and the freedom to determine the grounds upon which such licenses are granted”. In spite of the clarity of this language, WTO Members around the world seeking to make use of compulsory licences as a tool to increase access to affordable medicines have faced various challenges/barriers.
Some possible grounds for compulsory licensing are suggested in Article 5A of the Paris Convention (e.g. abuse of patent rights, including failure of the patent holder to work the invention) and in Article 31 of the TRIPS Agreement (e.g. national emergency and public non-commercial use). However, this list is not exhaustive. The Doha Declaration on the TRIPS Agreement and Public Health confirmed what was already implicit in the TRIPS Agreement – that WTO Members have the freedom to determine the grounds upon which compulsory licenses are granted. They are thus not limited to emergencies or other urgent situations, as is sometimes mistakenly believed. A range of grounds have been set out in national laws like (i) non-working or insufficient working, (ii) anti-competitive practices, (iii) public interest, (iv) dependant and blocking patents, (v) Government use.
The sponsors of this communication invite Members to share their national experiences and examples of using compulsory licenses. The information exchange could serve to enhance understanding of Members on various grounds available for issue of compulsory licenses and problems faced by Members while using them.
Guiding questions:
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What grounds are available in their national laws to issue compulsory licenses?
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What are the difficulties faced by WTO Members in using compulsory licenses, including constraints, such as insufficient or no manufacturing capacities?
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How the measure of compulsory licence was used by governments to obtain price reduction from patent holders?
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What was the result of using compulsory licenses in terms of price and access to affordable products and technologies?
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The clock is ticking for World leaders to generate wealth from sustainable fisheries
UNCTAD will organize an event themed “Enhancing trade opportunities for Least Developing Countries and Small Island Developing States through the fisheries sector” to address challenges imposed by international food standards. This will be held on the sidelines of the Oceans Conference of the United Nations in New York on 7 June 2017.
“Oceans and their resources have a vast potential to unlock growth, wealth and support the implementation of the Agenda 2030 Sustainable Development Goals,” said Mukhisa Kituyi, UNCTAD Secretary General, adding “the fisheries sector is a major source of income, employment and food security for Least Developed Countries and Small Island Developing States”.
Fishing accounts for a large percentage of economic activity in many Least Developed Countries, a UN category that contains those countries at the lowest levels of economic development. Small Island Developing States, some of which are also Least Developed Countries, is the category given to some island states that also have specific development challenges.
For example, in Comoros and Cambodia fisheries, both marine and inland, generates 15 per cent and 10 per cent of GDP respectively. Of the 16 top producers of inland waters fish in 2003-2012, 6 are least developed countries (Myanmar, Bangladesh, Cambodia, Uganda, United Republic of Tanzania and Democratic Republic of Congo). Myanmar was also among the top 10 producers of marine fish during the same period.
In Uganda, fish is the second largest source of foreign currency after coffee. In 14 out of the 48 Least Developed Countries, fish exports are ranked in the top five merchandise exports.
The fisheries sector is not only a major source of income, but also of employment and food security. In Bangladesh, 15 million people are either directly or indirectly employed in the sector, in Cambodia approximately 6 million of that country’s 16 million people work in the sector and some 100,000 of the 730,000 people in Comoros work in fisheries. In many Least Developed Countries, fish provides more than half of the animal protein consumed in people’s diets.
Notwithstanding the economic value and poverty-reducing role of well-managed fisheries and related industries, the sector is often underdeveloped and poorly exploited in Least Developed Countries. From 1980 to 2014, Developing Countries’ excluding Least Developed Countries, share of world fishery exports increased from about 37 percent to slightly over 50 percent in 2014.
In contrast, the share of Least Developed Countries remained marginal, rising from 1.7 percent to 2.1 per cent during the same period. This is despite the fact that these countries receive preferential market access in major fish importing countries, particularly in the European Union.
“We must urgently address ways and means for sustainably tapping fishery resources for the socio-economic development of Least Developed Countries and Small Island Developing States, including providing support for them to meet international food safety and quality standards for sustainable development,” said Dr. Mukhisa Kituyi, UNCTAD Secretary General.
Data from the Pacific Islands Forum Fisheries Agency is suggestive of why this is such a challenge. While their membership contributes 40 per cent of the worldwide supply of tuna for canning, foreign vessels catch two thirds of this and only about 10 per cent is processed onshore in the region. Only a small percentage of the basic value, and an even smaller percentage of the value added elements, of fisheries are currently supporting local economies.
The reasons are complex. Within Least Developed Countries deficient transportation and storage facilities, poor energy infrastructure and high electricity cost, lack of investment, finance or credit to small operators, overfishing and depletion of fish resources, water pollution and a lack of common fishery policies among countries that share water resources are all consistent challenges that undermine the local industry. The weakness, or absence, of institutions and facilities for testing and certifying products throughout the value chain, particularly in compliance with importing country regulations is also a widespread barrier to entry into international fisheries markets.
However, despite supposedly welcoming international markets for Least Developed Country products, importing countries also raise significant barriers to fisheries products. Perhaps the most important are the stringent food quality and safety standards imposed by importing countries, which Least Developed Countries often find difficult to meet.
UNCTAD data on these “non-tariff measures” reveals that, on average, countries have twice as many measures, particularly sanitary regulations, for fish as for other products. These measures-both public and private-block access to major importing markets for many fish exporters from Least Developed Countries. While the stringency of regulations may sometimes be an issue, the procedures for meeting them are often a bigger one. This is mainly due to the fact that standards are not harmonized and are costly for Least Developed Countries to meet.
About 90% of those employed in fisheries value chains in Least Developed Countries are engaged in the small-scale sector. The complexity and diversity, and level of enforcement, of Sanitary and Phytosanitary measures and other technical barriers to trade in domestic and international markets may have dramatic effects that disproportionately impact the poorest, both globally and within countries. Small and artisanal fishers may see their export opportunities vanish and even their domestic markets marginalised. Chances to reach target 14.b of SDG 14 could thus be jeopardized.
The UNCTAD event will identify ways and means for sustainably tapping fishery resources for the socio-economic development of Least Developed Countries and Small Island Developing States. This will include coordinated and fair compliance with international food safety and quality standards. The potential to contribute to both poverty reduction and the sustainable management of marine resources is enormous.
Related resources
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Concept note: Partnership dialogue 5 – Increasing economic benefits to SIDS and LDCs and providing access for small-scale artisanal fishers to marine resources and markets (Advance unedited version, PDF)
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The Potential of the Blue Economy: Increasing Long-term Benefits of the Sustainable Use of Marine Resources for Small Island Developing States and Coastal Least Developed Countries (World Bank and UN-DESA, PDF)
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UNCTAD and other global influencers gather to discuss eliminating harmful fisheries subsidies at UN Ocean Conference
UNCTAD at the Oceans Conference is working towards a call for action on a binding global agreement to end certain forms of fisheries subsidies
Why are fishery subsidies so harmful to our planet? Because they create a devastating domino effect that negatively impacts the environment and the world’s most vulnerable people.
Subsidies from wealthy governments encourage overfishing, overcapacity and may contribute to illegal and unregulated fishing. This creates food insecurity, unemployment and poverty for vulnerable people who rely on fish as their primary source of nourishment and livelihood.
UNCTAD will be highlighting this topic at the Oceans Conference in New York to be held from 5-7 June 2017.
“Developing countries can protect millions of jobs by ending harmful fish subsidies, it’s our job in the international community to help facilitate this much-needed change”, said UNCTAD Secretary-General Mukhisa Kituyi.
Fishing subsidies are estimated to be as high as $35 billion worldwide, of which about $20 billion can directly contribute to overfishing and overcapacity. The share of fish stocks within biologically sustainable levels continues to decline, falling from 90 percent in 1974 to 69 percent in 2013.
“Of every $5 in fish products, about $1 is subsidised in different ways. The total export of fish and seafood products is $146 billion. This is not a small amount. People are paying an unnecessarily expensive amount for fish, and many people in the developing world are far too poor to afford this inflated cost,” said UNCTAD’s Expert, David Vivas-Eugui.
During the Ocean conference, Dr. Kituyi will meet with world leaders and key influencers, to apply further pressure to governments to end fisheries subsidies once and for all.
This is consistent with last year’s UNCTAD 14 pledge, in which 91 countries signed up to UN roadmap for the elimination of harmful fishing subsidies. In September 2016, global leaders agreed to a new sustainable development goal (SDG) on fisheries, Goal 14, to conserve and sustainably use the oceans, sea, and marine resources. Target 14.6 addresses the harmful subsidies directly and has re-energised efforts to reduce and ultimately phase-out fish subsidies.
In an interactive dialogue to be held on day two of the conference, Dr. Kituyi will be joined by José Graziano da Silva (Director-General of the Food and Agriculture Organization), Erik Solheim (Executive Director, United Nations Environment Programme) and Karl Braumer (Deputy Director-General of the World Trade Organization), for a joint debate on how to implement the road map for ending these subsidies.
“Getting 91 countries to sign up to a new initiative in such a short period of time shows both the need for this initiative and the power of UNCTAD in building consensus for meaningful change,” said Dr. Kituyi.
At the Oceans Conference, UNCTAD will follow-up with governments to support implementation strategies for ending these harmful subsidies.
The roadmap agreed upon at UNCTAD14 included a four-point plan:
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Require countries to provide information on what subsidies they are providing.
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Prohibit those subsidies which contribute to overfishing and illegal fishing.
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Introduce new policies tools to deter the introduction of new harmful subsidies.
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Provide special and differential treatment to developing countries.
“The demand for fish products remains quite strong, mainly from the Asian region and in developed country markets. The Ocean conference needs to be a game changer. Hence countries are not only going to New York just to consider issuing a political signal, but because they are very concerned about the future prospects of this considerable market,” said Lucas Assunção, Head of UNCTAD’s Trade, Environment, Climate Change and Sustainable Development Branch.
A Call for Action for the Oceans Conference highlights the need for governments to act decisively to prohibit certain forms of fisheries subsidies which contribute to overcapacity and overfishing, eliminate subsidies that contribute to illegal, unreported and unregulated fishing and refrain from introducing new such subsidies.
UNCTAD is directly supporting the Ocean Conference on trade-related aspects of SDG 14 in a coalition jointly confirmed by FAO, UNEP, The Commonwealth, the ACP Group, and the International Oceans Institute. UNCTAD is organising a series of side events and launching several tailor-made publications at the conference, which can be found HERE.
Through UNCTAD’s participation in the conference, the organization aims to build on the momentum created by the UNCTAD 14 joint declaration and focus on scaling the delivery of the four-point action plan toward a call for a binding global agreement on fisheries subsidies at 11th WTO Ministerial Conference in Buenos Aires, later this year. UNCTAD will be gathering actors to discuss next steps for accelerating the removal of harmful fisheries subsidies and for converging on a global agreement. It will also seek to encourage the deposit of voluntary commitments by Member States to reform and ultimately phase-out harmful fishery subsidies.
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High Level Panel on Migration in Africa launched with Liberia’s Sirleaf as chair
“Just last week, some forty young men and women died of thirst in the Sahara Desert, while trying to reach Europe. More than a thousand have perished in the Mediterranean Sea since the beginning of this year.” Those were the words of President Ellen Johnson Sirleaf in her remarks during the launch of a High Level Panel on Migration (HLPM) in Africa, which took place on Tuesday in Monrovia.
Ms. Sirleaf noted that in many places in Europe today, “a mixture of migrants from diverse backgrounds have been living in the streets, under conditions that can best be described as inhumane.”
Established in April 2016 by the Economic Commission for Africa (ECA) under the direction of the joint African Union(AU) and ECA Conference of Ministers in Addis Ababa, HLPM is made up of 14 members with Ms. Sirleaf as chair. The panel aims to push migration issues to the top of policy agenda by engaging major stakeholders and partners.
Speaking during the launch, ECA’s Acting Executive Secretary, Abdalla Hamdok, stated that Africa is still missing out on the many benefits of migration because of tight border policies. He deplored the fact that Africans need visas to travel to 55% of other African countries.
“Travel in Africa by Africans is curtailed by stringent visa requirements, excessive border controls and immigration restrictions”, said Hamdok, adding that the phenomenon “increases the costs and risks of migration and often comes into conflict between individual motivation to migrate and state restrictions on mobility.”
Mr. Hamdok also stated that although International media outlets tend to present images of large numbers of migrants crossing the Mediterranean Sea into Europe as being mostly from Africa, intra-Africa migration still dominates migration flows on the continent.
“Data shows that less than three per cent of Africa’s population have migrated internationally and less than 12 per cent of the total migrant stock in Europe are from Africa.”
This view was also highlighted by Ms. Maureen Achieng, Representative of the International Organization for Migration (IOM) to the AU, ECA and IGAD.
“Migration from Africa towards other regions is taking place in a much lower level than one might think,” said Ms. Achieng. “There are an estimated 7.5 million West African migrants in West Africa compared to 1.2 million in North America and Europe combined.”
The issue of excessive border controls was also deplored by Ms. Alma Negash, founder of Africa Diaspora Network and member of the HPLM. Ms. Negash cited Uganda’s acceptance of migrants as good example of what African countries should be doing.
“I salute the exemplary conduct of Uganda on migration. In the past few years, Uganda alone took 800 thousand South Sudanese migrations and refugees. Africa needs to accept and take care of its children.”
For his part, Knut Vollebaek – an HLPM member and former minister of foreign affairs of the kingdom of Norway – said the government of Norway “is very pleased” with the HLPM initiative. Mr. Vollebaek expressed hopes about the panel’s ability to achieve its goals.
“It is my hope that we the panelists under the wise leadership of President Sirleaf will mobilize political will among governments in Africa and abroad, regional and international organizations, civil society, business and other stakeholders in support of adopting the necessary policies to facilitate the orderly, safe, regular and responsible migration and mobility of people.”
Mr. Vollebaek added that, “I hope our work can champion the new development paradigm enshrined in agenda 2030 and Agenda 2063 for Africa.”
Over the next few months, the HLPM will consult with relevant constituencies at national, regional and global levels to come up with recommendations on how to build and sustain broad political consensus on an implementable international migration development agenda, taking into account the particular challenges of countries in conflict and post-conflict situations. The report will be submitted to the African Union Heads of State summit in July 2018.
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African Border Day: Message from AUC Peace and Security Commissioner Amb. Smail Chergui
African Border Day celebration 2017
Message from AU Commissioner for Peace and Security, Ambassador Smail Chergui (Algeria)
Dear Fellow Africans,
On the 7th of June 2017, we will celebrate African Border Day, as we did in previous years, since its establishment by the African Border Ministers on May 25, 2010. This celebration is an opportunity to highlight the African Union Border Program (AUBP) and invite Member States to become more involved in its implementation in order to prevent conflicts and promote continental and regional integration.
Between 2007 and 2017, the African Union Border Program made significant progress in the areas of delimitation and demarcation of boundaries, cross-border cooperation and capacity building. Joint commissions have been relentlessly working to delimit and demarcate their common interstate borders. Demarcation treaties and cross-border cooperation agreements have been developed and signed by Member States. National border management policies have been defined and national programs and plans for their implementation have been developed. Educational tools and knowledge on border management have been produced and widely disseminated. Cross-border cooperation initiatives are undertaken at the Regional Economic Communities level.
This means that through this program we are working collectively and resolutely to transform African interstate borders into bridges and therefore promoting the free movement of people, goods and services.
Indeed, thanks to the commitment of Member States, Regional Economic Communities and the Commission of the African Union, the subject of border is no longer taboo. Rather, it is now a part of peaceful and constructive bilateral or multilateral discussions and exchanges.
Better yet, they are increasingly seen as points of inception and operationalization of socio-economic policies, as evidenced by the provisions contained in the African Union Convention on Cross-border Cooperation, known as the Niamey Convention, adopted in 2014 and in the process of ratification. The implementation of this Convention will enable the transformation of border zones and cross-border areas into spaces conducive to regional and continental integration processes.
Seen from this perspective, borders are potentially an instrument, or even a resource, to implement the aspiration contained in the Agenda 2063: “a continent of seamless borders and management of cross-border resources through dialogue”. More specifically, the Action Plan of this Agenda contains joint cross-border investments to exploit shared natural resources, promote peaceful conflict prevention and dispute resolutions and silence the guns by 2020.
This substantial contribution of borders to the achievement of the objectives of Peace and Stabilization in Africa illustrates the strategic importance of AUBP. It is with this conviction that I make a strong appeal to Member States, Regional Economic Communities and all other stakeholders to take the necessary steps to consolidate the achievements of AUBP and widen its scope of implementation.
We must all the more respond to the imperative to amplify these achievements considering that current security issues and challenges are mainly concentrated in the border areas. More than ever, it is in these national border areas and cross-border areas, which are a haven for organized crime, cross-border crime and terrorist groups, that we must focus our attention and our efforts to prevent conflicts, promote peace, security and stability.
The dynamics of resilience of border areas, which will be stimulated by increased cross-border cooperation activities, will also make it possible to cope with the harmful effects of climate change with its series of natural disasters such as repeated droughts, recurrent floods, the depletion of resources such as water, grazing lands, croplands, etc. The adoption of more cooperative strategies on both sides of the border will guarantee efficiency and effectiveness in managing the forced displacement of people, food crises, humanitarian tragedies and conflicts related to the ownership and access to natural resources.
The purpose of the AUBP is certainly to prevent conflicts, but also to facilitate the resolution of border disputes, which, unfortunately, have tended to increase in recent years, notably with the development of oil exploration and mining. The discovery of natural resources in the subsoil and seabed of border areas sharpens national appetites and crystallizes land claims and disputes over borders. This is attested by the recent appeals of several Member States to the international courts in order to find a judicial settlement to their border dispute. Even if the jurisdictional route offers the guarantee of a verdict to which the parties in conflict are bound to comply, it remains, nevertheless, very costly, long and ends up defining a winner and a loser. This is not conducive to a climate of mutual understanding and agreement between neighboring States. It is therefore desirable to engage in dialogue and cooperation to resolve border disputes.
Allow me to remind you that the African Union Commission has instruments and mechanisms that put forward political and diplomatic means to find lasting solutions to border conflicts. I urge Member States, whenever necessary, to request the Commission of the African Union to make available preventive diplomacy instruments through mediation, good offices and negotiation mechanisms.
This year, the theme of African Border Day is the role of the youth in conflict prevention and cross-border cooperation. In so doing, it popularizes the African Union Assembly Decision (Assembly/AU/Dec.601 (XXVI) of January 2016, which enshrines the theme of 2017 as: “harnessing the demographic dividend through investment in youth”. In this regard, I would like to recall a strong recommendation contained in the Action Plan drawn up for the period of August 2016 through December 2017 urging all the Specialized Technical Committees (STCs), Regional Economic Communities (RECs) and other continental meetings of 2017 to identify their contribution in the exploitation of the demographic dividend through investment in youth and to harmonize the implementation of related continental policies.
In this regard, I encourage Member States to promote the involvement of the youth in conflict prevention and in the development of cross-border cooperation initiatives. Peaceful and stabilized border areas are resources that the youth can invest in by developing income generating jobs; skills and expertise as well as social services. Therefore, in addition to structurally preventing conflicts in these areas by intervening on the root causes that trigger them, the youth will position themselves as key actors in the operationalization of cross-border cooperation. By taking part in this approach to developing border areas, Member States will concretely realize their objective of a people-centered development that will result in the on the ground realization of integration
The potential of border areas and youth as a resource should encourage Member States to sign, ratify, domesticate and implement the African Union Convention on Cross-border Cooperation (the Niamey Convention) if they haven’t done so. I appeal to you and call upon the Member States to seize the opportunity of the African Border Day on June 7 to start the process of ratifying this important instrument.
I urge all Member States of the African Union to commemorate the 2017 African Border Day under the theme “the role of the youth in conflict prevention and cross-border cooperation” and I commend those who will celebrate it. My most heartfelt wish is to see, on that day, television and radio broadcasts spreading this theme throughout Africa, as well as conferences and debates, playful and educational activities in schools, sporting and cultural events and various inaugurations at the borders.
I hope that on June 7, 2017, special attention will be paid to the borders and that this call will be heard warmly welcomed throughout our continent. I wish you an excellent celebration of Africa Border Day.
Long live the African youth and long live Africa.
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tralac’s Daily News Selection
The African Statistical Yearbook 2017 is launched (UNECA)
The Yearbook series is a result of joint efforts by major African regional organizations to set up a joint data collection mechanism of socioeconomic data on African countries as well as the development of a common harmonized database. The Joint African Statistical Yearbook is meant to break with the practices of the past where each regional/subregional organization was publishing statistical data on African countries of the continent in an inefficient way, leading to duplication of efforts, inefficient use of scarce resources, increased burden on countries and sending different signals to users involved in tracking development efforts on the continent. [Profiled Table from the yearbook (pdf): Intra-African trade by Regional Economic Communities in 2015 (Chapter 4 External Sector, p 65)]
Brexit Dashboards: Africa-UK regional factsheets (Commonwealth)
The economic fallout from Brexit – the UK’s withdrawal from the EU – may have wide-ranging implications for many Sub-Saharan African countries. The main transmission channels through which countries’ growth and development prospects could be affected include trade, investment, remittances, aid and development finance. Prepared ahead of the Commonwealth African Regional Consultation on Multilateral, Regional and Emerging Trade Issues in Mauritius (held on 25-26 May 2017), these factsheets provide a snapshot of indicators for each region’s macroeconomic, trade and investment exposure to the UK. Southern Africa and East Africa are extremely exposed to Brexit-related shocks, while Central Africa is the least exposed. [Downloads (pdf): East Africa, Central Africa, Southern Africa, West Africa]
Africa and illicit financial flows: (i) IFF Working Group convenes second meeting in Kenya, (ii) EU Parliament public hearing: Impact of the schemes revealed by the Panama Papers on developing countries (pdf)
Profiled EALA Committee oversight reports: (i) Report of the Committee on Communication, Trade and Investment on the Single Customs Territory (with 14 recommendations) (pdf); (ii) Report of EALA on the sensitisation activities in EAC partner states, April 2017 (with 10 recommendations) (pdf)
Kenyan assemblers seek EALA’s nod for higher taxes on used cars (Business Daily)
Kenya’s vehicle assemblers have turned to the regional parliament, seeking steeper taxes for second-hand cars. The assemblers have appealed to the EALA to have all second-hand vehicles subjected to higher tariffs than the 25 per cent currently levied on both old and new vehicles. Through the regional umbrella body for businesses, the East African Business Council, the firms also want the bloc to adopt a uniform age limit rule for second hand vehicles. At the moment, Kenya applies an eight-year age rule on second hand vehicles while Tanzania has a 10-year limit. The rest of the East Africa Community members do not have age restrictions on second hand car imports.
EALA: Bid for an EA regional mining umbrella afoot (Daily News)
The EAC Mining Bill that was moved by Mr Chris Opoka-Okumu (Uganda) hopes to provide a legal framework for the regulation of mining operations in the EAC. It seeks to implement the EAC Vision 2050 and specifically to operationalise Article 114(2) (c ) (iv) of the EAC Treaty that calls for harmonisation of mining regulations to ensure environmentally friendly and sound mining practices. The Bill further provides for a transparent and accountable mechanism for reporting mining and mineral related activities in the region. It is aimed at ultimately reducing differences in the operating environment for the sector. It sailed through after the first reading and sent to a committee for necessary actions. [Tanzania: Mining dust still to settle]
Indonesia, Nigeria agree to increase economic cooperation (Jakarta Globe)
During her visit to Nigeria on June 3-6, Indonesian Foreign Minister Retno Marsudi pushed for a preferential trade agreement to increase bilateral trade and asked support from Onyeama to form a preferential trade agreement between Indonesia and countries within ECOWAS. Nigeria is Indonesia’s largest trade partner in sub-Saharan Africa, and is a potential market for exports of more Indonesian products in non-traditional markets. Trade value between the two countries was valued at around $1.5bn in 2016. The Southeast Asian nation mainly exports palm oil to Nigeria and other countries in sub-Saharan Africa. There are currently 14 Indonesian companies investing in Nigeria, but bilateral trade between the two countries has seen a decline over the past five years.
Inaugural Belarus-Africa Forum: Belarus interested in boosting trade with African countries (BelTA)
Belarus is interested in promoting mutual trade with African countries, Belarusian Deputy Agriculture and Food Minister Igor Brylo said ahead of the first Belarusian-African forum “Belarus and Africa – New Frontiers” on 6 June, BelTA has learned. The number of participants from the African countries exceeded 70 representatives, including the agriculture ministers of Angola, Namibia and Uganda, the industry minister of Angola, the finance minister of Togo, the leadership of the African Export–Import Bank, other banking structures of Africa, the president of the National African Farmers Union, and representatives of Africa’s biggest companies.
Tanzania: Hectic week as Minister Mpango unveils budget (Daily News)
Budget speech for 2017/18 fiscal year and report on the country’s state of the economy is scheduled for tabling in the National Assembly this Thursday. The timetable for the House’s activities shows that the Minister for Finance and Planning, Dr Philip Mpango, will read the budget after the presentation of the economic status report. Key economic areas to be covered by the budget include infrastructure development, energy and minerals projects and industrial projects.
Kenya: 7th Presidential Roundtable Meeting (GoK)
In its report, KEPSA said President Kenyatta’s Administration has achieved all the goals that were set out in the National Business Agenda 2, which was adopted in the beginning of 2014. The achievements by the government were classed into thematic areas which included improving governance and business regulatory environment; upgrading security; infrastructure development; enhancing trade and investment; and promoting human capital and entrepreneurship development. The business organisations said the Jubilee Administration has scored high in the objective to reduce business and property registration and licensing costs. The government was also praised for reducing the cost of enforcing contracts and speeding up dispute settlements. It was also praised for strengthening the rule of law and promoting anti-corruption measures.
Philda Maiga: Transforming Kenya’s economy through its first ever national trade policy (The Commonwealth)
Equatorial Guinea graduates from the category of Least Developed Countries (UN-OHRLLS)
Equatorial Guinea, 34 years after its inclusion, graduated from the category the LDC category on 4 June 2017, following a transition period of three and a half years after the adoption by the UNGA of resolution A/RES/68/18 of 4 December 2013, which took note of the decision of the Economic and Social Council E/RES/2012/32 to endorse the recommendation of the Committee for Development Policy on this matter. Equatorial Guinea is the fifth country graduating since the creation of the category in 1971. With the graduation of Equatorial Guinea, there are still 33 LDCs in Africa, 13 in Asia and the Pacific and 1 in Latin America and the Caribbean, totaling 47 LDCs.
South Africa: The South African economy moved into recession with a decrease of 0,7% in GDP during the first quarter of 2017, following a 0,3% contraction in the fourth quarter of 2016.
How to boost private sector investment in Africa’s transmission sector (World Bank)
The Linking up: Public-Private Partnerships in power transmission in Africa report examines private sector-led investments in transmission globally and how this approach is applicable in sub-Saharan Africa. The private sector has participated successfully in transmission networks in many countries in Latin America and Asia, and this approach could be replicated. The study provides a set of recommendations for countries to adapt to specific local conditions and lists 10 steps to get there, including the right legal and regulatory framework, new models for concessional lending, competitive tender processes, adequate revenue flow and credit enhancement for projects, or tailored IPT projects to attract international investors, to name a few.
The potential of the Blue Economy: Increasing long-term benefits of the sustainable use of marine resources for Small Island Developing States and Coastal Least Developed Countries (World Bank)
This report was drafted by a working group of UN entities, the World Bank, and other stakeholders to suggest a common understanding of the blue economy; to highlight the importance of such an approach, particularly for small island developing states and coastal least developed countries; to identify some of the key challenges its adoption poses; and to suggest some broad next steps that are called for in order to ensure its implementation. [UN Ocean Conference: UNCTAD, partners work towards eliminating harmful fisheries subsidies]
Work in a changing climate: The Green Initiative (ILO)
Guy Ryder, Director-General of the ILO, says nothing will more clearly distinguish the first hundred years of the ILO’s history from the second “than the necessary greening of the world of work”. “Today, the Paris Agreement and the national commitments made under its terms, together with the 2030 Agenda, provide a unique opportunity to translate the tripartite consensus we have constructed into large scale practical ILO work with member States,” Ryder said in opening remarks to the 106th Session of the International Labour Conference. Introducing his report entitled, Work in a changing climate: the Green Initiative, Ryder said it “highlights the potential for greening of production to be a powerful engine for decent work creation and strong and balanced growth and development.”
Today’s Quick Links: Mozambique: Quarterly Report (January – March 2017) by Supporting the Policy Environment for Economic Development project (SPEED+). Component 2 in the report, on Trade and Investment issues, covers TFA ratification and implementation, AGOA utilization strategy, Reducing import/export costs on the Nacala Corridor, SPS framework issues. Mozambique seeks $4bn for infrastructure development Kenya to export Turkana crude three times in a year ICC Banking Commission launches working group on digitalisation of trade finance Sierra Leone: IMF Executive Board approves $224.2m under the ECF arrangement |
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Brexit dashboards: Africa-UK regional factsheets
The economic fallout from Brexit – the UK’s withdrawal from the EU – may have wide-ranging implications for many Sub-Saharan African countries. The main transmission channels through which countries’ growth and development prospects could be affected include trade, investment, remittances, aid and development finance.
Prepared ahead of the Commonwealth African Regional Consultation on Multilateral, Regional and Emerging Trade Issues in Mauritius (held on 25-26 May 2017), these factsheets provide a snapshot of indicators for each region’s macroeconomic, trade and investment exposure to the UK. Southern Africa and East Africa are extremely exposed to Brexit-related shocks, while Central Africa is the least exposed.
Note: Due to the nature of the data work, the configuration of regions does not correspond to RECs. In addition, RECs that overlap were deliberately not chosen.
The Brexit dashboards were prepared in collaboration with International Economics Ltd (find out more on their website) and have been made available to tralac by the Commonwealth Secretariat.
Presentations from the Commonwealth African Regional Trade Consultation are available to download. Visit the Brexit and the Commonwealth webpage to find additional research and reports from the Commonwealth Secretariat on the UK’s decision to exit the European Union.
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UN Ocean Conference opens with calls for united action to reverse human damage
Opening a “game-changing” international conference on the health of the world’s oceans and seas, top United Nations officials on Monday urged coordinated global action to protect the planet.
Speaking in the UN General Assembly Hall, Secretary-General António Guterres cautioned Governments that unless they overcome short-term territorial and resource interests, the state of the oceans will continue to deteriorate.
“Improving the health of our oceans is a test for multilateralism, and we cannot afford to fail,” the Secretary-General said addressing his first major UN conference since taking on his post.
“We must jointly address the problems of governance that have held us back,” he said, calling for a new strategic vision of how to govern the oceans and marine resources.
One of the main challenges, he said, is to end “the artificial dichotomy” between jobs and healthy oceans: “The conservation and sustainable use of marine resources are two sides of the same coin.”
He called for strong political leadership and new partnerships, based on the existing legal framework, and concrete steps, such as expanding marine protected areas and reducing plastic waste pollution.
Among other specific actions, Mr. Guterres urged Governments to allocate the promised funding for the 2030 Sustainable Development Agenda, the Paris Agreement on climate change and the Addis Ababa Action Agenda, as well as improving data collection and sharing their best experiences.
These works are supported by the UN, he added, which among its work, is building partnerships with Governments, the private sector, civil society and others, and working with international financial institutions to allocate resources.
Also addressing the thousands of participants – including heads of State and Government, civil society representatives, business people, as well as actors, and ocean and marine life advocates – was the President of the General Assembly, Peter Thomson.
“The time has come for us to correct our wrongful ways,” said Mr. Thomson, who hails from the island of Fiji, which is co-hosting the event alongside Sweden.
He spoke out against “inexcusable” actions, such as dumping the equivalent of one large garbage truck of plastic into the oceans every minute of every day, driving fish stocks to the points of collapse, and destroying marine life through acidification and deoxygenation.
“We are here on behalf of humanity to restore sustainability, balance and respect to our relationship with our primal mother, the source of life, the Ocean,” he noted.
Also speaking at the opening was Wu Hongbo, the Secretary-General of The Ocean Conference, who pointed out that without oceans and seas, where would be no life on the planet.
Mr. Wu, who is also the Under-Secretary-General for Economic and Social Affairs, noted that everyone must work together – not in silos – to achieve the goals of the Conference.
The Ocean Conference, which runs through Friday, focuses on the targets outlined in the 2030 Agenda for Sustainable Development, adopted by Governments in 2015. In particular among the Sustainable Development Goals (SDGs), Goal 14 highlights the need to conserve and sustainably use oceans, seas and marine resources to benefit present and future generations.
The main areas of work at The Ocean Conference will be a political call to action, a segment on partnership dialogues and voluntary commitments. Hundreds of commitments were already registered by the time the conference opened earlier on Monday.
Additional discussions with high-level officials, actors and activists will take place in the SDG Media Zone.
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ILO head calls for the much needed greening of the world of work
Guy Ryder, Director-General of the ILO, has told delegates at the 106th International Labour Conference to build governance that makes migration safe, orderly, and regular.
The Director-General of the International Labour Organization (ILO), Guy Ryder, has told delegates that nothing will more clearly distinguish the first hundred years of the ILO’s history from the second “than the necessary greening of the world of work”.
“Today, the Paris Agreement and the national commitments made under its terms, together with the 2030 Agenda, provide a unique opportunity to translate the tripartite consensus we have constructed into large scale practical ILO work with member States,” Ryder said in opening remarks to the 106th Session of the International Labour Conference (ILC).
Introducing his report to the ILC, this year entitled, Work in a changing climate: the Green Initiative, Ryder said it “highlights the potential for greening of production to be a powerful engine for decent work creation and strong and balanced growth and development.”
“We need the right policies to make transition happen and to make it just,” he noted. “And like any process of change at work that will require the combined efforts of governments and of employers and workers through social dialogue.”
The Director-General also highlighted that the governance of labour migration is both a constitutional responsibility of the ILO and at the top of the international policy agenda, with the adoption of a Global Compact before the UN General Assembly next year. A special Conference committee will discuss labour migration and the challenge of governance this year, and its conclusions are expected to feed in to discussions at the UN.
“But everybody is needed to build governance that makes migration safe, orderly, and regular, and our opportunity for that starts here at this Conference,” he said.
Ryder introduced Dr. Tabaré Vázquez, President of Uruguay, as the representative of a country that “has come out victorious in recent years in its fight for democracy, and has today strong and consolidated institutions and a political culture of dialogue.”
Speaking at the opening of the Conference, the Uruguayan President called on delegates not to wait for the future but to build “a world of work that serves the interests of everyone.” According to the guest of honour, social dialogue between governments, trade unions and employers’ organizations are “key to the social contract and democracy” and indispensable for sustainable progress.
The President reminded delegates that Uruguay was among the first members of the ILO in 1919 and reaffirmed his country’s adhesion to the ILO's founding principles and its centenary initiatives.
During the Conference, committees of workers, employers and government representatives will be considering how best to promote peace and stability through a possible revision of the Employment (Transition from War to Peace) Recommendation, 1944 (No.71). The promotion of Decent Work opportunities is key in countries emerging from crisis, conflict and disaster.
Other committees will discuss fundamental principles and rights at work as a follow up to the ILO’s Social Justice Declaration. The Conference Committee on the Application of Standards will address the situation of labour rights in countries around the globe and focus particularly on occupational safety and health (OSH) this year – based on a general survey concerning the promotional framework on OSH, construction, mines and agriculture.
On 15 June, a high-level World of Work Summit will discuss the situation of women in the labour market – with the participation of the Presidents of Malta, Mauritius and Nepal.
The first day of the Conference also saw Luis Ernesto Carles, Minister of Labour of Panama, elected President of the Conference over its duration from 5-16 June.
The Conference elected as Vice-Presidents, Saja S. Majali (Governments) from Jordan, José Maria Lacasa Aso (Employers) from Spain and Marie Clarke Walker (Workers) from Canada.
The International Labour Conference sets the broad policies of the International Labour Organization and meets once a year in Geneva, Switzerland. The annual “world parliament of labour” brings together more than 5,000 government, worker and employer delegates from the ILO’s 187 member States.
» Download the report of the Director-General here: Work in a changing climate: The Green Initiative.
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Transforming Kenya’s economy through its first ever national trade policy
In recent years, Kenya has moved up 21 places in the World Bank’s ease of doing business index, from 113 in 2015 to 92 in 2016. The country is hopeful of making further gains thanks to a new National Trade Policy, developed with the advice of Philda Maiga, a national trade adviser deployed to the Ministry of Foreign Affairs and International Trade, Kenya under the Hub and Spokes programme.
The programme provides trade experts to national ministries and regional trade organisations to enhance trade capacity in the African, Caribbean and Pacific (ACP) group of states. It is a joint initiative of the European Union, the Commonwealth Secretariat, the ACP Group Secretariat and the Organisation Internationale de la Francophonie.
The adoption of the trade policy, the first of its kind, in December 2016 was momentous and a profound feat for all policy-makers involved. As someone who advised the government on the policy from start to finish, I am pleased to provide this snapshot of how it will help to transform the country.
In a nutshell, the policy deals with both trade in goods and services and has two critical parts: domestic trade and international trade. It synchronises trade with industrial policy and strengthens coordination with those institutions responsible for investment, agriculture, industry and energy policy.
The domestic component of the policy focuses on wholesale, distribution and informal trade. Under the policy, a robust implementation roadmap is being developed to help grow and enhance productivity, develop infrastructure, improve the quality of products and develop laws and regulations for distribution.
The international trade component, on the other hand, deals with issues such as product and market diversification, trade facilitation and quality infrastructure. A major emphasis here is to enhance roads, railways and ports as well as energy, water and telecommunication. This is important as infrastructure provides links to the world market that are vital for export competitiveness.
The policy clearly recognises the importance of services trade, whose contribution to Kenya’s GDP has reached 60 per cent. Services have become an area of comparative advantage for Kenya and can usefully be exploited to harness its potential to generate spillover benefits for the overall economy. The policy underscores services that facilitate the growth of other sectors of the economy such as such as agriculture and industry.
It also recognises that while growing the country’s exports within the framework of the trade policy is extremely important, it is not the only part of the development strategy. Hence, it is smartly anchored in Vision 2030, the country’s long term planning framework that pulls together social, political and economic pillars of growth.
It is expected to boost inclusive development by supporting sectors that add more value to goods, rather than simply growing or extracting commodities. Towards this end, Kenya is looking to cluster sectors with high export potential under the national export strategy that is now being developed.
In typical Kenyan style, several Bills which will deliver the National Trade Policy are already before parliament, such as the Trade Development Bill and the Trade Remedies Bill. Through this legislation, the policy is expected to accentuate Kenya’s position as a regional trade hub and make the country a target for investors. These reforms will boost productivity and employment, helping to deliver economic stability, predictability and security.
This will provide the catalyst for the country to increase its exports to the rest of the world and, in due course, will help to create growth and jobs for the benefit of all Kenyans.
Philda Maiga is a lawyer specialising in commercial law and intellectual property. She taught at Makerere University, Kampala, before joining the Hub and Spokes programme in June 2014.
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World Bank report shows how to boost private sector investment in Africa’s transmission sector
A new World Bank report released today called for increased private sector investment in Africa’s under-developed electricity transmission infrastructure, a vital ingredient for reaching Africa’s energy goals.
Africa lags the rest of the world when it comes to electricity, with just 35 percent of the population with access to power and a generation capacity of only 100 GW. Those who do have power typically consume relatively little, face frequent outages and pay high prices.
Transmission infrastructure is a crucial middle part of the electricity value chain. Alongside generation and distribution, improving and increasing transmission infrastructure is key to closing the access gap. So far, transmission in Africa has been financed from public sources and new models of financing involving the private sector have received insufficient attention from policymakers or financiers.
The ‘Linking up: Public-Private Partnerships in Power Transmission in Africa’ report examines private sector-led investments in transmission globally and how this approach is applicable in sub-Saharan Africa. The private sector has participated successfully in transmission networks in many countries in Latin America and Asia, and this approach could be replicated.
“Private finance has supported the expansion of electricity transmission infrastructure in many regions of the world and the same can happen in Africa. To attract private sector investment, however, governments need to adopt policies supportive of this strategy and establish the right business, regulatory and legal environment to sustain investor interest,” said Riccardo Puliti, Senior Director and head of Energy and Extractives Industries at the World Bank.
Estimates of annual investments required from 2015-2040 to expand the transmission network range from $3.2 billion to $4.3 billion. These investments are critical to delivering cost-effective power to households and industries.
The report examined independent power transmission projects (IPTs) in five countries (Brazil, Chile, India, Peru and the Philippines) where major power sector reforms were undertaken to privatize the sector. For example, the use of privately financed transmission lines in Brazil, Chile, Peru and India collectively raised over $24.5 billion of private investment between 1998 and 2015. This resulted in close to 100,000 km of new transmission lines.
The study provides a set of recommendations for countries to adapt to specific local conditions and lists 10 steps to get there, including the right legal and regulatory framework, new models for concessional lending, competitive tender processes, adequate revenue flow and credit enhancement for projects, or tailored IPT projects to attract international investors, to name a few.
Specifically, the report recommends that African governments take the following steps to make it attractive for the private sector to invest in the region’s electricity transmission infrastructure:
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Develop policies that support IPTs
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Develop legal and regulatory frameworks to support IPTs
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Conduct trials of IPTs alongside existing business models of transmission
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Introduce new models for concessional finance
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Identify the stage at which to tender transmission projects
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Determine payments to IPTs based on transmission availability
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Ensure adequate revenue flow and credit enhancement for projects
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Tailor IPT projects to attract international investors
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Prepare to implement IPT transactions, and
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Run competitive tenders for IPTs
The report suggests that the next key step will be to begin piloting a few new projects in Africa to scale up electricity access and pave the way for a sustainable power sector.
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The potential of the blue economy: Increasing long-term benefits of the sustainable use of marine resources for SIDS and coastal LDCs
Humanity’s relationship with the oceans, and how people use and exploit their resources, is evolving in important ways.
While the oceans are increasingly becoming a source of food, energy, and products such as medicines and enzymes, there is also now a better understanding of the non-market goods and services that the oceans provide, which are vital for life on Earth. People also understand that the oceans are not limitless and that they are suffering from increasing and often cumulative human impacts. Oceans that are not healthy and resilient are not able to support economic growth.
The fact that oceans and seas matter for sustainable development is undeniable. Oceans and seas cover over two-thirds of Earth’s surface, contribute to poverty eradication by creating sustainable livelihoods and decent work, provide food and minerals, generate oxygen, absorb greenhouse gases and mitigate the impacts of climate change, determine weather patterns and temperatures, and serve as highways for seaborne international trade. With an estimated 80 percent of the volume of world trade carried by sea, international shipping and ports provide crucial linkages in global supply chains and are essential for the ability of all countries to gain access to global markets (UNCTAD 2016).
The “blue economy” concept seeks to promote economic growth, social inclusion, and preservation or improvement of livelihoods while at the same time ensuring environmental sustainability. At its core it refers to the decoupling of socioeconomic development through oceans-related sectors and activities from environmental and ecosystems degradation. Challenges in the sustainable use of marine resources – such as the impacts of climate change in the form of rising sea levels, increased frequency and severity of extreme weather events, and rising temperatures – are going to have direct and indirect impacts on oceans-related sectors, such as fisheries, aquaculture, and tourism, and on maritime transport infrastructure, such as ports, with broader implications for international trade and for the development prospects of the most vulnerable nations, in particular coastal least developed countries (LDCs) and small island developing states (SIDS). While the blue economy, both as a concept and in practice, is relevant to all countries, this paper focuses on SIDS and coastal LDCs.
The blue economy has diverse components, including established traditional ocean industries such as fisheries, tourism, and maritime transport, but also new and emerging activities, such as offshore renewable energy, aquaculture, seabed extractive activities, and marine biotechnology and bioprospecting. A number of services provided by ocean ecosystems, and for which markets do not exist, also contribute significantly to economic and other human activity such as carbon sequestration, coastal protection, waste disposal and the existence of biodiversity.
The mix of oceanic activities varies in each country, depending on their unique national circumstances and the national vision adopted to reflect its own conception of a blue economy. In order to qualify as components of a blue economy, as it is understood here, activities need to:
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provide social and economic benefits for current and future generations
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restore, protect, and maintain the diversity, productivity, resilience, core functions, and intrinsic value of marine ecosystems
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be based on clean technologies, renewable energy, and circular material flows that will reduce waste and promote recycling of materials.
The blue economy aims to move beyond business as usual and to consider economic development and ocean health as compatible propositions. It is generally understood to be a long-term strategy aimed at supporting sustainable and equitable economic growth through oceans-related sectors and activities. The blue economy is relevant to all countries and can be applied on various scales, from local to global. In order to become actionable, the blue economy concept must be supported by a trusted and diversified knowledge base, and complemented with management and development resources that help inspire and support innovation.
A blue economy approach must fully anticipate and incorporate the impacts of climate change on marine and coastal ecosystems – impacts both already observed and anticipated. Understanding of these impacts is constantly improving and can be organized around several main “vectors”: acidification, sea-level rise, higher water temperatures, and changes in ocean currents. These different vectors, however, are unequally known and hard to model, in terms of both scope – where they will occur, where they will be felt the most – and severity. For instance, while not as well understood as the other impacts, and more difficult to measure, the impacts of acidification are likely to be the most severe and most widespread, essentially throughout any carbon-dependent ecological processes. Likewise, the effects of sea-level change will be felt differently in different parts of the world, depending on the ecosystems around which it occurs. Most importantly, however, and unlike in terrestrial ecosystems, further uncertainty results from the complex interactions within and between these ecosystems. In spite of this uncertainty, the current state of knowledge is sufficient to understand that these impacts will be felt on critical marine and coastal ecosystems throughout the world and that they fundamentally affect any approach to the management of marine resources, including by adding a new and increasing sense of urgency.
Healthy oceans and seas can greatly contribute to inclusiveness and poverty reduction, and are essential for a more sustainable future for SIDS and coastal LDCs alike. Oceans and their related resources are the fundamental base upon which the economies and culture of many SIDS and coastal LDCs are built, and they are also central to their delivery of the 2030 Agenda for Sustainable Development, including the Sustainable Development Goals (SDGs). A blue economy provides SIDS and coastal LDCs with a basis to pursue a low-carbon and resource-efficient path to economic growth and development designed to enhance livelihoods for the poor, create employment opportunities, and reduce poverty. It is also clear that SIDS and coastal LDCs often lack the capacity, skills and financial support to better develop their blue economy. This report lays out steps for countries to follow to make the blue economy an important vehicle to sustain economic diversification and job creation in these countries.
In spite of all its promises, the potential to develop a blue economy is limited by a series of challenges. First and foremost is the need to overcome current economic trends that are rapidly degrading ocean resources through unsustainable extraction of marine resources, physical alterations and destruction of marine and coastal habitats and landscapes, climate change, and marine pollution. The second set of challenges is the need to invest in the human capital required to harness the employment and development benefits of investing in innovative blue economy sectors. The third set of challenges relates to strengthening the concept and overcoming inadequate valuation of marine resources and ecosystem services provided by the oceans; isolated sectoral management of activities in the oceans, which makes it difficult to address cumulative impacts; inadequate human, institutional, and technical capacity; underdeveloped and often inadequate planning tools; and lack of full implementation of the 1982 United Nations Convention on the Law of the Sea (UNCLOS) and relevant conventions and instruments. While stimulating growth in individual oceanic sectors is comparatively straightforward, it is not always clear what a sustainable blue economy should look like and the conditions under which it is most likely to develop.
This report was drafted by a working group of United Nations entities, the World Bank, and other stakeholders to suggest a common understanding of the blue economy; to highlight the importance of such an approach, particularly for small island developing states and coastal least developed countries; to identify some of the key challenges its adoption poses; and to suggest some broad next steps that are called for in order to ensure its implementation.
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tralac’s Daily News Selection
Continental Free Trade Area update: Conference of the African Union Ministers of Trade (5–16 June, Niamey)
The objective of the 6th Continental Free Trade Area Negotiating Forum is to conclude the draft Modalities for Tariff Liberalization and Trade in Services negotiations, consider the draft texts of the CFTA Agreement and receive the reports from the second meeting of technical working groups. The meeting will commence with sessions on presentations on, among others, Trade Mapping and the Trade Analysis Tool. The objectives of the 3rd Meeting of the Senior Trade Officials will be to consider the outcomes of the 5th and 6th Meetings of the CFTA Negotiating Forum as well as the Progress Report on AGOA, while the 3rd Meeting of African Ministers of Trade will consider the outcomes of the 3rd Meeting of Senior Trade Officials. The Meeting of the African Union Ministers of Trade (29–30 November 2016) considered, amongst others, the draft Modalities for the CFTA Tariff Liberalization and Trade in Services negotiations. The meeting requested an analysis and diagnostic study of the impact of the four options of the Modalities on Tariff Liberalization on the economies of Member States. The analysis was to include mapping of intra African trade flows focusing on direction and volume of trade.
The AERC’s Bi-Annual Research Workshop is underway in Sandton: further details
ABCA 2017 Roundup: Markus Goldstein on the latest research on agriculture in Africa
WCO Guide for Technical Update of Preferential Rules of Origin: Annexes I – B to III – B (impact of HS Amendments on rules of origin) and Appendix (presentation) have been added, improving the usability of the guide
Global Economic Prospects: Sub-Saharan Africa update (World Bank)
Growth in Sub-Saharan Africa is forecast to pick up to 2.6%in 2017 and to 3.2% in 2018, predicated on moderately rising commodity prices and reforms to tackle macroeconomic imbalances. Per capita output is projected to shrink by 0.1%in 2017 and to increase to a modest 0.7% growth pace over 2018-19. At those rates, growth will be insufficient to achieve poverty reduction goals in the region, particularly if constraints to more vigorous growth persist. Growth in South Africa is projected to rise to 0.6% in 2017 and accelerate to 1.1% in 2018. Nigeria is forecast to go from recession to a 1.2% growth rate in 2017, gaining speed to 2.4% in 2018, helped by a rebound in oil production, as security in oil producing regions improves, and by an increase in fiscal spending. Growth is forecast to jump to 6.1% in Ghana in 2017 and 7.8% in 2018 as increased oil and gas production boosts exports and domestic electricity production. Ethiopia is forecast to expand by 8.3% in 2017, Tanzania by 7.2%, Côte d’Ivoire by 6.8%, and Senegal by 6.7%, all helped by public investment. However, some countries need to contain debt accumulation and rebuild policy buffers. [Global Economic Prospects in 10 charts]
Mrs. Ellen Johnson Sirleaf (Chair of the Authority of ECOWAS Heads of State and Government): Reflection on progress in our Community in 2016-2017 (pdf). The road to regional integration is likely to be long and require consistency. Economies of several of our countries have progressed tremendously in the past years but are now plagued by the sharp decline in commodity prices on the world market. If there is a lesson to be learned from this situation which affects all our exports, from oil to iron ore and to cocoa, it is that we must diversify our economies and invest in small transformative industries. With a population of more than 300 million people, we have the potential to establish an internal market place that will create jobs and sustain our progress. We note that regional integration plans continue on course as a result of our Community’s collective resolve to implement the Protocols on Free Movement of People and Goods, particularly the Common Internal Tariff, the ECOWAS Trade Liberalization Scheme and the Economic Partnership Agreement.
Regional integration programs designed for the benefit of our Community citizens, depend on regular payment of the Community Levy to the ECOWAS Commission. The Commission has taken action to solidify the ongoing review of Community Levy payments by Member States, which were delinquent. Today, I am pleased to say that an increasing number of Member States, including Liberia, has liquidated their accounts, and are current in their payment of Levy proceeds. Our gratitude is due to the Federal Republic of Nigeria for making payments on its arrears. Plans have been put in place for resource mobilization, to increase the level of compliance by Member States by setting up a Community Levy Committee to work for the full implementation of the Community Levy Protocol.
Related: PM Netanyahu’s speech at the ECOWAS Summit, Nigeria absent as Netanyahu addresses summit, ECOWAS gives agreement in principle to Morocco’s adhesion, Togo’s President Faure Gnassingbe is new ECOWAS chairperson
COMESA Bureau of Council meets in Zambia
Among the key issues in the Bureau’s agenda was the review of the status of implementation of COMESA priority programme for 2017. The Bureau discussed the progress on the negotiations for membership of the Republic of Tunisia to COMESA, the status of contributions by member States to the budget of the COMESA Secretariat and preparations of the 2017 Summit among others.
Anne Kiruku: When will ‘Made in East Africa’ become a reality? (IPPMedia)
Improving the business environment by prioritising on removing barriers to starting and doing business in the region would also help in spurring the sector. Investing in developing the three main trade corridors, and prioritisation of infrastructure development in the areas of energy, transportation and telecommunications, is key to spurring the growth of the sector. Due to the capital-intensive nature of most large-scale industrialisation projects, it is paramount for the region to encourage public-private partnerships which are key to driving industrialisation. The regional leaders should heed the resolution by the Kigali conference to develop policy frameworks for government led industrialisation mega projects that can drive up manufacturing in the region. The EAC partner states should commit a certain percentage of national budgets for industrial development.
Kenya’s EALA row to cripple business in regional House (Daily Nation)
Protracted political battles between the ruling Jubilee coalition and the Opposition over nominees to the EALA is now set to paralyse the operations of the regional assembly. Although the nominees from other member states will be sworn in on Monday in Arusha, no business will take place. Despite Kenya being given notice on January 24 to start the process of electing new nominees so as to avoid any vacuum when the assembly starts holding its sittings, it has not finalised the process, five months later. [EALA Fourth Assembly still in doldrums, Beginning of the end for EAC as Kenyan MPs snub EALA session]
Malawi Economic Monitor: Harnessing the urban economy (World Bank)
Increased tobacco exports have helped to offset weaker performance by other commodities. Malawi’s exports were strongly affected by the impact of the El-Niño drought, with its major exports being agricultural commodities. Other factors that contributed to the decline were low commodity prices and a decline in demand by regional trading partners, particularly South Africa. On the other hand, tobacco proved resilient to the effects of the drought, with production in 2016 at 195.1 million kg almost matching the level of 2015 volumes at 192.7 million kg. Agricultural commodities contribute to more than three quarters of Malawi’s export earnings, with tobacco alone contributing to almost 50%. Hence, movements in tobacco tend to have a significant influence on overall export performance. In 2017, although an overall decline in tobacco production is expected, the decline in exports is projected to be less pronounced. Tobacco exports are projected to decline by around 27.6%, while overall production is projected to decline by 36%. Although prices are expected to improve due to the undersupply and to the increase in international prices, the fall in the volume of exports is expected to more than balance the impact of this, thus leading to an overall decrease in the value of tobacco exported.
Malawi Poverty Assessment (World Bank)
Regional imbalances in poverty incidence and shared prosperity remain across Malawi’s regions. Table 1.2 shows that Southern and Northern Malawi were worse off than Central Malawi in monetary poverty in 2004 (the poverty incidence stands at 60%, 54%, and 44%, respectively). Ultra-poverty displays a similar distribution across Malawi: 29% in the South, 24% in the North, and 15% in the Centre. Such cross-regional differences have not varied over time. Minor changes in the poverty incidence occurred in the North and Centre regions. Although the South region experienced a significant drop in poverty of 4.2 percentage points, it is still the poorest region. With regards to ultra-poverty, the regional ranking also remains constant. The proportion of ultra-poor increased notably in the Centre region - by almost four percentage point - but the region continues to exhibit the lowest poverty rates in the country.
Shire-Zambezi waterway not viable, insists Transport Ministry of Mozambique (Reuters)
Malawian officials have once again raised the question of using the Shire-Zambezi waterway for Malawian trade, protesting that the Mozambican authorities are “creating difficulties”. At a Maputo press conference on Thursday, senior Transport Ministry official Jafar Ruby retorted that the difficulties are not of Mozambique’s making, but are inherent to the Malawian project which was “neither viable nor sustainable in the short, medium and long term.
Afreximbank closes record $632.9m and Euro 499.6m syndicated term loan facility (Afreximbank)
According to the Bank, the fact that the facility attracted a wide base of lenders from around the globe, but particularly from Asia and the Middle East, is evidence of the confidence which lenders have in Afreximbank. “With 70% of the commitments coming from Asia and the Middle East, this facility greatly enhances our drive to diversify our liability book by geography,” said Denys Denya, Afreximbank’s Executive Vice President in charge of Finance, Administration and Banking Services. The facility attracted aggregate commitments amounting to the equivalent of $1.36bn which, following a scale-back, resulted in a final facility size equivalent to $1.16bn, with 35 banks joining.
South Africa: This is what changes to the Competition Act could look like (Fin24)
Government’s intention to give competition authorities more muscle so that they can address over-concentration in certain markets should be coupled with additional resources and appointing more decision-makers if this is to be done meaningfully, according to Gomolemo Kekesi of Bowmans law firm. “Government can increase their level of responsibility, but they need extra capacity and more decision-makers under them or working in parallel with authorities. You don’t want them to be so stretched that they can no longer achieve anything meaningfully,” she said.
Greening Africa’s Cities (World Bank)
Launched at the Greening Africa’s Cities Symposium held in Dar es Salaam, the report points out that unique features of Africa’s urbanization – such as substantially lower per capita incomes, high reliance on biomass fuels, extensive informal settlement with poor service levels, and the exposure of cities to environmental disasters, such as floods, is putting pressure on African cities’ natural environment and eroding the value of environmental assets – their green spaces, forests, and water resources. “There is a significant risk that Africa’s cities may become locked into a ‘grow dirty now, clean up later’ development path that may be irreversible, costly, inefficient, and welfare-reducing,” said Roland White, Global Lead for City Management, Governance and Financing for the World Bank and lead author of the Greening Africa’s Cities report.
Today’s Quick Links: Zimbabwe: ‘Infrastructure shortage halts one-stop border post’ Kenya set to issue four-day transit visa South Africa: Italian railway products maker takes root in regional market Morocco’s trade deficit soars in April 2017 Tegegnework Gettu: statement to the Annual Session of the UNDP Executive Board West African Sahel countries seek 50m Euros from EU for anti-Islamist force Local content policies in minerals-exporting countries: Part 1, Case studies (pdf) |
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Conference of the African Union Ministers of Trade (AMOT) on the Continental Free Trade Area (CFTA)
The African Union Commission (AUC) Department of Trade and Industry, in collaboration with the Government of Niger, is organising a Conference of the African Union Ministers of Trade (AMOT) on the Continental Free Trade Area (CFTA) from 5 to 16 June 2017 in Niamey, Niger.
According to the work plan of the CFTA negotiating institutions approved by Ministers of Trade in November 2016, the AUC Department of Trade and Industry has organised the 6th Meeting of the CFTA-Negotiating Forum to be conducted on 5-10 June 2017. This meeting will be immediately followed by the 3rd meeting of Senior Trade Officials (STO) and African Ministers of Trade (AMOT) on 12-14 and 15-16 June 2017, respectively.
The objective of the 6th CFTA-Negotiating Forum is to conclude the draft Modalities for Tariff Liberalization and Trade in Services negotiations, consider the draft Texts of the CFTA Agreement and receive the reports from the second meeting of Technical Working Groups. The meeting will commence with sessions on presentations on, among others, Trade Mapping and the Trade Analysis Tool.
The objectives of the 3rd Meeting of the Senior Trade Officials will be to consider the outcomes of the 5th and 6th Meetings of the CFTA Negotiating Forum, as well as the Progress Report on AGOA, the Report of the Fourth EPA Coordination Meeting and the Draft Common Position on EPA for the Africa-EU Summit, and the Progress Report on WTO MC11 Preparations, while the 3rd Meeting of African Ministers of Trade will consider the outcomes of the 3rd Meeting of Senior Trade Officials.
Background
The 25th Ordinary Session of the Assembly of Heads of State and Government of the African Union which was held in Johannesburg, South Africa in June 2015 launched the negotiations for the establishment of the Continental Free Trade Area (CFTA). The launch of the negotiations marked a major milestone in the implementation of the Summit Decision to establish a Continental Free Trade Area by 2017. The main objective of the CFTA negotiations is to achieve a comprehensive and mutually beneficial trade agreement among the Member States of the African Union.
The inaugural session of the CFTA Negotiating Forum was held in February 2016. The CFTA-NF has since established Technical Working Groups (TWGs), which will support the negotiations. The meetings of the TWGs have already commenced and one of the assignments which they are undertaking is the development of the draft CFTA texts. The first and second meetings of the TWG took place from 6 to 17 February 2017 and from 24th April to 5th May 2017 respectively.
The Meeting of the African Union Ministers of Trade held on 29th – 30th November 2016, considered, amongst others, the draft Modalities for the CFTA Tariff Liberalization and Trade in Services negotiations. The meeting requested for an analysis and diagnostic study of the impact of the four options of the Modalities on Tariff Liberalization on the economies of Member States. The analysis was to include mapping of intra African trade flows focusing on direction and volume of trade. In addition, the different options have to be analysed vis-à-vis their compatibility with the Guiding Principles on CFTA Negotiations. It was directed that the analysis be conducted in collaboration with UNCTAD, UNECA and the RECs. The 5th CFTA-NF did not conclude the draft Modalities for Tariff Liberalization and Trade in Services negotiations.
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Greening Africa’s cities to protect people and growth
A fast urbanizing Africa is rapidly degrading the environmental assets of its cities.
Protecting those assets can increase the productivity and livability of these cities, improve tourism opportunities, and enhance resilience to the impacts of extreme weather events, according to a new World Bank report, released on 1 June 2017, Greening Africa’s Cities.
Launched at the “Greening Africa’s Cities Symposium” held in Dar es Salaam, the report points out that unique features of Africa’s urbanization – such as substantially lower per capita incomes, high reliance on biomass fuels, extensive informal settlement with poor service levels, and the exposure of cities to environmental disasters, such as floods, is putting pressure on African cities’ natural environment and eroding the value of environmental assets – their green spaces, forests, and water resources.
“There is a significant risk that Africa’s cities may become locked into a ‘grow dirty now, clean up later’ development path that may be irreversible, costly, inefficient, and welfare-reducing,” said Roland White, Global Lead for City Management, Governance and Financing for the World Bank and lead author of the Greening Africa’s Cities report.
The report points out that there are important opportunities to change the trajectory that African cities are on to ensure those areas that will eventually be covered by the built environment are developed with a comprehensive green urban development strategy – one that tackles the core problems of pollution and waste, overconsumption of natural resources and eradication of ecosystems, and the diminishment of biodiversity. This agenda for action includes:
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Addressing the “Brown Agenda”, or providing basic sanitation and waste removal services in African cities to under-served populations
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Managing natural resource use
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Controlling traffic and vehicle emissions
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Controlling specific sources of pollution through prohibitions and incentives
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Protecting and restoring the natural environment within and around cities
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Combining engineering, spatial planning, environmental management and other interventions to produce greener outcomes for particular urban development interventions
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Investing in a greening program
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Strengthening institutions to manage green urban development
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Introducing financing instruments targeted at addressing environmental impacts at significant scale
“The degradation of natural assets and ecosystems within African cities carries tangible economic, fiscal, and social costs, including, increasing costs of water production, deteriorating human health, damaged infrastructure, reduced property values, and a loss of recreation and tourism value,” said Sanjay Srivastava, Lead Environment Specialist at the World Bank, and contributor to the report. “Fortunately, there are important opportunities to change the trajectory of African cities towards a more harmonious relationship between their natural and built environments. However, focused action is needed to make this to happen.”
Bella Bird, World Bank Country Director for Tanzania, Malawi, Burundi, and Somalia, pointed out that, “Green urban development approaches are a win-win for the environment and the people of cities. Using this approach African cities can be more cost-effective, while conserving natural capital. We can see in Tanzania, for example, that restoring forest areas and rehabilitating river systems could alleviate urban flooding problems, while also generating other economic and social benefits from reversing environmental degradation, and making cities more pleasant and productive places to live.”
The World Bank Group is working with countries around the world to help build resilience to the growing economic, environmental, and social challenges they face today. The Bank is working in partnership with the private sector, governments, and civil society in developing urban development strategies to build clean and efficient cities and communities that are resilient to natural disasters, and to create competitive economies that provide new kinds of jobs for people and ensure that everyone, especially the poorest, can benefit.
Changing the Environmental Trajectory to Build Sustainable Cities in Africa
The Nakivubo wetland, one of several large wetland systems within and around the Ugandan city of Kampala, is severely degraded. The volumes of contaminated runoff entering wetland channels from informal areas and partially treated wastewater from the overburdened sewage works have increased significantly.
The city is considering rehabilitating the Nakivubo wetland, but it would cost US$53 million, in addition to ongoing maintenance and operating costs of about US$3.6 million per year – it is now too costly and impractical to restore the wetland to a state where benefits can be achieved.
Had Kampala grown in a way that protects the wetland, the city would today be reaping the benefits of this natural asset and the flow of economic and fiscal value that it could supply.
“Once ecosystems such as wetlands in urban areas have become severely impacted, they are often effectively eradicated, as is the stream of services they can provide to support economic production and human well-being,” stressed Roland White. “While the environmental quality of cities may be treated as a low priority by financially-strapped local governments, it carries tangible economic, fiscal, and social costs.”
The adverse impacts of environmental degradation in Africa’s cities
Deterioration of environmental quality arising from urbanization is negatively impacting health, income, productivity, and the quality of life in African economies and cities. In Sub-Saharan Africa, public welfare losses resulting from exposure to household and ambient air pollution were estimated to amount to 3.8% of the regional gross domestic product.
The degradation of natural assets and ecosystems can also increase the impacts of extreme weather events. As cities grow, the magnitude of flood flows arising from any given rainfall event also grows. This means that the natural floodplain areas in low-lying parts of the city also increase. In Dar es Salaam, the expected annual losses from damage to structures in the Msimbazi floodplain alone amount to an estimated US$47.3 million per year.
Cities may also forfeit property tax income from premium property owners who are willing to pay for being close to natural and open space areas that are in good condition. Research undertaken in the city of Durban, which has a well-developed network of green open space, shows that the premiums paid for proximity to good quality natural and man-made open space areas can amount to US$339 million.
Building sustainable and resilient cities in Africa
According to White, “Africa is urbanizing late but fast. Africa’s cities have grown at an average rate of close to 4.0% per year over the past twenty years, and are projected to grow between 2.5% and 3.5% annually from 2015 to 2055. Yet most African cities are on a trajectory of environmental degradation that has become negatively reinforcing and unsustainable.”
Africa is urbanizing at relatively low levels of industrialization, motorization, and technology by international standards. However, its heavy reliance on biomass fuels is generating high levels of fine and small particulate matter (PM2.5 and PM10) relative to other regions.
In addition, Africa is urbanizing at substantially lower levels of wealth than other regions, with low proportions of overall capital investment (infrastructure, housing, and office building) – around 20% of GDP. Relative to city size, fiscal resources are extremely limited, with public expenditures on urban infrastructure and services (outside of South Africa) in a range of less than US$1 to around US$15 per capita per year. For the entire region, the proportion of urban residents with access to sanitation was estimated to be only 37% in 2010.
Add to that the fact that institutions and systems that are critical to effective urban development and management are weak, with most large metropolitan areas covering numerous jurisdictions, and managed by different elected bodies, local government structures, and agencies. Many of them have fragmented and overlapping planning and regulatory authority that restricts effective urban environmental management.
The report, Greening Africa’s Cities, underscores the urgency for green urban development policies that can help cities move toward a more harmonious relationship between the natural and built environments if focused action is taken, tackling the core problems of pollution and waste, overconsumption of natural resources and eradication of ecosystems, and the deterioration of biodiversity in the context of urban growth.
“The World Bank helps clients build inclusive, resilient, and sustainable cities, villages, and communities,” said Ede Ijjasz-Vasquez, Senior Director of the World Bank’s Social, Urban, Rural and Resilience Global Practice, “with strong linkages to the Bank’s twin goals of ending extreme poverty and promoting shared prosperity in a sustainable way. The Bank is working with African countries in developing green urban development strategies to build sustainable cities.”
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Urbanization key to Malawi’s future growth prospects
The World Bank says Malawi needs to better manage its urbanization process as this will be critical to the country’s efforts to boost resilience, reduce poverty, and achieve sustainable, inclusive growth.
In the fifth edition of the Malawi Economic Monitor (MEM) titled Harnessing the Urban Economy released on Friday, the Bank says Malawi is still at an early stage of urbanization and the slow urban transformation rate well-positions the country to formulate plans to maximize the benefits of urban agglomeration into the future. It however cautions that a more rapid rate of urbanization might result in urbanization of poverty unless more public resources are allocated to meet investment needs in urban areas, and capacities of local governments strengthened to manage increased urbanization rates.
The MEM suggests that a systematic effort should be made to improve revenues of city councils from their own sources with emphasis on property tax, and better management of resources and services. Recommended measures include modernizing payment systems, reducing leakages, updating regulatory provisions, and outsourcing some services to the private sector.
The MEM also reviews the latest economic developments in the country, estimating GDP growth to increase to 4.4 percent in 2017, driven by improved conditions in the agriculture sector. A favorable weather pattern with increased rainfalls in 2017 is expected to result in higher levels of agricultural output than was recorded in 2015 and 2016. With improved agricultural production and reduced pressure on food prices, the average inflation rate is projected to decelerate to 15.2 percent in 2017.
In its analysis, the MEM acknowledges the efforts Government is making in containing public debt, containing spending, improving fiscal management, and implementing reforms in key areas as agricultural markets, all of which are helping to lay the foundations for future growth. “Government however still needs to be cautious about the macroeconomic environment, continue efforts to consolidate its fiscal position and begin to focus on medium term policies and investments to improve the country’s resilience against climate-related shocks,” said Richard Record, lead author of the MEM.
The MEM is a series of biannual country flagship reports that provide an analysis of economic and structural development issues in Malawi with the aim of fostering better informed policy analysis and debate.
How to Harness the Benefits of Urbanization for More Economic Growth Overall
A small country of only four cities and just 27 other urban centers, Malawi still has a long way to go in terms of urbanization. Only 16 percent of its population of about 17 million lives in urban areas, so most national development policies have focused on rural areas instead.
But should Malawi urbanize more rapidly in order to catch up with other countries?
The World Bank believes Malawi is in a good position to come up with plans to maximize the benefits of urbanization in the future. In its Malawi economic monitor report, Harnessing the Urban Economy, the Bank gives Malawi useful tips about a number of things it can take into consideration so the country can reap the benefits of becoming more urbanized.
Urbanize with the rural poor in mind
Malawi rates as one of the least developed countries in the world; because urbanization creates opportunities for more economic development, more of it could be of benefit to rural areas as well.
Projections indicate a more rapid process of urbanization could help boost economic growth by increasing demand among urban businesses and individual consumers for more agricultural products, which in turn could contribute to poverty reduction in rural areas. Most Malawians’ livelihoods are agro-based.
Malawi therefore needs to leverage this potential advantage.
Infrastructure and resource management
As the country urbanizes, there will be a growing need for investment in urban infrastructure and services, which require financial resources. Local governments in Malawi mostly depend on their own sources of revenue; to generate more revenue, payment systems can be modernized to seal leaks and encourage taxpayers to settle their property rates. This will require giving city council officials training and modern taxation tools, such as GIS systems.
Mzuzu City Council in the north of Malawi is already a model of this, having updated its tax rolls. Its experience can be scaled up.
A system of incentives for local governments could encourage them to manage both their resources and reforms. For example, more financial transfers could be given to those local governments that successfully increase their own revenue and reach higher levels of efficiency.
Malawi could learn from two models used in other African countries: performance-based grant systems and municipal contracts. These are issued between central and local governments. The central government provides additional grants and other assistance if the local government implements a defined range of reforms.
Service provision
Town or city councils provide services but their capacity to do so is sometimes limited. Outsourcing some services to the private sector might help, especially in sectors where private sector involvement has proven to be cost effective, such as waste collection and road works.
This could help local governments reduce their payrolls and other recurring costs, creating the budgetary space for them to increase the amount of capital they might have left to reinvest.
City councils could also consider leaving the provision of certain services, such as sanitation, to other existing institutions that may be better suited for the delivery of utilities and other urban public goods. This will allow them to play a vital coordinating role in providing the infrastructure and services necessary for Malawi to mitigate the negative effects of urbanization and harness the positive effects of it.
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Global growth set to strengthen to 2.7 percent as outlook brightens
Commodity exporters gradually recovering from recent low prices
The World Bank forecasts that global economic growth will strengthen to 2.7 percent in 2017 as a pickup in manufacturing and trade, rising market confidence, and stabilizing commodity prices allow growth to resume in commodity-exporting emerging market and developing economies.
According to the World Bank’s June 2017 Global Economic Prospects report, growth in advanced economies is expected to accelerate to 1.9 percent in 2017, which will also benefit the trading partners of these countries. Global financing conditions remain favorable and commodity prices have stabilized. Against this improving international backdrop, growth in emerging market and developing economies as a whole will pick up to 4.1 percent this year from 3.5 percent in 2016.
Growth among the world’s seven largest emerging market economies is forecast to increase and exceed its long-term average by 2018. Recovering activity in these economies should have significant positive effects for growth in other emerging and developing economies and globally.
Nevertheless, substantial risks cloud the outlook. New trade restrictions could derail the welcome rebound in global trade. Persistent policy uncertainty could dampen confidence and investment. Amid exceptionally low financial market volatility, a sudden market reassessment of policy-related risks or of the pace of advanced-economy monetary policy normalization could provoke financial turbulence. Over the longer term, persistently weak productivity and investment growth could erode long-term growth prospects in emerging market and developing economies that are key to poverty reduction.
“For too long, we’ve seen low growth hold back progress in the fight against poverty, so it is encouraging to see signs that the global economy is gaining firmer footing,” World Bank Group President Jim Yong Kim said. “With a fragile but real recovery now underway, countries should seize this moment to undertake institutional and market reforms that can attract private investment to help sustain growth in the long-term. Countries must also continue to invest in people and build resilience against overlapping challenges, including climate change, conflict, forced displacement, famine, and disease.”
The report highlights concern about mounting debt and deficits among emerging market and developing economies, raising the prospect that an abrupt rise in interest rates or tougher borrowing conditions might be damaging. At the end of 2016, government debt exceeded its 2007 level by more than 10 percentage points of GDP in more than half of emerging market and developing economies and fiscal balances worsened from their 2007 levels by more than 5 percentage points of GDP in one-third of these countries.
“The reassuring news is that trade is recovering,” said World Bank Chief Economist Paul Romer. “The concern is that investment remains weak. In response, we are shifting our priorities for lending toward projects that can spur follow-on investment by the private sector.”
A bright spot in the outlook is a recovery in trade growth to 4 percent after a post-financial crisis low of 2.5 percent last year. The report highlights a key area of weakness in global trade, trade among firms not linked through ownership. Such trade through outsourcing channels has slowed much more sharply than intra-firm trade in recent years. This is a reminder of the importance of a healthy global trading network for the less integrated firms that account for the majority of enterprises.
“After a prolonged slowdown, recent acceleration in activity in some of the largest emerging markets is a welcome development for growth in their regions and for the global economy,” said World Bank Development Economics Prospects Director Ayhan Kose. “Now is the time for emerging market and developing economies to assess their vulnerabilities and strengthen policy buffers against adverse shocks.”
» Download: Global Economic Prospects: A Fragile Recovery, June 2017 (PDF, 9.05 MB)
Regional outlook: Sub-Saharan Africa
Recent developments
Growth in Sub-Saharan Africa is recovering, supported by modestly rising commodity prices, strengthening external demand, and the end of drought in a number of countries. Security threats have subsided in several countries. Several factors are preventing a more robust recovery. In Angola and Nigeria, tight foreign exchange liquidity conditions, reflecting distortions in the foreign exchange market, constrain activity in the non-oil sector. In South Africa, political uncertainty and low business confidence are weighing on investment.
In contrast to oil and metals prices, cocoa prices have plummeted, reducing exports and fiscal revenues in Côte d’Ivoire, Ghana, and other cocoa producers. The drought in East Africa has continued into 2017, adversely affecting economic activity in Kenya, and contributing to famine in Somalia and South Sudan.
Regional inflation is gradually decelerating from a high level, although it remains elevated in Angola, Nigeria, and Mozambique. Inflationary pressures increased in East Africa, due to drought.
Outlook
Growth in Sub-Saharan Africa is forecast to pick up to 2.6 percent in 2017 and to 3.2 percent in 2018, predicated on moderately rising commodity prices and reforms to tackle macroeconomic imbalances. Per capita output is projected to shrink by 0.1 percent in 2017 and to increase to a modest 0.7 percent growth pace over 2018-19. At those rates, growth will be insufficient to achieve poverty reduction goals in the region, particularly if constraints to more vigorous growth persist.
Growth in South Africa is projected to rise to 0.6 percent in 2017 and accelerate to 1.1 percent in 2018. A rebound in net exports is forecast to only partially offset weaker-than-previously-forecast growth of private consumption and investment, as borrowing costs rise after the country’s sovereign-debt ratings downgrade. Nigeria is forecast to go from recession to a 1.2 percent growth rate in 2017, gaining speed to 2.4 percent in 2018, helped by a rebound in oil production, as security in oil producing regions improves, and by an increase in fiscal spending. Growth is forecast to jump to 6.1 percent in Ghana in 2017 and 7.8 percent in 2018 as increased oil and gas production boosts exports and domestic electricity production.
Growth in non-resource intensive countries is anticipated to remain solid, supported by infrastructure investment, resilient services sectors, and the recovery of agricultural production. Ethiopia is forecast to expand by 8.3 percent in 2017, Tanzania by 7.2 percent, Côte d’Ivoire by 6.8 percent, and Senegal by 6.7 percent, all helped by public investment. However, some countries need to contain debt accumulation and rebuild policy buffers.
Risks
The regional outlook is subject to significant internal and external risks. A sharp increase in global interest rates could discourage sovereign bond issuance, which has been a key financing strategy for governments. Weaker-than-expected growth in advanced economies or major emerging markets could reduce demand for exports, depress commodity prices and curtail direct foreign investment in mining and infrastructure in the region. Proposed cutbacks to U.S. official development assistance will be a concern to some of the region’s smaller economies and fragile states.
On the domestic front, countries including Angola, Mozambique and Nigeria need to implement significant fiscal adjustment policies to sustain macroeconomic stability and nurture economic recovery. Increased militant activity is a risk in Nigeria. Weather-related risks are elevated in East Africa. Worsening drought conditions will severely affect agricultural production, push food prices higher, and increase food insecurity in the sub-region.
Special focus – Debt Dynamics in Emerging Market and Developing Economies: Time to Act?
Since the global financial crisis, rising private sector debt and deteriorating government debt dynamics have made some emerging market and developing economies (EMDEs) more vulnerable to financing shocks. Specifically, at end-2016, government debt exceeded its 2007 level by more than 10 percentage points of GDP in more than half of EMDEs and the fiscal balance worsened from its 2007 level by more than 5 percentage points of GDP in one-third of EMDEs. Although many EMDEs have strengthened their monetary policy frameworks and accumulated significant reserve buffers over the past two decades, they now need to shore up their fiscal positions to prevent sudden spikes in financing cost from forcing them into fiscal tightening.
Introduction
As growth becomes more durable and inflation rates get closer to central banks’ targets, monetary policy in advanced economies is expected to normalize. While this normalization is likely to proceed smoothly, there is a possibility that it could stir financial market volatility with adverse implications for EMDEs. In many EMDEs, both public and private sector vulnerability to financing cost spikes has risen since the global financial crisis.
Government debt dynamics in EMDEs have deteriorated since the global financial crisis. On average across EMDEs, government debt has risen by 12 percentage points of GDP since 2007 to 47 percent of GDP by 2016, and fiscal deficits have widened to about 5 percent of GDP in 2016 from a surplus of roughly 1 percent of GDP in 2007. At end-2016, government debt exceeded its 2007 level by more than 10 percentage points of GDP in more than half of EMDEs. In addition, the fiscal balance worsened from 2007 levels by more than 5 percentage points of GDP in one-third of EMDEs.
Benign financing conditions have contributed to shifts in the composition of government balance sheets, but not always to strengthen its resilience. In the median EMDE, for example, the share of short-term components of debt securities held by nonresidents has been smaller since 2007. However, the share of nonresident-held debt itself has risen and the maturity of government debt has been on a declining path. The share of government debt in foreign currency has increased in the median EMDE since the late 2000s.
In addition, private sector debt in EMDEs has risen sharply since 2007, reflecting a combination of financial deepening and credit booms. Since 2007, domestic bank credit to the private sector has risen by 12 percentage points of GDP to 52 percent of GDP in 2016 (excluding China) and by more than 20 percentage points of GDP in one-fifth of EMDEs. Firm-level data also suggest that the corporate sector has become more financially fragile since the global financial crisis as solvency positions weakened. During episodes of severe financial stress, private sector debt may become a contingent liability for the public sector. For example, before 2008, some EMDEs suffered systemic banking crises that required governments to provide substantial financial support. Though typically not fully reflected in deficits, such outlays significantly increased public debt above and beyond increases attributable to an accumulation of fiscal imbalances. As these experiences show, the fiscal space implicit in low debt levels can shrink rapidly during periods of elevated financial stress.
Long-term government debt dynamics depend on debt and deficits but also on the macroeconomic context, especially the paths of GDP growth and interest rates. This Special Focus examines the evolution of EMDE fiscal positions since the global financial crisis as well as during typical episodes of financial stress. To do so, it combines fiscal indicators and macroeconomic factors into a single measure of government debt dynamics: the fiscal sustainability gap, defined as the difference between the actual fiscal balance and the debtstabilizing fiscal balance.