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ACP secretary general has dire warning for member states in 2017
Secretary general of the African Caribbean and Pacific (ACP) Group of countries, Dr Patrick I Gomes, is urging member states to move towards ratifying the World Trade Organization (WTO) 2013 Trade Facilitation Agreement.
The Guyanese-born diplomat said that there must be “more concerted actions by ACP member states” to ratify the accord for which the ACP Group, as a critical global force, had exerted its influence in the G90 (Group of Developing Countries) to secure a treaty that reduces cross-border customs regulations and transaction costs.
“The ACP Group will continue to play the role of champion, advocate and reliable ally of the Global South in ensuring an enduring commitment to the development dimension of the world trade system,” he said, adding that linked to strides made in trade negotiation capacity building by the ACP Secretariat “efforts in 2017 are being centred on the design of an ACP-wide Investment regime to be developed in collaboration with the United Nations Conference on Trade & Development (UNCTAD).
Gomes said that at the UNCTAD XIV Summit in Kenya last July, the ACP and UNCTAD agreed on broad principles for regulatory and incentive systems to address cross-border and downstream investments on natural resource and commodity enterprises such as cocoa, cotton, kava, cashew nuts as well as minerals, oil, gas and petroleum by-products.
“Moreover, in collaboration with UNCTAD, the UN Economic Commission for Africa and FAO, the ACP has proposed a comprehensive approach to ‘harnessing the blue economy’. This will address marine resource development, research and innovation studies on fisheries, seabed mining, coastal area conservation and development, artisanal and aquaculture programmes.”
Gomes said that 2017 “will be undoubtedly marked by meagre economic recovery, growing political uncertainty, complex realignments at the international level and continuing regional conflicts [but] we will redouble efforts to strengthen our initiatives to assist our member states to implement the UN’s Agenda 2030 and the SDGs and vigorously pursue alliances of the like-minded to safeguard multilateral institutions for the good of all humanity.
“In this regard, 2017 will be a year for consolidation, standing firm on South-South solidarity and strengthening the core values and mutual interests between and among ACP societies as efforts are intensified for the structural transformation and diversification of ACP economies,” Gomes said, adding that the achievements of 2016 provide a strong platform on which to aim for reasonable success during this year and beyond.
In his New Year message to the 79-member grouping, Gomes said that sound progress had been made last year with the contentious ACP-EU economic Partnership Agreements (EPAs).
He said that while the accord enables implementation measures for these WTO-compatible, preferential trade and investment accords to start reaping some, if even limited, “those ACP countries with full or interim agreements, that have not been ratified should do so as soon as possible and ensure their tariff schedules are prepared to take effect in 2017”.
Caribbean countries, including Jamaica, signed the EPA with Europe in 2008.
In his statement, Gomes said that the gains made in the last year were particularly valuable in advancing commitments made by the ACP Group to the 2015 Paris Agreement and 2016 Marrakech Declaration on climate change.
“The ACP is proud of the ratification and implementation of the 2015 Paris Agreement by so many ACP member states. Their submissions of nationally determined targets for adaptation and mitigation of climate impact on food security, protecting forests and oceans, ensuring sustainable management of extractive sectors and enabling our ACP agro-processing enterprises to move up and into Global Value Chains (GVCs) and derive improved incomes, skills development and decent jobs, especially among women and youth [have had impact]. ”
Gomes said that the impact of these results across several sectors is tangible proof of growing attention to specific UN Agenda 2030 Sustainable Development Goals (SDGs).
“These have included reducing extreme poverty, fostering food and nutrition security, protecting land, forests, oceans and seas and upgrading living conditions in slums and urban settlements and thereby providing a strong platform for continuing progress of ACP States in achieving sustainable development in 2017 and the years ahead.”
Gomes said that while the ACP welcomes the notable gains in the rule of law and good governance by many ACP states as witnessed by the smooth transition of power by electoral means in Ghana, “we are firmly resolved that the outgoing President of the Republic of the Gambia, Yaya Jammeh, should hand over the mantle of leadership to the democratically elected President as expressed by the will of the people.
“To this unequivocal call by fellow Leaders of the Economic Community of West African States (and by the African Union), United Nations and a host of civil society organisations in The Gambia, the ACP Group has aligned itself and urges President Jammeh to honour the electoral results and demit office by the constitutionally due date of 18 January 2017,” he said.
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‘Significant discrepancies remain in commodity trading data’ – UNCTAD
On 14 July 2016, recently published a report on primary commodity trade misinvoicing, saying that some countries could lose as much as 67% of commodity exports to misinvoicing. The report prompted significant reaction, broadly divided between those who think misinvoicing is a problem and those who think it is not. On 23 December, UNCTAD published an updated version of the report.
An early version of the UNCTAD report Trade Misinvoicing in Primary Commodities in Developing Countries: The cases of Chile, Côte d’Ivoire, Nigeria, South Africa and Zambia generated substantial interest and contributed to the debate on the broader issues of transparency in international trade statistics and fairness in the distribution of gains from globalization. The reactions to the report also revealed some areas of confusion in the interpretation of the results and inadequate understanding of the key concepts used in the analysis. The revised report provides a more detailed exposition of the methodology and the concepts used while further stressing the main messages from the analysis.
In the revised report, the concept of trade misinvoicing is explained in greater detail, including its origin in the literature and the estimation methodology. Trade misinvoicing consists of either perverse discrepancies or excessive normal discrepancies in partner trade statistics derived from the comparison of the value of exports as reported by the exporter to the value of imports as reported by the importer. Perverse discrepancies refer to situations where the value of imports is significantly less than the value of exports plus the cost of transport, insurance and duties. This reflects either export overinvoicing or import underinvoicing. Excessive normal discrepancies pertain to the situation where the value of imports exceeds that of exports by an amount that is substantially higher than the reasonable value of the costs of transport, insurance and duties. This situation reflects export underinvoicing or import overinvoicing. Trade misinvoicing is due to factors pertaining to the origin or the destination of trade flows or both. It is therefore not possible to assign a priori the respective share of responsibility on the basis of the estimates of trade misinvoicing alone.
Given that the data on the cost of transport, insurance and duties are not readily available for most countries the report follows the tradition of using 10 percent of exports as a proxy for these costs. In the case of South Africa, one of the only two African countries (the other country is Zimbabwe) that publish imports in f.o.b. and c.i.f. values, the average ratio of the two series over the 1980-2014 period, is 11 percent. Obviously this ratio is likely to vary across countries and products. Therefore if the estimates of trade misinvoicing are low, it may be argued that the discrepancies reflect the gap between the proxy and true value of c.i.f. But when the scale of the estimated trade misinvoicing is substantially large as is the case in the sample of countries and products considered in this report, such an explanation is not plausible.
A number of comments on the first version of the report have centered on the issue of quality of bilateral trade statistics. In addition to potential problems relating to measurement of the costs of transport, insurance and duties mentioned above, comments have also been raised about the timing of the recording of imports and exports, classification of goods, and the reporting of the destination of trade. It may be argued that the observed perverse or excessive normal discrepancies could be due to discrepancies between the data in official national statistics and the data in the databases compiled by international institutions such as COMTRADE. Such discrepancies are likely to be minimal given that these international institutions receive the data from national sources.
It has been argued that excessive normal and perverse discrepancies may arise from inconsistent classification of products across partners and over time. The case of gold exports from South Africa has been referred to as an illustration of this phenomenon. In national statistics, gold exports are split between monetary and non-monetary gold. The analysis in the UNCTAD report focused on non-monetary gold which is reported by both South Africa and its trading partners in Comtrade, thus enabling comparison of similar products as reported on both sides. Contrary to some criticisms of the first version of the report, the series of non-monetary gold exports reported in Comtrade are similar to those in national statistics, as expected, at least up to 2010. This is shown in Table 12 of the revised report using data from South Africa’s Department of Trade and Industry (DTI). However, the values reported show large discrepancies between data from South Africa and its trading partners, which may reflect inconsistencies in classification of gold. A comparison of partner data on non-monetary gold exports with the combined values of monetary and non-monetary gold provided by South Africa still exhibits large discrepancies: South African values are higher in most years up to 2010 and the situation is reversed starting from 2011. Curiously, starting from 2011, all gold exports appear under non-monetary gold in DTI statistics. This change in reporting further complicates the comparison of data from South Africa with that of its trading partners.
The interest in the issue of trade misinvoicing is, indeed, driven by the important consequences, both direct and indirect, that such a phenomenon has on national economies, especially those of developing countries. Trade misinvoicing carries direct costs in the form of foreign exchange that is not repatriated and surrendered to exporting countries’ authorities, lost government revenues from the taxes and other levies not paid on the associated exports and imports, or from export tax credit issued on inflated values of exports. An important dimension of the indirect costs of trade misinvoicing is the associated unfair distribution of the gains from trade.
Q&A with Janvier Nkurunziza, Chief of UNCTAD’s Commodity Research and Analysis Section
Q: Why did you feel it was necessary to publish a new version of the report?
A: When the report was published in July 2016, it attracted considerable attention, and many issues were raised and new information surfaced, including from partners and counterparts in South Africa. We felt it was necessary, as far as possible, to consider the issues raised, and therefore publish a new version.
Q: What is different in this report from the last one?
A: Before talking about the differences, I want to say that the key similarity with the first version – not difference – is that after analysis of export and import data on a range of commodities from developing countries, we still find discrepancies worth tens of billions of dollars.
Our paper covered exports of gold, silver, platinum, and iron ore from South Africa, oil from Nigeria, copper from Zambia and Chile, and cocoa from Cote d’Ivoire, over periods of 14 to 20 years.
We reached our conclusions after analyzing statistics from the UN’s COMTRADE data, one of two major sources of global trade data and the only one disaggregated by both partner and commodity. The other data base is the International Monetary Fund’s Direction of Trade Statistics, which is disaggregated by partner only.
One key difference is that in our original draft we identified discrepancies in South Africa’s gold exports of $78.2 billion, equal to 67% of their total gold exports. This result does not change if we use COMTRADE data. However, since July, South Africa has changed both its key export statistics and its methodologies. This means that, if we use the publicly available data published by South Africa’s Department of Trade and Industry (DTI), as some commentators suggest, then we can no longer calculate with certainty the discrepancies in South African gold exports.
A second key difference is that with the first version, we suggested that the core reason for the discrepancies was intent to deceive for tax evasion or other reasons. In the second version, we make it clear that it’s impossible to know with certainty why these discrepancies exist. However, we do maintain that the discrepancies are too large to be caused by simple human error or methodological differences. Finally, this version of the report looks more closely at the role of transit hubs such as Switzerland and the Netherlands.
Q: What are the key findings in this report now?
A: First, as I said, we find significant discrepancies in import-export data, worth tens of billions of dollars. Whatever the reason for these discrepancies, policy makers and civil society alike should see this as a serious problem. The discrepancies mean that billions of dollars cannot be accounted for. At best, the data is not sufficiently transparent. At worst, some of these discrepancies can represent a loss of tax receipts, foreign exchange, and opportunity.
One other finding which caused some surprise is that South Africa’s DTI made two significant revisions to its gold export data in September 2016, after we had published the first version of our report.
First, South Africa’s DTI statistics on total gold exports over the period from 2000 to 2014 changed from about $34 billion to about $62 billion. Second, exports of non-monetary gold for the period 2011 to 2014 were combined with those of monetary gold. This makes it impossible to compute the estimate of trade misinvoicing over those years, which looks only at non-monetary gold.
Q: What can policymakers learn from this report?
A: First, policymakers may wish to recognize that trade misinvoicing is a sizeable issue in commodity-dependent developing countries. These countries and their development partners may wish to establish programmes that detail the magnitude of this phenomenon, how it occurs, and who the actors are.
Second, exporting countries and their trading partners should improve the transparency and quality of trade statistics. The consistent use of information by all trading partners would allow us all to assess whether exporting countries are getting the right amounts for their commodities in terms of foreign exchange and fiscal receipts.
Third, governments and business should work together to ensure that export records match the import records of receiving countries. At present, especially for transit trade, commodities are often recorded as being exported to a country when in reality they are physically exported elsewhere. This creates confusion in bilateral data statistics, hinders efforts towards increasing transparency in international trade statistics, and complicates traceability throughout the supply chain. While we agree that companies are well within their rights to do whatever they like with the commodities that they have bought and that these commodities may be bought and sold several times while still at sea, we think that, technically, it should be straightforward to record clearly the countries which import and export commodities.
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UNCTAD sees cause for concern in sluggish trade growth
Unusual trends in international trade statistics, such as the falling value of world trade in goods and services even as the global economy grew in 2015, give cause for concern, said an UNCTAD report released on 22 December.
Last year, 2015, was the first time since 2001 that the value of trade has fallen during a period of economic expansion, according to the report – Key Indicators and Trends in International Trade 2016 – which noted that the volume of trade still grew about 1.5%.
“In other words, while many exporters had to cope with lower prices, they saw no decline in export volumes,” the report said. “Although positive growth is consistent with the overall economic trends, there are still reasons to be concerned.”
To start with, the growth of trade volume has been below the overall growth of the world economy, something that has seldom happened in the last few decades and only during economic downturns as in 2001 and 2009, the report said.
Second, trade volumes have been rather unstable, showing substantial volatility during 2015 across quarters and across countries. Trade volumes have increased for the world as a whole, but for many countries trade volumes have in fact decreased.
“Finally, it is arguable whether the physical growth in international trade can continue in a deflationary economic environment,” the report said. “The concern is that many exporters may not be able to maintain their position in the markets for long when facing reduced financial returns.”
The sharp decline in international trade results from several factors, both nominal and structural.
Falling commodity prices and the appreciating US Dollar contributed most to the nominal fall in world trade, with oil prices going from an average of more than $100 per barrel in 2014 to about $50 per barrel in 2015. The trade weighted US dollar index appreciated by almost 15% between 2014 and 2015.
But deflationary factors can explain only some of the trade collapse in 2015. In fact, falling commodity prices explain only half of the 2015 decline in world trade.
“The sluggish growth of 2012-2014 and the magnitude of the decline in trade of goods and services in 2015 suggest a change in the dynamics behind the international integration process,” the report said.
“Indeed, the most commonly used index to gauge globalization trends – the ratio of the value of world trade over global GDP – indicate a decline in economic interdependence,” it added.
Part of the reason for this is that global value chains are shortening. Many countries, including those in East Asia, are reshoring and consolidating manufacturing production processes.
Better access to G20 markets could boost exports from poorest countries by 15%
The world’s poorest countries are barely engaging in the global economy, but fully liberalising trade for these countries into G20 markets could boost their exports by about 15%.
While least developed countries (LDCs) account for about 12% of the world’s population, their share in global exports stands at about 1%, the Key Indicators and Trends in Trade Policy 2016 report says.
Boosting exports from LDCs could help accelerate economic growth, generate jobs, and provide financial resources for sustainable and inclusive development.
Recognising the importance of trade for LDCs, the sustainable development goals (SDGs) include Target 17.11 to “Increase significantly the exports of developing countries, in particular with a view to doubling the least developing countries’ share of global exports by 2020”.
“We’ve seen some progress in the last decade, but the participation of least developing countries in the global economy remains marginal,” said Guillermo Valles, Director of UNCTAD’s Division on International Trade in goods and services and Commodities.
“To double the LDC share of global exports – and achieve the SDG target – the trick will be not just to fix the issue of tariffs but to do the non-tariff measures too,” he said.
The report finds that LDCs generally trade much less than the size of their economies would suggest. The export-to-GDP ratios of the 48 LDCs are on average about 25%, substantially less than the average for other developing countries of about 35%.
“This indicator has been on a clear downward trend since 2011 and it shows the LDC struggle to integrate into the global economy,” Mr. Valles said.
Generally speaking, G20 countries support LDCs through a range of mechanisms to facilitate trade, such as duty-free and quota-free access. But removing all tariffs could boost LDC exports to G20 countries by about $10 billion per year.
Similarly, reducing the distortionary effects of non-tariff measures (NTMs) could boost LDC exports by about $23 billion per year. But this requires a more complex approach. NTMs such as quality standards serve public policy objectives and cannot be removed without disrupting these objectives.
Therefore, the report says, reducing the distortionary effects of NTMs comes not from removing them, but from helping LDCs to comply.
“Taken together, fully liberalising market access for LDCs and eliminating the negative trade effect of NTMs on LDCs would increase their exports by about 15%,” the report says.
The textile and apparel sectors – as well as some agricultural categories – would benefit most, it says.
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From surviving to thriving: How AfDB is helping transform agriculture in Africa – new report
By 2025, Africa aims to feed its fast growing population with its own production. What is more, the world will need Africa’s help to feed an extra two billion people in the coming generation. So making the right investments right now is crucial to unleash the huge potential of Africa’s farms and agribusinesses.
The African Development Bank (AfDB), as one of the leading investors in agriculture in the continent, has been firmly on track on how it has deployed US$5.5 billion in investments in the agriculture sector over five years to 2015, the new Development Effectiveness Review on Agriculture released on 21 December shows.
Here is a brief report card of the AfDB’s topline results: the Bank trained three million people on better farming practices, put 20,000 food marketing and storage into use, constructed four thousand kilometers of feeder roads, offered 150,000 microcredit loans, irrigated and built other water systems on 181,000 hectares of farmland.
“The Development Effectiveness Review is mission accomplished, as the AfDB sets out an even more ambitious agenda in its Feed Africa strategy to end hunger and extreme poverty by 2025,” said Simon Mizrahi, Director of Quality Assurance and Results Department that authored the Development Effectiveness Review on Agriculture.
Making no little plans
The Review details the progress and the pitfalls to date in transforming Africa’s agriculture sector, and lays out what steps must be taken to catapult Africa into becoming a global agricultural powerhouse in the next decade. In recent years, agriculture has zoomed to the top of Africa’s policy agenda, with African countries pledging to eradicate hunger and halve post-harvest losses in under a decade.
It has become increasingly clear that “investing in agriculture is the best way to end hunger, malnutrition, and extreme poverty in Africa,” the development report states. Given that seven out of 10 Africans earn a living from the land, agriculture can create economic growth spread more evenly across society, and extending deeper into rural areas, and helping more women, who make up 70 percent of farmers. The report also pointed out that agriculture can create jobs for the 10 million young Africans entering the labor force every year.
Africa has tremendous scope to grow and develop its farming sector and make it an engine of economic growth, the report highlighted: Africa imports twice the food it exports, and agriculture yields in Africa are only one-quarter those of China. African agriculture makes up a mere five percent of global trade.
At the same time, improving the lot of farmers and farming is crucial to the sustainable growth and development of Africa: eighty percent of the typical household budget is spent on food, while forty percent of food produced spoils after the harvest, due to bad or nonexistent roads or lack of storage.
A more robust agriculture system is also key to ending hunger, the Development report says, since one out of four people lacks regular access to food. What is more, agricultural development must be reoriented to factor in climate change: 65 percent of Africa’s arable land is now degraded, and moisture and fertility losses in African soils are worsening.
Over the last five years, the report detailed how AfDB steered its investments into promoting the continent’s transition to commercial agriculture: building up regional transport corridors to link rural farmers to city centers and ports, providing irrigation and building canals to reduce vulnerability to drought, planting over 64 million trees to boost the land’s hardiness in the face of climate change, and bringing agriculture experts together to collaborate, such as the Alliance for a Green Revolution in Africa, which helps family farms across 18 African countries.
Making headway
Some of the Bank’s most noteworthy operations cited in the report during the period include the Africa Food Crisis Response Programme, which fast-tracked relief that raised US$1.0 billion and led to better harvests; New Rice for Africa, which boosted the hardiness, nutrition and yields of rice and improved the livelihoods of almost a quarter of a million subsistence farmers, with a large share of the development for women’s groups; and the Congo Basin Forest Partnership, which reduced deforestation and degradation by producing millions of trees and agroforest saplings, involving almost 50,000 people in producing and processing non-timber forest products and creating 46,60 hectares of community forest plantations.
One of the largest contributions of the AfDB in shaping the agriculture agenda was its leading role during the Feeding Africa conference in Dakar in October 2015, helping craft a plan for Africa to transform Africa’s agriculture sector. The plan is designed to ramp up nutrition programs, boost agriculture productivity through research, develop farming corridors and agribusiness industrial zones to get infrastructure support, set up a risk-sharing facility, start raising US$3 billion to finance women farmers, and develop diaspora agriculture bonds based on remittances flows.
Progress report card
The sum total of these efforts showed the AfDB has made good progress on several fronts: 97 percent of the Bank’s agriculture projects were rated satisfactory. In the meantime, project approval times shrank to six months from nine months. Largely as a result of the Bank’s Integrated Safeguards on social and environmental impact and its enhanced focus on gender equality, 89% of projects had a climate-informed design, and 87% factored in gender differences, major improvements on both aspects. The number of projects managed by field offices grew to 70%, a leap from 40%, to meet the demand of member countries to working more closely with the Bank.
Doubling down
Now the AfDB is gearing up to deliver more under its new strategy through 2025 by investing US$24 billion, and boosting overall investment through equity, debt, risk and other financial means.
AfDB’s new Feed Africa strategy is one of its High Five priorities, which aims to end poverty, hunger, and malnutrition by 2025 and make the continent a net food exporter. The Bank will achieve this by focusing on certain foods and growing zones, from wheat in North Africa to fish farming everywhere, and making Africa’s food value chains world-class by building markets, setting up commodity exchanges and linking farmers and buyers, among other means. Feed Africa will support agribusiness and innovation, climate-smart agriculture and build roads, energy, and water infrastructure.
2016 Development Effectiveness Review on Agriculture
Agriculture is at the heart of Africa’s development: 7 in every 10 Africans rely on agriculture for their livelihoods. While Africa has enjoyed impressive growth rates for over a decade, this growth has barely touched the millions living on the land. Africa has yet to experience the agricultural miracle that has transformed other developing regions.
Yet Africa has vast agricultural potential, and most of the technologies required to boost yields are already at hand. With the right policies and investments, African agriculture could readily become an engine for inclusive growth across the continent.
The African Development Bank’s (AfDB) work in agriculture has delivered a wide range of benefits to farmers: better seeds, irrigation and sustainable technologies, and greater access to finance and to markets. Bank projects have increased yields, production levels and incomes for farmers, resulting in more dynamic local economies. We recognise, however, that much more needs to be done.
Total investment in African agriculture is still well short of the levels required to deliver fundamental change and prosperity. Africa’s rapid rates of population growth and urbanization are creating vast unmet demands for food and agricultural products. The continent needs a major injection of both public and private finance into all stages of the agricultural value chain, using finance in smarter ways to create dynamic enterprises throughout the sector and markets. This must include both small- and large-scale agribusinesses, to ensure that agricultural development generates inclusive growth.
This is the right time for a big and sustained push on agriculture. That’s why the Bank has made the transformation of this sector, one of its five top priorities (the “High5s”), along with light up and power Africa, industrialize Africa, integrate Africa and improve the quality of life of the people of Africa.
For our part, working with African governments, other development partners and the private sector, the Bank has refocused its assistance on transforming agriculture and agribusiness by 2025. We are working to create better returns to farmers and agribusinesses, including more opportunities for women and young people, while promoting improved food security and nutrition across the continent.
Mozambique: Report discusses poverty trends and recommends way forward
Anemic poverty reduction reveals lack of social and economic inclusion
Between 1997 and 2009 for every percentage point of economic growth in Mozambique, poverty fell by only 0.26 percentage points in the country, roughly half of what is observed in the sub-Saharan Africa region, reveals the latest World Bank publication on poverty and its causes in Mozambique.
The publication titled “Accelerating Poverty Reduction in Mozambique: Challenges and Opportunities” also concludes that poverty has declined more slowly since 2003, having fallen by only 4 percentage points to reach 52 percent in 2009.
On the other hand, poverty reduction performance is uneven across regions of the country, with the central and northern regions showing disproportionately high poverty rates. In general, urban provinces tend to have lower poverty rates than rural provinces. Thus, the City of Maputo, for example, has the lowest levels of poverty in the country with 10 percent of the poor. At the other end of the distribution spectrum Zambezia province has poverty rates of 73 percent. Instead of shrinking like the rest of the country, poverty worsened in the 2003-2009 period in the provinces of Zambézia, Sofala, Manica and Gaza. These five provinces together accounted for approximately 70 percent of the poor in 2009, up from 59 percent in 2003. The provinces of Zambezia and Nampula together represented almost half of the country's poor in 2009 (48 percent), up from 42 Percent in 2003.
“The robust growth that the country has seen in recent times has mainly benefited the non-poor, signaling a weak inclusion in the country’s economic growth model,” said Mark Lundell, World Bank Director for Mozambique. “The country needs to focus on public policies and investments geared towards social and economic inclusion,” he added.
Mozambique has large levels of inequality. High levels of inequality tend to reduce the impact of economic growth on income growth for those at the bottom of the distribution scale. In other words, economic growth in Mozambique could have had a much greater impact on poverty reduction if its effects had not been affected by the increase in inequality over the same period. The absence of inclusive growth policies has affected the expansion of shared prosperity. To expand shared prosperity it would require a growing economy that brings more benefits to the lower echelons of the income distribution scale compared to the rest of the population.
The report also focuses on weak economic opportunities for the poor compared to the non-poor, as well as the issue of access (lack of) schooling as elements that contribute to the generational transmission of poverty among the poor. The report examines what is behind the high poverty rates in the central and northern provinces, concluding, among other things, that these provinces demonstrate low levels of return on household assets compared to other provinces, adding that if the return on household assets in relation to population assets had increased in the provinces of Nampula and Zambezia at the same pace as in the rest of the country, poverty would have reduced by about half in those two provinces.
Finally, the report recalls that while Mozambique has a huge potential for agriculture, which remains largely untapped, low productivity and limited growth in market-based agriculture are major contributors to weak poverty reduction. On the other hand, the effects of natural disasters on the economy as a whole are exacerbated by the weight of agriculture in the country’s GDP. For example, in the year 2000, cyclone Eline, which caused record levels of precipitation, caused costs estimated at 20 percent of GDP at the time.
Accelerating Poverty Reduction in Mozambique: Challenges and Opportunities
Poverty in Mozambique has fallen but not nearly quick enough, according to a new World Bank report. Official data shows that poverty fell from 69.7% in 1996 to 46.1% in 2015 but for each percentage point of economic growth between 1996 and 2009, poverty only reduced by 0.26 percentage points. This is nearly half as fast as what Sub-Saharan Africa has achieved relative to the same level of growth (0.5 percentage points).
The report notes that while poverty reductions have been modest, not everyone is benefitting equally. Inequality remains high and has reduced the potential for economic growth to generate significant gains in reducing poverty. More than two million Mozambicans could have been lifted out of poverty had the economic growth created between 1997 and 2009 been more equally shared.
Additional findings of the report:
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Poverty remains much higher in rural areas and is becoming geographically concentrated in some provinces. Contrary to national trends, poverty increased in the 2000s in Zambezia, Sofala, Manica, and Gaza. Jointly with Nampula, these provinces account for 70% of the poor, up from 59% in 2002-03. Especially, Zambezia and Nampula are home to 38% of the population, yet nearly half of the poor live in these two provinces.
In the last 20 years poverty fell by over 70% in the south (Maputo City and Province) but by less than 20% in the north (Nampula and Zambezia)
Note: Y-axis is an index for the poverty rate (1996/97 = 100)
Source: Mozambican Ministry of Economy and Finance (2016)
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Most of the population is disconnected from the growth process and low accessibility to and participation in markets explain up to 70% of the differences in changes in poverty rates between the lagging provinces and the rest of the country. Lack of access to basic services, ability to invest in human and physical capital, access to markets and economic opportunities constrains most of the population to contribute to and benefit from economic growth. In 2014-15, more than half of the people aged 20 to 30 years in the poorest provinces are illiterate. Only 8% and 4% of rural households have access to electricity and sanitation, respectively. Even when Mozambicans in the more isolated areas such as Nampula and Zambezia have managed to accumulate physical and human capital at a faster pace, they are unable to put them to good use and earn fair returns.
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The vast majority of the population and almost all of the rural poor work in agriculture. Higher productivity and better connection to markets can lead to real improvements in poor people’s livelihoods. Agriculture’s potential to drive poverty reduction is dampened due to low productivity, (maize yields average one ton per hectare compared to 3.8 in South Africa and 2.2 in Malawi), low utilization of inputs and technology (less than 3% of farmers use fertilizers), and limited connectivity and commercialization (eight in 10 farmers are disconnected from reliable all-weather road networks and do not sell part of their production). A Mozambican farmer that employs fertilizers can profit from yields that are up to 40% higher compared to a farmer that doesn’t. Similarly, farmers that sell part of their produce, on average, record yields that are 25% higher relative to those engaged in subsistence farming.
Adoption of productivity enhancing technologies in the agricultural sector is low
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Accelerating poverty reduction also requires protecting vulnerable populations from the effects of extreme weather. Three in four farmers in Mozambique report losing part of their crops, animals or other equipment due to climatic shocks. A child born in a place affected by severe floods, like the ones that hit the country in 2000, is more likely to be undernourished, drop out of school, and not participate in the labor market later in life than a child raised under normal weather conditions.
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Sustainable energy financing key to bright future for Africa’s poorest countries
Access to finance is vital for Africa’s poorest countries to develop sustainable energy initiatives and build renewable power capacity, which would contribute to ending poverty, empowering women and building resilience. At a two-day meeting of sustainable energy experts, which opened in Dar es Salaam, Tanzania on 5 December 2016, participants highlighted the need to scale up and speed up support to sustainable energy in Africa’s least developed countries.
Reliable and affordable access to energy has the potential to transform the daily lives of those living in the world’s poorest countries and is essential for education and health, private sector development, productive capacity building and expansion of trade.
“Two thirds of those living in Africa’s least developed countries do not have access to electricity yet the majority of African least developed countries are endowed with vast reserves of renewable energy resources. These opportunities, together with new technologies, offer many solutions for gaining energy access,” said Gyan Chandra Acharya, Under-Secretary-General and High-Representative for Least Developed Countries, Landlocked Developing Countries and Small Island Developing States. “I hope that this event will inspire new ideas on accelerating reliable access to energy and mobilizing finance bringing swift benefits to Africa’s poorest communities.”
Over the next two days government representatives from African least developed countries, development partners, the United Nations, private sector and civil society focused on practical, workable solutions in areas including access to finance for energy initiatives, energy investment and business plans, benefitting from global energy initiatives, project preparation skills to attract investment and partnerships for sustainable energy. Discussions from the event will feed into the global follow-up process following international commitments made in 2015, including those of the 2030 Agenda and the Addis Ababa Action Agenda and the Paris Agreement on Climate Change.
The event, co-organised by UN-OHRLLS and the Government of Tanzania, with support from UNDP Tanzania, considered many of the main constraints to accessing finance for expanding modern energy. These include lack of scale, lack of substantial local investment, institutional capacity constraints, poor or non-existent credit ratings, as well as low project preparation capacities and skills to deploy financing models that encourage blended finance to attract more funds, private and public, domestic and international. National Energy investment plans were also highlighted as playing a critical role in paving the way forward. Grid, mini-grid and off-grid solutions will also be reflected in the discussions as each country’s transition to a sustainable energy involves a unique mix of resource opportunities and challenges.
“Sustainable energy is central to economic growth, social progress, and environmental sustainability, as recognized in the new 2030 Agenda for Sustainable Development, which includes a standalone goal on energy (SDG7) to ‘ensure access to affordable, reliable, and sustainable modern energy for all’,” says Mr. Alvaro Rodriguez, UN Resident Coordinator and UNDP Representative.
“Over the past two decades, UNDP has mobilized around a total of US$ 2 billion in grant financing and for sustainable energy projects in more than 110 countries and territories worldwide. Unleashing climate finance for sustainable energy is critical to achievement of the Paris Agreement and the SDGs. UNDP supports developing countries and its partners through a market transformation approach.”
There are 48 least developed countries, 32 of which are in Africa. Least Developed Countries are at the bottom of the development ladder, with very low human development, low income and economic growth and high degree of vulnerability. As such they remain at the centre of global development challenges. Reliable access to sustainable energy stands to strengthen multiple elements outlined in the Sustainable Development Goals in areas including climate action, health, education, water and food security and women’s empowerment.
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Africa’s agricultural production systems need a radical change – ECA’s Karingi
“Regardless of the approach or transformative pathway chosen to change food systems and trade regimes, African countries need to undertake radical change in agricultural production systems, adopt agribusiness and promote regional agricultural value chains as a vein for regional integration.”
This statement was made by Stephen Karingi, Director of the ECA’s Regional Integration and Trade Division this week in Cote d’Ivoire, at the opening of a symposium, on the theme Implementing Agro-Industrialization and Regional Value Chains for Africa’s Agricultural Transformation.
“Despite a handful of landmark political commitments, Africa is the only region in the world that has witnessed an increase in the number of food insecure people and has a mushrooming agricultural and food trade deficit,” said Karingi.
He noted that the food situation continues to worsen in real terms with the number of chronically food insecure reaching 229 million in 2016. “This is about 49 million more people at risk compared to 1990 – almost one of every four in Africa, excluding North Africa,” he said.
Karingi indicated that the progress in the levels of agricultural productivity has been uneven across countries, ranging from an increase of 325% in Nigeria to a decrease of about 40% in Zimbabwe and proposed that rethinking agricultural transformation would involve the adoption of a three-pronged approach that should systematically and comprehensively consider three essential elements: farming systems, agribusiness and regional value chains.
On efficient farming systems he said that Africa needs to produce more food and agricultural products through systems that can produce more with less finger print; that are resilient to climate variability and external shocks and that are more responsive to changing needs.
With regard to adopting an agribusiness growth strategy, he said it fits both the resource endowment of most African economies and the conditions surrounding the overwhelming majority of the poor who live in rural areas and depend on agriculture for their livelihood.
“Agribusiness is substantially labor-intensive in terms of creating jobs and generating value added; in addition, it strengthens forward and backward linkages,” he said, adding: “This entails a paradigm shift from supply to a demand-driven market, in which the agribusiness value chain, covering farming production, processing and services and shifts the transitional focus from production to downstream stages of value chains.”
He underscored the benefits of a sustained demand for agricultural products, stating that a vigorous agribusiness would fuel agricultural production and productivity.
On the third approach, Mr. Karingi said that promoting regional agricultural value chains is a critical step towards creating incentives for meaningful private sector investment, allowing the full realization of competitiveness gains and intra-regional trade potential for African agriculture.
ECA has embarked, jointly with the AUC, on a process to develop a Draft Africa Policy Framework, Applications Platform and Guidelines for the Development and Promotion of Regional Agricultural Value Chains (RAVCs). The Policy Framework aims to provide principles, tools and guidelines for Regional Economic Communities and AU member states to guide policies and regulations that promote a viable sustainable agricultural development through fostering RAVCs.
The framework builds on the findings of 5 regional assessment studies, spanning over 16 African countries, of value chains of some of the most important strategic commodities. These studies, through a comprehensive approach, identified the potential and challenges for the development of regional value chains and underscored the need to develop a unified coordination and implementation arrangement.
The Symposium is jointly organized by the ECA, the Government of Cote D’Ivoire, African Union’s Trade and Industry Department and the African Development Bank.
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Global economy sees sharp contraction in short-term debt flows, foreign direct investment remains steady: World Bank
New data on International Financial Flows through 2015 now available
For the first time since the financial crisis, principal repayments on external debt held by low- and middle-income countries exceeded lending inflows, according to International Debt Statistics 2017 released on 14 December 2016.
Short-term debt flows reversed to an outflow of $398 billion, about 3 times higher than the inflow in 2014. Meanwhile long-term debt flows remained positive but plummeted to $214 billion, half the previous year’s level. As a result, external debt stock declined by 6 percent, to $6.7 trillion, equivalent to an average of 25 percent of Gross National Income (GNI).
Looking beyond debt, foreign direct investment equity flows to low- and middle-income countries proved resilient but, with debt flows negative, net financial flows (debt and equity) fell to $377 billion, one third the level reported for 2014.
Trends in debt and equity flows and their policy implications vary from country to country. More specific information is contained in International Debt Statistics 2017 including an analysis of key trends and developments. Some highlights include:
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The combined external debt stock of low- and middle- income countries fell 6 percent, to $6.7 trillion. Net debt outflows and the effect of exchange rate changes vis-à-vis the U.S. dollar were the main contributors to the decline. External debt stocks remained moderate in relation to GNI, an average of 25 percent, and to exports, an average of 98 percent.
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Net debt outflows in 2015 were $186 billion, a marked contrast to inflows of $540 billion in 2014, and reflected a sharp contraction in short-term debt flows, which registered a $398 billion outflow (compared to net inflows of $130 billion in 2014).
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Net financial flows (debt and equity) fell to $377 billion, a third of the 2014 level ($1,157 billion). Foreign direct investment (FDI) proved resilient, holding steady at $543 billion in 2015. Portfolio equity flows remained positive for the fourth successive year but fell to $20 billion, one quarter the 2014 level, reflecting investor uncertainty centered around prospects for China. As a share of total GNI in low and middle-income countries, net financial flows fell by 1.5 percent from an average of 4.9 percent in 2013-2014.
High-income countries reporting quarterly external debt confirm their debt levels are, on average, much higher than in low- and middle-income countries. For most high-income countries government debt-to-GDP ratios (external and domestic debt combined) moderated in 2015.
IDS 2017 draws from comprehensive databases of debt statistics collected from low and middle-income countries, and quarterly external and public sector debt, including from high-income economies. These databases are presented through comprehensive, readily accessible on-line tools and are also available for download. Users can easily view, graph and download the debt statistics of each country.
“These comprehensive international debt statistics are a vital input for debt managers and researchers around the world working to improve the management of global capital flows. Making them available to all is an important element of the Bank’s commitment to Open Data,” says Haishan Fu, Director of the Bank’s Development Data Group that produced the report and database.
International Debt Statistics 2017 now provides a summary overview of:
- Regional trends in debt stocks and flows for low an middle income countries,
- Overview of capital flows and tables of indebtedness indicators
- Global trends in the external debt of high income countries, including aggregate tables
- Global trends in Public Sector Debt Statistics, including aggregate tables
International Debt Statistics 2017 provides statistical tables showing the external debt of low and middle-income countries that report to the World Bank’s Debtor Reporting System. It also includes summary information for countries reporting to the Quarterly External Debt Statistics and the Public Sector Debt databases. Data and related resources are available at: datatopics.worldbank.org/debt
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UNCTAD launches its 2016 Handbook of Statistics
The Handbook includes a wealth of data for analysis of international trade, investment, or development.
Presented in English and French, the annual Handbook provides users – policymakers, researchers, academics, government officials, journalists, and others – with access to cross-comparable data sets.
“By supporting policy analysis, this resource will help policy makers to implement better and more effective policies,” Steve MacFeely, UNCTAD’s Head of Statistics, said.
“With this Handbook, UNCTAD offers trade data that are largely based on final official figures, and which provide a greater level of detail than any other dataset on trade,” he added.
As with previous issues, the Handbook covers international merchandise trade, international trade in services, commodities, international finance, and GDP and population.
According to the Handbook the value of global merchandise trade fell 13% from $19 trillion in 2014 to $16.6 trillion in 2015, making 2015 only the second year since 2000 in which merchandise trade declined.
The value of trade in services also decreased, falling 6% over the same period to $4.8 trillion in 2015.
The data indicate that a weak recovery after the 2009 global financial crisis has ended. The Handbook also notes the widening trade deficit of Least Developed Countries (LDCs) in Africa.
Also available, UNCTADstat is a rich online database detailing key economic statistics by region and country, including indicators on international trade, economic trends, foreign direct investment, external financial resources, population and labour force, information economy and maritime transport is also available.
UNCTAD publishes country profiles which provide a summary overview of data for each county.
Highlight
The UNCTAD Handbook of Statistics provides a collection of statistics and indicators relevant to the analysis of international trade, investment and development. Reliable statistical information is indispensable for formulating sound policies and recommendations that may commit countries for many years as they strive to integrate into the world economy and improve the living standards of their citizens. Whether it is for research, consultation or technical cooperation, UNCTAD needs reliable and internationally comparable trade, financial and macroeconomic data, covering several decades and as many countries as possible.
In addition to facilitating the work of the secretariat’s economists, the Handbook provides all other users – policymakers, research specialists, academics, officials from national governments or international organizations, journalists, executive managers, members of non-governmental organizations – with access to cross-comparable sets of data. The Handbook presents a consolidated, yet wide-ranging overview of the statistical series available at UNCTAD.
Unlike the Handbook, which captures statistics at one point of time, UNCTADstat is continuously updated and enhanced, thus providing users with the latest available data. Consequently, the figures from the Handbook may not always correspond to UNCTADstat.
Download: UNCTAD Handbook of Statistics 2016 (PDF, 5.03 MB)
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Global community makes record $75 billion commitment to end extreme poverty
Targets fragility, refugees, climate change and other pressing challenges
A coalition of more than 60 donor and borrower governments agreed on 15 December 2016 to ratchet up the fight against extreme poverty with a record $75 billion commitment for the International Development Association (IDA), the World Bank’s fund for the poorest countries.
“This is a pivotal step in the movement to end extreme poverty,” World Bank Group President Jim Yong Kim said. “The commitments made by our partners, combined with IDA’s innovations to crowd in the private sector and raise funds from capital markets, will transform the development trajectory of the world’s poorest countries. We are grateful for our partners’ trust in IDA’s ability to deliver results.”
The funding will enable IDA to dramatically scale up development interventions to tackle conflict, fragility and violence, forced displacement, climate change, and gender inequality; and promote governance and institution building, as well as jobs and economic transformation – areas of special focus over the next three years. These efforts are underpinned by an overarching commitment to invest in growth, resilience and opportunity.
“With this innovative package, the world’s poorest countries – especially the most fragile and vulnerable – will get the support they need to grow, create opportunities for people, and make themselves more resilient to shocks and crises,” said Kyle Peters, World Bank Group Interim Managing Director and Co-Chair of the IDA18 negotiations. “IDA’s focus on issues like climate change, gender equality and preventing conflict and violence will also contribute to greater stability and progress around the world.”
Financing during the IDA18 replenishment period, which runs from July 1, 2017 to June 30, 2020, is expected to support:
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Essential health and nutrition services for up to 400 million people
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Access to improved water sources for up to 45 million people
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Financial services for 4-6 million people
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Safe childbirth for up to 11 million women through provision of skilled health personnel
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Training for 9-10 million teachers to benefit 300+ million children
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Immunizations for 130-180 million children
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Better governance in 30 countries through improved statistical capacity
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An additional 5 GW of renewable energy generation capacity
“IDA is writing a whole new chapter in the story of development,” said Dede Ekoue, IDA18 co-chair and Togo’s former Minister of Development. “Together with donors, working hand-in-hand with borrower governments, we are putting forward an innovative, ambitious and responsive package of support that gives hope to the poorest. These interventions will help transform the lives of billions of people living in IDA countries.”
To finance this groundbreaking package, IDA is proposing the most radical transformation in its 56-year history. For the first time, IDA is seeking to leverage its equity by blending donor contributions with internal resources and funds raised through debt markets. By blending concessional contributions from donors with its own resources and capital market debt, IDA will significantly increase the financial support it provides to clients.
“The innovative financing package offers exceptional value for money, with every $1 in partner contributions generating about $3 in spending authority,” said Axel van Trotsenburg, World Bank Vice President for Development Finance. “It is one of the most concrete and significant proposals to date on the Addis Ababa Action Agenda – critical to achieving the 2030 Sustainable Development Goals.”
The additional financing will enable IDA to double the resources to address fragility, conflict and violence (more than $14 billion), as well as the root causes of these risks before they escalate, and additional financing for refugees and their host communities ($2 billion). Increased financing will help strengthen IDA’s support for crisis preparedness and response, pandemic preparedness, disaster risk management, small states and regional integration.
Efforts to stimulate private sector development in the most difficult environments, at the core of job creation and economic transformation, will receive a major push in the form of a new $2.5 billion Private Sector Window (PSW). The PSW, being introduced together with the International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA), will help mobilize private capital and scale up private sector development in the poorest countries, particularly in fragile situations.
The funds will also help governments strengthen institutions, mobilize resources needed to deliver services, and promote accountability.
A total of 48 countries pledged resources to IDA; additional countries are expected to pledge in the near-term. The World Bank Group is continuing the tradition of contributing its own resources to IDA.
“One of the extraordinary things about IDA is that it brings different countries together to help the poorest. In this replenishment in particular, we’ve really seen that IDA is truly a global coalition,” said van Trotsenburg.
A total of 75 low-income countries are eligible to benefit from the IDA18 financing package.
About IDA
The World Bank’s International Development Association (IDA), established in 1960, helps the world’s poorest countries by providing grants and low- to zero-interest loans for projects and programs that boost economic growth, reduce poverty, and improve poor people’s lives. IDA is a multi-issue institution, supporting a range of development activities that pave the way toward equality, economic growth, job creation, higher incomes, and better living conditions. IDA’s work covers, for example, primary education, basic health services, clean water and sanitation, agriculture, business climate improvements, infrastructure, and institutional reforms.
IDA partners with a broad range of entities, including multilateral organizations, ministries, think tanks, operational and advocacy CSOs, the private sector, foundations, and others, at the country and global level. IDA is one of the largest sources of assistance for the world’s poorest countries. Since its inception, IDA has provided half a trillion dollars (in constant 2015 prices) for investments in 112 countries. Annual commitments have averaged about $19 billion over the last three years, with about 50 percent going to Africa.
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tralac’s Daily News Selection
The selection: Thursday, 15 December 2016
Ongoing, in Marrakesh: The 2016 Atlantic Dialogues. Access updated session transcripts here.
Diarise: AU/UNECA 2017 Conference of Ministers (23-28 March 2017, Dakar)
In particular, participants will address the following thematic issues: (i) strategies for sustained, sustainable and inclusive growth, (ii) priorities for addressing inequalities at the national and regional levels, (iii) policy approaches for promoting sustainable and inclusive employment through a stronger role of the private sector and resilient labour markets, (iv) strengthening the data value chain for designing better policies and monitoring implementation to reduce inequalities. [Concept note, pdf]
Rwanda: Country Strategy Paper 2017 - 2021 (pdf, AfDB)
However, the structural transformation of Rwanda’s economy has been slow as growth continues to be generated mainly by low value added and low productivity economic activities. The country’s current growth pattern may, therefore, not be adequate to reach middle income status by 2020 as envisaged by the Government. Over the past 15 years, the relative contributions to GDP of the agriculture, services and industry sectors have changed only slightly: in 2015, services contributed about 47% of GDP, compared to 44% in 2000, thus a small increase. Agriculture contributed 33% of GDP in 2015, hence lower than the 37% 15 years ago. The industry sector’s share in GDP increased marginally during this period, from a low 12% in 2000 to 14% in 2015. In response to Rwanda’s overarching development challenge, the main objective of the new CSP 2017-21 is to accelerate the country’s economic transformation process, thereby boosting inclusive private sector-led growth and creating higher value-added formal wage employment.
SADC Competition Authorities: update (pdf, SA Competition Commission)
At an Extraordinary Meeting of the SADC Standing Committee on Competition and Consumer Law and Policy, chaired by Swaziland, SADC competition authorities approved and adopted detailed frameworks for future cooperation on mergers and cartel investigations. Today’s agreement follows the signature of the landmark MoU between the SADC competition authorities in May this year. The SADC Cartels Working Group, chaired by Zambia and South Africa, has been in operation since June 2015 and in that time has established two sub-groups, whose work plans have also today been approved. The sub-group on legal frameworks, chaired by the Botswana, Namibia and South African competition authorities, will be analysing and cataloguing laws relating to cartels in every SADC jurisdiction, as well as compiling legal challenges that have been encountered during the investigation and prosecution of cartels. The sub-group on investigative techniques, chaired by the competition authorities of Zimbabwe, Mauritius and South Africa, will be exploring the possibility of joint investigations and engaging in capacity building, including staff exchanges.
Construction‚ poultry‚ retail among those singled out as sectors plagued by cross-border price-fixing (TimesLive)
Construction‚ cement‚ poultry‚ milling and retail sectors have been singled out as the top sectors plagued by cross-border price-fixing‚ collusion and bid-rigging at the expense of the poor in the Southern African Development Community member states. The identified sectors are top on the priority list of the 15 SADC member states’ agreement on which to share expertise‚ information‚ resources and financial muscle to uproot anti-competitive connivance. Thembinkosi Bonakele‚ SA’s competition commissioner‚ said the region had a long history of cross-border cartels but there had been no cooperation arrangement to jointly combat the harmful anti-competitive practice.
Ashley Hope: The protection of personal information and cross-border data flows (tralac)
On 1 December 2016 South Africa’s very first Information Regulator commenced operations. The Information Regulator is an independent agency created by the Protection of Personal Information (POPI) Act 2013 – legislation that creates a new regime to ensure personal information is gathered and dealt with appropriately. The strict new rules to be enforced by the regulator could have implications for South African trade as they restrict the movement of data across borders. Given South Africa’s important role as trading partner on the continent it is worthwhile considering whether continent-wide rules on the protection of personal information should be part of continental free trade area negotiations.
Steinhoff and Shoprite to form retail giant (AFP)
Retail giants Steinhoff International and supermarket group Shoprite Holding Wednesday said they were in talks to merge their African operations to form a single company worth over $14bn. The companies said in a statement they had initiated talks "regarding the potential combination of their respective African retail businesses" with an objective of creating what could be regarded as "the retail champion of Africa". The new venture to be called Retail Africa would have annual revenues of about R200bn.
Zimbabwe: ‘Govt should establish commission to monitor currency issues’ (NewsDay)
The government should establish a commission that will look closely at the country’s currency issues amid indications that the South African rand is the preferred currency, an economic consultant has said. Speaking at a Poverty Reduction Trust Forum meeting held in the capital yesterday, economic consultant, Rongai Chizema said since Statutory Instrument 133 of 2016, which ushered in the bond notes, would lapse in six months, there was need to come up with a currency commission, which would advise the country on the way forward with regards to which currency to use. “We take the six months window to have the currency commission that will have a small team of experts that will discuss the cash crisis, currency issues and financial sector confidence,” he said.
Nigeria: Will ban of vehicle importation through land borders boost economy? (Nigeria Today)
Barring the unforeseen, the enforcement of the ban on the importation of vehicles through the land borders will begin next month. The measure is to shore up revenue, curb smuggling and keep the ports busy. But, stakeholders in the maritime industry and members of the House of Representatives feel the implementation of the prohibition would be counterproductive.
Nigerian deficit to rise as Buhari presents record budget (Reuters)
Nigeria expects its 2017 deficit to rise to 2.36 trillion naira ($7.75bn), President Muhammadu Buhari said on Wednesday, as the government tries to drag Africa’s biggest economy out of recession with a budget that foresees record spending. Spending is set to rise 20.4% to 7.3 trillion naira, and revenues are projected to increase by 28% to 4.94 trillion naira, the president said. The deficit would be funded by borrowing 1.254 trillion naira domestically and 1.067 trillion naira abroad, he said, putting the debt to GDP ratio at 2.18% compared with 2.16% in 2016. [2017 Budget Speech: full text]
West African food systems and changing consumer demands (SWAC)
This paper analyses the key drivers of change and their implications on the various demands facing the food system. It then looks at how different elements of the food system respond to evolving demands, discusses the constraints to more effective responses, and finally considers some policy implications and key recommendations, particularly in the context of the ECOWAS-led efforts to develop and implement more effective regional agricultural policies. [The analysts: John Staatz, Frank Hollinger]
EAC: Regional consultations on Draft Sanitary and Phytosanitary Bill ongoing in Nairobi
IGAD: Enhanced trans boundary water governance and cooperation among member states
Ugandan traders ask Tanzania to harmonise cargo transit fees (Daily Monitor)
The private sector in East Africa has asked Tanzania to harmonise the preferential treatments it offers to transit goods as a way of encouraging use of the central corridor. While Rwandan trucks transiting through the central corridor (Dar es Salaam Port) each pay $150 (Shs535,000); other East African member states such as Uganda are charged $500 (Shs1.7 million) per truck for goods in transit. Mr Kassim Omar, the chairman Uganda Clearing Industry and Forwarding Association, who is also East Africa Business Council (EABC) vice chair for Uganda, said: “Indeed, the Dar es Salaam Port has improved. But they need to harmonise the transit fees to make doing business in the region less costly.”
Glimpses into the 2017 global trade policy arena:
Dani Rodrik: The era of trade agreements is over. Should we miss them? (WEF): So economics doesn’t take us too far in understanding trade agreements. Politics seems a more promising avenue: US trade policies in steel and aircraft are probably better explained by policymakers’ desire to help those specific industries – both of which have a powerful lobbying presence in Washington, DC – than by their overall economic consequences. Trade agreements, their proponents often argue, can help rein in such wasteful policies by making it harder for governments to dispense special favors to politically connected industries. But this argument has a blind spot. If trade policies are largely shaped by political lobbying, wouldn’t international trade negotiations similarly be at the mercy of those same lobbies? And can trade rules written by a combination of domestic and foreign lobbies, rather than by domestic lobbies alone, guarantee a better outcome? [What trade rules can Canada turn to if Trump rips up NAFTA? (The Globe and Mail)]
Trump packs trade team with veterans of steel wars with China (Reuters): President-elect Donald Trump is stacking his trade transition team with veterans of the US steel industry’s battles with China, signaling a potentially more aggressive approach to US complaints of unfair Chinese subsidies for its exports and barriers to imports. Led by Wilbur Ross, a billionaire steel investor and Trump’s nominee for commerce secretary, Dan DiMicco, the former CEO of steelmaker Nucor Corp, and three veteran steel trade lawyers, the team is expected to help shift the US trade focus more heavily toward enforcement actions aimed at bringing down a chronic US trade deficit, Washington trade experts said. Based on their past efforts, this could include more challenges to China’s trade practices through the World Trade Organization and more US government-initiated anti-dumping and anti-subsidy cases against a wider range of Chinese products. The latter would be argued before the US International Trade Commission - a forum where the steel industry has had considerable success. [Blackstone, Bridgewater execs added to US trade representative list (POLITICO), Why GM or Ford might get slapped with a fine from China (Fortune)]
China, US positive economic outlook for 2017: Mohamed El-Erian (ecns): Economist Mohamed El-Erian said on Wednesday that China’s economic transformation policy and Donald Trump’s increased growth plans will bear fruit in 2017. The Chief Economic Advisor at German insurance group Allianz and Chairman of President Barack Obama’s global development council, El-Erian, spoke at the one-day 2016 Arab Strategy Forum which addressed economic forecasts for 2017. El-Erian said the road for economic growth in China will always be "a bit bumpy," because the world’s most populous country is depending less on local production and exports, increasing consumption and building a stronger private sector. Compared with other emerging markets in transition such as Brazil’s or India’s, whose economies are struggling, China is managing its transformation policy well, said Egyptian-American economist El-Erian. [‘State of the World Report in 2017’ (prepared for the Arab Strategy Forum by Eurasia Group)]
Service industries set to benefit most from global trade (The Financial): Whilst global merchandise exports have probably contracted by about 3% this year (in USD nominal terms), cross-border sales of services such as tourism, banking, construction and software development have risen by 1%, according to HSBC’s Global Trade Forecast (pdf), which includes the most comprehensive ever country-by- country analysis of trade in services. If governments refrain from introducing new impediments to trade, the value of global goods exports is expected to recover gradually to expand by 3% in 2017 and then 6% a year to 2030. Services, meanwhile, will average 7% growth to contribute USD12.4 trillion to global trade flows in 2030, up from an estimated USD4.9 trillion this year. However, if new tariff and non-tariff barriers are implemented due to US trade policy changes mooted by President-elect Donald Trump and a so-called ‘hard Brexit’ in the UK, the combined value of goods and services trade in 2030 could drop by 3% to USD48.8 trillion from a current projection of USD50 trillion.
Jim O’Neill: Toward a Rust Belt powerhouse (Project Syndicate)
Ajit Ranade: A dollar winter is coming (Livemint)
EU-UK trade deal finalisation could take at least 10 years, warns British diplomat (IBTimes)
The global information and communications technology industry: where Vietnam fits in global value chains (World Bank)
This paper situates Vietnam in the global information and communications technology industry, and identifies several constraints to future growth, including the limited availability and quality of trained information and communications technology professionals, ineffective supplier development initiatives, and weak entrepreneurial ecosystem, especially in management skills. The paper concludes with a set of policy recommendations and forward-looking statements aimed at helping Vietnam move into higher-value activities in the coming years.
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Service industries set to benefit most from global trade
As economic and political headwinds slow global trade in commodities and manufactured goods, businesses seeking to boost sales through exports should explore opportunities linked to services, new research from HSBC Commercial Banking shows.
Whilst global merchandise exports have probably contracted by about 3 per cent this year (in USD nominal terms), cross-border sales of services such as tourism, banking, construction and software development have risen by 1 per cent, according to HSBC’s Global Trade Forecast, which includes the most comprehensive ever country-by-country analysis of trade in services.
If governments refrain from introducing new impediments to trade, the value of global goods exports is expected to recover gradually to expand by 3 per cent in 2017 and then 6 per cent a year to 2030. Services, meanwhile, will average 7 per cent annual growth to contribute USD12.4 trillion to global trade flows in 2030, up from an estimated USD4.9 trillion this year.
However, if new tariff and non-tariff barriers are implemented due to US trade policy changes mooted by President-elect Donald Trump and a so-called ‘hard Brexit’ in the UK, the combined value of goods and services trade in 2030 could drop by 3 per cent to USD48.8 trillion from a current projection of USD50 trillion.
Natalie Blyth, Global Head of Trade and Receivables Finance, HSBC, said: “This complete picture of global commerce, spanning services as well as merchandise, clearly shows the value of cross-border trade to our economies and the value of diversification to long-term business growth. We can see that technological advances, rising consumer spending and falling travel costs are boosting the services sector even as factors such as commodity price volatility and subdued investment spending weigh on growth in goods trade.”
In their analysis of bilateral trade between 25 key trading nations, HSBC and research partner Oxford Economics found that growth in services exports has outstripped growth in goods trade since the global financial crisis. This is partly down to spending on services being less affected by fluctuations in economic activity than spending on goods.
Trade in business-to-business (B2B) and information and communications technology (ICT) services in particular has flourished, averaging growth of 9 per cent and 12 per cent per year respectively between 2000 and 2015 as business models evolved to exploit new technologies such as cloud-based data-sharing.
The US, UK, China, Germany and France were the world’s top exporters of services in 2015, and will remain so in 2030, but most developed markets will lose share as today’s emerging economies develop their workforce skills and digital infrastructure. India, for example, is already a highly successful exporter of business process outsourcing (BPO) and support services for finance, medicine and engineering, and is set to increase these exports in the coming years.
Nonetheless, whilst trade in services continues to thrive it is dwarfed by global trade in goods. The latter will be worth about USD37 trillion by 2030, according to the forecast, equating to 75 per cent of total trade.
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Construction‚ poultry‚ retail among those singled out as sectors plagued by cross-border price-fixing
Construction‚ cement‚ poultry‚ milling and retail sectors have been singled out as the top sectors plagued by cross-border price-fixing‚ collusion and bid-rigging at the expense of the poor in the Southern African Development Community member states.
The identified sectors are top on the priority list of the 15 SADC member states' agreement on which to share expertise‚ information‚ resources and financial muscle to uproot anti-competitive connivance.
Thembinkosi Bonakele‚ SA's competition commissioner‚ said the region had a long history of cross-border cartels but there had been no cooperation arrangement to jointly combat the harmful anti-competitive practice.
“It is important that we look at it from a regional point of view to ensure there is no safe haven for cartels within SADC. We are committed to assist each other in uprooting them...the area involves price-fixing‚ collusion and bid-rigging; where firms coordinate each other's responses on tender bids often by governments‚ so that is the area of focus‚” he said.
However‚ for the agreement to succeed the countries would have to first overcome some hurdles as members states were at different levels of competition laws and institutions.
Luyamba Mpamba‚ Zambia's director of mergers and monopolies‚ said out of 15 SADC members states that were part of the agreement‚ five - Lesotho‚ Mozambique‚ Angola‚ Madagascar and Democratic Republic of Congo - either had no competition laws or had the laws but were in the process of establishing institutions to enforce those laws.
“Some countries are in a situation where‚ for instance‚ there is a cartel conduct in the country but there is no competition authority so it becomes difficult to enforce the law there. Sometimes there is law but no institutions set to enforce the law. (Cartels) may get away with that behaviour there‚” she said.
Mpamba said therefore it was important for the SADC secretariat to encourage formation of competition authorities‚ saying that some countries were more advanced and more developed in terms of competition laws and institutions whereas others were just beginning.
“So we have to try to bridge the gap by cooperating with each other‚” she said.
Magdeline Gabaraane‚ Botswana's Competition Authority's director for mergers and monopolies‚ said their institution was established five years ago and would benefit from SA which was far ahead.
She said SA was more advanced in terms of when they were established and the resources available to them in terms of both manpower and financial power. She said SA had uncovered a lot more cartels and the competition culture in SA saw lots of countries using it as the benchmark.
“You also find that the markets are not the same‚ for instance Botswana's market is not as complex as SA and companies that are in Botswana are headquartered in SA so cooperation with SA is paramount. These investigations are very expensive‚ resource intensive and some of us cannot afford to have those type of resources. These are the dynamics that we need to manage and see how the more advanced ones can assist the less advanced ones‚” she said.
She added that anti-competitive behaviour was harmful in that it robbed the poor and the benefits that would flow from competition included choice and quality of goods.
A recent World Bank study on competition policy in South Africa showed that by tackling four cartels in wheat‚ maize‚ poultry and pharmaceutical‚ some 202‚ 000 individuals were lifted above the poverty line through the lower prices that followed.
The savings put an additional 1.6% back into the pockets of the poorest 10% by raising their disposable income.
The gross effects of cartels in the continent are also documented in a joint report by the African Competition Forum and the World Bank‚ which showed that the retail prices of ten key consumer goods (including bread‚ milk‚ eggs‚ potatoes and frozen chicken) are on average 24% higher in African cities than in other economies around the world.
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Nigerian deficit to rise as Buhari presents record budget
Nigeria expects its 2017 deficit to rise to 2.36 trillion naira ($7.75 billion), President Muhammadu Buhari said on Wednesday, as the government tries to drag Africa’s biggest economy out of recession with a budget that foresees record spending.
Buhari is facing rising disenchantment with his handling of the economy as Nigeria struggles with 18 percent inflation and its first recession in 25 years, brought on by low global prices for the oil it produces.
Capital expenditure will rise by nearly a quarter next year to 2.24 trillion naira as the state invests in roads, railways and power plants to diversify the economy, Buhari told parliament.
“This budget... represents a major step in delivering on our desired goals through a strong partnership across the arms of government and between the public and private sectors to create inclusive growth,” he said. “Fiscal, monetary and trade policies will be fully aligned.”
But John Ashbourne, economist at Capital Economics in London, said the budget’s planned oil production of 2.2 million barrels a day looked “very, very optimistic” as militant attacks had cut output to 1.68 million bpd.
He said the assumed currency rate of 305 naira to the dollar, some 40 percent stronger than the black market rate, meant Nigeria did not plan a new devaluation, as demanded by investors who have been reluctant to commit money at the current rate. “That’s pretty worrying for the non-oil economy,” he said.
Spending is set to rise 20.4 percent to 7.3 trillion naira, and revenues are projected to increase by 28 percent to 4.94 trillion naira, the president said.
The deficit would be funded by borrowing 1.254 trillion naira domestically and 1.067 trillion naira abroad, he said, putting the debt to GDP ratio at 2.18 percent compared with 2.16 percent in 2016.
Buhari did not say when Nigeria would emerge from recession and whether the deficit for 2016 would be 2.2 trillion naira as forecast. The government has struggled to fund the 2016 budget as a Eurobond sale and World Bank loan have been delayed.
The budget must be agreed by parliament before being sent back to Buhari to be passed into law. The 2016 budget became law in May after being delayed by several months by wrangling between the government and the upper house of parliament.
Senate President Bukola Saraki said lawmakers would cooperate with the government. “We assure you Mr. President and all Nigerians that not even a single minute would be wasted on our side in the course of getting this budget approved,” he said.
2017 Budget of Recovery and Growth
Extracts from the speech by President Muhammadu Buhari at the Joint Session of the National Assembly, 14th December 2016
It is my pleasure to present the 2017 Budget Proposals to this distinguished Joint Assembly: the Budget of Recovery and Growth.
We propose that the implementation of the Budget will be based on our Economic Recovery and Growth Strategy. The Plan, which builds on our 2016 Budget, provides a clear road map of policy actions and steps designed to bring the economy out of recession and to a path of steady growth and prosperity.
We continue to face the most challenging economic situation in the history of our Nation. Nearly every home and nearly every business in Nigeria is affected one way or the other.
Yet I remain convinced that this is also a time of great opportunity. We have reached a stage when the creativity, talents and resilience of the Nigerian people is being rewarded. Those courageous and patriotic men and women who believed in Nigeria are now seeing the benefits gradually come to fruition. I am talking about the farmers who today are experiencing bumper harvests, the manufacturers who substituted imported goods for local materials and the car assembly companies who today are expanding to meet higher demand.
Distinguished members of National Assembly, for the record: For many years we depended on oil for foreign exchange revenues. In the days of high oil prices, we did not save. We squandered.
We wasted our large foreign exchange reserves to import nearly everything we consume. Our food, Our clothing, Our manufacturing inputs, Our fuel and much more. In the past 18 months when we experienced low oil prices, we saw our foreign exchange earnings cut by about 60%, our reserves eroded and our consumption declined as we could not import to meet our needs.
By importing nearly everything, we provide jobs for young men and women in the countries that produce what we import, while our own young people wander around jobless. By preferring imported goods, we ensure steady jobs for the nationals of other countries, while our own farmers, manufacturers, engineers, and marketers, remain jobless.
I will stand my ground and maintain my position that under my watch, that old Nigeria is slowly but surely disappearing and a new era is rising in which we grow what we eat and consume what we make.
We will CHANGE our habits and we will CHANGE Nigeria.
By this simple principle, we will increasingly grow and process our own food, we will manufacture what we can and refine our own petroleum products. We will buy ‘Made in Nigeria’ goods. We will encourage garment manufacturing and Nigerian designers, tailors and fashion retailers. We will patronize local entrepreneurs. We will promote the manufacturing powerhouses in Aba, Calabar, Kaduna, Kano, Lagos, Nnewi, Onitsha, and Ota. From light manufacturing to cement production and petrochemicals, our objective is to make Nigeria a new manufacturing hub.
Today, the demand of the urban consumer has presented an opportunity for the rural producer. Across the country, our farmers, traders and transporters are seeing a shift in their fortunes. Nigerians who preferred imported products are now consuming made in Nigeria products. From Argungu in Kebbi to Abakalaki in Ebonyi, rice farmers and millers are seeing their products move. We must replicate such success in other staples like wheat, sugar, soya, tomato and dairy products. Already, the Ministry of Agriculture and Rural Development, the Central Bank of Nigeria, the Organised Private Sector and a handful of Nigerian commercial banks, have embarked on an ambitious private sector-led N600 billion program to push us towards self-sufficiency in three years for these products. I hereby make a special appeal to all State Governors to make available land to potential farmers for the purpose of this program.
To achieve self-sufficiency in food and other products, a lot of work needs to be done across the various value chains. For agriculture, inputs must be available and affordable. In the past, basic inputs, like the NPK fertilizer, were imported although key ingredients like urea and limestone are readily available locally. Our local blending plants have been abandoned. Jobs lost and families destroyed. I am pleased to announce today that on 2nd December 2016, Morocco and Nigeria signed an ambitious collaboration agreement to revive the abandoned Nigerian fertilizer blending plants. The agreement focuses on optimizing local materials while only importing items that are not available locally. This program has already commenced and we expect that in the first quarter of 2017, it will create thousands of jobs and save Nigeria US$200 million of foreign exchange and over N60 billion in subsidy.
We must take advantage of current opportunities to export processed agricultural products and manufactured goods. Let it not be lost on anyone that the true drivers of our economic future will be the farmers, small and medium sized manufacturers, agro-allied businesses, dressmakers, entertainers and technology start-ups. They are the engine of our imminent economic recovery. And their needs underpin the Economic Recovery and Growth Plan.
Let me, Mr. Senate President, Right Hon. Speaker, here acknowledge the concerns expressed by the National Assembly and, in particular, acknowledge your very helpful Resolutions on the State of the Economy, which were sent to me for my consideration. The Resolutions contained many useful suggestions, many of which are in line with my thinking and have already been reflected in our Plan. Let me emphasise that close cooperation between the Executive and the Legislature is vital to the success of our recovery and growth plans.
Permit me to briefly outline a few important features of the Plan. The underlying philosophy of our Economic Recovery and Growth Plan is optimizing the use of local content and empowering local businesses. The role of Government must be to facilitate, enable and support the economic activities of the Nigerian businesses as I earlier mentioned. Fiscal, monetary and trade policies will be fully aligned and underpinned by the use of policy instruments to promote import substitution. Government will however at all times ensure the protection of public interest.
First we clearly understand the paradox that to diversify from oil we need oil revenues. You may recall that oil itself was exploited by investment from agricultural surpluses. We will now use oil revenues to revive our agriculture and industries. Though we cannot control the price of crude oil, we are determined to get our production back to at least 2.2 million barrels per day. Consistent with the views which have also been expressed by the National Assembly, we will continue our engagement with the communities in the Niger Delta to ensure that there is minimum disruption to oil production. The National Assembly, State and Local Governments, Traditional Rulers, Civil Society Organisations and Oil Companies must also do their part in this engagement. We must all come together to ensure peace reigns in the Niger Delta.
In addition, we will continue our ongoing reforms to enhance the efficiency of the management of our oil and gas resources. To this effect, from January 2017, the Federal Government will no longer make provision for Joint Venture cash-calls. Going forward, all Joint Venture operations shall be subjected to a new funding mechanism, which will allow for Cost Recovery. This new funding arrangement is expected to boost exploration and production activities, with resultant net positive impact on government revenues which can be allocated to infrastructure, agriculture, solid minerals and manufacturing sectors.
I earlier mentioned our ambitions for policy harmonisation. But we all know that one of the peculiar problems of our environment is execution. This phenomenon affects both government carrying out its own functions and the innumerable bureaucratic hurdles in doing business. To this end, I will be issuing some Executive Orders to ensure the facilitation and speeding up of government procurements and approvals. Facilitation of business and commerce must be the major objective of government agencies. Government must not be the bottle neck. Additionally, these Executive Orders will widen the scope of compliance with the Fiscal Responsibility Act by Federal Government owned entities and promote support for local content in Ministries, Department and Agencies.
The Executive will soon place before the National Assembly proposals for legislation to reduce statutorily mandated minimum times for administrative processes in order to speed up business transactions. In addition, I have established the Presidential Enabling Business Council, chaired by the Vice President with a mandate to make doing business in Nigeria easier and more attractive. Getting approvals for business and procurements will be simplified and made faster.
In 2017, we will focus on the rapid development of infrastructure, especially rail, roads and power. Efforts to fast-track the modernization of our railway system is a priority in the 2017 Budget. In 2016, we made a lot of progress getting the necessary studies updated and financing arrangements completed. We also addressed some of the legacy contractor liabilities inherited to enable us to move forward on a clean slate. Many of these tasks are not visible but are very necessary for sustainability of projects. Nigerians will soon begin to see the tangible benefits in 2017.
We also have an ambitious programme for growing our digital platforms in order to modernise the Nigerian economy, support innovation and improve productivity and competitiveness. We will do this through increased spending on critical information technology infrastructure and also by promoting policies that facilitate investments in this vital sector.
During 2016, we conducted a critical assessment of the power sector value chain, which is experiencing major funding issues. Although Government, through the CBN and other Development Finance Institutions has intervened, it is clear that more capital is needed. We must also resolve the problems of liquidity in the sector. On its part, Government has made provisions in its 2017 Budget to clear its outstanding electricity bills. This we hope, will provide the much needed liquidity injection to support the investors.
In the delivery of critical infrastructure, we have developed specific models to partner with private capital, which recognize the constraints of limited public finances and incorporate learnings from the past. These tailor-made public private partnerships are being customized, in collaboration with some global players, to suit various sectors, and we trust that, the benefits of this new approach will come to fruition in 2017.
Fellow Nigerians, although a lot of problems experienced by this Administration were not created by us, we are determined to deal with them. One of such issues that the Federal Government is committed to dealing with frontally, is the issue of its indebtedness to contractors and other third parties. We are at an advanced stage of collating and verifying these obligations, some of which go back ten years, which we estimate at about N2 trillion. We will continue to negotiate a realistic and viable payment plan to ensure legitimate claims are settled.
2016 Budget Performance
In 2016, the budget was prepared on the principles of zero based budgeting to ensure our resources were prudently managed and utilized solely for the public good. This method was a clear departure from the previous incremental budgeting method. We have adopted the same principles in the 2017 Budget.
Distinguished members of the National Assembly may recall that the 2016 Budget was predicated on a benchmark oil price of US$38 per barrel, oil production of 2.2 million barrels per day and an exchange rate of N197 to the US dollar.
On the basis of these assumptions, aggregate revenue was projected at N3.86 trillion while the expenditure outlay was estimated at N6.06 trillion. The deficit of N2.2 trillion, which was about 2.14% of GDP was expected to be mainly financed through borrowing.
The implementation of the 2016 Budget was hampered by the combination of relatively low oil prices in the first quarter of 2016, and disruptions in crude oil production which led to significant shortfalls in projected revenue. This contributed to the economic slow-down that negatively affected revenue collections by the Federal Inland Revenue Service and the Nigerian Customs Service.
As at 30 September 2016, aggregate revenue inflow was N2.17 trillion or 25% less than prorated projections. Similarly, N3.58 trillion had been spent by the same date on both recurrent and capital expenditure. This is equivalent to 79% of the pro rated full year expenditure estimate of N4.54 trillion as at the end of September 2016.
In spite of these challenges, we met both our debt service obligations and personnel costs. Similarly, overhead costs have been largely covered.
Although capital expenditure suffered as a result of project formulation delays and revenue shortfalls, in the five months since the 2016 Budget was passed, the amount of N753.6 billion has been released for capital expenditure as at the end of October 2016. It is important to note that this is one of the highest capital releases recorded in the nation’s recent history. In fact, it exceeds the aggregate capital expenditure budget for 2015.
Consequently, work has resumed on a number of stalled infrastructure projects such as the construction of new terminals at the country’s four major airports; numerous major road projects; key power transmission projects; and the completion of the Kaduna – Abuja railway to mention a few.
We remain resolute in our commitment to the security of life and property nationwide. The courageous efforts and sacrifices of our heroes in the armed forces and para military units are clear for all to see. The gradual return to normality in the North East is a good example of the results. Our resolve to support them is unwavering. Our spending in the 2016 fiscal year focused on ensuring these gallant men and women are properly equipped and supported. We will continue to prioritise defence spending till all our enemies, within and outside, are subdued.
Stabilisation of sub-national government finances remains a key objective in our plans to stimulate the economy. In June 2016,a conditional Budget Support Programme was introduced, which offered State Governments N566 billion to address their funding shortfalls. To participate, State Governments were required to subscribe to certain fiscal reforms centered around transparency, accountability and efficiency. For example, States as part of this program were required to publish audited accounts and introduce biometric payroll systems with the goal of eliminating ghost workers.
Our efforts on cost containment have continued throughout the year. We have restricted travel costs, reduced board members’ sitting allowances, converted forfeited properties to Government offices to save on rent and eliminated thousands of Ghost workers. These, and many other cost reduction measures will lead to savings of close to N180 billion per annum to be applied to critical areas including health, security and education.
2017 Budget Priorities
Let me now turn to 2017 Budget.Government’s priorities in 2017 will be a continuation of our 2016 plans but adjusted to reflect new additions made in the Economic Recovery and Growth Plan. In order to restore growth, a key objective of the Federal Government will be to bring about stability and greater coherence between monetary, fiscal and trade policies while guaranteeing security for all.
The effort to diversify the economy and create jobs will continue with emphasis on agriculture, manufacturing, solid minerals and services. Mid- and Down-stream oil and gas sectors,are also key priority areas. We will prioritise investments in human capital development especially in education and health, as well as wider social inclusion through job creation, public works and social investments.
Our plans also recognise that success in building a dynamic, competitive economy depends on construction of high quality national infrastructure and an improved business environment leveraging locally available resources. To achieve this, we will continue our goal of improving governance by enhancing public service delivery as well as securing life and property.
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tralac’s Daily News Selection
The selection: Wednesday, 14 December 2016
Starting today: Donor, borrower country representatives of the World Bank Group meet in Indonesia to finalize details for the 18th IDA replenishment. A preview by Thomas Farole.
The Least Developed Countries Report 2016: The path to graduation and beyond – making the most of the process (UNCTAD)
The proportion of the global poor in the 48 LDCs has more than doubled since 1990, to well over 40%. Their share of those without access to water has also doubled to 43.5% in the same period. And these countries now account for the majority (53.4%) of the 1.1 billion people worldwide who do not have access to electricity, an increase of two thirds. In six LDCs, the rate of extreme poverty is between 70 and 80%, and in 10 more the rate is between 50 and 70%. There are only four other countries in the world where the rate is above 30%, and nowhere else is it above 50%. Only one country (Samoa) has graduated since 2011; only three more (Equatorial Guinea, Vanuatu and Angola) are scheduled to do so in the coming years. Looking ahead, the Report projects that only 13 more will qualify for graduation by 2021, far short of the 21 needed to meet the goal in 2020. For LDC Governments, moving from graduation strategies to graduation-plus strategies aimed at achieving graduation with momentum is also essential. Key priorities include the following: [2016 LDCs report launch in Kigali: update, UNCDF 50th anniversary meeting in Dar es Salaam: Either execute projects or risk losing aid]
WTO Trade Facilitation Agreement nearing entry into force (Bridges Africa)
The process to bring the WTO’s Trade Facilitation Agreement into force is entering the home stretch, with the Geneva-based organisation reporting that only eight more ratifications are needed to do so. The two most recent ratifications – Gabon and Kyrgyzstan – were confirmed this week, coming fast on the heels of Dominica and Mongolia. To date, 102 of the WTO’s 164 members have ratified the TFA.
IBSA meet may see pact to boost trade (The Hindu)
“With the Indian Government planning to promote the IBSA grouping in a big way, efforts should be made to bring the proposal for an India-MERCOSUR-SACU CEPA to the level of an IBSA Joint Study Group. The CEPA can help boost intra-IBSA trade and investment ties,” said Sachin Chaturvedi, Director General of the New Delhi-based think-tank RIS. Intra-IBSA trade (export and import) in 2012 was about $50.5bn, which was only 3.4% of their total trade with the rest of the world. Though the CEPA proposal was mooted in 2007, talks on it have not yet taken off.
East African single visa in limbo as Kenya holds Uganda, Rwanda cash (Business Daily)
The National Treasury, citing stringent fiscal rules, has been holding the cash collected on behalf of Uganda and Rwanda since the three states started piloting a common tourist visa in February 2014. “Kenya has not been able to remit any of the money collected in the last two years from issuance of the regional visa because we don’t have a legal framework to do so,” said Mr Alfred Kitolo, director of productive services at Kenya’s East African Community ministry. “We are not suggesting that any money collected on behalf of Rwanda and Uganda has been lost. Kenya will release all the cash once it gets around the legal hurdle.” According to Mr Kitolo, Kenya is already mulling an option of classifying single visa proceeds as fees.
Dar too small a market for vehicle assembly, manufacturing (IPPMedia)
With an annual average of less than 4,000 units in sales of light-duty new vehicles, Frost & Sullivan says Tanzania is a tiny market to lure serious investors in the sector. Senior officials of the Texas based company told Smart Money via email that the same fate befalls almost all African countries. “The local market volumes do not warrant assembly. Most of the assembly policies are export oriented - all the African markets that assemble require export demand to be sustained, even South Africa,” Samantha James, the company’s Senior Corporate Communications Executive, who handles the African docket, said last week.
South Africa: Study pokes holes in flawed UNCTAD gold exports report (Business Day)
As the Eunomix report puts it, the Unctad study makes some very confident assertions but does not attempt to discuss alternative theories around trade misinvoicing, its prevalence, scale or origins. This leads to the incorrect assumption that the theoretical core of the Unctad report is unchallengeable. However, not only is there not agreement on the central proposition of the report, but trade misinvoicing and its relationship with trade discrepancies are the focus of significant and ongoing debates. There is no consensus, whether theoretical or empirical, that trade data discrepancies correlate with trade misinvoicing, much less that trade misinvoicing would be the primary cause of such discrepancies. In the same vein, while trade misinvoicing is recognised as being a practice, it may not explain, in whole or in part, trade data discrepancies.
Uganda: Local manufacturers ask govt to explain role of foreign investors (Daily Monitor)
Tempers were high at the Monday validation meeting for the draft report on Uganda-Netherlands bilateral investment treaty in Kampala as local manufacturers tasked Uganda Investment Authority to explain what foreign investors have contributed to the country’s economy. Mr Owomusa’s call for more foreign investors did not go down well with Mr Godfrey Ssali, a development policy analyst and lobbyist at Uganda Manufacturers Association. Citing an example of Ethiopia that has reserved some sectors such as banking, telecommunication and retail businesses for its nationals, Mr Kenneth Lubogo, the Bulamogi constituency Member of Parliament, also chairman parliamentary trade and industries committee, said it was time some sectors be preserved for only Ugandans.
Botswana: Transporters contest SA firm’s bid for 4MS (Mmegi)
Local transport industry players are poised to block the acquisition of assets and cession of the main contracts belonging to 4MS Group Holdings by Transport Holdings Limited. The acquiring company, Transport Holdings is a logistics subsidiary of Imperial Holding Group of South Africa and is involved in carrying out large-scale transportation. During a public hearing held by the Competition Authority last week, the operators warned that the proposed deal would boost the dominance of Transport Holdings and reduce the ability of other transport operators to compete.
Botswana’s Choppies says 7 Ukwala outlets bought are insolvent (Business Daily)
Botswana retailer Choppies has disclosed that the seven Ukwala Supermarkets stores it took over in March are technically insolvent to the tune of Sh63.8 million. Choppies, in its latest annual report, says the stores — five in Kisumu and two in Nakuru — have accumulated more liabilities than assets and that they closed the year to June at a loss of Sh126.8 million. [Choppies 2016 annual report: Extended wings for new African destinations (pdf)]
ECOWAS, US renew partnership for security and development in West Africa
Under this agreement (signed by the President of the ECOWAS Commission, Marcel de Souza, and the USAID West Africa Regional Mission Director, Alexandre Deprez) the US government will provide up to $221m over the 2015 – 2019 period in support of activities promoting ECOWAS priorities.
Abidjan–Lagos Corridor Highway Development Project: GPN for study (pdf, AfDB)
The objective of the Abidjan-Lagos Corridor Highway Study is to undertake all of the necessary studies on the hard and soft aspects necessary for the effective implementation, operations and economic development of the Corridor; primarily, between Abidjan and Lagos via Accra, Lome and Cotonou. The new highway will be a six-lane (3-lane dual) carriageway highway, approximately 1028 kilometers and the Study to be undertaken will be based on one main principle. It shall primarily follow a new alignment, incorporating sections of the existing alignment, where necessary, to ensure route optimization. The study has the following components: [Abidjan-Ouagadougou corridor: IDA credit approval]
IMF African country statements:
South Africa: concluding statement. Barriers to entry, including those resulting from multiple and occasionally conflicting regulations, need to be reduced. Vigorous action by the Competition Commission to dismantle cartels and to prevent abuse of dominant market positions should also be supported. Moreover, trade liberalization to promote regional integration would reduce input costs and facilitate gaining economies of scale. By undertaking reforms that spur growth, thereby slowing the rise in the public debt ratio, there is an opportunity to reduce the pace of fiscal adjustment.
Mozambique: IMF staff team concludes visit. Discussions on a possible IMF arrangement were held in a constructive and cooperative atmosphere. While good progress was achieved on a number of technical questions, additional policy adjustments are required to further consolidate macroeconomic and financial stability, and pave the way for a Fund-supported program. Notably, further fiscal consolidation is needed in 2017. Special attention should be given to containing the expansion of the wage bill and gradually eliminating general price subsidies. [Swaziland, South Sudan]
Kenya: Agricultural Development Status Assessment (Nepad/IfPRI)
Extract from Section 3, Regional Trade: This section analyses the changes in the intra-African trade position of Kenya between the period preceding the launching of the CAADP process in Africa and the period of the implementation of Kenya’s NAIP. It focuses on changes in the net values of intra-African trade – exports net of imports – of agricultural and food commodities. The latter are differentiated into 17 commodity groups, including staple food and cash-value commodities. The analysis also covers an assessment of the importance of African markets (versus non-African markets) as destinations for the country’s exports and as origins for the country’s imports of the different agricultural commodity groups. The resulting profile shows the particular progress made by the country during the NAIP implementation years in terms of its participation in African markets for agricultural and food commodities. [Kenya risks maize crisis as traders step up South Sudan sales via Uganda]
FAO urges investing in agriculture science and technology to achieve 2030 ‘zero hunger’ target (UN)
In a report issued last week (pdf), the UN FAO Regional Office for Asia and the Pacific warned that if investment in agricultural research is not increased, particularly in Asia, home to 60% of the world’s hungry people, global efforts to achieve the zero hunger target by 2030 – Goal 2 SDGs – could fall short. In addition, the agency said that investment in agricultural sciences has been on the decline for years worldwide at the same time that advances against hunger have been slowing – particularly in Asia.
A poor means test? Econometric targeting in Africa (World Bank)
While Latin America has attracted the bulk of the past research on PMT, we study the method using survey data for the world’s poorest region, Sub-Saharan Africa. This is also the region where existing social spending has been least effective in reaching the poorest. The specific countries studied are Burkina Faso, Ethiopia, Ghana, Malawi, Mali, Niger, Nigeria, Tanzania and Uganda, being all those countries in SSA with recent and reasonably comparable surveys in the World Bank’s Living Standards Measurement Study. For a subset of these countries we also have panel data. [The analysts: Caitlin Susan Brown, Martin Ravallion, Dominique Van De Walle]
Malaria remains acute public health problem in sub-Saharan Africa (UN)
Despite major progress in the fight against malaria, the mosquito-borne disease remains an acute public health problem, particularly in sub-Saharan Africa, home to 90 per cent of the world’s malaria cases, according to an annual flagship report by the World Health Organization. [Maria Kuecken blog]
Today’s Quick Links:
Uganda: Weakening Shilling to top Central Bank meeting today
South Africa: International Cooperation, Trade and Security Cluster briefing
Fast food chains invade Kenya, unleashing obesity, NCDs (The EastAfrican)
EAC, UNECA hold seminar on AU Declaration on Land (EAC)
Tanzania: Govt clarifies Sh20tr cement investment plan
2016 GFMD Civil Society Days Statement
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Poverty trap leaves least developed countries ever further behind
Global poverty is increasingly concentrated among a group of 48 countries, which are falling further behind the rest of the world in terms of economic development, according to a United Nations report released on Tuesday by UNCTAD.
The Least Developed Countries Report 2016: The Path to Graduation and Beyond – Making the Most of the Process states that a global goal to halve the size of this group will be missed unless the international community takes more action.
“These are the countries where the global battle for poverty eradication will be won or lost,” said UNCTAD Secretary-General Mukhisa Kituyi, launching the Report. “A year ago, the global community pledged to ‘leave no one behind’, but that is exactly what is happening to the least developed countries [LDCs].”
The proportion of the global poor in the 48 LDCs has more than doubled since 1990, to well over 40 per cent. Their share of those without access to water has also doubled to 43.5 per cent in the same period. And these countries now account for the majority (53.4 per cent) of the 1.1 billion people worldwide who do not have access to electricity, an increase of two thirds.
In six LDCs, the rate of extreme poverty is between 70 per cent and 80 per cent, and in 10 more the rate is between 50 per cent and 70 per cent.
There are only four other countries in the world where the rate is above 30 per cent, and nowhere else is it above 50 per cent.
This leaves many LDCs stuck in a poverty trap, a vicious circle in which poverty leads to poor nutrition and health, and lack of education, undermining productivity and investment. This in turn blocks the sustainable development needed to reduce poverty.
Countries can only break out of such vicious circles with international support in finance, trade and technology. The LDC category was created largely to target such support for those countries that most need it.
Countries graduate from the LDC category by satisfying a complex set of economic and social criteria. But only four countries have graduated in the 45 years since this classification was established.
In 2011, prompted by this glacial rate of progress, the international community set a goal that half of all LDCs should satisfy the criteria for graduation by 2020. But halfway to the target date, this goal already appears out of reach.
Only one country (Samoa) has graduated since 2011; only three more (Equatorial Guinea, Vanuatu and Angola) are scheduled to do so in the coming years. Looking ahead, the Report projects that only 13 more will qualify for graduation by 2021, far short of the 21 needed to meet the goal in 2020.
Graduation itself is only a first step towards long-term development. To weather the loss of the international support they received as LDCs and confront the challenges that lie further ahead requires what the Report calls “graduation with momentum” – a process of structural change to increase the productivity of their economies. But many of the countries projected to graduate will not achieve this.
“Graduation is not the winning post of a race to escape from the LDC category. It is the first milestone in the marathon of sustainable long-term development,” said Mr. Kituyi. “So how a country graduates is just as important as when it graduates.”
Likely failure to meet the graduation target, or to achieve graduation with momentum, highlights the inadequacy of international support measures to the developmental needs of LDCs. The Report therefore calls for improvements to such measures, for example:
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Fulfilment by donors of their long-standing commitments to provide 0.15-0.20 per cent of their national income for assistance to LDCs, to make aid more stable and predictable, and to align it more closely with national development strategies.
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Faster progress towards 100 per cent duty-free and quota-free access for LDCs’ exports to developed country markets.
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Renewed efforts to break the stalemate on special and differential treatment for LDCs in World Trade Organization negotiations.
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Full and timely operationalization of a technology bank for LDCs in 2017, with adequate financing and due regard for each country’s level of development.
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Improved monitoring of technology transfer to LDCs.
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A more systematic, smooth transition process for graduating countries, to limit the impact of losing access to international support measures when they graduate.
For LDC Governments, moving from graduation strategies to graduation-plus strategies aimed at achieving graduation with momentum is also essential. Key priorities include the following:
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Transforming rural economies by developing rural non-farm activities in parallel with upgrading agriculture.
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Combining economy-wide industrial policies directed towards market failures with policies aimed at promoting productive activities that contribute to development.
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Building capacities in science, technology and innovation.
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Strengthening tax systems, improving financial systems and addressing financial inclusion.
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Pursuing macroeconomic policies that combine stability with investment dynamism and employment generation.
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Strengthening efforts to address gender inequality across all policy areas.
Highlight
Graduation is the process through which a country ceases to be an LDC, having in principle overcome the structural handicaps that warrant special support from the international community, beyond that generally granted to other developing countries. However, the Report argues that it should be regarded, not as a winning post, but rather as a milestone in a country’s long-term economic and social development. Thus, the focus should not be on graduation itself, but rather on “graduation with momentum”, which will lay the foundations for long-term development and allow potential pitfalls to be avoided far beyond the country’s exit from the LDC category.
Structural transformation, the importance of which is explicitly recognized in the 2030 Agenda for Sustainable Development, plays a fundamental role in this process.
Projections conducted for the Report suggest that only 16 of the 48 current LDCs are likely to fulfil the graduation criteria by 2021, well short of the IPoA target. Unless effective national and international action is taken, the ensuing graduations are also likely to widen the development gap between the remaining LDCs and other developing countries still further.
While there are numerous international support measures (ISMs) for LDCs, their contribution towards graduation is undermined to varying degrees by vague formulation, non-enforceability of commitments, insufficient funding, slow operationalization and exogenous developments in international trade and finance. Their effectiveness also depends critically on the institutional capacities of each LDC to leverage them in support of its own development agenda. Nonetheless, loss of access to LDC-specific trade preferences after graduation may entail substantial costs, estimated by the Report to be in the order of $4.2 billion per year across LDCs as a whole. Such losses underscore the importance of effective smooth transition procedures, and of strong leadership and sound preparation on the part of LDC governments.
The Report highlights the need for LDCs to move from graduation strategies focused on qualification for graduation to “graduation-plus” strategies that take a long-term perspective and foster structural transformation.
Facts and Figures 2016
The UNCTAD Least Developed Countries Report 2016 projects that the following 16 LDCs will graduate from the LDC status in the 2017-2024 period: Afghanistan, Angola, Bangladesh, Bhutan, Djibouti, Equatorial Guinea, Kiribati, Lao People’s Democratic Republic, Myanmar, Nepal, Sao Tome and Principe, Solomon Islands, Timor-Leste, Tuvalu, Vanuatu, and Yemen.
The report projects that the target set in Istanbul in 2011 – that half of the-then 49 LDCs satisfy the graduation criteria by 2020 – will not be met. Projections indicate that only ten LDCs will meet the graduation criteria by that date.
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The number of LDCs doubled from the original list of 25 in 1971 to a peak of 50 between 2003 and 2007, declining to 48 since 2014.
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Four LDCs have graduated since the principle of graduation was established in 1991: Botswana in 1994, Cabo Verde in 2007, Maldives in 2011 and Samoa in 2014.
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While Botswana graduated three years after first meeting the criteria in 1994, this took 17 years for Samoa, 11 years for Maldives, and 10 years for Cabo Verde.
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None of the graduated LDCs has satisfied the vulnerability criterion even after graduation.
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33 LDCs and two of the four past graduates have remained in the same per-capita-income category since 1987
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In the 1950-2010 period, LDCs on average experienced more than 20 years of declining real GDP per capita, compared with around 15 years for other developing countries and fewer than 10 years for developed countries.
Graduates’ profile and post-2025 LDC profiles
UNCTAD graduation projections imply a reduction in the total number of LDCs from 48 in 2016 to 32 in 2025. These would be: Benin, Burkina Faso, Burundi, Cambodia, Central African Republic, Chad, the Comoros, Democratic Republic of the Congo, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Rwanda, Senegal, Sierra Leone, Somalia, South Sudan, Sudan, Tanzania, Togo, Tuvalu, Uganda, Yemen and Zambia.
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By the mid-2020s, the projections imply that the LDC group would include only two countries outside Africa (Cambodia and Haiti) and only one small island country (Comoros).
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The average GNI per capita of the projected graduates of 2017-2024 was nearly double that of the LDCs projected to form the group in 2025 ($1,377 as against $731).
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The projected graduations would increase the agricultural share of employment from 59.7 per cent in the current LDC group to 68.1 per cent in the 2025 group.
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None of the current exporters of minerals, ores and metals is projected to graduate by 2024; and two of the five current fuel exporters are projected to be unable to graduate in this period (Chad and South Sudan).
Commodity dependence
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In 38 of the 47 LDCs for which data are available, commodities accounted for more than two-thirds of merchandise exports in 2013-2015.
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Only five LDCs (Afghanistan, Burundi, Comoros, Solomon Islands and Uganda) have reduced their dependence on primary commodities significantly since 2000, while a quarter have seen significant increases.
Divergence between LDCs and other developing countries (ODCs)
The GDP per capita of LDCs as a whole has fallen almost continuously relative to that of other developing countries and economies in transition since 1981, from more than a quarter to barely one sixth. This ratio fell in all but 5 of the 33 years from 1981 to 2014.
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Since 1990 the proportion of all people worldwide without access to electricity who live in LDCs has increased by two thirds, from 31.8 per cent to 53.4 per cent of the world total; and their share of people without access to water has more than doubled, from 20.0 per cent to 43.5 per cent.
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The tertiary education enrolment ratio in LDCs rose slightly from 1.6 per cent in 1970 to 9.0 per cent in 2013. At the same time it soared from 4.0 per cent across all developing countries to 26.4 per cent over the same period.
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Other developing countries registered 907 times as many patents relative to population and LDCs in 2014, compared with 35 times as many in 1980, as registrations have stagnated in LDCs but boomed in other developing countries.
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The proportion of medium and high skills- and technology-intensive manufactured goods in total merchandise exports has consistently been around 10 times higher in ODCs than in LDCs since 1995, and the gap has widened still further in recent years.
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The median level of mobile telephone subscriptions per 100 people is 65 in LDCs, compared with 110 in other developing countries.
Economic growth
Economic growth in LDCs reached a low of 3.6 per cent in 2015, by far the slowest pace of expansion this century, the slowest since 1994, and barely half the Istanbul Programme of Action target of 7 per cent.
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Their average per-capita GDP growth rate fell by more than half, from 3.3 per cent in 2014 to 1.5 per cent in 2015.
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GDP per capita fell in 13 LDCs, in three cases (Equatorial Guinea, Sierra Leone and Yemen) by more 10 per cent
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The fastest growth in 2015 was recorded by exporters of manufactured goods, at 6.2 per cent, faster than the average for developing countries as a whole.
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Ethiopia enjoyed the fastest growth rate among LDCs in 2015 (10.2 per cent), followed by the Democratic Republic of the Congo, Bhutan, Myanmar, the Lao People’s Democratic Republic and the United Republic of Tanzania, all of which grew by at least 7 per cent.
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Yemen experienced a dramatic reduction in GDP (-28.1 per cent), due to armed conflict taking place there.
International trade
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Despite targeting a doubling LDCs’ share of global exports by 2020 (under the Istanbul Programme of Action), their share in global exports of goods and services fell from 1.05 per cent in 2011 to 0.96 per cent in 2015.
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In 2015, LDCs’ total current account deficit was a record $68.6 billion, one-third greater than in 2014, while both developing countries as a whole, and developed countries, had surpluses.
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The current account deficit of LDCs in Asia nearly doubled to $13.8 billion.
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Relative to GDP, Mozambique had the largest current account deficit in 2015 at 41.3 per cent.
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The total merchandise trade deficit of LDCs almost doubled from $36 billion in 2014 to $65 billion in 2015.
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In nominal terms, the merchandise trade deficit of African LDCs and Haiti group grew by a factor of more than eight, from $2.6 billion in 2014 to $22.5 billion in 2015.
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Fuels, ores, metals, precious stones and gold accounted for 77.7 per cent of merchandise exports of African LDCs and Haiti in 2015, compared with 20.5 per cent for Asian LDCs, and 7.8 per cent for island LDCs.
Finance
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Total net official development assistance (ODA) to LDCs in 2014 amounted to $26 billion. The share in total ODA to developing countries received by LDCs went down from 31.2 per cent in 2013 to 27.1 per cent in 2014.
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The largest LDC recipients of ODA in 2014 were Afghanistan ($3.9 billion), Ethiopia ($1.9 billion), South Sudan ($1.6 billion), the United Republic of Tanzania ($1.5 billion), Mozambique ($1.4 billion), Bangladesh ($1.4 million), the Democratic Republic of the Congo ($1.2 billion) and Myanmar ($1.2 billion)
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Inflows of foreign direct investment (FDI) to LDCs as a group increased by one third to $35 billion in 2015, compared with an increase of 9.5 per cent (to $765 billion) to developing countries as a whole.
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The Africa and Haiti group received 79.9 per cent FDI flows to LDCs, Asian LDCs 19.7 per cent, and island LDCs 0.4 per cent.
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Personal remittances to LDCs rose from $38.5 billion in 2014 to $41.3 billion in 2015, despite a fall from a global historic high of $592 billion in 2014 to $582 billion in 2015.
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Seven countries accounted for 82.5 per cent of all personal remittances to LDCs in 2015: Bangladesh ($15.4 billion), Nepal ($7 billion), Myanmar ($3.5 billion), Yemen ($3.5 billion), Haiti ($2.2 billion), Senegal ($1.6 billion) and Uganda ($1.1 billion).
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Relative to GDP, remittances were greatest in Liberia (33.8 per cent), Nepal (33.4 per cent), Haiti (24.7 per cent), Senegal (11.7 per cent) and Kiribati (11.0 per cent).
Gender
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In 2015, the United Nations Development Programme’s gender inequality index was 0.57 for LDCs, compared with 0.45 for developing countries as a whole.
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Of the 36 LDCs for which data are available, 26 are in the lowest of five categories based on this index.
Landlocked LDCs
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Landlocked LDCs have an average GNI per capita more than one-quarter less than the LDC average and 37 per cent less than that of coastal and island LDCs.
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Growth in landlocked countries has on average been at least 3.5 percentage points less than in coastal and island developing countries (controlling for other determinants), an effect that cannot be wholly offset by domestic policies.
Small island LDCs
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Three of the four countries that have graduated to date are small island developing states (SIDS), as are six of the ten countries projected to graduate by 2021. Only one small island LDC (Comoros) is not projected to graduate in the 2017-2024 period.
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The particular economic vulnerability of small island LDCs is reflected in a higher Economic Vulnerability Index (EVI) than other LDCs (52.0, compared with 39.6).
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Kiribati is the most vulnerable of the 145 countries for which the EVI has been calculated. Its score on this index is 71.5.
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Small island LDCs on average have a substantially higher Human Asset Index than other LDCs (73.9, compared with 47.7), and their average GNI per capita is more than twice as high ($2,088.6 as against $942 in 2013-2015), reflecting the so-called “island paradox”.
Ongoing efforts
Most of the countries whose graduation is expected by 2024 have included graduation as an explicit goal in their development plans and programmes, and at least five of these countries (Bangladesh, Bhutan, the Lao People’s Democratic Republic, Myanmar and Nepal) have set explicit timetables.
Most LDCs that are not expected to graduate until after 2024, by contrast, emphasize goals related to reaching middle-income status, rather than graduation from the LDC group.
International support measures (ISMs) to LDCs
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The potential impact of losing LDC-specific trade preferences is estimated at $4.2 billion annually across LDCs as a whole.
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There are 136 LDC-specific ISMs, in the fields of finance, trade, technology and technical assistance.
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ODA to LDCs from Development Assistance Committee (DAC) donors was only half the 1981 agreed target of 0.15 to 0.20 per cent of GNI in 2012–2014, a shortfall of $26-$50 billion.
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The climate finance architecture is immensely complex, encompassing 29 implementing agencies, 21 multilateral funds and initiatives, and 7 bilateral funds and initiatives.
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In 2013, Quad countries (the United States, the European Union, Japan and Canada) accounted for 40 per cent of LDCs’ total merchandise exports.
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More than half of LDC exports to major developed country markets would have faced zero tariffs even without preferential market access.
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LDCs accounted for an average of 29 per cent of total Aid-for-Trade commitments and 27 per cent of disbursements in 2012-2014.
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In 2014 the share of LDCs in total Aid-for-Trade disbursements fell to 25 per cent, the lowest level for at least a decade.
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Only 0.49 per cent of total ODA disbursements to LDCs in 2012-2014 went to science, technology and innovation, barely one-third of the small proportion (1.44 per cent) in other developing countries.
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The number of LDCs benefiting from technical assistance under Article 67 of the World Trade Organization’s Trade Related Intellectual Property Agreement (TRIPs) fell by more than two thirds from 25 to 8 between 2008 and 2012, while the number of cooperation partners providing such assistance fell from 13 to 5.
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85 per cent of respondents to an UNCTAD survey with LDC policymakers deemed their respective countries’ access to development finance insufficient to achieve the Istanbul Programme of Action targets by 2020.
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Only about half of the respondents considered that there had been improvements in their respective countries’ ability to retain and manage resource rents.
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Building quality infrastructure promotes sustainable economic development
Infrastructure plays a vital role in Africa’s economic growth, and building quality into every stage of the life-cycle of projects is essential if investment in infrastructure is to have a positive impact on the economic development of the continent and its citizens.
This was one of the key messages from participants at this year’s annual meeting of the Infrastructure Consortium for Africa (ICA), where the theme was “Building Quality Infrastructure for Africa’s Development”.
Participants agreed that while increasing funding for infrastructure development was important, this must be accompanied by improvements to the quality and sustainability of infrastructure. Providing infrastructure that is economically efficient, socially inclusive, safe, resilient and sustainable requires building-in concepts of quality throughout the project life-cycle, from feasibility planning and design, through to appropriate technology, operation and maintenance.
Further, as Africa is likely to be impacted severely by climate change, policy makers and infrastructure practitioners must ensure that climate resilience measures are built into infrastructure projects.
The 12th Annual Meeting of the ICA, which took place on 21 & 22 November 2016, was jointly organised by the Government of Japan (Ministry of Foreign Affairs of Japan and Japan International Cooperation Agency – JICA), the African Development Bank (AfDB) and the ICA and was hosted by the AfDB at its office in Abidjan.
Amongst the over 150 participants at the two-day meeting were senior figures such as Mr Patrick Achi (Minister of Economic Infrastructure, Government of Cote d’Ivoire), H.E. Mr Seiji Okada (Ambassador for the Tokyo International Conference on African Development, Ministry of Foreign Affairs, Japan), Dr Elham Ibrahim (Commissioner for Infrastructure, African Union), Mr Bruno Kapandji (former Minister of Energy of DRC and current head of the Inga III project), and Mr Stefan Nalletamby (Acting Vice President, African Development Bank).
The first day of the annual meeting on 21 November was attended by ICA members and invited stakeholders only, while the Plenary Session on the second day, where the theme was “Building Quality Infrastructure for Africa’s Development”, was open to wider participation.
As well as highlighting the key roles that quality infrastructure can play in the continent’s economic growth and development, other conclusions from the discussions at the Plenary Session included:
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There was broad consensus that infrastructure provides the basis for economic development, and economic efficiency is central to providing quality infrastructure;
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Involving the private sector in infrastructure projects could enhance their quality, but Africa has rather limited experience with the private provision of infrastructure and of Public Private Partnerships, due to issues of country risk, governance and capacity;
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It was noted that during the investment phase, life-cycle costs of projects must be thoroughly considered including funding for adequate maintenance and environmental and social considerations;
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It was also noted that current procurement practice does not always allow optimal outcomes because of the rigidity of the processes, focusing mainly on the need for transparency;
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To ensure infrastructure projects have the desired impact it is important to involve stakeholders throughout the process, with consultations of potentially affected communities during the planning phase, and involvement of local businesses during the build, operation and maintenance phases;
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Africa is likely to be significantly impacted by climate change, through increased weather events (both droughts and storms) and rising sea levels. Ensuring climate resilience implies additional investment costs, probably of between 10% and 15%. However, there would be later benefits, both financial and societal;
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The concepts of quality infrastructure, together with information and best practice, must be shared and disseminated throughout the continent.
Financial commitments to Africa’s infrastructure development grow by 12%
Members of the Infrastructure Consortium for Africa (ICA) and invited stakeholders were briefed on the details of the Infrastructure Financing Trends 2015 report on the first day of the ICA’s two-day Annual Meeting in Abidjan, Cote d’Ivoire, on 21 November 2016. They also received reports about the other key activities of the ICA Secretariat during 2016 and the studies produced.
Commenting on the reaction to the Infrastructure Financing Trends report Mr Mohamed Hassan, Coordinator of the ICA Secretariat, said:
“ICA members commended the report for the consistency of the quantitative data and the continuing trend for greater qualitative analysis. This year’s report includes more detailed analysis of the processes and dynamics that drive infrastructure investment, and incorporates the views of a wide range of stakeholders, including the private sector.
“The ICA’s annual report on infrastructure financing in Africa is a unique publication and an important tool for infrastructure planners, financiers and decision-makers across the continent. The ICA is delighted that its flagship report makes such a valuable contribution to Africa’s infrastructure development.”
In addition to the Infrastructure Financing Trends in Africa 2015 report, participants at the meeting commended the ICA Secretariat on the concluded reports and studies it commissioned. Presentations were made at the meeting on a number of completed studies and others still in production, including: the Atlas of Africa Energy Resources; the report on Africa Power Pools; the Diagnostic Study and Project Development/Investment Pipeline for Urban Transport in Sub-Saharan Africa; the second edition of the One Stop Border Post (OSBP) Sourcebook; and Nexus Trade-offs and Strategies for Addressing the Water, Agriculture and Energy Security Nexus in Africa.
The ICA Secretariat briefed participants about the ICA’s support for the Water, Climate and Development Programme (WACDEP), provided a progress report on the Project Preparation Facilities Network (PPFN), and outlined planned activities for 2017.
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IBSA meet may see pact to boost trade
To be held in 2017, tri-nation summit may also see more contribution to developmental projects
The proposal for a Comprehensive Economic Partnership Agreement (CEPA) between India and the two separate customs unions involving Brazil and South Africa – MERCOSUR and SACU respectively – to boost trade and investment ties, is set to get a leg up with New Delhi likely to accord it priority at the forthcoming IBSA Summit.
Also topping the agenda at the sixth IBSA (India, Brazil, South Africa) Summit – likely to be held in India in mid-2017 – would be the three IBSA members enhancing contribution to the ‘IBSA Fund’ to support more developmental projects across the world. The summit could also see the three major emerging market economies strengthening trilateral cooperation on renewable energy projects, sources said.
On trade, India has a Preferential Trade Agreement (PTA) with MERCOSUR (a trading bloc and customs union of Latin American nations, including Brazil) and both the sides are looking to expand its coverage. India is also negotiating a PTA with Southern African Customs Union (SACU) that includes South Africa – though only five rounds of negotiations had been held so far, with the fifth round having been held back in October 2010. A PTA between MERCOSUR and SACU had become operational from April this year.
Expanding scope
In the backdrop of these PTAs, the proposal for an India-MERCOSUR-SACU CEPA is to expand the scope of the PTAs from just trade in goods and then convert them into a comprehensive agreement that will also cover investments, trade in services and areas including intellectual property rights and competition laws among others.
“With the Indian Government planning to promote the IBSA grouping in a big way, efforts should be made to bring the proposal for an India-MERCOSUR-SACU CEPA to the level of an IBSA Joint Study Group. The CEPA can help boost intra-IBSA trade and investment ties,” said Sachin Chaturvedi, Director General of the New Delhi-based think-tank RIS. Intra-IBSA trade (export and import) in 2012 was about $50.5 billion, which was only 3.4 per cent of their total trade with the rest of the world. Though the CEPA proposal was mooted in 2007, talks on it have not yet taken off.
IBSA Fund
On the IBSA Fund, the three IBSA member-nations had in March 2005 agreed that each of them will pitch in with an annual contribution of $1 million to the Fund.
Though operational from 2006, the Fund had received contributions of only about $18 million, sources said, adding that the aim was to enhance it soon to $40 million to assist 25 projects every year, especially in least developed countries.
The Fund, managed by the UN office for South-South cooperation in the UN Development Programme (UNDP), is however sector- and region-agnostic.
According to an RIS report, there is a need for national development cooperation agencies of the three IBSA member nations to assume a larger role in development cooperation through IBSA.
“Instead of over-reliance on UNDP, the ABC of Brazil, DPA of India and SADPA (of South Africa) can jointly manage the Fund and the projects,” it added.
The projects completed by the IBSA Fund include those in Burundi (combating HIV/AIDS), Palestine (sports promotion and rehabilitation of cultural/hospital centre), Sierra Leone (human development and poverty reduction), Cape Verde (health care infrastructure, drinking water), Guinea-Bissau (agriculture development), Haiti (solid waste collection), Cambodia (empowering people with special needs) and Vietnam (rice production).
The IBSA Fund also supported Laos in the formulation of projects and Timor-Leste through a technical exchange.
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WTO Trade Facilitation Agreement nearing entry into force
The process to bring the WTO’s Trade Facilitation Agreement (TFA) into force is entering the home stretch, with the Geneva-based organisation reporting that only eight more ratifications are needed to do so.
The two most recent ratifications – Gabon and Kyrgyzstan – were confirmed this week, coming fast on the heels of Dominica and Mongolia. Under WTO rules, two-thirds of the global trade body’s membership must ratify an accord in order for it to enter into force for those members.
To date, 102 of the WTO’s 164 members have ratified the TFA. The deal includes a series of provisions aimed at making customs and border procedures easier, thus speeding up the passage of goods between countries and lowering their costs.
These include commitments relating to publishing import, export, and transit procedures and forms online; allowing opportunities for comments on new laws and regulations that may affect the movement and clearance of goods; disciplines on fees and charges for customs processing; pre-arrival processing of goods; and various others
Overall, the Geneva-based organisation predicts that the TFA’s export gains could add up to US$750 billion to US$1 trillion annually. According to the global trade body, developing countries – particularly African and least developed countries – are expected to see the greatest reductions in costs due to the TFA.
The WTO’s Trade Facilitation Agreement was adopted in Bali, Indonesia, in December 2013 at the organisation’s Ninth Ministerial Conference. It then opened for ratification in November of the following year.
Category notifications, donor support
Along with its potential to cut costs and speed up trade, the TFA is also notable among the WTO’s body of rules as having provisions that enable developing and least developed countries to notify which commitments they can implement right away, and which ones will require more time or support to implement.
According to a list provided by the WTO’s TFA Facility – a mechanism designed to help developing and least developed countries implement the new deal’s requirements – 90 WTO members have put forward their Category A notifications, which list those commitments which will enter into force as soon as the TFA comes online.
For the other two categories – those that require a transition period, known as “Category B” and those that will need both extra time and technical assistance – six notifications have been received.
To that end, various bilateral donors and regional/multilateral organisations have already been making preparations to provide the necessary support. WTO members having difficulty getting the help or information they need can also turn to the TFA Facility for additional assistance.
The facility is working to provide training materials, courses, regional workshops, and other support, according to a 2016 work plan.
Coming up
Once the Trade Facilitation Agreement enters into force, a series of institutional arrangements will also take effect. For example, the Preparatory Committee on Trade Facilitation – which has been shepherding the process of preparing for the deal to come online – will be replaced with a Committee on Trade Facilitation which will meet at least annually.
That new committee will aim to provide a forum for information sharing, along with collaborating with the World Customs Organization (WCO) and other relevant international bodies that could help support the TFA. It will also hold a review on the TFA’s “operation and implementation” four years after it takes effect, with subsequent reviews held regularly.
Meanwhile, WTO members will also need to have in place national committees on trade facilitation, or their equivalent, in order to help in the implementation process.
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“The Time for Action is upon us” – 2016 GFMD Civil Society Days Statement
Civil society leaders at global meeting call for justice, rights, partnerships and a Global Compact that brings real meaning to migrants’ lives
More than 200 representatives of civil society from over 50 countries, as well as representatives from governments and international organizations, gathered in Bangladesh last week to deliberate on action needed for inclusion, protection and empowerment of migrants, and the governance of migration.
The Civil Society Days (CSDs) of the Global Forum on Migration and Development (GFMD), entitled “Time for Action; Doing rights-based governance of migration and development in our communities and across borders”, took place on 8 and 9 December. On 10 December, the CSDs participants – leaders of civil society, migrant and diaspora groups, trade unions, and academia – joined ministers and senior government officials, together with representatives of international organizations and the private sector, for a day of “Common Space”, followed by two days of government deliberations on 11-12 December.
Civil society’s Call for Action in our communities and across borders – highlights
During the Opening Ceremony of the Government Days, the 2016 Chair of the CSDs, long-term community-leader Colin Rajah of the People’s Global Action on Migration, Development and Human Rights, presented civil society’s Call for Action with key recommendations from the CSDs.
“We have looked at people-centered, needs-first, rights-based policies in migration and human development,” Mr. Rajah said, and how these “can be implemented in work civil society itself does, as well as together with governments, international organizations and increasingly the private sector”. The statement addressed issues such as:
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the protection and empowerment of migrant workers, and their labour rights;
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the needs and human rights of migrants who are on the move, and in transit;
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social inclusion and addressing structural inequalities including the role of local authorities;
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development investments by diaspora of all “skill” levels; and funding and finding ways to implement and monitor the migration-related targets on the UN 2030 Agenda.
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Women and children in migration as advocates for rights and agents for change
With the unprecedented UN High-level Summit last September, and the resulting New York Declaration for Refugees and Migrants that launched the development of a Global Compact for “safe, orderly and regular” migration by 2018, much energy was also put, throughout the CSDs, into considering the development of this Compact.
In particular, over and over civil society participant emphasized that this Global Compact needs to have “practical effects on the ground, improving the lives, opportunities, and respect for the human rights of all migrants.”
Rajah and his co-chair of the GFMD CSDs 2016, Sicel’mpilo Shange-Buthane of Amnesty International, said it best when calling the Summit and the Compact the start of a “paradigm shift for all of us”. Civil society called for an inclusive multi-stakeholder process, building from the local level up.
“Only with real engagement and partnership, rooted firmly in the principles of rights and justice”, Rajah said “can we reach a Compact that can bring real meaning, and change, to migrants’ lives”.
With the development of the Global Compact getting underway in a few weeks, and the next GFMD taking place in 6 months from now in Berlin, Rajah concluded “indeed the Time for Action is upon us.”