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Zimbabwe 2017 National Budget Statement: “Pushing production frontiers across all sectors of the economy”
Finance minister Patrick Chinamasa has projected the economy to grow by 1,7% next year buoyed by growth in agriculture and mining.
Presenting the $4,1 billion 2017 national budget yesterday, Chinamasa said the economy was projected to grow by 0,6% this year but would improve next year.
“In 2017, the economy is set to turn around from the slowdown mode to modest growth led by key sectors of mining and agriculture, benefitting from the anticipated normal to above normal rainfall. Overall GDP growth is, therefore, projected at a moderate 1,7% in 2017, also against the background of anticipated moderate improvements in international commodity prices, fruition of planned mining investments and benefits from the ease of doing business reforms,” he said.
The growth projection is a sober one after Treasury had earlier forecast a growth rate of 4,8% in its strategic paper.
Revenue will be $3,7 billion leaving a financing gap of $400 million, Chinamasa said.
“The fiscal framework of revenue collections of $3,7 billion and projected expenditures of $4,1 billion presents a financing gap of about $400 million, which is 2,7% of GDP, for the proposed 2017 budget,” Chinamasa said.
The 2016 financing gap had been projected to be $150 million. Chinamasa said the projected financing gap in 2017 would be an improvement on the anticipated 2016 unsustainable financing gap of $1,18 billion outturn, given projected total revenues of $3,53 billion, against anticipated expenditures of $4,59 billion.
Employment costs would take $3 billion, leaving $400 million for current operations and $180 million for debt services out of the overall proposal for recurrent expenditures of $3,58 billion.
Capital expenditure will have $520 million, which is 14% of total revenues from the national budget. Chinamasa said the desired levels for capital expenditure on the capital budget for implementation of ZimAsset project was $5,4 billion.
“The 2017 budget provision of $3 billion for employment costs represents decline from the estimated outturn of $3,14 billion to year end 2016. The anticipated lower provision on employment costs by an estimated $140 million is reflective of financial savings arising from the implementation of the Public Service Wage Bill rationalisation measures,” he said.
Chinamasa said a severe drought, for the second consecutive year, had a heavy toll on agriculture production, with some crops, such as maize, recording merely 511 000 tonnes, against the average national requirement of 1 800 000 tonnes, resulting in a huge import bill for the country. Consequently, agriculture recorded a growth decline of -3,7% in 2016. However, in 2017, Chinamasa said agriculture was projected to grow by 12% driven by higher output from major crops such as maize, cotton and tobacco, as well as milk production.
He said the country needed to gradually revert back to the cash budgeting framework tenets, through ensuring that all line ministries adhere to allocations and spend as and when resources are available.
Chinamasa proposed a moratorium on Treasury bill issuances and confining borrowing at concessional rates from external sources for development programmes. The government has been resorting to issuing Treasury Bills to finance the gap caused by the mismatch between revenue and expenditure.
“In tandem with the above, government will also start addressing the fiscal gap through a number of expenditure management measures backed by revenue increasing interventions anchored on stimulation of production,” he said.
Chinamasa said the country would next year clear its arrears with other multilateral creditors such as the African Development Bank ($610 million), the World Bank ($1,16 billion), the European Investment Bank ($212 million) and other multilateral institutions as well as bilateral official creditors, after it cleared its $108 million debt with the International Monetary Fund.
Commenting on the budget, former Finance minister Tendai Biti said one cannot expect to get different results from the same figures. For instance, this year’s budget was projected at $4 billion and the growth projects were revised to 0,6% by Chinamasa.
Biti rapped the proposal to levy 5 cents for every dollar on airtime and data to finance the health fund.
“It has nothing to do with health. it’s a fundraising initiative. Government can have a proper health care that should work, not these levies, which are punitive. This is a political move to push people away from social media that has been against this regime,” he said.
Biti said the country was in a recession and heading towards economic depression and it required a fundamental shift with major cost cutting measures.
2017 National Budget Statement
Extracts from the National Budget Statement presented to the Parliament of Zimbabwe by Hon. Patrick A. Chinamasa, MP Minister of Finance and Economic Development, on 8 December 2016
The 2017 National Budget Statement constitutes the fourth Budget for implementing our Zim Asset, whose mission is “Providing an enabling environment for sustainable economic empowerment and social transformation to the people of Zimbabwe”.
The economy is still confronted with a number of headwinds, which continue to restrain sustainable and equitable economic growth.
Domestic Production
The fundamental challenge remains that of under-production, entirely across all sectors of the economy.
This economic under-performance is notwithstanding vast strengths and opportunities in agriculture, manufacturing, mining and tourism, arising out of our diverse natural resource endowment, conducive climatic conditions, and trained human resources.
The 2017 Budget, therefore, proposes interventions targeted at increasing domestic production.
Entrepreneurship
We, however, have to maximise returns on our human capital by reversing the prevailing mentality of trained personnel being contented to remain, first and foremost, as employees.
Central to this is broadening the culture of entrepreneurship among our people, inclusive of readiness to embark on business risky ventures.
Reform Thrust
The major challenge for the 2017 National Budget is, therefore, taking the lead in ‘walking the talk’ with regards to implementing critical reforms to:
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re-orient fiscal resources towards Zim Asset developmental programmes;
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strengthen interventions to stimulate production and supply across the various sectors;
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finalise the outstanding components of the re-engagement process with international financial institutions;
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entrench structural reforms to improve the domestic business and investment environment, vital for restoration of confidence, lowering the ease and cost of doing business and product competitiveness; and
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support implementation of poverty reduction programmes and projects highlighted in the IPRSP.
Accordingly, consistent with the above objectives, the 2017 National Budget is centred on the theme “Pushing Production Frontiers to Potential Levels Across all Sectors of the Economy”.
Consequently, this Budget, therefore, proposes corrective measures on fiscal and external imbalances to restore fiscal and debt sustainability, which provides a conducive environment for productive activities.
Specifically, while as alluded to above, fiscal imbalances will require containment of expenditures, implementation of strong structural reforms will entail:
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shedding off those State Enterprises that would benefit from joint venture partnerships with identified strategic investors;
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improving performance of those State Enterprises that remain;
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reducing policy uncertainty;
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fighting corruption in an effective way;
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enhancing competitiveness;
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enforcing guidelines on good corporate governance in public enterprises and local authorities; and
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building strong systems for ensuring transparency and accountability.
In the absence of a robust fiscal adjustment and structural reforms as well as arrears clearance, the persistent deterioration in the macro-economic environment will continue to incapacitate the country’s ability to honour its obligations to all its creditors and to move forward.
Safety Nets
Furthermore, under the challenging socio-economic environment, Government, under this Budget, will pay attention to alleviating increasing hardships afflicting the vulnerable segments of our population.
Central to this, will be interventions to empower vulnerable groups to participate meaningfully in economic and business activities across the various sectors, including in agriculture.
Without increasing production, it will remain difficult for the Government to have meaningful capacity to strengthen social safety nets, in line with the objectives of the Interim Poverty Reduction Strategy Paper (IPRSP) for 2016-2018.
Furthermore, as the 2018 Election year approaches, upholding an atmosphere of tranquillity, tolerance and minimum polarisation, supportive of conduct of economic activity will also be central.
In contextualising the key issues of the 2017 National Budget, this Budget Statement gives an outlook for the economy, including the appropriate fiscal framework, and some of the specific fiscal interventions, as well as critical structural policy reforms.
Economic outlook
The economy, notwithstanding resilience, remains under stress, principally on account of low domestic production across the various sectors – that is in agriculture, mining, manufacturing, tourism, construction, as well as in the other service sectors.
While the recent El-Nino induced drought had an effect on farming output, and depressed international commodity prices on mineral exports, reduced output across the other sectors is also reflective of the need for increased investment, both domestic and foreign.
This will require a complementary conducive doing business environment, as well as finalising the external payment arrears situation to help improve access to lines of credit.
In manufacturing, over-dependence on imports, against the background of the strong US dollar and a weakening South African rand, had undermined companies’ competitiveness over both the domestic as well as export markets.
The above adverse effects on agriculture, mining and manufacturing, as a result, meant low domestic production underpinning the prevailing low capacity utilisation across sectors, low incomes, high unemployment levels, domestic liquidity and cash challenges.
The low domestic savings base, inclusive of the fiscal deficit, also meant continued absence of domestic financial resources which limited local domestic investment.
Against this background, the overview for the overall economic outturn in 2016 is for real growth estimates of only 0.6%.
In 2017, the economy is set to turn around from the slowdown mode to modest growth led by key sectors of mining and agriculture, benefitting from the anticipated normal to above normal rainfall.
Overall GDP growth is, therefore, projected at a moderate 1.7% in 2017, also against the background of anticipated moderate improvements in international commodity prices, fruition of planned mining investments and benefits from the ease of doing business reforms.
Manufacturing
Manufacturing, which continues to face such constraints as antiquated equipment, capital, low aggregate demand, liquidity, high costs of utilities, and unfair competition from imports, is projected to register modest growth of 0.3% in 2017.
The thrust of the 2017 Budget interventions, in line with the Zim Asset, will centre on sustaining the evening of the playing field, re-kindling business confidence, and enhancing competitiveness through lowering the cost of doing business and improving the business and investment environment.
With regards to evening the playing field, initial results from an evaluation of the impact of SI 64 indicate gains in capacity utilisation across such sub-sectors as milling and baking; food, fruits and vegetables processing; iron and steel making; battery manufacturing; packaging; pharmaceuticals; and furniture manufacturing, among others.
Government continues to monitor impact of this instrument on investment into re-equipping, increased production and creation of employment.
This should also benefit from Government initiatives in support of the promotion of value chains, especially those linkages between agriculture and the manufacturing sector.
Already, notable linkages are accruing under the recently promoted cotton to clothing, beef to leather and agro-processing value chains.
The introduction of the 5% bond note export incentive through the Reserve Bank also proffers benefits for improved domestic production over the coming year.
Export Performance
A downturn in overall export performance is estimated for 2016, with exports falling by 6.9% to US$3.365 billion, from US$3.614 billion last year.
Under the prevailing multi-currency arrangement, export receipts represent the economy’s anchor source of the economy and banking sector cash and liquidity.
The reversal of the worrisome decline in exports requires intervention measures to restore competitiveness and diversification of the economy’s export base across all sectors, including remittances of non-residents.
Foreign Capital Inflows
The current huge savings-investment gap requires that the country establish a highly competitive environment to attract external savings through external capital inflows comprising of FDI, portfolio and other offshore loans.
Capital inflows are expected to reach US$692.4 million in 2016, against US$1.2 billion recorded in 2015.
Given the declining trends and the low levels of foreign capital inflows, it is imperative that the country continues to expedite the re-engagement process with the international financial institutions.
Furthermore, it is critical to increase the impetus on the implementation of the on-going ease of doing business reforms as well as ensuring policy clarity, in order to boost investor confidence.
Imports
The economy’s relatively high import bill remains unsustainable at US$5.35 billion in 2016, against exports of US$3.365 billion.
The prioritisation of essential imports through implementation of such temporary imports prioritisation instruments as SI 64 in favour of promoting the importation of such critical imports as raw materials and replacement equipment is, therefore, central to the Zimbabwean economy contributing positively to regional economic performance.
Expenditure Proposals
The 2017 Budget proposes Vote Appropriations of US$3.4 billion, inclusive of Employment Costs of US$2.52 billion, Operations and Maintenance of US$400 million and Capital Expenditures of US$520 million.
Constitutional and Statutory Appropriations have been allocated US$673.7 million, resulting in overall Budget Expenditures of US$4.1 billion.
Allocations under the 2017 Budget are primarily directed at priority areas, drawing from Zim Asset clusters namely:
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Food Security and Nutrition;
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Value Addition and Beneficiation;
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Infrastructure and Utilities; and
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Social Services and Poverty Eradication.
Line Ministries and Departments will, therefore, be required to design implementation of their projects and programmes in line with Zim Asset clusters, to create synergies, necessary for optimising on the little resources available, for the achievement of Zim Asset.
Prioritised Zim Asset cluster based projects and programmes include those identified under the Interim Poverty Reduction Strategy Paper (IPRSP) for 2016-2018, which was formulated with support from development partners, including the World Bank and the European Union.
Overall Allocations
The 2017 National Budget proposes an allocation of US$1.35 billion towards health, social welfare and education Ministries under the Social Services and Poverty Eradication cluster.
Social safety nets have been allocated US$78 million in order to cushion the vulnerable groups of our population in terms of health, education and social welfare programmes.
Given the centrality of agriculture in terms of food security and support to other sectors, an allocation of US$303.2 million is being proposed under this Budget.
With regards to the Infrastructure and Utility cluster, the 2017 Budget sets aside US$188 million, which will be complemented by resources from statutory funds, respective state owned enterprises, development partners and loan financing.
Revenue Measures
The revenue measures that I am proposing seek to enhance the support that has already been availed to industry through tax relief and modest protection, enhance revenue and efficiency in tax administration.
Support to Industry
In an effort to boost domestic production and value addition against declining exports, Government has supported industry through prioritisation of critical raw material imports and levelling the playing field using such temporary import prioritisation instruments that include tariffs and SI 64 of 2016.
Consequently, industry capacity utilisation has increased significantly from 34% in 2015 to the current level of 47%.
Government measures to support the resuscitation of industry will have to be complemented by manufacturers playing their part with regards to guaranteeing quality of goods, as well as competitiveness of prices.
Tax Relief Measures
Tax Incentives for Special Economic Zones
Government enacted the Special Economic Zones legislation in order to attract foreign direct investment and enhance the economy’s capacity to produce goods and services competitively.
In order to enhance the attractiveness of the Special Economic Zones, it is proposed to provide tax incentives as follows:
Tax Head | Proposed Incentive |
Corporate Tax | Exemption from Corporate Income Tax for the first 5 years of operation. Thereafter, a corporate tax rate of 15% applies. |
Special Initial Allowance | Special Initial allowance on capital equipment to be allowed at the rate of 50% of cost from year one and 25% in the subsequent two years. |
Employees’ Tax | Specialised expatriate staff will be taxed at a flat rate of 15%. |
Non-Residents Withholding Tax on Fees |
Exemption from Non-residents tax on Fees on services that are not locally available. |
Non-Residents Withholding Tax on Royalties | Exemption from Non-residents tax on Royalties. |
Non-Residents Withholding Tax on Dividends | Exemption from Non-residents tax on Dividends. |
Customs Duty on Capital Equipment | Capital equipment for Special Economic Zones will be imported duty free. |
Customs Duty on Raw Materials |
Inputs which include raw materials and intermediate products imported for use by companies set up in the Special Economic Zones will be imported duty free. The duty exemption will, however, not apply where such raw materials are produced locally. |
The tax incentives will apply in demarcated geographical areas and are restricted to production for export.
This measure takes effect from 1 January 2017.
Taxation of Small to Medium Enterprises
Small to Medium Enterprises (SMEs) play a critical role in the economy, hence, account for a significant portion of the gross domestic product and employment creation. Initiatives by SMEs have, thus, greatly assisted in poverty alleviation and economic empowerment.
In support of this important sector of the economy, Government has already committed to implementing policies, programmes and strategies aimed at resolving the perennial challenges experienced by SMEs. These challenges include inadequate financing, improper infrastructure and lack of requisite entrepreneurial, marketing and management skills, among others.
In order to further enhance the growth of SMEs, thereby creating an environment conducive for their participation as anchors of economic development, it is necessary to provide additional support measures:
Registration for Value Added Tax
In order for SMEs to transact with private and public sector entities as corporate suppliers within the value chain, they must be registered for VAT. This will enable the established corporates to claim input tax on goods and services supplied by the SMEs.
However, most SMEs are not registered for VAT, hence they cannot take advantage of existing market opportunities as corporate suppliers. In addition, they miss out on benefits such as improved quality control and technology and skills transfer that are derived from dealing with large businesses.
Most SMEs are, however, reluctant to register for VAT, due to the massive backdated taxes and penalties that they are likely to incur upon registration.
In order to facilitate VAT registration for SMEs that qualify on account of their gross turnover exceeding the threshold of US$60 000 per annum, it is proposed to waive the requirement to account for output tax from the deemed date of qualification for registration.
Eligible SMEs will, thus, account for VAT from the date of registration.
This incentive will apply to SMEs whose turnover does not exceed US$240 000 per annum and also voluntarily register for VAT with the Zimbabwe Revenue Authority.
This moratorium will be effective over a period of six months beginning 1 January 2017.
Provisional Tax
Furthermore, SMEs that voluntarily register with the Zimbabwe Revenue Authority will only account for provisional tax during the first year of registration, when the Fourth Quarterly Payment Date falls due.
Alternatively, qualifying SMEs may account for provisional tax on a monthly basis.
However, SMEs that are compelled to register for tax after an audit by ZIMRA, will not benefit from the above incentives.
This measure takes effect from 1 January 2017.
Presumptive Tax
In view of the increase in unregistered businesses, Government introduced presumptive taxes on selected sectors of the economy such as restaurants, bottle stores, the cottage industry, hair salons, and commuter omnibus operators, among others, in order to broaden the tax base.
However, despite measures instituted to capture the revenue inflows from the informal sector, revenue contribution to the fiscus remains insignificant, due to low compliance.
The informal sector largely view taxes as an additional cost to business. This is despite the expectation that Government should provide quality social services.
Furthermore, due to the liquidity constrains that are currently being experienced, business operations in the informal sector are generally low.
It is, therefore, proposed to review downwards, presumptive taxes and the payment period from quarterly to monthly basis, with effect from 1 January 2017, as shown in Annexure 19.
The Ministry of Small and Medium Enterprises Development and approved SME Associations, will work together, in order to ensure compliance.
Revenue Collected from SMEs
I have already identified inadequate working capital as one of the hindrances to the growth of SMEs.
It is, therefore, proposed to ring fence revenue generated from presumptive taxes towards capitalisation of the Small and Medium Enterprises Development Corporation (SMEDCO) for on-lending to SMEs.
Taxpayer Education
In order to sustain efforts to formalise SMEs and enhance taxpayer compliance, particularly with regards to registration, filing of tax returns and payment of tax, the Zimbabwe Revenue Authority will intensify training programmes in collaboration with the responsible Ministry.
The level of education received by taxpayers is an important factor that contributes to their understanding of their tax obligations.
VAT Exemption on Banking Services
Technological advancement has resulted in the adoption of new methods of banking, which include mobile banking. This has brought convenience to the banking public and assisted in resolving some of the payment challenges arising from the current cash shortages. In some areas this has promoted financial inclusion for the unbanked population.
Such innovative services are, however, subject to VAT. This is in contrast to the VAT exemption on services offered by the traditional financial institutions.
In order to support the growth of these innovative banking and payment solutions, thereby enhancing financial inclusion, it is essential that we level the playing field within the financial services sector.
It is, therefore, proposed to exempt banking and payment solutions offered by any person registered under the National Payments Systems Act from VAT.
It is my legitimate expectation that the benefit of the exemption will be passed to the consumer.
This measure takes effect from 1 January 2017.
Electronic Cargo Tracking System
In order to mitigate the adverse effects of transit fraud, Government, with the assistance of the African Development Bank, has put in place an Electronic Cargo Tracking System. The facility allows for tracking of transit cargo from point of entry to point of exit.
The Electronic Cargo Tracking System will enhance efficiency in clearance and management of transit cargo and also minimise transit fraud.
The facility is currently on a trial phase along the Beitbridge to Chirundu, and Forbes to Chirundu routes.
CCTV
In an effort to curb corruption and smuggling, Government implemented the CCTV systems at Beitbridge Border Post. The system, which has been running for the past four months has begun to bear fruit, with some corrupt elements now being apprehended.
Legislative Amendments
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Reduce debt redemption levy on petrol by 1 cent per litre, with effect from 1 January 2017;
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Exempt Government from Carbon Tax Debt Redemption and Strategic Reserve Levies;
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Provide for exemption of VAT on Radiation Protection Service for the period 2011 to 2015, in order to cover the legacy debt of the Authority;
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Extend VAT zero rating to the supply of pipeline transportation, storage and handling services for purposes of delivery of fuel through the pipeline, with effect from 1 January 2017;
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Extend deferment of export tax on un-beneficiated platinum to 1 January 2018;
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Include supply of gold to Fidelity Printers and Refineries on the list of VAT zero rating.
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Eliminate double taxation on presumptive taxes payable under informal traders’ tax;
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Amend the carbon tax rates charged on foreign registered motor vehicles to a uniform rate of US$10 per month, with effect from 1 January 2017;
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Amend the Revenue Authority Act to allow the Board to appoint the Commissioner General of ZIMRA with the approval of the Minister;
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Income tax exemption on Investor Protection Fund, which no longer falls under the Securities and Exchange Commission Act;
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Tax Exemption for Zimbabwe Asset Management Company with effect from 15 July 2014 instead of 1 January 2016.
Structural Policy Initiatives
The thrust of this and future Budgets is also to overcome all arising structural bottlenecks to business activity and the investment environment, targeting both domestic as well as foreign investors.
For the coming fiscal year, focus is on lowering the cost of doing business by further implementation of reforms to improve:
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Competitiveness;
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Ease of doing business;
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Policy consistency;
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Public entities’ performance;
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Public finance management;
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Public procurement; and
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Corporate governance and accountability.
Competitiveness
The country’s investment and growth prospects are being weighed down by low competitiveness emanating from a number of areas as indicated in the World Bank’s Doing Business Index.
These include unreliable supply of utilities, limited access to affordable financing, delays at ports of entry, as well as multiplicity of licences and fees, among other business and investment constraints that raise the cost of doing business.
As a result of the above weaknesses, the recent 2016 World Bank Doing Business Index Report ranked Zimbabwe at 161 out of 191 countries from 157 of 2015.
The identified shortcomings provide useful lessons and information for improvement on those areas with weaknesses, and in this regard Government is doubling efforts on furthering the necessary reforms.
To that end, Government will be launching another 100 day cycle under the Rapid Results Based Approach being spearheaded by the Office of the President and Cabinet to improve the competitiveness of domestic companies.
Ease of Doing Business
His Excellency, the President, outlined during his State of the Nation address last year the Rapid Results Initiative to significantly improve Zimbabwe’s Doing Business rankings.
Pursuant to this, Government has since undertaken an extensive review of the bottlenecks and challenges that have stalled progress in the advancement of Zim Asset objectives to generate both domestic and foreign direct investment into the economy.
This review has informed a raft of policy, institutional, legal and regulatory reforms that are expected to significantly improve the business environment, considerably enhance access to finance for SMEs and entrepreneurs, and contribute to making Zimbabwe an investment destination of choice.
Some of the imminent legislative reforms are the introduction of:
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a Movable Property Security Interest Bill to permit creation of a Collateral Registry and, thereby improve access to finance for SMEs by allowing them to use movable assets as collateral.
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a Companies Amendment Bill to modernise the legal regime and enhance, amongst others, processes for business entry, business administration and protection of minority investors.
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an Insolvency Bill to ensure accountability and efficient insolvency proceedings that permit unsalvageable companies to be quickly liquidated and viable firms to be revived, thus preserving jobs.
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a Judicial Laws (Ease of Settling Commercial and other Disputes) Amendment Bill, to ensure expeditious resolution of commercial disputes.
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Deeds Amendment Bill to allow for electronic management of the Deeds Registry.
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a Procurement Bill.
The 2017 Budget will, therefore, make available the resources that will ensure effective implementation of the laws and the development of the institutions required to ensure consistent improvement of Zimbabwe’s business environment.
Over the next year, Government will:
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overhaul the business registration process, in order to offer entrepreneurs prompt formal business entry.
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introduce financial sector infrastructure, that will permit the use of movable assets as collateral.
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reform the insolvency regime, in order to permit the rescue of viable businesses and the prompt and efficient liquidation of unviable businesses.
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improve access to the Courts of Law, in order to permit the expeditious resolution of commercial disputes, and,
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simplify the payment of taxes and trading across borders, which will contribute to making the country a preferred investment destination for citizens and foreigners alike.
Policy Consistency
Policy inconsistencies have serious negative impacts on the performance of our economy, as well as on the outcomes of the on-going reengagement process.
It is, therefore, critical that Government remains speaking with one voice on any policy direction so as to avoid any unnecessary misinterpretation by the public and investors.
The Office of the President and Cabinet will be, therefore, coordinating policy pronouncement as well as any required clarifications to avoid conflicting interpretations of policies by different Government Ministries and Departments.
Anti-Money Laundering
Pursuant to the adoption of the Anti-Money Laundering second round Mutual Evaluation Report on Zimbabwe in September 2016, Government is developing a comprehensive Post Mutual Evaluation Implementation Plan that seeks to consolidate reforms instituted over the past 3 years and addressing deficiencies.
Further to this, Government is undertaking a capacity building and institutional strengthening process, targeted at law enforcement agents, the Financial Intelligence Unit and other related Anti-Money Laundering and Combating the Financing of Terrorism reporting institutions.
Conclusion
This Budget marks a turning point towards a developing economy through fiscal consolidation and stimulation of production.
The success of the proposed measures can only be meaningfully realised through the collective responsibility of all stakeholders, through sustained implementation, anchored by policy consistency, credibility, predictability and coherence, which by and large we have now been able to achieve through sustained effort.
Robust fiscal adjustment and structural reforms, as well as arrears clearance, are also crucial to the promotion of a business environment conducive for sustainable production and entrepreneurship.
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Ongoing conflicts continue to intensify food insecurity
Global agricultural prospects are improving but lean seasons loom in near future
Civil conflict and weather-related shocks have severely stressed food security in 2016, increasing the number of countries in need of food assistance, according to a FAO report. The new edition of the Crop Prospects and Food Situation report, released on 8 December 2016, highlights 39 countries that are in need of external assistance for food.
While the outlook for global cereal supplies is improving due to generally favourable growing conditions for crops, the legacy of recent droughts persists, as do the negative effects of a spate of conflicts.
Agricultural forecasts suggest robust grain harvests are on the horizon, but hunger will likely intensify in some regions during the lean seasons before the new crops have matured.
In Southern Africa, where El Niño effects sharply curtailed food production in 2016, the number of people requiring outside assistance from January through March 2017 is expected to significantly increase compared to the same period a year ago. Child stunting rates are “significantly high” in the most troubled areas, notably Madagascar, Malawi and Mozambique, the report notes.
In some regions, inadequate stocks of cereal and legume seeds due to two consecutive poor harvests may limit plantings. FAO and governments are implementing agricultural support programmes to improve access to key farming inputs.
Conflicts cast a long shadow on food security
To facilitate humanitarian response planning, the report identifies the primary causes of local food crises. These range from exceptional shortfall in food production and widespread lack of access – due to low incomes, high prices or disrupted distribution networks – to the impact of conflicts on local food security conditions.
Civil conflicts and their consequences, including refugee movements that are burdening host countries such as Cameroon and Chad, are cited in 21 of the 39 countries. Widespread conflict can lead to the loss and depletion of households’ productive assets, as in Central African Republic, and to security concerns that hinder farming activities, as in South Sudan.
In parts of South Sudan, improved harvests are likely to have only a short-lived effect as ongoing conflict has reduced the ability to engage in agriculture, posing extra risks for the most vulnerable communities.
Continuing civil conflict in Syria has led to 9.4 million people requiring food assistance. This year’s wheat production is estimated to be around 55 percent below its pre-crisis level. The ongoing conflict in Yemen has likely increased the number of food-insecure people from the 14.2 million people assessed in June, the report said. The recent escalation of conflict in Iraq is triggering a widespread internal displacement. Acute food insecurity affects more than 8 million people in Afghanistan and their numbers are likely to increase with the return of around 600,000 refugees from Pakistan before the end of 2016.
The number of food insecure people in Nigeria is above 8 million and is projected to increase to 11 million by August 2017. The ongoing conflict in northern states curtailed plantings, while the sharp depreciation of the Naira currency has raised domestic food prices and affected regional trade as more Nigerian cereals are exported while fewer livestock are imported.
Agricultural trends appear poised to improve after rough 2016
Droughts and weather effects linked to El Niño triggered significant crop shortfalls in 2016 in several countries. Africa’s aggregate cereal production declined in 2016 despite some sub-regional gains, notably in West Africa and the Sahel region, which is on track for a record cereal production. Maize output in Southern Africa decreased sharply, severely stressing food security conditions.
Poor harvests triggered sharply higher prices for staple maize in Malawi, where 6.5 million people are expected to be food insecure during the upcoming lean period. On a positive note, with El Niño over, preliminary estimates point to a 27 percent increase in maize plantings for South Africa’s 2017 crop, by far the region’s largest producer.
While much of Asia benefited from robust food production in 2016, led by a sharp recovery in India, the impact of long-running conflicts in several Near Eastern countries continues to severely depress agricultural production despite generally beneficial weather conditions for staple grain crops.
In Latin America and the Caribbean, expectations of a production rebound in Central America in 2016 are welcome, following the drought-affected outputs in the previous year, while the 2017 planting season in South America is off to a favourable start after a reduced 2016 crop mostly due to droughts in Bolivia, Brazil and Paraguay.
The 39 countries currently in need of external food assistance are Afghanistan, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Congo, Democratic People’s Republic of Korea, Democratic Republic of the Congo, Djibouti, Eritrea, Ethiopia, Guinea, Haiti, Iraq, Kenya, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nepal, Niger, Nigeria, Pakistan, Papua New Guinea, Sierra Leone, Somalia, South Sudan, Sudan, Swaziland, Syria, Uganda, Yemen and Zimbabwe.
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Get on track with trade
Trade raises productivity but may hurt some unless policies redistribute the benefits
As the global economy struggles with slow growth, political support for freer international trade has weakened, most notably in advanced economies and especially in the United States. While some resistance to freer trade is nothing new, it never stopped the postwar trade liberalization process, which delivered growth in advanced economies and promoted convergence of per capita incomes throughout a significant portion of the developing world.
Opposition to trade remains a minority view – most people gain from trade, but it seems to have many more vocal enemies these days.
Trade enables a country to use its resources more efficiently. But the gains from that greater efficiency may be divided unevenly among a country’s citizens, so that some of them lose out. The result can be greater income inequality and disrupted lives.
Over the past quarter century, the global economy has seen a seismic transformation thanks to increased trade and technological and political changes. While there is much progress to cheer at the global level, most governments have not ensured that gains from economic growth – including those due to trade – are broadly shared. In some places, tepid and declining overall income growth has brought frustrations to a boil.
Trade’s benefits have always been unequally shared, and maybe more so in recent years. But its gains are all the more important in today’s low-growth environment. Countries must protect and expand these gains through policies that redistribute them more equitably. That will also make economies more resilient to a range of market forces, beyond those connected with globalization.
Trade and technology
Since World War II, progressive reduction in trade barriers such as tariffs and quotas has supported growth and welfare everywhere it was undertaken – in part by getting a greater variety of goods to households at lower prices. Even more important, trade also has powerful positive effects on productivity – that is, the efficiency with which global resources are used to produce economic goods. These gains are especially important to reap in a world where economic growth seems to be slowing.
The main reason trade enhances productivity is comparative advantage, as the British economist David Ricardo explained two centuries ago. For example, he said, if England and Portugal both can produce cloth and wine, output of the two goods is maximized when the country with the lower domestic opportunity cost of wine making specializes in producing it, while the other country specializes in cloth. Both trade partners gain from this specialization. Moreover, that specialization remains efficient even if one of the countries can produce both goods more efficiently than the other – that is, has an absolute productivity advantage in making both goods. Trade always raises the productivity of every country that allows it – a point often missed in public discourse today.
Empirical research supports Ricardo’s fundamental insight that trade fosters productivity. But the productivity and growth benefits of trade go far beyond Ricardo’s insight. With trade, competition from abroad forces domestic producers to raise their game. Trade also offers a wider variety of intermediate production inputs firms can use to produce at lower cost. Finally, exporters can learn better techniques through their engagement in foreign markets, and are forced to compete for customers by raising efficiency and upgrading product quality (for example, Dabla-Norris and Duval, 2016).
In Ricardo’s world, trade is like a new, better technology that simultaneously becomes available to all countries that open their borders and from which everyone benefits equally.
Trade sometimes works this way. But such positive accounts of trade throw no light on why some people bitterly oppose it.
There are two main aspects of trade that help explain the opposition. First, there are short-run costs of redeploying an economy’s resources out of the sector that shrinks under free trade. Some workers are stranded in a contracting cloth sector, perhaps unable to move to a wine-producing region or to learn wine-making skills quickly. In the real world, costs and inefficiencies can be protracted and fall harshly on some, making long-run gains to the economy feel abstract and irrelevant to them.
Second, even without adjustment problems, trade can worsen the domestic income distribution, even making some people worse off in absolute terms. In this case, although the country as a whole experiences increased productivity and income, some people may gain disproportionately, while others lose absolutely. For the losers, it feels like a raw deal (see box).
These so-called redistributive effects can arise not just through globalization, but through technological improvements that benefit some parts of the economy more than others. The sequence of events is almost identical if technical advances allow more cloth to be produced with the same input of unskilled and skilled workers while the wine production technology doesn’t change. Because trade is analogous to a technological improvement, it is no surprise that technology’s advance can redistribute income just as trade does. Yet, even though a substantial minority is skeptical of trade, almost no one opines against higher productivity.
A major challenge in understanding the link between globalization and income inequality is to filter out the important effects of other factors, such as changes in technology. To make this task more complicated, globalization and technology feed each other – indeed, globalization’s encouragement of technological progress is an important source of gains from trade.
Why may some people lose from trade?
There are many ways some people can lose from trade, but economists Wolfgang Stolper and Paul Samuelson provided one of the simplest and most influential theoretical examples in a 1941 paper. Suppose that wine and cloth production both rely on skilled and unskilled workers, but that wine requires relatively more skilled winemakers and cloth employs mostly unskilled factory hands. If cloth production shrinks as a result of freer trade, newly unemployed unskilled workers somehow have to find jobs in the expanding wine sector, where there are relatively few low-skill jobs, even though that sector as a whole is growing. The only way the unskilled former workers can be reemployed in wine is if their wages fall and those of skilled workers rise, so that all businesses in the wine sector have an incentive to substitute unskilled for skilled workers – for example, by leveraging fewer skilled workers to supervise teams of the unskilled.
Inequality between and within nations
Even as there has been some drop in income inequality between nations in recent decades, inequality has risen within many nations. Trade and technology have both spurred the global convergence of incomes for many in poorer countries while shifting production patterns and income distribution within nations.
The most striking examples of reduced inequality between nations come from Asia, notably, the graduation of Hong Kong SAR, Korea, Singapore, and Taiwan Province of China to high-income status and the recent economic growth of China and India. India’s per capita real GDP grew from $553 in 1991 (in 2010 dollars) to $1,806 in 2015 while China’s rose spectacularly, from $783 in 1991 to $6,416 in 2015. Given these countries’ enormous populations, the Chinese and Indian success stories contribute to a large drop in inequality among the world’s population. Slower-growing Latin America and sub-Saharan Africa have not reduced their gaps with richer countries as quickly, but the incidence of poverty has fallen considerably in the poorer countries.
These advances in income convergence and poverty reduction owe much to global trade and investment – if not to free-trade policies in many cases, then to an outward orientation of production.
The fruits of growth, however, have not always been distributed equally in emerging market and developing economies. Roughly speaking, inequality has worsened most in Asia and eastern Europe, whereas in parts of Latin America – Brazil is a notable example – it has declined, while remaining high compared with much of the rest of the world.
Increased inequality in nearly all advanced economies, coupled with the recent slowdown in economic growth, has led to relatively slow long-term growth in household incomes except at the top (see Chart 1). The causes of the slowdown are complex, but they stem partly from the global financial crisis.
The U.S. case illustrates how economic growth in advanced economies has become less inclusive as it has slowed over the postwar period. In 2014, U.S. real median annual family income was $53,657 according to U.S. Census Bureau data, roughly the same in real (inflation-adjusted) terms as in 1989. In contrast, this measure of income nearly doubled between the early 1950s and the late 1980s. After a period of rapid and more widely shared economic advancement, at least half of U.S. households missed the benefits of economic growth over the past quarter century. (This was before an abrupt 5.2 percent jump in median income in 2015 – whose durability remains to be seen.)
To a substantial degree, these developments reflect idiosyncratic national developments – such as changes in tax progressivity, executive pay constraints, or the financialization of the economy. But globalization and technology are at least potentially universal drivers, so it is important to try to quantify their respective roles. As noted, though, globalization and technology are intertwined. Technological innovations, such as in information and communication technology (ICT), have made more trade possible – for example, in services such as banking and insurance. Given the opportunity to enter export markets, or faced with import competition, businesses may innovate to upgrade production processes. Foreign direct investment as well as trade can result in the spread of technological best practice across borders, which itself influences patterns of comparative advantage. In other words, globalized trade itself helps to make technology a global factor.
Global transformation
Events of the tumultuous past quarter century leave little doubt that both trade and technology have played significant roles in altering production and wage patterns worldwide. Around the start of the 1990s, several developments converged to transform the global economy. The Soviet bloc collapsed, freeing its members in eastern Europe and Asia to move to market-driven economies open to international trade and investment. About the same time, China, which had begun to embrace the market in 1978, accelerated the process, in particular by authorizing more firms to engage in trade and lowering barriers to imports and exports. Other countries in the emerging world became more open to trade too, including several countries in Latin America hoping to put a near decade of debt-ridden low growth behind them and India, which implemented a wide-ranging reform in 1991. In many cases, openness to foreign direct investment and other types of financial flows also increased, further promoting exports.
These developments were widely welcomed at the time, and rightly so. They created a global trading system more extensive than at any other time in human history. They promised not only greater economic and in some cases political freedom for billions throughout the world, but also more buoyant growth driven by rising global incomes, consumption, investment, and innovation. Growth accelerated in many emerging market economies, in some cases raising domestic inequality as certain people proved more able than others to profit from the new opportunities. Still, for the first time, significant middle classes emerged in countries such as China and India.
But important distributional consequences of these global changes also became apparent, notably for advanced economy workers facing a sharply higher global supply of labor – much of it low skilled. As of 2000, China, India, and the Soviet bloc countries had contributed nearly 1.5 billion workers to the world economy, doubling its labor force (Freeman, 2007). Stolper-Samuelson reasoning suggests the increase in the global ratio of labor to capital would depress labor compensation relative to capital income in the advanced economies; this is likely part of the story behind both the long-term sluggishness of median wages and the fall in labor’s share of GDP in North America, western Europe, and Japan. That process was reinforced by the decline of labor unions and the related rise in businesses’ willingness to shift production to low-wage venues offshore.
Stolper-Samuelson logic also implies that low-skilled workers in poorer countries would see their relative wages pulled up while high-skilled workers would benefit in rich countries, lowering wage inequality in poorer economies and raising it in richer ones. But in fact the gap between the wages of skilled and unskilled workers rose for both country groups after the 1980s. Also contradicting the Stolper-Samuelson story was the tendency for such skill premiums to rise even within industries, with no evidence that industries in advanced economies were employing higher shares of low-skilled workers in response to the fall in their relative cost.
Many economists believe that the global evolution of the skill premium through the late 1990s is explained mainly by shifts in technology favoring higher-skilled workers – for example, the ICT revolution – another globally transformative and widely acclaimed change that accelerated in the early 1990s. But expanded trade could still have played a role, as exporting firms within industries have been found to use relatively more skilled labor than those that do not export, and increased trade would therefore feed the demand for skills. Another likely channel is outsourcing: shifts of low-skill activities from rich to poorer countries can raise the skill premium everywhere (Feenstra and Hanson, 1996).
Since the early 2000s globalization, including full integration of China into the global trading system, has accelerated. Increased educational investment by emerging markets allowed greater offshoring of routinized manufacturing and service-industry tasks, as well as a surge in high-tech exports, notably from China. In advanced economies, middle-skill jobs have been disappearing—a phenomenon known as “job polarization.” While some polarization is attributable to trade and offshoring, there is also a possibly dominant technological component, as routine tasks become increasingly automated (Goos, Manning, and Salomons, 2014).
Only recently have enough detailed data accumulated to identify convincingly long-lived negative effects of Chinese imports and offshoring on employment in import-competing industries, local labor markets, and wages. Manufacturing’s share of the labor force has declined across the advanced economies due to relatively strong productivity growth in that sector. But the U.S. decline in the 2000s was especially sharp, in part because firms sent capital abroad to produce goods there for export back into the United States, including from China (see Chart 2).
If workers displaced from U.S. manufacturing can find reemployment at all, they must accept significantly lower wages, evidence shows (Autor, Dorn, and Hanson, 2016; Ebenstein, Harrison, and McMillan, forthcoming). The phenomenon of workers displaced by import competition suffering long-term wage losses and unemployment occurs in a broad range of countries, including emerging market economies. It is also a long-standing problem, exacerbated recently by aging advanced-economy workforces and the sheer size of the disruptions associated with China’s rapid export growth.
From safety nets to trampolines
More shocks on the scale of those that created the new global economy likely are not in the cards, but the political and economic aftershocks remain substantial, and similar – albeit smaller – disruptions will surely occur. What can governments do to head off protectionist policies while defending and extending the gains from trade?
In its 1989 report, Adjusting to Win, the Canadian Advisory Council on Adjustment contrasted “safety net” policies – which protect those subject to job loss, for example, through unemployment benefits – with “trampoline” policies that offer a springboard to new jobs (Trebilcock, 2014). Both are important, but trampoline policies – which include active policies like job counseling and retraining – help people adjust faster when economic shocks occur, reducing long unemployment spells and the resulting depreciation of skills and employability. Such programs, which already exist in many advanced economies, deserve further study so that all can benefit from best practice.
Trampoline programs are helpful – and likely necessary – for all sorts of changes, not just those related to trade. It is hard to identify specifically trade-related job losses – and the economic case for government intervention to hasten movement of workers to new occupations is compelling whether the need arises from trade or other change in the economy. Policies that help people adjust include educational investments to create a nimble workforce, expenditure on needed infrastructure, investment in health, improved availability of housing, lowered barriers to entry for new businesses, and well-functioning financial markets. Such policies have the added benefit of also supporting growth.
Safety net programs have a role to play too. More open economies may be more susceptible to external shocks, and therefore require more extensive social safety nets. Governments can offer broader partial wage insurance for workers displaced into lower-paying jobs (Kletzer and Litan, 2001) and offer employers wage subsidies for hiring displaced workers. Programs such as the U.S. earned income tax credit should be extended to further narrow income gaps while encouraging people to work. More progressive tax and transfer policies must play a role in spreading globalization’s economic benefits more broadly.
As increased capital mobility across borders has fueled international tax competition, governments find it harder to finance safety nets and adjustment programs without inordinately high taxes on labor or regressive consumption taxes. As a result, we need international coordination against tax avoidance to prevent the bulk of globalization gains from accruing disproportionately to capital. If these inequities continue unchecked, political support for trade will weaken further.
No guarantees
Globalization offers the potential of economic gains for all, but there is no guarantee that potential will be realized absent decisive government action to support those who suffer from the side effects. Years of seismic global transformation since the early 1990s, coupled with persistently low economic growth following the financial crisis, have left many individuals and communities behind. As a result, a backlash against further trade and trade liberalization is crystallizing in a number of advanced economies.
Trade and trade policies have not, however, been the only factors behind these changes – they probably were not even the most important – nor are they the reason for slower growth. Technological changes as well as idiosyncratic national developments also have played major roles. The political consensus that drove trade policy over much of the postwar period will dissipate without a purposeful policy framework that spreads the risks of economic openness; ensures flexible labor markets and educated, agile workforces; promotes job matching; improves the functioning of financial markets; and directly addresses inequality of incomes. This same framework is needed to address a range of other economic changes, which, like trade, can harm some and require adjustment within the economy.
Trade is special only in the illusion that governments can shut out the rest of the world when the world becomes inconvenient. In the 21st century, however, interdependence is not optional.
Maurice Obstfeld is the IMF Economic Counsellor and Director of the IMF’s Research Department. Opinions expressed in articles and other materials are those of the authors; they do not necessarily reflect IMF policy.
This article is published in the December 2016 edition of Finance & Development.
References
Autor, David H., David Dorn, and Gordon H. Hanson, 2016, “The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade,” NBER Working Paper 21906 (Cambridge, Massachusetts: National Bureau of Economic Research).
Dabla-Norris, Era, and Romain Duval, 2016, “How Lowering Trade Barriers Can Revive Global Productivity and Growth,” iMFdirect, posted June 20.
Ebenstein, Avraham, Ann Harrison, and Margaret McMillan, forthcoming, “Why Are American Workers Getting Poorer? China, Trade, and Offshoring,” in The Factory-Free Economy, ed. by Lionel Fontagné and Ann Harrison (New York: Oxford University Press).
Feenstra, Robert C., and Gordon H. Hanson, 1996, “Globalization, Outsourcing, and Wage Inequality,” American Economic Review, Vol. 86, No. 2, pp. 240-45.
Freeman, Richard B., 2007, “The Great Doubling: The Challenge of the New Global Labor Market,” in Ending Poverty in America: How to Restore the American Dream, ed. by John Edwards, Marion Crain, and Arne L. Kalleberg (New York: New Press).
Goos, Maarten, Alan Manning, and Anna Salomons, 2014, “Explaining Job Polarization: Routine-Biased Technical Change and Offshoring,” American Economic Review, Vol. 104, No. 8, pp. 2509-26.
Kletzer, Lori G., and Robert E. Litan, 2001, “A Prescription to Relieve Worker Anxiety,” Policy Brief 73 (Washington: Brookings Institution).
Trebilcock, Michael J., 2014, Dealing with Losers: The Political Economy of Policy Transitions (New York: Oxford University Press).
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‘Nigeria risks becoming dumping ground if free trade zones don’t function’
Nigeria risks becoming a dumping ground for countries in the West African sub-region if the country’s export free trade zones are not allowed to function to meet international standards.
A free trade zone is a special economic or geographical area in a country where foreign companies can import materials, manufacture goods, and export products without being affected by the Customs’ rules and taxes.
The Executive Secretary, African Free Zones Association, Chris Ndibe, said in Abuja on Monday that with most trade zones in the neighbouring West African sub-region, particularly Ghana and Togo thriving, Nigeria will end up being the dumping ground.
“Our neighbouring countries, especially in West Africa, are doing very well,” Mr. Ndibe said. “What they are doing is that they have Nigeria as their market, and their free zones. Togo next door is gearing up also.
“Ghana has the highest number of free zones in Africa. The single factory zones scheme that were frustrated in Nigeria is booming in Ghana.
The single factory zone is where a government confers export potential and status to enjoy the incentives, no matter where the factory is sited in the country.
A one-time General Manager, Nigerian Export Free Zones Authority (NEPZA), Mr. Ndibe, who is also one of the founding members of the World Free Trade Zones Organization, said a survey of free zones in Africa showed Nigeria as one of the worst.
Identifying Ghana, Kenya and Egypt as the premier free trade zones in Africa, Mr. Ndibe warned that at the rate Nigeria was going, the country would end up as dumping ground, especially for other free trade zones within the West African sub-region if nothing urgent was done.
“If one does not know how to handle a thing, one would not get anywhere. The rate at which free zones are developing across the world is going higher and higher. It is getting more scientific.
“If one looks at what is moving free zones all over the world, one will find out that we (Nigeria) don’t have it, and we are not moving any higher. There are things that are supposed to be done. Today, the country has 38 approved free trade zones. But, only about eight are operational.”
He identified Banky free trade zone in Borno State as one of those areas that have not become functional, despite being given approval since 1999, noting that if the zone had been in operation all these years, most people conscripted into Boko Harm for lack of jobs would have been been gainfully engaged.
“I am yet to know the scheme that can turn around the country’s economy more than free zone. Oil is instant, but in terms of manufacturing, job employment, backward linkages, taking care of the farmers and transfer of technology, I rate free zones higher than any other thing.
“When I visited Mombasa sometime last year, one factory that produces jeans material for the American market has 2,500 workers on shifts.
“Our own Calabar Free Trade Zone has the capacity to accommodate hundreds of such factories. If 50 of such factories are employing 2,500 workers, Nigeria would even end up importing workers from other African countries to be able to meet up with the volume of workforce required.
“With the number of employment that free zones are supposed to give, I am very optimistic that if the required attention is given to it, we will go places,” Mr. Ndibe said.
The level of incentives in Nigeria, as enshrined in the Nigerian free trade zone Act, he pointed out, was not attractive enough and should be reviewed.
“The services we give are below international standards. The incentives need to be revisited. Our infrastructure is at the lowest ebb today. The highest obstacle to investment in the free zones today is the conflict between the free zone authority and other government agencies like Nigeria Customs, Nigerian Immigration Service and the free zones authority,” he stated.
Emphasizing the need for the review of the Act promulgated over 20 years ago, he said wall over the world, the practice was to revisit the operational every five to ten years.
To turn the industry around, he said the World Free Zones Organization has organized workshops to train workers of the regulatory authorities, while ensuring the right attention was given to the free trade zone in Nigeria to get the country out of the current economic recession and help escape being a dumping ground.
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tralac’s Daily News Selection
The selection: Thursday, 8 December 2016
Starting today, in Addis: 5th Ministerial Retreat of the Executive Council. The Ministerial Retreats of the Executive Council, first held in January 2014, have become an important forum towards engagements on the key steps necessary to take forward the continental integration project, the effectiveness of the Union institutions and the implementation of Agenda 2063.
Today, in Windhoek: The Ministry of Industrialization, Trade and SME Development, in collaboration with the Namibia Trade Forum, will host a seminar on the CFTA.
Tomorrow, in Abuja: the ECOWAS Convergence Council will hold an ordinary session to determine progress made in implementing the roadmap of the Community’s Single Currency Programme and adopt the macroeconomic convergence report of member states.
Doing Business Trading Across Borders and Logistics Performance Index: similar yet different (World Bank)
People who look at the Doing Business report’s Trading Across Borders indicator and the Logistics Performance Index (LPI) often wonder why one country can perform well on one of the rankings but not so well on the other although they both measure trade and logistics. In fact, earlier this year, the Doing Business team organized a workshop at the World Bank Global Knowledge and Research Hub in Kuala Lumpur to clarify the differences between the two datasets.
East Africa: Customs administrations welcome more WCO involvement
The WCO/JICA Joint Project Manager introduced the upcoming activities to be held in 2017 in cooperation between the WCO and JICA. The participating Commissioners General and Commissioners Customs welcomed this development. The Trade Facilitation Project in East Africa is expected to be completed by December 2017 and the WCO is committed to work with JICA and Customs administrations in East Africa to achieve the project objectives together through the new framework of WCO/JICA cooperation.
Tanzania: How Kigoma porous border lose government revenues (IPPMedia)
A one-month investigation conducted by this paper has revealed that the government of Tanzania is losing billions of money per year in terms of revenues collections along Kigoma porous border with the neighbouring countries of Burundi and DR Congo. This follows the presence of more than two hundred illegal routes along the porous border of Kigoma which is more than 300 kilometres before snaking into the neighbouring Katavi Region.
Face to face with Beitbridge’s daring smuggling syndicates (The Standard)
A recent investigation by The Standard revealed that smuggling syndicates have mushroomed at Zimbabwe’s busiest port of entry following a government import ban imposed in July. While smuggling was common along the country’s porous border with South Africa through illegal entry points, the syndicates now have the audacity to transport their loot through the heavily manned Beitbridge Border Post. The syndicates are big and involve Zimbabwe Revenue Authority (Zimra) officials, police, state security agents, soldiers, traders and members of the public, our investigations revealed.
Inactivity of EAC Attorneys General hampers legislation (New Times)
Presenting Bills proposed by the Council of Ministers to the East African Legislative Assembly for debate to facilitate EAC integration has become harder for lack of green light by the Sectoral Council. The bills must be scrutinised and accepted by the EAC Sectoral Council on legal and judicial affairs before submission to the regional Assembly. But sectoral council has not met for nearly two years, The New Times understands. During a recent EAC media training workshop in Nairobi, Peter Njoroge, director of Economics with Kenya’s Ministry of EAC Affairs, also noted there was frustration caused by the sectoral council. “If there is a sectoral council we are having problems with it is the sectoral council on legal and judicial affairs. They do not meet to look at legislation and this affects progress,” Njoroge said, while shedding light on issues concerning the East African Monetary Union project. [Isaac Mwangi: Creation of EAC committee of eminent persons still a mystery]
Central Africa: Sub-regional Coordination Mechanism update (UNECA)
Of particular interest to the Secretary General of the ECCAS Secretariat – H.E. Mr Ahmad Allam-Mi, who opened the session, was improved trade between countries of the sub-region. “The operationalisation of the ECCAS Free Trade Area should therefore be the priority of the priorities of activities to be included in the next Common Indicative Programme, otherwise the ambitious project for the construction of a Common Market in Central Africa will remain, a pious wish for yet a long time to come,” he said. The session ended with the adoption of an 18-month a roadmap for populating and kick starting the third Common Indicative programme (CIP III) for Central Africa’s development.
The political economy dynamics of regional organisations in Africa: a new project from ECDPM
In the next two years, our new PEDRO project wants to dig even deeper by looking into the political economy dynamics of 17 regional organisations in Africa. The study, carried out with support from the German ministry for economic cooperation and development (BMZ), will try to understand the actors and factors that shape how regional organisations play their role in promoting regional integration and cooperation. The three overarching research questions of this study are:
Uganda: We need Shs140b to collect more taxes, URA tells government (Daily Monitor)
In order to meet the target of collecting 16% tax ratio to GDP, the Uganda Revenue Authority says government needs to avail it with Shs140 billion to make massive investments needed to put in place all the necessary infrastructure and systems. URA Commissioner General, Ms Doris Akol, says the URA needs to make investments in IT infrastructure and compliancy mechanism by strengthening electronic tracking devices; open up more offices in Kampala and up country; and increase the staff. “URA has about 2,400 staff; one staff handles 7,000 payers on average. This is heavy work load for one person to do his or her work effectively. In other places we don’t have offices to reach out to the general public and collect tax,” she said.
Tanzania: Mafuru removed from the Treasury (The Citizen)
Arguably, the biggest surprise in President Magufuli’s latest reshuffle is the change of guard at the sensitive Treasury Registry. The new Treasury chief, Dr Mashindano, was a principal research associate with the Economic and Social Research Foundation. He replaces Mr Lawrence Mafuru.
Indonesia to finalize five trade deals next year in hunt for wider markets (Jakarta Post)
Apart from the five aforementioned deals, Indonesia is also preparing for other potential agreements. It is currently carrying out a joint feasibility study with the Eurasian Economic Union, a bloc that includes Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan and comprises 183 million people. It is also considering starting talks on a trade deal with either Egypt or Southern African Customs Union (SACU) and is reconsidering one with Turkey. In the planned deals, Indonesia will seek to lure investors into priority industries and export more of its champion manufactured goods.
African Economic Conference closes with call for agriculture to be at the centre of Africa’s development (UNECA)
“This should not just be another conference. There has to be some key actions going forward, deploying agriculture to spearhead Africa’s economic transformation,” Ousmane Dore, the Resident Representative of the African Development Bank’s Nigeria Country Office, said as he closed the meeting. Dore highlighted the Bank’s operations in Nigeria, a huge agriculture portfolio including the ENABLE Youth programme, which is assisting young graduates, or “agripreneurs”, to venture into a variety of agri-businesses. The theme of the conference was timely, he said.
Country CAADP Implementation Guidelines under the Malabo Declaration (pdf, AU)
We intend these to be ‘living guidelines’ that will be accompanied by follow-up information in the form of Technical Notes such as on market regulation, price control, input subsidies but also on management tools as the Medium Term Expenditure Framework, Agriculture Public Expenditure Review, Performance Assessment Framework. [Note: the Guidelines are also available in French and Portuguese]
Agricultural productivity in resource-rich African countries (UNDP)
Between 2003 and 2013, agricultural output in resource-dependent countries in sub-Saharan Africa (SSA) actually grew at an average annual rate of 3.6%, slightly higher than the 2.7% growth rate experienced by the rest of SSA. Annual agricultural output growth rates in Angola, Cameroon and Zambia, for instance, averaged higher than 6% and were among the world’s highest growth rates. A closer look at the use of production inputs, however, indicates that much of the growth in agricultural output has been achieved by increasing the size of cultivated land and not productivity. Cropland grew at an annual rate of 2.6%, reaching a total of 103 million hectares compared to 83 million hectares in the previous decade. [The authors: Degol Hailu, Chinpihoi Kipgen]
Southern Africa: Humanitarian needs continue to spiral as peak of lean season looms (OCHA)
Southern Africa is now entering the peak of the lean season following the worst El Niño-induced drought in decades. With food stocks largely depleted due to poor or failed harvests across the region, estimates of people in need of humanitarian assistance have increased by more than one million to 13.8 million, mainly due to rising needs in Madagascar, Malawi, and Zimbabwe.
Sahel region: UN launches $2.66bn appeal for emergency assistance (UN)
“And we must, more than ever, shift ‘from providing aid to ending needs’ because extreme vulnerability in the Sahel is the most visible symptom of the triple crisis of governance, insecurity and climate change that affects this region. The demographic explosion, which will see the region’s population double in the next twenty years, exacerbates the situation still further,” Mr. Lanzer underscored. The Sahel regional appeal is part of the larger $22.2 billion funding request for 2017 launched by the United Nations Monday in Geneva, Switzerland.
The Fourth Industrial Revolution: Women’s jobs at risk from tech disruption (World Bank)
Our analysis of this report shows that in absolute terms, men stand to gain one job for every three jobs lost to technology advances, while women are expected to gain one job for every five or more jobs lost. These figures are based on our analysis of the statistics for disproportionate job losses from the World Economic Forum’s Future of Jobs Survey results. Some of these job losses could be partially offset by emerging roles in science, technology, engineering and mathematics (STEM). But currently, these roles are very male-dominated. Women are expected to gain only one new STEM job per 20 jobs lost from technological disruption, while men are set to gain nearly one new STEM job for every four jobs lost.
Egypt’s central bank governor says intervention in currency market is "history"
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Donald Kaberuka joins Boston Consulting Group
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Angola: Locomotives start arriving to strengthen rail network
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African Economic Conference closes with call for agriculture to be at the centre of Africa’s development
The 11th African Economic Conference (AEC) wound up in Abuja, Nigeria on Wednesday, after three days of intensive discussions on how African countries can achieve agro-allied industrialization.
Over 300 participants attended the annual event, co-organized by the African Development Bank (AfDB), UN Economic Commission for Africa (ECA) and United Nations Development Programme (UNDP), on the theme, “Feed Africa: Towards Agro-Allied Industrialization for Inclusive Growth.”
“This should not just be another conference. There has to be some key actions going forward, deploying agriculture to spearhead Africa’s economic transformation,” Ousmane Dore, the Resident Representative of the African Development Bank’s Nigeria Country Office, said as he closed the meeting.
Dore highlighted the Bank’s operations in Nigeria, a huge agriculture portfolio including the ENABLE Youth programme, which is assisting young graduates, or “agripreneurs”, to venture into a variety of agri-businesses. The theme of the conference was timely, he said.
Commenting on the outcomes, Adam Elhraika, Director of Macroeconomic Policy Division of the UN Economic Commission for Africa (ECA), urged participants to share the excitement and important messages that emerged from the conference with partners and governments in order to ensure their implementation.
For his part, Ayodele Odusola, Chief Economist and Head of the Strategy and Analysis Team for UNDP’s Regional Bureau for Africa, said the theme of the conference was in tune with the African Union’s 2063 agenda as well as the UN’s Sustainable Development Goals. He echoed the sentiments of the Conference that agro-allied industrialization would lead to the attainment of Africa’s ultimate development objectives.
Several research papers were presented at the conference, alongside high-level panel discussions on agro-allied industrialization. The research papers ranged from agriculture, climate change and food security, which served the conference well as they initiated discussions on sustainable development.
Opening the conference earlier, Nigeria’s Vice-President, Yemi Osinbajo, commended the theme and the high-level participation in the conference, adding that the Government looks forward to the outcome of its deliberations “as it would be very useful as we design our new economic recovery plan where agro-industrialization will certainly play a key role.”
AfDB President, Akinwumi Adesina gave a keynote speech in which he underscored the fact that agriculture, which contributes over 28% of Africa’s GDP, holds the key for accelerated growth, diversification and job creation for African economies and its people.
“Agriculture provides the basic raw materials needed for industrial development. Food accounts for the highest share of consumer price index and providing cheap food is critical for taming inflation. When inflation is low, interest rates decline and it brings greater private sector investments. A more productive, efficient and competitive agriculture sector is critical for boosting rural economies, where the majority of the population live in Africa,” Adesina said. “The future of Africa depends on agriculture.”
Two research papers claimed the top positions in the final review by the conference organizers. The first position went to Mintewab Bezabih of the UK School of Economics and Political Science, Remidius Ruhinduka of the University of Dar es Salaam, Tanzania, and Mare Sarr, University of Cape Town, South Africa, who presented their work on “Climate change perception and system of rice intensification (SRI) in Tanzania: A moment approximation approach”. While the second position went to a paper titled “Greenhouse Gas Mitigation in the Agricultural Sector: Win-Win or Trade-Off among Small Farmers from West Africa” written and presented by Tiertou Edwige Some of Université Cheikh Anta Diop, Senegal; and Bruno Barbier of the Centre de Recherche d’Économie Appliquée (CREA) in Senegal.
The conference attracted a number of eminent speakers over the three days, including Eric Maskin, Economics Professor at Harvard and co-recipient of the 2007 Nobel Prize; Xiaobo Zhang, Economics Professor and Senior Research Fellow at the International Food Policy Research Institute (IFPRI); Chris Barrett, Professor in Applied Economics at Cornell University; and Paul Amaza, a Medical Professor at the University of Jos, Nigeria.
Other high-level participants included, among others, Cho Gyoung-Rae, Secretary General of the Korea-Africa Good and Agriculture Cooperation Initiative (KAFACI); Charles McClain, Deputy Minister of Agriculture for Planning and Development in the Liberia Ministry of Agriculture; Henry Eyebe Ayissi, Minister of Agriculture and Rural Development, Cameroon; and Godwin Emefiele, Governor of the Central Bank of Nigeria.
The 12th African Economic Conference will take place in Addis Ababa, Ethiopia, in December 2017.
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Doing Business Trading Across Borders and Logistics Performance Index: similar yet different
People who look at the Doing Business report’s Trading Across Borders indicator and the Logistics Performance Index (LPI) often wonder why one country can perform well on one of the rankings but not so well on the other although they both measure trade and logistics.
In fact, earlier this year, the Doing Business team organized a workshop at the World Bank Global Knowledge and Research Hub in Kuala Lumpur to clarify the differences between the two datasets.
Let’s start off with a few definitions:
The Doing Business report is a World Bank Group flagship publication, which covers 11 areas of business regulations. Trading Across Borders is one of these areas. It looks specifically at the logistical processes of exporting and importing. Data is updated annually and the latest edition covers 190 economies. Doing Business collects data from local experts and measures performance as reported by domestic entrepreneurs, while taking into consideration factual laws and regulations.
The Logistics Performance Index is a benchmarking tool which focuses on trade logistics. It is created to help countries identify the challenges and opportunities they face as they relate to customs, border management, transport infrastructure, and logistics services. Updated biennially, the latest data and report cover 160 economies. Data is collected from global freight forwarders and express carriers who provide feedback on the logistical “friendliness” of the countries they operate.
Looking deeper into the methodology:
Doing Business follows very specific case study assumptions, to allow for comparability across all countries included in the report. For example, Malaysia imports car parts from Thailand and exports electrical machinery to China. The Doing Business indicator looks uniquely at the time and cost associated with documentary and border requirements and regulations mandatory for a shipment to cross the economy’s border. The Trading Across Borders ranking is based on the distance to the frontier scores of the eight indicators.
The LPI on the other hand, does not follow specific case study assumptions. The survey invites the respondents to rate from very low (1) to very high (5) the overall logistics “friendliness” of eight countries in which they operate along six areas. The six areas that are evaluated include: (1) Customs, (2) Infrastructure, (3) Ease of arranging shipments, (4) Quality of logistics services, (5) Tracking and tracing, (6) Timeliness. The LPI score is constructed from these six indicators using principle component analysis.
Table 1. Summary of selected differences between the Doing Business Trading Across Borders indicator and Logistics Performance Index
Trading Across Borders | Logistics Performance Index | |
---|---|---|
Overview | One of the 11 areas of business regulations measured by the Doing Business report | Interactive benchmarking tool measuring performance on trade logistics |
Coverage | 190 economies in the latest edition | 160 countries in the latest release |
Data update | Annually | Biennially |
Focus | Experts answer specific questions on their country's domestic logistics processes | Each survey respondent rates eight foreign countries about their logistics "friendliness" |
Case study | Very specific case study assumptions | No case study is applied |
Areas measured | Eight dimensions of trade, focusing on the time and cost for border and documentary compliance during export and import | Six dimensions of trade, focusing on quality of customs, infrastructure, arrangements of shipments, logistics services, tracking and tracking consignments and frequency with which shipments reach consignees |
Ranking | Based on the distance to frontier score for eight indicators | Based on the six indicators using principle component analysis |
What is the relationship between the two scores?
Analysis shows that economies that perform well in the Doing Business Trading Across Borders indicator also tend to perform well on the Logistics Performance Index. For example, The Netherlands ranks 1st on Trading Across Borders and 4th on the Logistics Performance Index; Mongolia ranks 103 on Trading Across Borders and 108 on the Logistics Performance Index. This also means that there is a positive association between the rating that experts provide in the Logistics Performance Index survey and the responses reported by local experts in the Trading Across Borders questionnaire (Figure 1).
Figure 1. Relationship between Trading Across Borders rank and Logistics Performance Index rank
Source: Doing Business 2017 and Logistics Performance Index 2016. The correlation between the Trading Across Borders rank and the Logistics Performance Index rank is 0.59. The relationship is significant at the 1% level after controlling for income per capita. The sample includes 144 countries.
Both reports are standalone products of the World Bank Group and while some similarity between the two may be observed due to their largely shared theme, the two products are methodologically and conceptually different. That said, both datasets are powerful tools which complement each other and help policymakers pinpoint specific areas of logistics and trade that they need to improve.
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Inactivity of EAC Attorneys General hampers legislation
Presenting Bills proposed by the Council of Ministers to the East African Legislative Assembly (EALA) for debate to facilitate the East African Community integration has become harder for lack of green light by the Sectoral Council.
The bills must be scrutinised and accepted by the EAC Sectoral Council on legal and judicial affairs before submission to the regional Assembly.
But sectoral council has not met for nearly two years, The New Times understands.
The sectoral council on legal and judicial affairs is made up of East African Community Attorneys General, Solicitors General and ministers responsible for judicial and constitutional affairs.
MP Patricia Hajabakiga, the chairperson of the Rwandan delegation to the East African Legislative Assembly (EALA), in a recent interview with The New Times, said laws such as the EAC Standardisation, Quality Assurance, Metrology and Testing (SQMT) Act that are outdated and need urgent review remain unaddressed.
“Bills proposed by Council have to go through the sectoral council on legal and judicial affairs in order to be submitted to parliament. But the problem is that the sectoral council rarely meets,” she said.
“They have not sat for the past two years to look at any legislation. This means that, for the past two years, apart from the Appropriation Bills which are budget related and don’t require the sectoral council on judicial and legal, no other laws came to parliament.”
The SQMT Act, enacted in 2006, provides a framework for development and implementation of SQMT activities in the bloc and other lower level technical teams have worked on amendments to update it but the sectoral council has never looked at their work.
Asked if EALA has ever asked the Council about the issue, Hajabakiga said that has been done, “several times,” at Assembly level in the plenary and at Commission level.
The EALA Commission, one of the Assembly’s seven standing committees, is the principal committee which manages the affairs of the Assembly, organises the business and programme of the House, and nominates members of other committees.
Hajabakiga said: “When we ask them [Council of Ministers] they say they have about 12 pending Bills which are supposed to be looked into by the sectoral council on legal and judicial affairs but are unable to submit them to parliament because those people have not met.”
These considered necessary meetings of the sectoral council on legal and judicial affairs are preceded by those of sectoral groups “which actually do their work” but must have to wait for the ministers to examine the final product.
During a recent EAC media training workshop in Nairobi, Peter Njoroge, director of Economics with Kenya’s Ministry of EAC Affairs, also noted there was frustration caused by the sectoral council.
“If there is a sectoral council we are having problems with it is the sectoral council on legal and judicial affairs. They do not meet to look at legislation and this affects progress,” Njoroge said, while shedding light on issues concerning the East African Monetary Union project.
Rwanda’s Minister for Justice and Attorney General, Johnston Busingye, acknowledged that it is important that sectoral councils meet because when one does not meet to discharge its Community functions, work remains undone and impacts integration directly.
He added: “The sectoral council of the Attorneys General has not met for some time owing to busy domestic schedules of one or the other Attorney General when there is a meeting scheduled. This can happen.
“I hope each of us will do what it takes to ensure that the next meeting takes place so that we can clear the work pending our input.”
As per the EAC Treaty, only two entities can send Bills to EALA: the Council or by means of a private members’ Bill but the latter has limitations since lawmakers cannot put forward any law which has financial implications.
Since most laws have financial implications, Hajabakiga said: “It is extremely difficult for us.”
During one of its sessions, in September 2014, the sectoral council of legal and judicial affairs cleared legal input into the draft EAC Elimination of Non Tariff Barriers Bill, 2014; the draft East African Competition Act (Amendment) Bill, 2014; and the East African Community Customs Management Act (Amendment) Bill, 2014, all of which aimed at ensuring statutory support for relevant policy positions and advised the Council to introduce them in the Assembly.
That meeting also finalised legal input into the draft Protocol to Operationalise the Extended Jurisdiction of the East African Court of Justice (EACJ) whose purpose was to ensure the court’s extended jurisdiction to cover trade and investment disputes.
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Indonesia to finalize five trade deals next year in hunt for wider markets
As Indonesia accelerates talks with 15 Asia-Pacific nations, it is prioritizing the conclusion of five trade deals next year to open access to foreign markets and lure inflows of investment.
The biggest one is the intensively discussed Regional Comprehensive Economic Agreement (RCEP), which will create a market of 3.4 billion people involving ASEAN and its six major trading partners – Australia, China, India, Japan, New Zealand and South Korea.
The rest are two comprehensive economic partnership agreements (CEPA) with the European Free Trade Association (EFTA) and Australia and two free trade agreements (FTA) with Peru and Chile.
Trade Ministry director general for international trade negotiation Iman Pambagyo said that the deals are expected to strengthen Indonesia’s grips on regional and international markets, as well as integrate its industries more deeply with global supply chains amid a worldwide economic slowdown that has sapped trade growth in recent years.
Global trade fell to a low cycle in the past four years of 2.8 percent in 2012 and 3.5 percent last year.
Before commodity prices plunged and the United States experienced a budget crisis, international trade grew at 11.71 percent in 2010, World Bank data shows.
Indonesia’s exports have gradually shrunk since 2011, after they hit an all-time high of US$203.4 billion, to $150.2 billion last year, according to data from the Central Statistics Agency (BPS).
Once completed, the RCEP will help more goods, services and investment flow into the biggest regional trade bloc ever, one that would represent 30 percent of the global economy.
ASEAN has already sealed an FTA, known as ASEAN+1, with the trading partners. However, its six partners have yet to ink similar deals among themselves.
“Now we want to combine all these [agreements] to become one, so that all 16 countries can develop, deepen and widen the regional supply chain,” Iman recently told The Jakarta Post.
Talks on the RCEP have just entered their 16th round and they are taking place in Indonesia this week. For the first time, the discussions will touch on issues like the free movement of workers and intellectual property rights, while also trying to finish a chapter on small and medium enterprises (SMEs).
A CEPA with the EFTA, meanwhile, is expected to be completed in the first half of 2017. With the agreement, Indonesia would prioritize attracting investments from Iceland, Norway, Switzerland and Liechtenstein, a combined market of only 14 million people.
The Indonesia-Australia (IA) CEPA, which has been discussed since 2010, has a deadline of late next year.
Traditionally, the two countries produce complementing products and services, except for cattle and horticulture.
Indonesia ships mostly automotive parts and paper to its neighbor, which has a population of 23 million, and also hopes for more investment from there.
At least 250 Australian firms already have a presence in Southeast Asia’s biggest economy.
As export growth has slowed in recent years, Indonesia is trying to reach out to two non-traditional markets, Peru and Chile, which have populations of 30.7 million and 17.6 million respectively. Household spending accounts for more than 60 percent of the gross domestic products (GDP) of both countries.
Apart from the five aforementioned deals, Indonesia is also preparing for other potential agreements. It is currently carrying out a joint feasibility study with the Eurasian Economic Union (EEU), a bloc that includes Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan and comprises 183 million people.
It is also considering starting talks on a trade deal with either Egypt or Southern African Customs Union (SACU) and is reconsidering one with Turkey.
In the planned deals, Indonesia will seek to lure investors into priority industries and export more of its champion manufactured goods.
In the National Industry Development Masterplan (RIPIN) for 2019 to 2035, the Industry Ministry has set 10 priority industries to develop and defend amidst tighter global competition, including food, textiles, footwear, automotive, basic metals and minerals and electronics.
In line with the goal, economic policies to grab investment in those areas have been put into place and are partly aimed at reducing dependence on imported goods.
However, questions linger over whether Indonesia would benefit from the trade agreements it is seeking. Business players have long voiced such concerns, saying that it is necessary for the country as well as its industries to boost their own competitive edges.
Indonesian Chamber of Commerce and Industry (Kadin) deputy chairwoman for international relations Shinta W. Kamdani highlighted the lack of labor productivity and poor coordination between the central and regional administrations as some main stumbling blocks to provide a more conducive investment climate and lower production costs to compete with foreign products.
“There’s much homework for us, ranging from regulations and productivity to labor issues. If we don’t settle them, we can lose out in the global market,” she told the Post.
The business group has already signed a memorandum of understanding with the Manpower Ministry, the Industry Ministry and Germany to create more internship areas and do talent matching with vocational schools across the country. It is scheduled to start next year.
Sharing a similar concern with Shinta, Indonesian Textile Association (API) chairman Ade Sudrajat said the most daunting task would be to improve the ease of doing business, which helps lure investment.
“Our policies must also be consistent and it requires regulatory impact studies. However, the reality at present speaks differently,” he told the Post, referring to an antidumping duty that Indonesia applies on imported yarn from Taiwan, China and South Korea, which makes its textile products more expensive.
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Humanitarian needs continue to spiral in Southern Africa as peak of lean season looms
Southern Africa is now entering the peak of the lean season following the worst El Niño-induced drought in decades. With food stocks largely depleted due to poor or failed harvests across the region, estimates of people in need of humanitarian assistance have increased by more than one million to 13.8 million, mainly due to rising needs in Madagascar, Malawi, and Zimbabwe.
“Humanitarian assistance is being scaled up throughout the region,” said Timo Pakkala, El Niño Coordinator for the Southern Africa Office for the Coordination of Humanitarian Affairs (OCHA). “However as we enter the critical period of the crisis during the lean season, many countries are struggling to stretch funds to cover the growing needs. It is essential that humanitarian assistance to the most vulnerable people is sustained through this period, and for farmers to be supported so they can resume agricultural production.”
On 6 December 2016, humanitarian agencies of the Regional Inter-Agency Standing Committee (RIASCO) launched a revised Action Plan, outlining the deteriorating humanitarian conditions as well as response in the region.*
Food shortages across the region are now severe, and are being exacerbated by a multitude of existing and increasing vulnerabilities, including weak commodity prices, unfavourable exchange rates and slow economic growth. Moreover, the region accounts for a third of all people living with HIV worldwide. The crisis is also disproportionately affecting women and children, with an increasing number of children dropping out of school due to lack of water and food, and entering child labour or early marriage. For example, in Malawi, more than 137,000 children are being forced out of school by the crisis.
Southern Madagascar is of particular concern where an estimated 845,000 people are currently in the emergency or crisis category of food security. Maize, cassava and rice production has decreased there by as much as 95% compared with 2015. The Madagascar humanitarian response plan is only 29% funded.
As of early December 2016, some $757 million has been raised for the humanitarian programmes of RIASCO partners in the region, which has helped save lives, protect livelihoods and reduce human suffering. This funding has allowed for a broad range of humanitarian assistance from partners. WFP’s combined operations, including food and cash assistance, reached 6.6 million people in October. WFP is now scaling up to reach 13 million people in January through a combination of relief, development, resilience and recovery operations From now until April 2017, WFP is supporting governments in treating and preventing moderate malnutrition among more than 700,000 young children, pregnant and nursing women, and people living with HIV across the region.
UNICEF and partners have treated more than 82,000 children for severe acute malnutrition and reached more than 600,000 people with clean water. In the coming months, UNICEF will work with partners to mobilise resources to provide life-saving treatment to 580,000 severely malnourished children; water, sanitation, and hygiene to more than 4.6 million children and their families; education to 1.9 million affected children; and protection and care for 5 million children.
FAO is supporting the provision of agricultural inputs for 800,000 farmers. National social protection programmes have been strengthened and cash transfer programmes expanded to stimulate local markets. National and international non-governmental organizations have played an indispensable role in the response.
Despite efforts, critical remaining funding gaps amounting to $550 million need to be met, without which, millions of the most vulnerable people will not receive full rations, and hundreds of thousands of children will remain at risk of irreparable damage from undernutrition and from dropping out of school. Health centres will not be able to provide the most essential services, and farmers will be unable to resume full agricultural production.
Alongside humanitarian assistance, the RIASCO action plan revision advocates stepping up efforts to end the cycle of drought-induced crises in southern Africa. Development partners say focus should be on the development of sound national policies and strategies, expanding coverage and strengthening social safety nets, promoting climate-smart agriculture, reinforcing early warning systems, and improving management of water and other natural resources.
Further investments in these areas, combined with solid fiscal and other risk management instruments at national and regional level, are required to build resilience and achieve the goal of breaking the cycle of recurrent drought emergencies.
An initial RIASCO Action Plan for Southern Africa, released in July 2016, outlined urgently-required, life-saving humanitarian actions plus various options to address chronic issues and build longer-term resilience.
Download: Revised Regional Response Plan for the El Niño-Induced Drought in Southern Africa, December 2016 – April 2017 (PDF)
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tralac’s Daily News Selection
The selection: Wednesday, 7 December 2016
From the 11th African Economic Conference: access the 47 papers, presentations on the theme ‘Towards agro-allied industrialization for inclusive growth’
ABCA 2017 call for papers: The challenges and opportunities of transforming African agriculture
Tomorrow: in Harare, Zimbabwe’s 2017 national budget will be presented; in Kuala Lumpur, International trade and non-convergence trap for middle-income countries seminar
Implementing gender-aware ex ante evaluations to maximize the benefits of trade reforms for women (pdf, UNCTAD)
The relationship between trade policies and gender is complex, and there is no clear-cut evidence on the effects of trade liberalization on women. Liberalization can be instrumental in providing new opportunities for women, yet may also, in certain cases, contribute to exacerbating existing gender biases and discrimination. This policy brief aims to provide stakeholders with an understanding of the scope of ex ante evaluations, and to provide practitioners with an overview of the different approaches available.
EAC cross-border trade: Traders told to learn rule of game (Daily News)
Traders in the East African Community should understand the rule of game in the regional cross-border trade, a trade technocrat has advised as millers in Kenya complain about zero rated wheat flour imports from Tanzania. EABC Trade Economist, Mr Adrian Njau, said in a telephone interview from Arusha yesterday that most traders were uninformed of their rights stated on the EAC treaties. [Kenyan millers protest Tanzania’s tax-free wheat flour]
The Brazzaville Declaration: Central African States adopt model cross-border laws on cyber security (UNECA)
Accordingly, it is in December 2016 that the Ministers of Posts and telecommunications of ECCAS member states adopted these laws and drafted a declaration dubbed ‘The Brazzaville Declaration’. One of the recommendations of the declaration urges the ECA to support the ECCAS Secretariat General in (i) developing a roaming frame of reference in the Central Africa sub-region and (ii) in establishing mechanisms for the monitoring and evaluation of the level of adaptation of legislative and regulatory frameworks.
Sub-Regional Coordination Mechanism for Eastern and Southern Africa: Migration to Europe a result of failed development policies in Africa (EAC)
The EAC Deputy Secretary General in charge of Infrastructure and Planning, Dr Enos Bukuku, said that poverty-stricken refugees were willing to risk their precious lives to cross the Mediterranean and face other risks knowing they could get a better life in Europe. Dr Bukuku said the migration provides an opportunity for African leaders, elites and governments to ask themselves pertinent questions on why the continent continues to score poorly on all development indicators. Among the RECs and IGOs represented at the meeting in Arusha are the EAC, SADC and the Indian Ocean Commission. Other organizations with representatives at the meeting are the AU, UNDP, ILO, IOM, NEPAD, and the Port Management Association for Eastern and Southern Africa. [UNECA media release]
Selected SGR updates: Kenya and Uganda officials to sign joint SGR financing pact in Beijing, George Omondi: SGR could help East Africa achieve free trade dreams (Business Daily)
Zambia Economic Brief: Raising revenue for economic recovery (World Bank)
The services sector has been an important driver of growth over the past ten years, and the greatest contributor to national income. The sector has struggled in 2016 following increased costs of borrowing, the electricity crisis, and slower consumption growth combined with high inflation. For example, the wholesale and retail trade sector contributes 40% to the services sector’s output, but has experienced a decline in sales in 2016. A recent monetary policy update by the Bank of Zambia (BoZ) suggests that consumer spending declined by 6% in Q3 2016 on account of tight credit conditions. Growth of the financial sector has been constrained by a tight monetary policy. Similarly, the transport sector declined following weak economic performance across other sectors of the economy. The kwacha has continued to fluctuate against its major trading currencies, but was stronger and less volatile in the first nine months of 2016 compared to 2015 (figure 7). Between January and end-November 2016, the kwacha has appreciated by 10.4% against the US$, 13.2% against the Euro, and 2.1% against the South African Rand. Four factors have contributed to the strengthening and relative stability of the kwacha.
Botswana: State of the Nation Address 2016
Despite initially optimistic projections, our domestic economy last year ended up with a negative growth of 0.3%, having been driven down by a 19.7% decline in mineral revenues linked to weaker global demand, aggravated by drought and the challenges we experienced in our water and energy sectors. We anticipate an overall domestic growth rate of 3.5% for this year and 4.1% in 2017. In this respect, while the liquidation of the BCL Group of companies will continue to have economic and social implications, particularly in the area of employment, it is anticipated that it will have limited direct impact in terms of our exports, government revenues and overall growth. Government shall, nonetheless, continue to closely monitor developments with respect to the BCL liquidation process with the view of updating our macroeconomic projections as may be necessary. Given the difficulties facing the mineral sector, domestic growth is expected to once more be driven by the non-mining sectors, more especially in Trade, Hotels and Restaurants (6.8%), Transport and Communication (6.1%) and Finance and Business Services (4.0%).
Zimbabwe: Diamond output declines 62% (The Herald)
Production of the precious mineral totalled 3,2 million carats in 2015, but has been negatively impacted this year by ongoing court cases where two miners are objecting to consolidation of the industry. Giving oral evidence before the Parliamentary Portfolio Committee on Mines and Energy yesterday, Mines and Mining Development Minister Chidhakwa said diamond production this year was severely affected by resistance to consolidation, which saw some mining companies challenging the decision in the courts.
Namibia’s credit rating revised to negative (The Namibian)
Moody’s has revised Namibia’s credit risk outlook from stable to negative, while affirming the country’s long-term issuer and senior unsecured ratings. The ratings agency announced this on Friday, saying that the decision to revise the credit risk outlook was based on Namibia’s poor policies to reduce the deficits and accumulated debt stock. They also said that Namibia’s public debt has continued to rise, and that there are chances that the economy could slide further when the government tightens domestic funding conditions. The credit agency added that while the government is committed to ambitious policies, these plans will face challenges from continued upward pressures on the public wage bill, uncertainty surrounding future Southern African Customs Union revenues and an external environment characterised by low growth.
Tanzania: Magufuli orders removal of top mining firm from gold field (IPPMedia)
The mineral prospecting area in question is located in Shinyanga Region and licenced to Pangea Minerals Limited, a subsidiary of Acacia Mining Plc (formerly Barrick Tanzania) which owns three gold-producing mines in the country - Bulyanhulu, North Mara and Buzwagi. The president yesterday chided the ministry for ordering the removal of artisanal miners from the Mwakitolyo area and reversed the decision, saying it is the mining giant that should be removed instead. "How do you kick out more than 5,000 people in favour of just one investor? This is unacceptable and it doesn’t even make sense," Magufuli said at State House in Dar es Salaam. He ordered Vice President Samia Suluhu Hassan to ensure his instructions are implemented and Pangea Minerals’ prospecting licence is cancelled forthwith.
Officials from 10 West African countries arrive for unprecedented visit to Israel (Jerusalem Post)
Aiming to adapt Israeli farming expertise to their environments back home, the delegates were taking part in the first-ever Economic Community of West African States seminar held outside of West Africa. The three-day conference, titled “Enhancing Sustainable Agricultural Productivity in Arid and Semi-arid Regions: The Israeli Development Experience,” is a collaboration between ECOWAS and the Foreign Ministry’s MASHAV (Hebrew acronym for Israel’s Agency for International Development Cooperation), along with the Agriculture Ministry’s CINADCO: The Center for International Agricultural Development Cooperation.
Expressing its deep concern over the humanitarian situation and persistent violence in eastern DRC, particularly in North Kivu, the Council called on the Government to take further action, with the support of United Nations Organization Stabilization Mission in the DRC (MONUSCO), to end the threat posed by the Allied Democratic Forces (ADF), the Forces démocratique de libération du Rwanda (FDLR) and all other armed groups operating in the country. It urged MONUSCO to fully implement its protection-of-civilians mandate, including in response to ongoing security threats.
CPI bias and its implications for poverty reduction in Africa (World Bank)
International poverty estimates for countries in Africa commonly rely on national consumer price indexes to adjust trends in nominal consumption over time for changes in the cost of living. However, the consumer price index is subject to various types of measurement bias. This paper uses Engel curve estimations to assess bias in the consumer price index and its implications for estimated poverty trends. The results suggest that in 11 of 16 Sub-Saharan African countries in this study, poverty reduction may be understated because of consumer price index bias. With correction of consumer price index bias, poverty in these countries could fall between 0.8 and 5.7 percentage points per year faster than currently thought. For two countries, however, the paper finds the opposite trend.
Mining and economic development: did China’s WTO accession affect African local economic development? (World Bank)
This paper investigates China’s influence on local economic development in 37 African countries between 1997 and 2007. The analysis compares the average changes in economic growth, migration, spatial inequality, and welfare for mineral-rich districts, pre- and post-accession, to the corresponding changes in districts without any mineral endowment. Using this exogenous variation, the paper shows that over 2002-07, mining activities in response to the global commodity price boom increased welfare as measured by spatial Sen Index but were insignificant for local economic growth, migration, and spatial inequality. The findings suggest that policy needs to do more to improve the local benefits of positive external shocks (such as China’s World Trade Organization accession): it is not enough to assume, given Africa’s high spatial inequality, that local economies will automatically benefit from higher national growth. [The analysts: Tony Addison, Amadou Boly, Anthony Francis Mveyange]
Sovereign wealth funds and long-term investments in Sub-Saharan Africa (World Bank)
In this paper, we theoretically and empirically analyze SWF investments in Africa. Since SWF activities remain minimal in Africa, the question is what would it take for SWFs to contribute more to long-term financing of development in Africa? [Second], we find empirically using a database of 26 SWF investments in Africa over the period 1985-2013 that: (i) about half of SWF investments in Africa are commodity-fueled funds, which raises some concerns given the end of the commodity super-cycle; (ii) Real Estate and Hotels are the most popular sector for SWFs in Africa, totaling 42 percent of investment, while only 10% of their investments are in infrastructure; (iii) SWFs that invest in Africa mainly originate from Asia, and Africa is the region that received the smallest share of SWF investments.
11th annual United Nations Internet Governance Forum opens (UN)
Each year, the UN convenes the IGF meeting, through the UN Department of Economic and Social Affairs, to unify various stakeholders and discuss Internet governance issues, as well as opportunities and challenges in an open, inclusive and transparent forum. This year’s theme – Enabling Inclusive and Sustainable Growth – aims to explore the ability of the Internet to foster development in sustainable and inclusive ways.
Philip Hammond travels to South Africa for post-Brexit trade
Mozambique: Cashew exports may bring tax revenues of $33m
Mauritius, South Africa to deepen collaboration in various economic spheres
Tanzania: Report backs cement firms’ outcry on coal
Kenya: House budget office faults Treasury growth forecasts
Kenya starts talks on direct flights between Nairobi, Latin America
Deputy President Cyril Ramaphosa: keynote address at Nelson Mandela Memorial Dialogue
Mediterranean Basin: an assessment of economic cooperation
DAC Temporary Working Group on Refugees and Migration: draft agenda (19 December, OECD)
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Botswana State of the Nation Address 2016
Delivered by His Excellency Lt. Gen. Dr. Seretse Khama Ian Khama, President of the Republic of Botswana, to the Third Session of the Eleventh Parliament, 5 December 2016
I come before you to once again report on our country’s progress over the past twelve months, while further updating this House and the nation about our roadmap for moving forward. Let me begin by saying that having now passed the golden milestone marking our first half century of democracy and development, we will continue to take full advantage of emerging opportunities in our shared journey as a united and proud nation.
The advent of our 50th Anniversary, coinciding with the passing of the baton from Vision 2016 to our new Long Term Vision 2036, underscores the fact that we as a nation must remain focused on our national development path. It is therefore appropriate for us to contemplate the extent to which past experience, along with current planning, may assure our future achievement.
To reiterate what I said during the Golden Jubilee celebrations, our economic and social growth as a people has been and should remain, rooted in a willingness to collectively overcome any obstacle, no matter how daunting. We can do this through persistence, hard work and mutual support, while at all times placing the interests of Botswana first.
This is all the more imperative given that the era of comfortable budgetary surpluses, driven by relatively steady mineral revenues, is behind us. We must therefore emulate our forbearers by doing more to optimise the assets at our disposal.
The prime objective of our new Vision 2036 remains the delivery of prosperity for all and ensuring that every Motswana enjoys a dignified livelihood. The quality of our progress in reaching this destination will be measured across four pillars, being:
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Sustainable Economic Development;
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Human and Social Development;
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Sustainable Environment; and
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Good Governance, Peace and Security.
Taken together the four pillars provide an ambitious but realistic framework for further progress that will be translated into programmes and initiatives with measurable timeframes.
The successful implementation of Vision 2036 across the next four National Development Plans (NDP), beginning with the just approved NDP 11, will furthermore be driven by a structured delivery mechanism based on enhanced monitoring and evaluation as well as communications, change management, planning and delivery capabilities.
Government’s recent decision to rename, rationalise and increase the number of line Ministries was motivated by a need to focus more on key developmental issues as part of NDP 11, while underscoring our intention to align ourselves with a changing world.
Enhanced partnership is further required for the delivery of our flagship programmes. In keeping with my party’s 2014 pledge, programmes such as the Economic Diversification Drive (EDD) and the Economic Stimulus (ESP) and Poverty Eradication Programmes shall remain as priorities. Job creation through EDD and ESP will be increasingly linked to private sector growth, with Government playing an enabling role.
As of September 2016 the total number of Batswana who have been employed through ESP stood at 18,867, of whom 8,718 or 46% were youth. Next year will see us rolling out yet another programme, which will embrace every constituency in the country in the form of community projects. It will increase the delivery of infrastructure at local level, while providing further income generating activities and employment opportunities. This supplementary programme will be overseen by the Ministry of Local Government and Rural Development.
Economic Outlook
According to the International Monetary Fund’s (IMF) most recent World Economic Outlook report, modest global growth rates of 3.1 for 2016 and 3.4% for 2017 are expected. Recent experience, however, teaches us to treat such projections with caution. Despite initially optimistic projections, our domestic economy last year ended up with a negative growth of 0.3%, having been driven down by a 19.7% decline in mineral revenues linked to weaker global demand, aggravated by drought and the challenges we experienced in our water and energy sectors.
We anticipate an overall domestic growth rate of 3.5% for this year and 4.1% in 2017. In this respect, while the liquidation of the BCL Group of companies will continue to have economic and social implications, particularly in the area of employment, it is anticipated that it will have limited direct impact in terms of our exports, government revenues and overall growth. Government shall, nonetheless, continue to closely monitor developments with respect to the BCL liquidation process with the view of updating our macroeconomic projections as may be necessary.
Given the difficulties facing the mineral sector, domestic growth is expected to once more be driven by the non-mining sectors, more especially in Trade, Hotels and Restaurants (6.8%), Transport and Communication (6.1%) and Finance and Business Services (4.0%).
Trade and Foreign Reserves
Trends in merchandise trade as supplied by Statistics Botswana indicate that total exports for 2015 were valued at P63.4 billion, against P76.2 billion in 2014. This represents a 16.8% decrease in exports, mostly due to a fall in the demand for rough diamonds. Total imports increased by 1%, recording P73.2 billion in 2015 from P72.4 billion during 2014.
As at August 2016, foreign exchange reserves were valued at P83.1 billion, equivalent to 18 months of import cover. Of these reserves, the Government Investment Account amounted to P33.8 billion.
Budget
The overall fiscal balance for the 2015/16 financial year was a deficit of P6.63 billion, which is higher than the projected P4.20 billion. This was an unfortunate necessity, as deficits should be avoided given their potential to erode our foreign exchange reserves; as well as impact negatively on our international sovereign credit ratings, which are critical in driving economic growth and development. Government can therefore not sustain such unbalanced spending, which we will do as a last resort only under exceptional circumstances.
Our prudent macro-economic management has continued to garner international praise for buttressing financial growth and stability. In April Moody’s Investors Service affirmed Botswana’s “A2” sovereign credit rating. Moody’s analyzed Botswana’s credit profile as still stable in the context of the shock to the economy caused by low copper and nickel prices, as well as instability in the demand for diamonds.
In its October 2016 review, Standard and Poor’s (S&P) Rating Services also reaffirmed its “A-2” sovereign credit rating for Botswana. As with Moody’s the latest S&P update reflected the continued downside risks stemming from volatile commodity prices.
Planning
Let me commend the members of this House for extending the last session of this House in order to debate and approve NDP 11, the implementation of which will commence on the 1st of April, 2017. The Plan is aligned to the UN Sustainable Development Goals as well as our new Vision 2036. Consistent with its theme of “Inclusive Growth for the Realisation of Sustainable Employment Creation and Poverty Eradication” it will, in particular, address the challenges of poverty, unemployment and income inequality.
To ensure the optimal use of our natural heritage on a sustainable basis, Government, remains committed to the Gaborone Declaration for Sustainability in Africa. This commitment is being implemented through the global partnership programme on Wealth Accounting and Valuation of Ecosystem Services (WAVES). We have now developed natural capital accounts for water, minerals, energy and compiled macroeconomic indicators of sustainable development.
Economic Diversification Drive (EDD)
Since its 2010 inception the EDD Strategy has led to a significant increase in the value of Government procurement from local manufacturers and service providers; annually amounting to over P 2.2 billion over the past three financial years. To date, 1,896 enterprises have been registered under the EDD.
Implementation of the EDD Medium to Long-Term Strategy to develop sustainable sectors for economic growth and diversification is progressing, with implementation of the textile, leather and dairy sub-sector strategies.
Under the Leather Sub-Sector, the establishment of a Special Purpose Vehicle that will own, build, operate and maintain the Leather Industry Park is progressing. Eight companies responded to an Expression of Interest, which was published in June 2016 to identify potential investors. Once complete, the Leather Industry Park is expected to create direct employment of 6000 to 8000 jobs.
Implementation of the Private Sector Development Programme, a joint initiative between Government and European Union (EU) to improve enterprise competitiveness, is being administered by Business Botswana. The Programme has enrolled 100 small and medium enterprises in manufacturing; ICT; agro-industry; hotel and tourism as well as the construction and public works sectors. The Programme is further enhancing the capacities of development institutions such as LEA, CEDA, BITC, HATAB and Community Based Organisations.
Implementation of recommendations from the Beef Value Chain Study is being finalised, while six additional value chain studies for horticulture, piggery, goats, honey, morula and tourism have been completed.
Investment and Trade
During the 2015/16 financial year the Botswana Investment and Trade Centre (BITC) registered P377 million of investment expansions resulting from their investor aftercare programme, which encourages companies to reinvest locally. FDI attracted through BITC in 2015 amounted to P1.493 billion compared to P1.489 billion the previous year, while domestic investment amounted to P1.253 billion compared toP238.4 million the previous year. In 2015, BITC further facilitated exports valued at P2.2 billion.
As part of Government’s investment promotion strategy, BITC has been further attracting investment in areas of competitive advantage such as cargo and logistics, beef, coal and soda ash beneficiation, auto components, ICT and leather production.
Moving forward our potential as a centre for trade and investment has been enhanced by the recent signing of the EU-Southern African Development Community (SADC) Economic Partnership Agreement (EPA), which accords duty and quota-free market access for Botswana’s exports to the EU market. Under this Agreement, our infant industries can be protected against EU imports from established industries. The Agreement also provides for transitional safeguard measures for Botswana’s sensitive products.
Economic Development Initiatives
A Board for the Special Economic Zone Authority (SEZA) has been appointed and is already engaged a Technical Advisor for the rollout of the zones. Priority is now being given to the development of the mixed use Special Economic Zone at Selebi Phikwe.
In addition SPEDU has engaged with communities in the SPEDU Region to resuscitate and support development projects in such areas as piggery, fish farming through co-operatives and development trusts. SPEDU is also facilitating the establishment of a Regional Chamber of Commerce and the development of the strategy to incorporate the SMME’s into the mainstream economy in partnership with Business Botswana.
SPEDU is further facilitating the allocation of land for the establishment of private sector businesses including a pharmaceutical and air separation plants and an aloe Vera farm and plant. These businesses are expected to be fully operational before the end of the 2016/17 financial year, while plans to facilitate dam tourism are also underway.
From April 2015 to March 2016, 2657 entrepreneurs were trained and mentored by LEA, of whom 2033 were youth. As of March 2016, an additional 25,189 were also trained through the Entrepreneurship Awareness Workshops programme, which targets secondary school leavers, vocational education trainees, as well as prison inmates.
Government is employing sector specific strategies to promote local industries. A statutory instrument to restrict importation of salt in small quantities has been introduced to promote market access for locally packaged salt. Since its commencement two salt packaging companies have been established.
Cooperatives
Botswana’s 241 cooperatives continue to contribute to economic, social and cultural development. Government is therefore monitoring the implementation of the Co-operative Transformation Strategy, with a view to resuscitate, revamp and re-direct the development of co-operatives into competitive businesses.
Competition & Consumer Protection
The Botswana Bureau of Standards (BOBS) has developed 216 standards in such areas as the construction, chemical, agriculture and food sectors.
For its part, the Competition Authority has been overseeing merger applications involving foreign investors, among other transactions. Such cross border transactions can strengthen the capacity of local companies as well as empower citizens through ownership of shares in the merged business. In the financial year 2015/16, a total amount of P800 million was injected into the local economy as a result of such merger transactions.
The Citizen Entrepreneurial Development Agency (CEDA) remains constant in its support of citizen business start-ups. Since 2008 CEDA has funded 3,289 enterprises with a total value of nearly P 2.7 billion. During the 2015/16 financial year, it further assisted 418 new enterprises with a total monetary value of P 400 million, generating 2,952 new jobs.
Minerals
The market demand for rough diamonds improved slightly in 2016, increasing the investors’ confidence in the diamonds supply. Carat sales and revenue for this year are forecast to be 65% and 27% respectively above 2015 as a result of improved global demand.
While the BK 11 mine continues to be under care and maintenance, the Lerala Mine started production in April 2016 and has already made two sales. The Karowe mine has continued to perform well after unearthing the second largest diamond in history, the 1,111 carat Lesedi la Rona.
Copper and Nickel prices, however, remained depressed in 2016.
The downturn put BCL and Tati Nickel Mines under severe financial constraint, leading to our decision to place the BCL Group under provisional liquidation in October 2016. In taking this difficult step Government was confronted by the fact that to stay afloat the BCL companies required an additional P 2 billion over and above the P 1 billion plus Government had guaranteed for a bridging loan advanced by Barclay’s Bank in April of this year. These additional funding requirements, on top of the Barclay’s loan that must be serviced by Government, had by any measure exceeded our financial capacity for further support; more so that based on medium term projections the mines would continue to incur losses.
To secure Selebi Phikwe’s future, Government is implementing a robust Economic Recovery Plan, coordinated by the Former Bank of Botswana Governor. The plan includes provision for the accelerated implementation of the SPEDU economic diversification framework coupled with further public and private investment.
Our other copper mines also continue to struggle. Boseto Mine has been acquired by Khoemacau after undergoing liquidation in 2015. The mine remains under care and maintenance and will hopefully reopen by end of 2017. Mowana Mine was also put under liquidation at the end of 2015 and is seeking new investors.
Notwithstanding these challenges, we continue to view the mineral sector as an area of opportunity for economic growth and diversification through the promotion of further beneficiation as well as the expansion of new, including non-traditional, mining operations. In this regard, I am pleased to confirm that there are some positive developments in the energy minerals sub-sector.
Agriculture and Food Security
Over the past year the Agricultural Sector implemented ESP packages to improve access roads to production centres, use of treated sewage water for irrigation, electricity connection to production clusters, improvement of infrastructure at horticulture production areas and commissioning of a National Agro-Processing Plant. These initiatives have contributed to food security and employment creation.
The Agro-Processing plant in Selebi-Phikwe has been completed and since September 2016 is able to produce vegetables and associated commercial products for wholesale and retail suppliers.
Government is also strengthening its efforts to exploit sewage water for irrigation such as at Glen Valley where 203ha have been allocated to 47 farmers. The Serowe grey water re-use project is also progressing well and should be completed by the end of this month.
Crop production was affected by periods of extended heat waves and low moisture levels. The national cereal production for 2015/16 is 54,374.20 Metric Tonnes, which is 18.1% of the National Cereal requirement of 300,000 Metric Tonnes. A drought assessment tour conducted in February and May 2016, confirmed that though there were late rains in February - March 2016, the rainfall had been poorly distributed and below normal in most parts of the country.
In view of this, the whole country was declared drought stricken. Government will be continuing with Drought Relief and special assistance measures until 30th June 2017 except for the 25% livestock subsidy which should terminate at the end of this month. [Its raining!]
The Botswana Meat Commission (BMC) has increased its revenue from 2013 through 2015 by about 20.4%. The BMC has also grown its export to Europe from about 6,000 tons in 2013 to just over 9,000 tons in 2015, while hoping to further increase exports in 2016 to over 10,000 tons.
The dairy industry has improved as a response to the implementation of the dairy development strategy, based on increasing the number of milking cows, availing land to dairy investors and improving milk marketing through EDD.
Government continues to implement agricultural support schemes such as ISPAAD, LIMID and Agricultural Service Support Programme (ASSP) to promote food security. In this respect, LIMID has supplied 76,076 small-stock to 5,474 beneficiaries countrywide. The construction of a small stock abattoir in Tsabong has commenced to further enhance the scheme. The project is anticipated for completion in July 2018.
A special ISPAAD programme targeting Kgalagadi, Ghanzi and parts of Kweneng and Southern Districts is being implemented to assist Batswana who could not benefit from the regular ISPAAD programme. Under the ASSP, three service centres are complete, while another three are at various stages of construction.
With respect to animal health, the last case of Foot and Mouth Disease (FMD) was reported on 4th August 2015 in the North West District. This opens the door for us to negotiate new markets for beef from this District. The FMD situation in the North East District has stabilized as a result of the continuing implementation of joint control of the disease along the shared boundary with Zimbabwe. This has led to re-listing of the Francistown BMC abattoir for export to the EU.
Government will submit applications for FMD free status for zones 3b (Nata-Gweta) and 7 (Mmadinare-Bobirwa) to the World Organization for Animal Health in May of next year.
There has, however, been an increase in livestock mortalities, especially cattle, in areas south of the Central District and northern Kgatleng and Kweneng Districts due to plant poisoning (Parvetta, called legonyana in Setswana). Under Agricultural Research and Development, maize and sorghum varieties, which are tolerant to drought, have been released. In addition Musi breed is currently being multiplied.
Rural Development
Diversification of the rural economy can foster job creation by creating resilient communities. In this regard, our rural areas are being transformed through the provision of social and physical infrastructure such as roads, schools, health facilities, water and telecommunications. Continued support for such transformation is being driven by the Rural Development Council.
Gender
Government continues to give priority to the promotion of gender equality and women’s empowerment by, among other things, the domestication of the Convention on the Elimination of all forms of Discrimination against Women. We have also adopted the National Policy on Gender and Development which promotes gender mainstreaming for sustainable development. To facilitate effective implementation of the policy, the National Gender Commission has been established and launched in September 2016.
We further recognise the need to be proactive in eliminating Gender Based Violence. To this end, we have piloted a Gender Based Violence Referral System, which allows referrals to be made electronically, relieving survivors the ordeal of having to repeat their story to each and every service provider assisting them.
The Women Economic Empowerment programme has expanded over the years from a budget of P300,000 per year which supported 20 women organisations and business to a total of over 30 Million Pula supporting over 600 beneficiaries.
International Relations
Botswana continues to be an active and influential player on diverse issues of national interests at bilateral, regional and multilateral fora. As a member of the community of nations that cherishes freedom, peace, good governance and the full enjoyment of life, it is in our strategic interests to contribute towards addressing the increasing global challenges of climate change, food security, conflict, terrorism and transnational crime.
We continue to be deeply concerned by the growing number of armed conflicts in various parts of the world. In the case of Syria, we note that, according to the International Committee of the Red Cross, protracted fighting has already caused over as quarter million deaths and 1.5 million casualties, while resulting in the displacement of some 12.5 million people. The escalation of conflicts in the Middle East and elsewhere, along with the blatant violations of universal values by some, is quite disheartening. We shall, therefore, continue to appeal to others in the international community, particularly at the level of the United Nations Security Council, to step up our collective efforts to bring an end to this ongoing trans-national disaster.
We have reaffirmed our commitment to the International Criminal Court and International Criminal Justice system. We are furthermore at an advanced stage in domesticating the Rome Statute, and making it part of our national laws.
Consistent with our commitment to uphold international peace and security, in April 2016 Botswana was elected a member of the African Union Peace and Security Council for a period of two years. We were also pleased to have been re-elected as a member of the United Nations Human Rights Council, which is a clear manifestation of the respect we enjoy in the international community.
We have further remained engaged in finding solutions to peace and security challenges in our own sub-region. In the context of my chairmanship of SADC, I convened two Summits of the SADC Double Troika which were aimed at addressing instability in the region.
As SADC Chairperson, I also convened three ministerial workshops to deliberate on the challenges experienced by the SADC relating to food insecurity and poverty eradication; water and energy crisis; as well as curbing illegal trade in wildlife. The workshops culminated in the drafting strategies that were subsequently adopted at this year’s Summit.
The progress we have made over the past 50 years has been facilitated by the generous assistance we have received from our international partners. I, therefore, take this opportunity to once more acknowledge and thank all of the countries and international organisations, including private institutions and individuals, who have supported us in our journey.
Yesterday our hearts were with the Cuban people as they said farewell to their former President Fidel Castro; who will be forever remembered for his steadfast support for our region’s liberation. We in Botswana shall remain further grateful for the generous assistance that we have continued to receive from the Government and people of Cuba, especially in the areas of medical personnel, sports and human development. This contribution is all the more remarkable given that Cuba itself is a developing nation.
Conclusion
Let me conclude my remarks by once more observing that we as a people are standing on the launch pad to greater heights. Our 50th Anniversary celebrations this year were a reminder of not only past achievement but also our potential for greater things if we remain united and focused in our shared aspiration to build a better Botswana. The domestic impact of the continued volatility in global markets was, however, a stark reminder of the risks we face in our progress.
Over the past year our unity and patriotic commitment as a nation was symbolised by the wearing of our national colours of blue, white and black. Moving forward I take this opportunity to call on Batswana to continue to make Friday’s our National Colours Day, as a reminder of where we have been and where we wish to go as a united and proud people.
In achieving our vision of a better future, while overcoming our current challenges, it is not enough that we have sound plans and a practical as well as positive long term vision. To succeed we must become much more urgent in our delivery. This is a daily challenge for all of us, both inside and outside Government. Overreliance on the state is not a sustainable much less optimal path to 2036.
As we chart our path forward, let us also be mindful and continue to seek the blessings of the Lord who makes all things humanly possible. As a nation united under God’s mercy, I would like to encourage religious leaders to continue to join together in organising common prayers for rains and the wellbeing of the nation.
Finally, let me take this opportunity to wish everyone in this nation a joyous and safe Christmas Holiday season and a happy New Year to come. May God bless us all.
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Zambia Economic Brief: Raising revenue for economic recovery in Zambia
Zambia needs higher domestic revenue collection if the current levels of government expenditure are to be maintained in a sustainable manner, says a new World Bank Economic Brief released today.
According to the Zambia Economic Brief: Raising Revenue for Economic Recovery, Zambia continued to face slower growth in 2016. Tough global conditions have combined with domestic challenges including power outages, tight liquidity, and limited appetite for economic reform during the first half of 2016.
The brief notes that implementation of the 2016 budget has been characterized by weak commitment control and deteriorating budget credibility. As revenues fell below target, Government did not make the necessary expenditure adjustments, resulting in a substantial build-up of arrears. Monetary policy has helped moderate inflation and supported exchange rate stability, but at the price of an increased cost of borrowing, a low availability of credit, and a drawdown in reserves; all of which have added an extra drag on growth.
“The 2017 national budget and Economic Recovery Program provide a good framework to support a return to faster and more inclusive growth,” said Gregory Smith, World Bank Senior Economist. “Further details are needed on the Government’s plan for 2018 and 2019,” he added.
The report highlights that to shift to faster and inclusive growth, efforts are needed to overcome a set of interlinked economic policy challenges – if progress is made on only some of them, and not on others, the desired outcomes will not be achieved. The sequencing and coordination of measures are key in 2017 and over the course of a medium-term economic recovery plan.
GDP growth is forecast to remain close to 3.0% in 2016, before improving in 2017 (4.0%) and 2018 (4.2%). The 2017 forecast assumes progress with the economic recovery plan, a better electricity situation than in 2015/2016 and improved copper exports.
According to Country Manager for Zambia, Ina-Marlene Ruthenberg, “there is a need to look closely at ways to improve revenue collection so that economic recovery will be expedited, growth itself can be made more inclusive to support households escape from poverty, and to ensure that prosperity is better shared in Zambia.”
For Zambia to realize its goal of fiscal fitness, then higher domestic revenue collections are essential. The report suggests that Government should work to improve both tax policy and tax administration. Four ideas for improving tax administration are as follows: (i) develop a strategy to increase tax compliance; (ii) scale up taxpayer focused public education campaigns; (iii) design and build an effective system for property tax; and (iv) further support efforts to improve transparency in monitoring the country’s mineral value chain.
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Migration to Europe a result of failed development policies in Africa
The ongoing migration of people to Europe is evidence that African countries have failed to implement policies that could yield benefits to their citizens.
The East African Community (EAC) Deputy Secretary General (DSG) in charge of Infrastructure and Planning, Dr. Enos Bukuku, said that poverty-stricken refugees were willing to risk their precious lives to cross the Mediterranean and face other risks knowing they could get a better life in Europe.
Dr. Bukuku said the migration provides an opportunity for African leaders, elites and governments to ask themselves pertinent questions on why the continent continues to score poorly on all development indicators.
The DSG said it was ironical that many African countries were at the same level of economic growth with most economies in South East Asia in the 1960s yet the latter had become part of the 20 largest economies in the world even as their African counterparts continue to lag behind in development.
Dr. Bukuku was speaking when he presided over the official opening of the 3rd Stakeholders Meeting on the Sub-Regional Coordination Mechanism (SRCM) for Eastern and Southern Africa at the EAC Headquarters in Arusha, Tanzania.
The main aim of the two-day SRCM is to bring together UN Economic Commission for Africa (UNECA) Sub-Regional Offices, Regional Economic Communities (RECs), Inter-Governmental Organisations (IGOs) and UN agencies in order to identify opportunities for joint planning and programme implementation at the sub-regional level and thereby effectively support the work and priorities of the RECs and IGOs in the regions.
Among the RECs and IGOs represented at the meeting are the EAC, Southern African Development Community (SADC) and the Indian Ocean Commission. Other organizations with representatives at the meeting are the African Union, United Nations Development Programme, International Labour Organisation, International Organization for Migration, NEPAD, and the Port Management Association for Eastern and Southern Africa.
Speaking at the forum, Mr. Maxwell Mkumba, the SADC Senior Policy Director and Technical Coordinator, on behalf of the SADC Executive Secretary and SRCM outgoing Chair, Dr. Stergomena L. Tax, emphasized the importance of aligning RECs and IGOs key flagship initiatives with the AU Agenda 2063 and the 2030 Agenda for Sustainable Development.
“We also need to discuss and agree on effective instruments to strengthen our collaboration, synergies and coherence that are necessary to ensure AU Agenda and the UN Sustainable Development Goals (SDGs) are effectively mainstreamed into the regional and national development plans,” said Mr. Mkumba.
Mr. Mkumba said that the SRCM had recorded significant achievements over the past one year when SADC held the position of Chair and cited the development of the Draft Addendum to the Business Plan and the study on the mapping of the SRCM stakeholders.
“However, we can do better than this if we are able to improve on our joint programming processes, allow for more regular interactions and effective information sharing and communication, as well as well as urgently deal with challenges around resourcing of programme implementation,” he said.
“Peoples of the regions we represent are looking up to initiatives like the SRCM to address development challenges, including poverty eradication. The SRCM should serve as the excellent mechanism for achieving sustainable development,” he added.
In her remarks, the UNECA Deputy Executive Secretary, Ms. Gionvanie Biha, said the SRCM was a relatively new and evolving mechanism that needs to be embraced and nurtured by all stakeholders, most of whom were still on a learning mode.
Ms. Biha urged UN agencies to use the SRCM as a platform for sharing information and knowledge and building on synergies and complementarities to support regional priorities, adding that leadership by RECs was key to the success of the mechanism.
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Cyber security: Central African States adopt model cross-border laws
An exacting endeavour of the Central African Economic Community (ECCAS) member states – supported by the Economic Commission for Africa (ECA) and the International Telecommunications Union (ITU) – has yielded fruits with the adoption by countries of the sub-region of model laws on telecommunications, cyber security and the regulatory framework to govern cross-border interconnection.
Such is the outcome of a meeting of Ministers of Posts and Telecommunications of the Economic Community of Central African (ECCAS) member States, which has just taken place in Brazzaville, the capital of the Republic of Congo.
The adoption is the outcome of a long process (initiated in 2011) and of a request by Ministers in charge of Telecommunications and ICTs of ECCAS member states in 2010, requesting the statutory Council of ECCAS Ministers to submit for approval to the ECCAS Conference of Heads of state and government four policy documents, including one on harmonization of national policies and regulations and plans of action for development of ICTs in the Central Africa sub-region.
The ECCAS Secretary General was tasked to initiate forthwith and in cooperation with ECA and ITU, the drafting of model laws and regulations pertaining to (a) electronic transactions, (b) protection of personal data and (c) cyber security.
In a bid to provide technical assistance to the Secretariat General of ECCAS and CEMAC, the sub-regional Office of ECA for Central Africa, in collaboration with the International Telecommunications Union (ITU), co-organized a workshop on harmonization of the cyber-security legal framework for Central Africa in 2011 in Libreville, Gabon. This workshop culminated in draft model laws on the protection of personal data, electronic transactions and cybercrime control to be adopted by the statutory organs of both communities.
Subsequently, three sub-regional meetings on these preliminary draft laws were organized by the ECA in collaboration with ECCAS (2012, 2013 and 2014) to sufficiently mature the document for adoption by ECCAS Telecommunications/ICTs Ministers. Accordingly, it is in December 2016 that the Ministers of Posts and telecommunications of ECCAS member states adopted these laws and drafted a declaration dubbed ‘‘The Brazzaville Declaration’’.
This harmonized legal framework is an essential frame of reference propitious for the development of ICTs through a sound, transparent and robust regulation, but especially a tremendous catalyst for attracting investors and capital that would, inter alia, help the sub-region to successfully achieve digital transformation. It should also greatly contribute to bolster citizen’s confidence in using ICTs and electronic communication services on the one hand and, on the other hand, foster the development of a digital economy or other online transactions while ensuring protection for personal data.
One of the recommendations of the declaration urges the ECA to support the ECCAS Secretariat General in (i) developing a roaming frame of reference in the Central Africa sub-region and (ii) in establishing mechanisms for the monitoring and evaluation of the level of adaptation of legislative and regulatory frameworks.
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G20 Scorecard: Could do better on business policy priorities
The International Chamber of Commerce (ICC) has unveiled the latest edition of ICC G20 Business Scorecard rating G20 responsiveness to key business policy priorities for growing the global economy.
The Scorecard shows G20 progress on a number of international business priorities but reveals important missed opportunities by the group to advance international trade and international policy frameworks.
Presenting the sixth edition Scorecard at an official Business-20 (B20) Germany kick-off event in Berlin, ICC Secretary General John Danilovich said: “Our Scorecard aims to help the G20 gauge progress and identify areas that merit greater attention. We are encouraged to see that G20 work is becoming increasingly responsive to priority recommendations put forward each year by business that aims to spur economic growth and job creation.”
The 2016 ICC Scorecard examined 25 business priorities developed during the Chinese B20 cycle and rates the G20’s responsiveness across seven policy areas.
The overall score of 2.3 out of 3.0 across all seven policy categories marks the highest overall score since ICC began its monitoring. However, despite the positive overall trend, progress is shown to be uneven with three GOOD, three FAIR and one POOR score.
Mr Danilovich said: “The mixed scores highlight several notable advancements on business priorities, but also that there is still much room for improvement.”
Supporting trade and investment
G20 commitments and decisions on Trade and Investment scored 2.25 out of a total of 3.0 points, a significant improvement from last year’s score of 1.0 and the second highest score in this area since ICC’s monitoring began. The improved score reflects G20 commitments to enhance an open world economy by working towards trade and investment facilitation and liberalisation, solid progress on ratification of the World Trade Organization (WTO) Trade Facilitation Agreement, and first steps taken on multilateral investment policy coordination.
“The G20’s adoption of the Guiding Principles for Global Investment Policy-Making marks an historic step toward bridging unhealthy disparity among inter-state investment policies and corresponds to a longstanding ICC recommendation for the G20 to intensify multilateral investment policy coordination,” said Mr Danilovich.
Mr Danilovich said that a higher score was withheld due to insufficient G20 action on prioritising a meaningful curb on protectionism at a time when strong leadership and support for open trade is needed.
“The global business community has been clear that tackling protectionism is a first order priority and has called on the G20 to demonstrate much-needed global leadership in refraining from protectionism or introducing new trade barriers. There is mounting evidence that rhetoric and reality are diverging at an increasing rate,” said ICC G20 CEO Advisory Group Director Jeff Hardy.
“In the current environment of global uncertainty and anti-trade sentiment, G20 economies must lead by example in the fight against protectionism. New trade-restrictive measures must be rejected, and existing ones need to be rolled back.”
Demonstrating leadership on anti-corruption
Reflecting the close partnership between the B20 and the G20 Anti-corruption Working Group, the scorecard gives an overall score assessment of 2.0 out of 3.0 points for G20 commitments and decisions on anti-corruption. A lack of detailed timelines, actions and deliverables in the new 2017-2018 G20 Anti-Corruption Action Plan prevented a higher score.
“Business has consistently highlighted the problem of corruption and presented strong recommendations to help tackle the issue focusing on private sector anti-corruption training and education initiatives. It is therefore rewarding to see that the new 2017-2018 G20 Anti-Corruption Action Plan identifies several business priorities, including beneficial ownership, private sector integrity, capacity building and increased transparency in public contracting and customs,” said ICC Senior Policy Manager Viviane Schiavi, who leads ICC works on anti-corruption.
“These commitments must now translate into tangible and specific actions to strengthen anti-corruption efforts that are reflected in the day-to-day operations of businesses.”
Energy and environment challenges
Equalling the highest score achieved in the fifth edition of the Scorecard, the overall score assessment of G20 commitments and decisions on Energy and Environment is 2.2 out of 3.0. The score is the result of a heightened focus on energy and climate change at G20 leader level, coupled with the organisation of a second G20 Energy Ministers Meeting in June 2016.
“We are pleased that the 2016 Hangzhou Communiqué recognised several ICC priorities and maintained a strong focus on energy and climate change, building on the unprecedented attention to these issues in the 2015 Antalya Leader’s Communiqué,” said Mr Hardy. “The joint ratification of the Paris Agreement on climate change by the US and China, just hours ahead of the Hangzhou Summit, serves as an example of how G20 Heads of Government can deliver shared global leadership.”
While welcoming G20 recognition of several of the ICC business priorities outlined in Six steps to energy sustainability and security, Mr Hardy said a lack of private-sector participation in the G20’s formal energy discussions remained a concern.
He concluded: “This edition of our Scorecard suggests that real progress will only become effective when policy guidance takes root in national capitals. So, while this year’s relatively high score reflects a strong policy response at the Leaders’ level, our eyes will be on national governments and their resolve to implement the extensive guidance that the G20 process has managed to produce.”
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tralac’s Daily News Selection
The selection: Tuesday, 6 December 2016
Profiled trade and development conferences now underway:
In Addis Ababa, the Fourth Africa-Korea Forum. The Forum will review the implementation of the 2013-2015 plan of action and adopt the 2017-2022 Africa-Korea Forum Framework for Cooperation.
In Abuja, the African Economic Conference opened yesterday (with keynote speeches by Dr Akinwumi Adesina (AfDB), Mr Abdoulaye Mar Dieye (UNDP), Dr Abdalla Hamdok (UNECA))
In Libreville: Conclave to revitalise UN’s support to AU/NEPAD programme in Central Africa
In Geneva, UNCTAD’s Trade and Development Board, sixty-third session
The ECOWAS Heads of State and Government Summit will take place later this month in Abuja.
January’s AU Summit, on the theme Harnessing demographic dividend through investments in the youth. Summit segments: 23-25 January (Permanent Representatives’ Committee), 26-28 January (Executive Council), 30-31 January (Assembly). An ISS preview.
Zambia: Preview of the forthcoming Jobs Diagnostics, Value Chain Analysis reports (World Bank)
The World Bank Jobs Group’s Zambia team recently met with government, private sector, development partners and civil society representatives to share the work it has been doing on jobs diagnostics and value chain analysis, and consult on the preparation of an action plan for jobs based on these analytical pieces. Based on the analytical work, the team proposed a preliminary Jobs Action Plan to help increase the number of formal jobs, improve the quality of informal jobs, and extend access to jobs for vulnerable groups, including youth and women. To do this, the team focused on three types of policies:
Fifth Ethiopia Economic Update: Wages and employment in a crowded labor market (World Bank)
Ethiopia’s medium-term economic growth is unlikely to be affected by the recent drought and the country should be able to sustain the growth momentum, the update says. The report highlights the government’s investments in key areas, including the Addis Ababa-Djibouti railway line, the launch of new industrial parks and the power sector, which are also expected to increase export performance and contribute to economic growth in the short- to medium-term. However, the report warns that if the performance of the industry and service sectors do not live up to expectations, it could negatively affect the growth. Additionally, the report notes the current unrest in the country could also pose potential risks to the country’s economic outlook. The report also predicts further poverty reduction; based on data on the impact of growth on poverty reduction in the country in the past decade, the report estimates that the proportion of households living below the international poverty line of $1.90 per day will decline from 27.2% in 2015 to 24.6% in 2018. For Ethiopia to sustain economic growth, reduce poverty and make its structural change more inclusive, the report recommends:
South Africa: Gross Domestic Product, 3rd Quarter 2016 (StatsSA)
South Africa’s GDP growth rate was 0,2% in the third quarter of 2016. The main contributors to the GDP growth rate were the mining and quarrying industry; finance, real estate and business services; and general government services. Mining and quarrying increased by 5,1%, largely as a result of higher production in the mining of ‘other’ metal ores, in particular iron ore. Four industries contracted in the third quarter, namely agriculture, forestry and fishing (-0,3%); manufacturing (-3,2%); electricity, gas and water (-2,9%); and trade, catering and accommodation (-2,1%). The agriculture, forestry and fishing industry has been in decline for seven consecutive quarters. [Download full report (pdf)]
Brexit and Commonwealth Trade (pdf, Commonwealth Secretariat)
It is worth pointing out that, currently, close to three-quarters of intra-Commonwealth goods exports come from developing country members. As these countries expand their overall trading and productive capacity, they will be able to exploit the Commonwealth effect further. Indeed, the nature of the Commonwealth advantage is such that, for example, even when the source of investment in a Commonwealth member is a non-Commonwealth state the recipient Commonwealth member can utilise the inherent advantage in generating additional intra-Commonwealth trade, given to its expanded economic activities resulting from the new investment. Similarly, improved trade facilitation measures to deal with cumbersome and costly administrative and cross-border movement of goods and services can also be helpful. [Richard Gibb: The impact of Brexit on South Africa]
SADC Trade Related Facility: approvals update (pdf, SADC)
Over the period August to November 2016, 14 project applications were submitted for a technical evaluation and approval process involving the SADC Secretariat and the TRF Steering Committee. The TRF is supported under the SADC-EU Contribution Agreement. The status of project approvals is:
COMESA: New Great Lakes Trade Facilitation Project rolls out
The implementation of the Great Lakes Trade Facilitation Project (GLTFP) has begun in earnest with the launching of recruitment for Trade Information Officers to be based at selected locations in the eastern borderlands of the DRC, Rwanda and Uganda. A total of 20 additional TID Officers will be recruited to complement the existing capacity as well as for the new desks that will be identified through the on-going assessment mission mounted by the COMESA Secretariat in the Great Lakes region. The new desks are expected to be at Mahagi in DRC and Goli in Uganda and Bukavu (DRC) and Rusizi (Rwanda) border regions. The new Trade Information Desk Officers will help traders apply the COMESA Simplified Trade Regime.
EAC stock markets integration for June 2017 (New Times)
Speaking at the end of a two-day EASEA meeting in Kigali, Rwabukumba said the exchanges are focusing on fast-tracking regional integration initiatives, particularly the capital market infrastructure (CMI) project, which is in its final stages, and conducting regional public awareness drives as well as enhancing the capacity of players to enhance efficiency. “We must innovate, educate and advocate to ensure sustainability,” he said. Hilda Njeni, the head of legal and compliance at the Central Depository and Settlement Corporation in Kenya, said it is important to fast-track the CMI project and implement it by June next year. She noted that this would, however, require more engagement with stakeholders across the board.
The Dakar digital dollar (LiveMint)
Senegal, of which Dakar is the capital, announced last week that it will be issuing its own national digital currency, based on blockchain technology. Senegal’s new eCFA digital money will be legal tender and will share this status alongside the CFA paper money currently in circulation. The currency will be distributed solely by the central bank, and has passed e-money regulations set by the Central Bank of the West African Economic and Monetary Union. Senegal is actually the second country to introduce a blockchain-based digital currency. According to news reports, Tunisia has also developed an e-Dinar version that uses similar underlying blockchain technology.
Trans-African Pipeline: Morocco-Nigeria cooperation carries immense economic prospects for West Africa (Morocco World News)
Morlaye Bangoura, ECOWAS Commissioner for Energy and Mines, had this to say on the subject: “This big project is amply justified for our region, which is full of large quantities of natural gas, of which Nigeria alone holds 90% of revenues and 30% of the continent’s reserves.” Accordingly, Ghana and Côte d’Ivoire are already two producers and consumers of this strategic energy source. Recent discoveries of large gas deposits in Senegal and Niger, as well as the upcoming exploitation of new discoveries in Côte d’Ivoire and Ghana, point to a promising future for this long-awaited gas pipeline project. In concrete terms, the Moroccan-Nigerian partnership paves the way for the supply of energy to the countries via the future 4,000-kilometer pipeline. This gigantic project between the Gulf of Guinea and Morocco could ultimately also extend to Europe.
Financial development and economic growth: evidence from southern African development community countries (Johns Hopkins University Press)
This paper examines causality between financial development and economic growth for 10 SADC countries for the period 1994 to 2013. We employed the vector autoregression approach to conduct Granger causality tests to determine the direction of causality relationship between financial development and economic growth. Our findings suggest different policy routes for countries within the SADC region with regard to how they can grow their economies. Specifically, countries for which the reverse causality result holds should direct more resources towards stimulating economic growth through channels other than financial development in order to develop their financial sectors. On the other hand, we recommend that countries for which the financial development leading to economic growth result holds should channel more of their resources towards growing their financial sectors in order to drive economic growth. [The analysts: Ariuna Taivan, Gibson Nene. Published in The Journal of Developing Areas, Volume 50, Number 4, Fall 2016]
African Development Bank: MDR assessment summary (pdf, DfID)
AfDB’s organisational strengths include good risk management and transparency. The return of AfDB’s headquarters to Abidjan in 2014/15 delayed internal reforms and led to a significant increase in vacancies in critical posts. The reforms now need to be seen through to improve delivery and workforce planning completed to allow the posts to be filled. Since the 2013 MAR Update, the Bank has strengthened its policy and expertise on gender, climate and fragile and conflict-affected states, which now need to translate into tangible benefits for its borrower countries. [Reviews set out UK vision for an open, modern development system]
G20 Scorecard: Could do better on business policy priorities (ICC)
The International Chamber of Commerce has unveiled the latest edition of ICC G20 Business Scorecard rating G20 responsiveness to key business policy priorities for growing the global economy. The Scorecard shows G20 progress on a number of international business priorities but reveals important missed opportunities by the group to advance international trade and international policy frameworks. The sixth installment of the annual ICC G20 Business Scorecard rates G20 responsiveness to business priorities as ‘fair’ (2.3 out of 3.0). The sixth edition Scorecard examines a total of 25 business priorities put forward during the 2016 Chinese Presidency and rates the G20’s responsiveness across seven policy areas:
Circular economy principles could help India realise $624bn (UNCTAD)
India could save $624bn a year by 2050 if it adopts circular economy principles rather than following a conventional but more wasteful development path, according to a new report on India produced by the Ellen MacArthur Foundation in association with UNCTAD. Using data from UNCTAD, the report estimates that India could save costs amounting 11% of its current GDP in 2030 and 30% of GDP in 2050 if proven circular approaches were adopted by the public and private sectors. Greenhouse gas emissions could be cut by 44%. [Further details, downloads]
Trade and Environment Review 2016 (UNCTAD)
UNCTAD’s 2016 Trade and Environment Review examines issues pertinent to the promotion of sustainable use of living marine resources in healthy oceans and seas, bringing together a collection of independent articles by 24 leading experts and practitioners on fish governance systems; fish harvest, production and consumption; unsustainable fishing practices; fish and marine ecosystems management; and fish trade. The Review provides a succinct diagnosis of some of the key challenges to be faced in addressing SDG 14, as well as novel suggestions and innovations to advance its implementation. The Review also looks to the future of the fish trade, providing a prognosis of international trade in fish and fish products until 2035 and identifying three key trends:
States of Fragility 2016: understanding violence (OECD)
Analysis of multiple data sources shows that global violence is at its worst level since the end of the Cold War, with nearly half the world’s population, or 3.34 billion people, living in proximity to or feeling the impact of political violence. Conflict is one cause of violent deaths, but in 2015 more people died violently in countries not afflicted by conflict. Central America is the region that suffers the most lethal violence, followed by Southern Africa, the Caribbean and South America.
HLM2: Nairobi Outcome Document (Global Partnership, UNDP)
We recognize the specific issues facing Middle Income Countries (MICs) and will ensure that development cooperation addresses these. We will also promote effective South-South Cooperation and Triangular Cooperation.
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End fishing subsidies to protect millions of jobs in developing countries
Developing countries can protect millions of fisheries-related jobs by negotiating an end to fishing subsidies at a top-level World Trade Organization (WTO) meeting scheduled for December 2017, UNCTAD Secretary-General Mukhisa Kituyi said on Wednesday.
In 2014, an estimated 38 million people were engaged in marine capture fisheries, including 29.7 million people in Asia, 5.4 million in Africa, and 2 million people in Latin America and the Caribbean.
However, overfishing puts global fish stocks under pressure, and many of these jobs appear unsustainable. Estimated at about $20 billion per year, harmful fishing subsidies compound the problem, by enabling industrial fishing fleets to travel to the coastal waters of developing countries and to out-compete the small-scale fishermen there.
“We all know that the world’s marine fish stocks are either stagnant or declining, so how do we, the global community, justify these wasteful and damaging subsidies?” Dr. Kituyi said, ahead of the release of UNCTAD’s 2016 Trade and Environment Review, which focuses on the trade in fish.
“Not only do these subsidies compound the destruction of small-scale and artisanal fisheries, they also export unemployment to developing countries,” he said.
The most effective way to end these subsidies, which represent unfair competition, will be to introduce legally binding trade agreements. This is best done through the WTO, the main global institution for setting and enforcing the rules on global trade, he said.
The WTO’s forthcoming ministerial conference, scheduled for December 2017 in Buenos Aires, Argentina, offers the best multilateral opportunity to conclude such an agreement, he added.
“Instead of subsidizing the depletion of our fish stocks, with the loss of livelihoods implied, use the money to better manage fisheries and to create sustainable jobs in sectors of the oceans economy such as aquaculture or marine tourism,” Dr. Kituyi said.
In July, UNCTAD, the Food and Agriculture Organization of the United Nations, and the United Nations Environment Programme, joined forces to propose a roadmap to end harmful fisheries subsidies. The roadmap was supported by 91 member States and many civil society organizations.
UNCTAD’s Trade and Environment Review identifies three main trends in the international fish trade.
First, the multilateral trading system and regional agreements will increasingly incorporate further marine life and fish conservation measures.
Second, by 2035, the wild fish catch will grow only slightly beyond current harvest levels, while the aquaculture harvest will rise substantially to meet growing demand.
Third, the fish trade will be affected less by tariffs and more by non-tariff measures, such as sustainability standards, catch certificates, traceability, eco-labeling and others.
Trade and Environment Review 2016: Fish Trade
For the first time, the Sustainable Development Goals (SDGs) have created a stand-alone charter that addresses the health of marine resources and ecosystems, with specific regard for fish.
SDG 14 brings international attention to the overexploitation of oceans and marine resources to the extent that their sustainability and resilience is threatened on a global scale. In particular it points to a pressing need for the international community to address the issue of the conservation and the rebuilding of global fish stocks that have been so quickly depleted.
UNCTAD’s 2016 Trade and Environment Review examines issues pertinent to the promotion of sustainable use of living marine resources in healthy oceans and seas, bringing together a collection of independent articles by 24 leading experts and practitioners on fish governance systems; fish harvest, production and consumption; unsustainable fishing practices; fish and marine ecosystems management; and fish trade. The Review provides a succinct diagnosis of some of the key challenges to be faced in addressing SDG 14, as well as novel suggestions and innovations to advance its implementation.
In order to avert what could be considered the first global tragedy of the commons, TER16 promotes the creation of a global monitoring and review process (a High-Level United Nations Conference) in order to complement the effective implementation of existing global governance frameworks that provide the legal basis consisting of rights and obligations of Member States over life on seas and for the development of sustainable fisheries on the advancement of trade-related targets under SDG 14.
Further, the Review contends that trade-related measures should seek to strengthen the implementation of the existing international legal regime for fisheries, in particular that multilateral, regional and bilateral trade agreements should build on multilateral United Nations instruments seeking oceans conservation and sustainable fisheries, along with stronger links between obligations and technical cooperation and capacity building in these agreements. TER16 points towards the prohibition under the Trans-Pacific Partnership (TPP) of the most harmful fishing subsidies and Illegal, Unreported and Unregulated (IUU) fishing as a clear way forward.
The Review also looks to the future of the fish trade, providing a prognosis of international trade in fish and fish products until 2035 and identifying three key trends: the selective and incremental incorporation of marine life and fish conservation measures in the multilateral trading system, particular into regional trade agreements; non-tariff measures including sustainability standards, traceability, eco-labeling as the primary factors shaping market conditions for fish and fish products; and the increased output off aquaculture in the face of stagnant wild harvests.
Accordingly, it will be increasingly important for international collaboration for the mapping, convergence and harmonization of NTMs, identifying minimum requirements for social sustainability, and creating flexible frameworks for developing countries to facilitate value addition and stimulate the emergence of new production networks the TER contends. Indeed, a fundamental message of the Review is that fish management systems should be designed to prevent overfishing and overcapacity reduce by-catch and non-targeted species, and promote recovery of overfished stocks.
It is widely recognized that the continuation of benefits from oceans and fisheries depends on the health of oceans and the sustainability and resilience of marine living resources. Fish stocks in particular, are facing unprecedented sustainability risks as a result anthropogenic pressures such as overfishing due to overcapacity of fishing fleets, IUU fishing, certain fisheries subsidies, destructive fishing practices, climate change and ecosystem degradation. According to the FAO, more than 85 per cent of global fish stocks are fully exploited or overexploited.
The Review addresses the matter of harmful incentives, primarily in terms of IUU fishing and fisheries subsidies, as an important part of the toolkit to restore fish populations, foster sustainable fisheries and deliver substantial economic and social gains.
The Review proposes developing an overarching traceability system of traded fish from vessel to final consumer, as key to arresting and eliminating IUU fishing, but notes the requirement for major upgrading of institutional and technical implementation capacities, which may be difficult for some countries with fewer financial resources. On subsidies, there should be full transparency and disclosure of all fisheries subsidies, which should be classified in order to identify and distinguish those that are harmful or not.
Efforts to discipline capacity-enhancing subsidies should be exerted at the national, regional and global levels of governance and, given previous intransience on this issue, a group of countries in partnership with organizations such as the WTO, UNCTAD and the FAO could stimulate collective actions with bottom-up voluntary commitments to subsidy reform.
The Trade and Environment Review 2016 continues UNCTAD’s work in the area of the oceans economy, which was recently strengthened by a new mandate in the Nairobi Maafikiano agreed at UNCTAD 14th Ministerial Conference.
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World Bank Group launches its 5th Economic Update for Ethiopia: Wages and employment in a crowded labor market
Over the past decade, Ethiopia has been one of the fastest growing economies in the world with growth averaging 10.9%. Despite recently facing the worst drought in fifty years, Ethiopia has remarkably been able to maintain positive growth.
“Economic growth remained at a respectable 8% in 2015/16, which is impressive especially compared to previous drought situations which often resulted in economic contraction,” said Carolyn Turk, World Bank Country Director for Ethiopia, Sudan and South Sudan.
According to the World Bank Group’s 5th Ethiopia Economic Update launched today, growth momentum will still remain and since 2016 rains arrived as expected, the recent drought will not likely affect Ethiopia’s medium-term economic growth. In addition, the newly completed Addis Ababa-Djibouti railway line, significantly eases trade logistics related constraints. The government’s increased focus on new industrial parks (Hawassa and Bole-Lemi Phase II) and the increasing capacity in power generation along with the completion of transmission lines to neighboring countries (Sudan and Kenya) are also expected to improve export performance and stimulate growth in the short to medium-term.
Furthermore, the report, which provides an in-depth view of Ethiopia’s’ labor market and identifies challenges and opportunities for making it more efficient, reveals that Ethiopia also managed to keep inflation under control. This in turn helps to avoid the erosion of the purchasing power of wages for workers of all levels of education, keep real wages stable and ensures that returns on education in urban labor markets are positive.
However, the report warns that if the performance of the industry and service sectors do not live up to expectations, it could negatively affect the growth. Additionally, the report notes the current unrest in the country could also pose potential risks to the country’s economic outlook.
The report reveals that the performance of the export sector and the current account balance have been weak. The chronic current account deficit (including official transfers) continued to deteriorate in 2014/15 reaching 12.2% of GDP due to the large imbalance in import and export of goods and services. The report identifies low volume, price effects and an appreciating real exchange rate, as the main reasons for the 3.7% export performance in 2015/16 which is the lowest in a decade.
“Export of goods contracted significantly over the past two years owing to a weak external environment and a supply shock from the drought that meant foregone agriculture production to exports,” said Paloma Casero, Africa Director of the Global Practice for Macroeconomic and Fiscal Management of the World Bank. “Moreover the overvalued currency limits Ethiopia’s export competitiveness and is a concern for the economy, especially with exports falling for three consecutive years.”
The report also predicts further poverty reduction; based on data on the impact of growth on poverty reduction in the country in the past decade, the report estimates that the proportion of households living below the international poverty line of $1.90 per day will decline from 27.2% in 2015 to 24.6% in 2018.
The Nature of Ethiopia’s Labor Market
As Ethiopia is rapidly urbanizing, the report points out that understanding the nature of urban labor markets provides valuable insights for further poverty reduction and for a successful transition to a manufacturing and service-oriented economy.
While labor market trends are moving in the right direction, there has been little change in Ethiopia’s structure of urban labor markets. Real wage trends have not reflected the increasing educational quality of the workforce although there have been some improvements. While wages were more than double for those with a degree compared to those without, returns on education have fallen in the last decade. Additionally, while jobs are being created, there are not enough jobs available for those with primary and secondary education. The report also points out that the high cost of job search is a factor in the high urban unemployment rate.
Addressing major obstacles in the labor market would enable Ethiopia to accelerate structural transformation, ensure inclusive growth and lead to further poverty reduction, according to the report. The report also identifies urban areas as key players in advancing structural change in Ethiopia, as centers of innovation and industrial development.
“Well-functioning and efficient urban labor markets are a key ingredient for this transformation to take place, and to ensure that its benefits reach all segments of the population,” said Michael Geiger, World Bank senior economist and main author of the update. “As unemployment in Ethiopia is by and large an urban phenomenon, increasing the efficiency of urban labor markets is not only key for structural transformation but also for overall economic development.”
The report, which analyzes the nature of urban labor markets in Ethiopia and identifies the various factors that contribute to curb their efficiency, provides five policy recommendations which could help make Ethiopia’s structural change more inclusive and contribute much more to poverty reduction. According to the report, Ethiopia should:
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encourage firm creation and growth that create jobs for non-graduates with a special focus on service and manufacturing sector growth,
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increase labor productivity in the low-skill segment by addressing constraints faced by firms in accessing capital (financial and physical) to ensure that the labor productivity increases and wages can rise,
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invest further in job and technical training programs to build the skills of those in the job market, both for low skilled workers and at higher levels of education in order to increase their productivity,
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introduce targeted urban safety nets and labor market programs to invest in skills of low-skilled employees and the unemployed and provide financial support to enable their job search, and
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enhance the use of ICT to provide information on job vacancies throughout Addis Ababa and reduce the cost of job search.
The 5th Ethiopia Economic Update, Why so idle? Wages and Employment in a Crowded Labor Market, is the latest programmatic knowledge product prepared by the World Bank Group as a part of its economic policy dialogue with the Government of Ethiopia.
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African Economic Conference opens in Abuja: Agricultural transformation on the agenda
The 11th African Economic Conference (AEC) kicked off in Abuja, Nigeria, on Monday with a consensus on the need to scale up the continent’s agricultural transformation to spur industrialization and inclusive growth.
Opening the conference, Nigeria’s Vice-President, Yemi Osinbajo, highlighted how the Nigerian Government and private sector partners are leveraging resources for agricultural transformation in the midst of the global economic recession, which has resulted in the country losing up to 1 million barrels of crude oil daily.
Vice-President Osinbajo, who spoke on behalf of President Muhammadu Buhari, disclosed numerous efforts being made by the Government to support agriculture and its value chains to diversify and transform the economy in the absence of oil resources, which formed the backbone of the economy.
He expressed the hope that the conference would come up with evidence-based research and knowledge of good practices that can help Nigeria and other African countries to transform their agricultural production for more sustainable growth.
Over 300 participants are attending the annual event, co-organized by the African Development Bank (AfDB), UN Economic Commission for Africa (ECA) and United Nations Development Programme (UNDP), on the theme, “Feed Africa: Towards Agro-Allied Industrialization for Inclusive Growth.”
AfDB President, Akinwumi Adesina, reminded participants that Nigeria was chosen to host the conference largely because of its enormous potential in agriculture, which, if well harnessed has the potential to become a global powerhouse through agro-industrialization.
In a keynote speech, Adesina noted that agriculture, which contributes over 28% of the GDP of Africa, holds the key for the accelerated growth, diversification and job creation for African economies.
“Agriculture provides the basic raw materials needed for industrial development. Food accounts for the highest share of consumer price index and providing cheap food is critical for taming inflation. When inflation is low, interest rates decline and it brings greater private sector investments. A more productive, efficient and competitive agriculture sector is critical for boosting rural economies, where majority of the population live in Africa,” Adesina said. “The future of Africa depends on agriculture.”
Citing examples in Africa (Ethiopia, Kenya and Rwanda) and from Asia, and South Korea in particular, Adesina illustrated how Africa can make agriculture a solid foundation to build a strong food and agro-industrial manufacturing base quickly.
Current estimates indicate that 65% of all the uncultivated arable land in the world that can feed 9 billion people by 2050, lies in Africa. At the same time, the continent spends US $35 billion annually importing food. This has huge implications for Africa not only in terms of lost income and rising unemployment. With the food and agribusiness sector projected to grow from US $330 billion to $1 trillion by 2030, the continent simply cannot afford to unlock this hefty opportunity.
According to Adesina, there is a need for “Growth Enhancement Support” for farmers: a system whereby small-scale farmers are provided with targeted input support to be able to use new technologies. The establishment of large “Staple Crop Processing Zones” and “Agro-industrial zones”, with the required infrastructure and risk-sharing facilities will also be very helpful.
He said that the AfDB has earmarked $800 million for ‘Technologies for African Agricultural Transformation’ (TAAT), targeting 40 million farmers over ten years, to take new agricultural technologies to scale.
TAAT would support people like Noel, a young graduate “agri-preneur” from Bukavu in Democratic Republic of Congo who, together with his colleagues, moved into agribusiness just over a year ago. They now generate US $4,000 per week from well packaged cassava flour sold to bakeries for the production bread. The combination of cassava and wheat flour to produce delicious loaves is now a good income generating activity across the continent.
“Our goal is simple: support massive agro-industrial development all across Africa. To make this happen, there is need for well-directed public policies to incentivize the agricultural sector, especially agribusiness and food manufacturing companies,” Adesina emphasized.
For his part, Acting ECA Executive Secretary, Abdalla Hamdok, emphasized the need for new policy approaches to incentivize production, which would require a stronger role by the State as well as the kind of leadership that provides a clear vision on agro-allied industrialization.
The UN Assistant Secretary General and Director of UNDP Regional Bureau for Africa, Abdoulaye Mar Dieye, urged African governments to work together with their bilateral and multilateral partners to support the continent’s agro-allied industrialization agenda. Speaking to Africa’s agricultural potential, Dieye said: “Agriculture can be the golden gate to Africa’s prosperity; it is the high octane oil that, if properly processed, can radically transform the continent.”
In this regard, developed and emerging countries would do well to remove unfair trade barriers, harmful agricultural export subsidies and regional protectionism that limit Africa’s access to markets and turns the continent to a dumping ground.
Prof. Eric Maskin of Harvard University and co-recipient of the 2007 Nobel Prize in economics made a short presentation on why globalization is accelerating inequality instead of reducing it. Maskin called for greater skills education and training, to provide people usually in rural agricultural areas with requisite skill that would enable them get jobs in agro-industry establishments.
“Governments need to get involved in skills training and education in agriculture because that is where the unskilled are mostly located. There is no higher priority than investing in people,” he said.