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Zambia to cut budget deficit, sees higher 2017 GDP growth
Zambia has proposed measures to curb its budget deficit at a time when slumping commodity prices have seen the country face mine closures, rising unemployment, power shortages and soaring food prices.
New Finance Minister Felix Mutati told parliament on Friday that Africa’s second-largest copper producer would cut its fiscal deficit to 7 percent of Gross Domestic Product (GDP) in 2017 from a projected 10 percent this year.
Presenting a 64.5 billion kwacha ($6.6 billion) budget, Mutati said it sought to limit domestic borrowing to 2 percent of GDP in 2017, slightly higher than 1.2 percent this year.
“We are all agreed that the task of restoring stability and accelerating growth will not be easy. We have to be bold and decisive,” Mutati, who was appointed in September, said.
The economy would grow 3.4 percent next year from just over 3 percent this year due to low copper prices, power shortages, inflation and a government cash crunch, he said, adding the government would restrict new capital projects.
Zambia is in talks with the International Monetary Fund about a potential aid package after agreeing its budget deficit was not sustainable and hopes to conclude a programme with the IMF in the first quarter of next year.
The stock of the government’s external debt as at end-September 2016 was $6.7 billion representing 35 percent of GDP while the domestic debt in form of government securities was 26 billion kwacha – equal to 12 percent of GDP, he said.
“Clearly we are walking a tight rope. We must not burden the next generation,” Mutati said.
Razia Khan, chief economist, Africa at Standard Chartered bank, said the budget contained a mixed bag of measures.
“The context of this budget was clear – there was a need for fiscal consolidation and the demonstration of reform in order to ease the way for negotiations with the IMF early next year,” she said.
The finance minister said Zambia would introduce import duty on copper concentrates at the rate of 7.5 percent starting in January next year, but would not change existing mining taxes.
Copper earnings fell to $3.2 billion in the first nine months of 2016 from $4 billion in 2015, Mutati said.
Mining companies operating in Zambia include Glencore, Canada’s First Quantum Minerals, Vedanta Resources and Barrick Gold.
Zambia would raise the price of electricity to reflect the cost of production by the end of 2017, and review state-owned firms in a bid to recapitalize those that are making profit and sell off loss-making firms.
Extracts from the 2017 Budget Address by Honourable Felix C. Mutati, MP Minister of Finance
Lusaka, 11 November 2016
Three months ago, the people of Zambia re-elected the Patriotic Front into Government which pledged to continue with its ambitious development agenda. The Patriotic Front Government under the able leadership of His Excellency the President Mr. Edgar Chagwa Lungu is a Government for all Zambians. As a demonstration of this fact, resources in the 2017 Budget have been allocated to promote equitable development across the country.
The past decade has been turbulent to our development agenda. Five Presidential elections have been held. This made it difficult to implement long term policies for economic stability and growth.
This new five year mandate that the Zambian people have given us provides ample time to achieve our set objectives. Accordingly, we shall ensure that we implement even those reforms that we could not previously undertake.
Turning the economy around requires that we make hard choices and implement difficult reforms. We are all agreed that the task of restoring stability and accelerating growth will not be easy. We have to be bold and decisive.
Only unity and hard work will help us overcome the current challenges for shared prosperity.
We are alive to the fact that the hard choices we are making will have consequences on our society, especially the vulnerable. Thus, we commit to scaleup our social safety net programmes. This is in fulfilment of the Patriotic Front Government’s commitment to alleviate the plight of the poor.
The economic environment in which the 2017 Budget will be implemented will be challenging. Growth in the global economy is expected to remain subdued. Domestically, low water levels will continue to hamper electricity generation and thus constrain production.
This reality means that we have to act decisively to address the challenges we face.
In order to restore economic stability, the Government has designed an Economic Recovery Programme dubbed “Zambia Plus”. This Programme is aimed at ensuring sustained and inclusive growth. I would like to reiterate that “Zambia Plus” is a home grown Economic Recovery Programme to be complemented by external support from our Cooperating Partners, including the International Monetary Fund (IMF).
I would like to clarify that Zambia has not yet discussed any programme with the IMF. Therefore, there are no conditions or financing arrangements that have been agreed upon. Discussions with the Fund will only be conducted in the first quarter of 2017 to augment our home grown programme.
Our Economic Recovery Programme, ‘Zambia Plus’, is built on five main pillars:
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Enhancing domestic resource mobilisation and refocusing of public spending on core public sector mandates;
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Scaling-up Government’s social protection programmes to shield the most vulnerable in our society from negative effects of the programme;
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Improving our economic and fiscal governance by raising the levels of accountability and transparency in the allocation and use of public finances;
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Restoring credibility of the budget by minimising unplanned expenditures and halting the accumulation of arrears; and
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Ensuring greater economic stability, growth and job creation through policy consistency to raise confidence for sustained private sector investment.
This programme will not be achieved in one year, but over the medium term. This budget therefore aims to set the foundation for success.
I carry a message for my fellow Zambians this afternoon. The message is simple. We cannot spend what we do not have. We cannot borrow beyond our ability to repay.
On 30th September, 2016 during the official opening of the first session of the 12th National Assembly, His Excellency the President Mr. Edgar Chagwa Lungu addressed the nation through this august House on his vision for an inclusive vibrant and robust economy. It is in this context that the theme of the 2017 Budget is: “Restoring Fiscal Fitness for Sustained Inclusive Growth and Development”.
Global and domestic economic developments in 2016 and the outlook for 2017
Global economic growth in 2016 is projected at 3.1 percent, a rate slightly lower than the 3.2 percent recorded in 2015. This is on account of lower economic activity in the advanced economies. In the emerging and developing economies, growth is projected to strengthen slightly to 4.2 percent in 2016 from 4.0 percent in 2015. This is despite lower growth in China. In Sub-Saharan Africa, growth is projected to fall to 1.4 percent in 2016 from 3.4 percent in 2015. This is largely on account of a slowdown in the larger economies of South Africa, Nigeria and Angola.
World trade is projected to grow by 2.3 percent in 2016. This is lower than the 2.6 percent growth recorded in 2015. The main factors weakening world trade include sluggish global economic activity, waning pace of trade liberalisation and the recent increase in protectionist tendencies.
On the domestic front, the Zambian economy faced a number of challenges. These included low commodity prices including copper, electricity deficits, high inflation, a deteriorated external sector and Government’s challenge to fully finance its commitments. Growth is therefore, projected to be just above 3 percent in 2016 against a target of 5.0 percent and to marginally rise to 3.4 percent in 2017.
Sectoral Performance
Agriculture recorded favourable performance, notably for maize, soya beans, sunflower and sorghum. Copper production was up by 8.2 percent to 575,780 metric tonnes in the first nine months of 2016, from 531,163 metric tonnes produced in the corresponding period in 2015.
There was improved performance in tourism, partly reflected in increased international passenger movements and higher entry into our major national parks. We recorded a 4.7 percent increase to over a million in international passenger movements during the first nine months of 2016, compared to 957, 373 over the corresponding period in 2015.
I am glad to note that we are increasing our usage of Information and Communication Technology (ICT). Our utilisation of mobile services including internet has increased. In the first nine months of 2016, mobile users increased to 11.5 million from 10.9 million recorded a year earlier.
We all know our situation with respect to electricity generation challenges. In the period up to September 2016, generation declined by 19.9 percent to 1,329.2 Megawatts compared to 1,658.6 Megawatts in the corresponding period in 2015. This constrained economic activity.
The stock of Government’s external debt as at end September 2016 was US$6.7 billion, representing 35 percent of GDP. The stock of domestic debt in the form of Government securities was K26.0 billion, representing 12 percent of GDP. Clearly, we are walking a tight rope. We therefore, have the responsibility to ensure debt sustainability. We must not burden the next generation with debt.
Monetary policy has helped to anchor restoration of macroeconomic stability. Annual inflation declined significantly from a peak of 22.9 percent in February 2016 to 12.5 percent in October 2016. Inflation is now expected to fall to single digit by year end. The exchange rate has remained relatively stable.
Total export earnings declined in the first nine months of 2016 compared with the corresponding period in 2015. Earnings from copper fell to US$3.2 billion from US$4 billion. Nontraditional export earnings declined to US$1.3 billion from US$1.6 billion. This outturn was mainly explained by unfavourable international commodity prices.
The cost of credit continued to be high with commercial banks average lending rates remaining elevated at around 28.9 percent in September 2016. This is not conducive to the growth of the Small and Medium Enterprises (SMEs) and the economy in general. Fiscal consolidation will help to lower the yield on Government securities and enable monetary policy to support growth.
Execution of the 2016 Budget has been daunting. The cash deficit is expected to close around 3 percent of GDP, largely on account of revenue shortfalls and planned external financing not coming through. The deficit on a commitment basis will be around 10 percent of GDP. This is largely on account of arrears arising from unplanned expenditures related to fuel and electricity subsidies.
Macro economic objectives, policies and strategies for 2017
The gravity of the state of our economy requires that we immediately put in place bold measures that will stabilise and grow our economy. In this regard, our macroeconomic objectives for 2017 will be to:
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achieve real GDP growth of at least 3.4 percent;
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attain end year inflation of no more than 9.0 percent;
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attain domestic revenue mobilisation of at least 18.0 percent of GDP;
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limit the overall fiscal deficit to no more than 7.0 percent of GDP on a cash basis;
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maintain domestic borrowing to no more than 2 percent of GDP;
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build up foreign exchange reserves to at least 3 months of import cover by end 2017; and
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support the creation of at least 100,000 decent jobs.
Key Sector Policies and Interventions
The Seventh National Development Plan is poised to give greater impetus to economic diversification and job creation. The underpinning macroeconomic objectives will therefore be supported by specific policy interventions related to the following:
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Agriculture;
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Industrialisation;
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Tourism; and
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Mining.
Allow me to now share with the House, specific policies that Government will put in place.
Industrialisation
Government will promote industrialisation as a means of diversifying the economy. This will be through facilitating value addition in the agriculture, mining and forestry sectors. In 2017, Government will facilitate the development of the Kafue Iron and Steel Economic Facility Zone and the Kalumbila Multi Facility Economic Zone. The private sector will invest US$100 million in the Kalumbila Multi Facility Economic Zone. Government will also assist up-scaling of investment projects at the Lusaka South-Multi Facility Economic Zone.
Industrialisation cannot take place without financing to SMEs that form the backbone of the economy. To address this, Government has accessed US$50 million for onlending to SMEs. This will create dynamic SMEs that will contribute to growth and generate jobs.
In 2017, Government will further develop financing instruments that will attract pension funds led by the National Pension Scheme Authority (NAPSA) and other investment companies to support industrialisation under the Industrial Development Corporation (IDC). Priority will be given to projects that add value to output of the agriculture, mining and other primary sectors.
Credit guarantee schemes are cardinal to alleviating the constraints facing SMEs in accessing finance. A significant number of our SMEs in Zambia demonstrate good commercial viability. However, they have limited access to conventional bank credit facilities. This is due to inadequacy of collateral and lenders’ limited understanding of the SME business model.
Government will in 2017 therefore establish an Agricultural and Industrial Credit Guarantee Fund for SMEs to facilitate access to affordable financing. These facilities will ensure SMEs contribute strongly to employment generation and economic growth.
Mining
The mining sector contributes over 70 percent of Zambia’s total export earnings. This sector will thus continue to play a pivotal role in the economy.
Government will ensure a stable and responsive mining tax regime. We will also fully implement effective mining monitoring mechanisms such as the Mineral Value Chain Monitoring Project to enhance transparency in the sector.
Government will accelerate the promotion of a diversified mining output base to other minerals such as gemstones, gold, nickel, manganese and iron. Government will also promote the exploration for oil and gas. Mapping of the entire Zambian territory will be undertaken to update the geological database to support future investment in the sector.
International Trade
We need to prioritise international trade as a tool for attaining inclusive growth and development. In 2017, Government will:
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Operationalise the Bilateral Trade Agreements with the Democratic Republic of Congo and the Peoples Republic of Angola;
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Provide for advance ruling on rules of origin for goods originating from countries with which Zambia has signed trade agreements. These include SADC and COMESA member states as well as India and China;
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Implement a Single Window platform for various border agencies to enhance trade facilitation; and
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Establish trade centres at the borders of our major nontraditional export markets beginning with Kasumbalesa, Kipushi and Chirundu.
The 2017 Budget
I now present the 2017 National Budget, which lays out revenue and expenditure measures aimed at achieving the objectives of our Economic Recovery Programme.
Government proposes to spend a total of K64.5 billion or 27.7 percent of GDP. In terms of financing the budget, K42.94 billion will be through domestic revenues, K2.23 billion through grants from our Cooperating Partners and K19.33 billion through debt financing from domestic and external sources.
Resources have been allocated to ensure that we:
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accelerate the dismantling of arrears to suppliers of goods and services to unlock the crunch in the economy;
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support growth in the key sectors of the economy;
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sustain and enhance the critical services of health, education and public order and safety; and
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mitigate the effects of the Economic Recovery Programme on the vulnerable in our society.
Related News
Trade in services and economic transformation
While much of the debate on economic transformation centres around transforming agriculture and moving into manufacturing, the potential of services is often left unexplored.
A proper understanding of the trade dimension of services lies at the frontier of new analytical work on economic transformation. It is crucially important for policy-makers in low-income countries, many of whom may not regard services, or trade in services, as a prime focus of action on economic transformation. This paper explores how policies both directly and indirectly affecting trade in services can have a major impact in terms of increasing the contribution of services to economic transformation.
It is often assumed that services follow transformation, but as in reality services also enable other sectors, it is important for economies to follow a balanced growth path where services and other sectors grow in tandem. Policy-makers need to update their evidence base on such linkages so they realise how services and other sectors grow together.
What is the role of trade in services in economic transformation and what can be done to improve the contribution? This paper seeks to answer these questions by reviewing what is known about the relationships between trade in services and economic development and identifying areas for further research, quantifying how these relationships work and exploring short case studies where countries have actively promoted exports of services.
Services trade data: a fundamental roadblock to negotiations and policy-making to support structural transformation
Despite improvements in the collection of services trade data over the past 15 years, in many low-income and least-developed countries (LICs) the macro- and micro- level services data needed for meaningful economic analysis simply do not exist. This acts as a fundamental roadblock to having informed services trade negotiations and to using services trade policy to leverage services for inclusive growth and structural transformation.
The relative paucity of services and services trade data has contributed to obscuring the role that services have increasingly been playing, alongside agriculture and manufacturing, in the process of structural transformation. While emerging research such as ODI’s Supporting Economic Transformation initiative and WIDER’s Industries Without Smokestacks project is helping to advance a more analytically rigorous understanding of the interactions different service sectors have in the transformation process, such efforts continue to be hampered by a number of services-specific data limitations.
Unlike trade in goods, where a single document provides an internationally recognised product code and an indication of the country of origin and destination, as well as a transaction value, collecting service trade statistics is a highly subjective undertaking, prone to inaccuracies and a general dearth of availability. This is particularly the case for LICs, though the challenges prevail in other developing and even developed countries. These challenges are directly related to the nature of services trade and the absence of a physical item (and/or sometimes a payment) crossing a border where national authorities can track, count and record it.
Deficiencies in the measurement and availability of services trade data were flagged by negotiators during the WTO’s Uruguay Round GATS negotiations and continue to hinder services negotiations the world over (e.g. Lipsey, 2006; Magdeleine and Maurer, 2008; WTO, 2010). However significant improvements in services trade data collection have been achieved since 1994. This includes the UN Statistical Commission’s publication of the Manual on Statistics of International Trade in Services (MSITS) (in 2002, revised in 2010), which provides guidelines and recommendations for best practice on how to use and develop sources to measure international trade in services. Four international sources now provide services trade data: the UN Services Database (UNSD); the WTO/UN Conference on Trade and Development (UNCTAD)/International Trade Centre (ITC) Services Database (WTOSD); the OECD Trade in Services by Partner Database (TISP); and the World Bank Trade in Services Database (WBTSD).
While these improvements have enabled better analysis, including in LICs, they have yet to fundamentally address a number of core deficiencies that impede more informed services trade negotiations and policy-making.
The first relates to the source of services trade data and the mismatch with how services trade negotiations are organised. In GATS-based negotiations, services are delineated by the different ways in which they are traded – e.g. online (mode 1 or ‘cross-border’), by consumers visiting the ‘exporting’ country (mode 2 or ‘consumption abroad’), by investment flows establishing an operation that provides services outside the home country (mode 3 or ‘commercial presence’) or by individuals operating outside their home country on a temporary basis (mode 4 or ‘presence of natural persons’). However, services trade data are sourced largely from the balance of payments (BoP), which records transfers of money across borders.
This results in a number of shortcomings. First, in instances where a local consumer pays funds to a locally established foreign affiliate services provider, these payments do not cross a border and are not captured. Investment-related services trade is effectively left out of BoP-based statistics.[1] In that the WTO has estimated such flows to comprise over 50% of global services trade (though surely less so in LICs), services negotiators and policy-makers start with (at best) only half the picture.
Second, when it comes to movement of persons, international services trade statistics utilise proxies in the form of labour-related flows (i.e. compensation of employees, workers remittances and/or migrant transfers). While these provide rough estimates, these data include the activities of permanent migrants and workers outside the services sector, whose work may also not be temporary in nature. This is likely to result in overestimations (offset, however, by the prevalence of the informal sector; see below).
Third, for cross-border services, while available statistics include elements of transportation services, communications, insurance and banking, as well as royalties and licence fees, they generally omit e-commerce transactions (notably where the product is both procured and delivered online).[2] In that e-commerce represents a growing potential delivery channel for LIC service providers (Frost & Sullivan [2014] for example estimate the African e-commerce market will grow by 40% annually over the coming decade), this leaves another key dimension of developing country services trade profiles out of the view of negotiators.
Lastly, with tourism being a major source of LIC services exports, the shortcomings in measuring services consumed abroad can have significant distortionary effects on policy-making and negotiations. For example, trade statistics on tourism generally rely on the travel account under the BoP, which includes not only services but also the purchase of goods by tourists. It also excludes international airfares, which are counted under transport services.[3]
While problematic in their own right, such shortcomings do not even begin to take into account more recent international trade patterns, notably in terms of indirect services trade (i.e. services embodied in goods) in the context of regional and global value chains. Here, trade in value-added statistics based on national input/output tables, are increasingly being deployed, such as those found in the OECD-WTO Trade in Value-Added (TiVA) database, the World Input-Output Database (WIOD), or the Eora multi-region input-output table (MRIO) database. Unfortunately outside of MRIO, few LICs are included in the country coverage, and where available in MRIO, the underlying data tends to be dated and of questionable quality. The SET data portal highlights a number of such services-related indicators of relevance for analysing economic transformation.
Other core deficiencies that preclude the use of existing services trade data to support services negotiations and policy-making relate to the absence of information on bilateral flows (i.e. what partner is the trade happening with?) and sectoral disaggregation (i.e. exactly which services are being traded?).
In recent Department for International Development (DFID)-supported research, Shingal (2015) reaffirms that the coverage of services trade, both aggregate and at the sector level, remains a challenge for least developed countries (LDCs) and LICs, especially vis-à-vis their bilateral trade flows. The latter is particularly so because, in the absence of LICs & LDCs reporting their bilateral flows, partner ‘mirror flows’ are used as a substitute. For example, when UNSD reports Tanzania’s commercial services exports to the UK, these figures are in fact what the UK reports as commercial services imports from Tanzania. While such standard techniques are helpful in filling some gaps, they do not address the gap in South–South services trade flows (as there are no mirror data to use). This has particularly adverse implications for South–South regional services integration: policy-makers and negotiators have virtually no data about the services that flow between the parties to the negotiation. It is perhaps unsurprising then that the private sector is hard-pressed to identify negotiated services outcomes that have a meaningful impact on their business.
Another important phenomenon affecting the availability of services trade data in LICs is the prevalence of the informal economy. To the extent that significant cross-border transactions happen outside the formal sector (e.g. distribution services, personal and professional services), these go unrecorded in the BoP. Similarly, where services operators tend to be micro and small enterprises, a tendency has been observed for successful services firms to export ‘under the radar’, often to avoid paying taxes (e.g. VAT) (Primack and Kanyangoga, 2014).
The low levels of data reliability add additional texture to these challenges. In comparing LIC & LDC services trade data in UNSD, Shingal (2015) identifies high variability in the recorded sectoral coverage across years, as well as at times significant year-on-year variation. These, he suggests, may point to weaknesses in the quality of data collection and transcription/coding. One commonly cited example is the improper handling of exchange rates, where in the context of relatively low overall volumes a few mis-recorded transactions can significantly distort an entire year of data.
LIC services policy-makers and trade negotiators have thus been left to operate in relative darkness. More often than not, the determination of offensive and defensive negotiating interests is left to the realm of anecdote, intuition and, at best, the input of a few (hopefully representative) stakeholders on the barriers they may be facing in external markets they are contesting (or would like to contest). The same goes for identifying binding constraints in the domestic market that may undermine firm competitiveness and limit productive and exporting capacities. While case studies in specific sectors and countries can help, and indeed remain essential even in the best of data scenarios, alone they cannot substitute for reliable, adequately disaggregated services trade statistics for informing services policy-making and negotiations (at both the macro country level and the micro firm level).
Improving the state of services trade data in LICs is a time- and resource-intensive endeavour, but one very much in the realm of the possible. Of note, securing results here need not require operating at the frontier of international best practice. Building on the aforementioned DFID-supported research, Holmes et al. (2016) suggest a sequenced process for improving the collection of services trade data based on the practices of other developing countries that have performed well in this realm. Such practices include, inter alia, undertaking a needs/capabilities assessment, implementing enabling legislative and institutional provisions (including strict confidentiality for reporting firms), use of multiple data sources – in particular targeted firm-level surveys – and securing external technical assistance and capacity-building. Finally, ensuring any such efforts are properly embedded in national planning and budget processes will help promote sustained improvements over the longer term.
The author of this article, David Primack, is Executive Director of International Lawyers and Economists Against Poverty (ILEAP). View the original article here.
A number of the studies cited emanate from the DFID-funded Trade Advocacy Fund (TAF) project Support to Enhance Development of Trade in Services Negotiations, led by the author. A host of project publications and services-related resources, including on services trade data, are available at www.tradeinservices.net. The author would also like to acknowledge the comments and support from Dirk Willem te Velde and Neil Balchin.
[1] While Foreign Affiliates Trade in Services (FATS) statistics track such investment flows, this is a still-novel and complex methodology, and as such remains largely the purview of advanced economies. BoP data do capture some mode 3 data related to constructions services.
[2] The use of thresholds under which items need not be declared can exacerbate under-reporting.
[3] Tourism under the Tourism Satellite Account represents an alternative framework.
References
Holmes, P., J. Rollo and A. Shingal. (2016). ‘Toolkit: Improving services data collection in LDCs & LICs’, ILEAP, CUTS International Geneva and CARIS: Toronto, Geneva and Brighton.
Primack D. and J.B. Kanyangoga. (2014). Operationalizing the LDC Services Wavier: Rwanda Country Assessment. Mimeo
Shingal, A. (2015). ‘Identifying good practices in services trade data collection in LDCs/LICs’, ILEAP, CUTS International Geneva and CARIS: Toronto, Geneva and Brighton.
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Illicit flows and trade misinvoicing: Are we looking under the wrong lamppost?
Illicit financial flows (IFFs) have become a high profile issue in recent years. The Sustainable Development Goals include a target (16.4: significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime), and the issues has been included in the Addis Ababa Action Agenda and the work of the G20 and the OECD. Donors including NORAD and DFID and multilateral organisations such as the World Bank and African Development Bank are also responding.
Introduction
Large estimates of trade misinvoicing have played a key role in shaping perceptions of the issue. The Washington based NGO Global Financial Integrity (GFI) uses mismatches in official trade data to estimate that trade misinvoicing drains US$800 billion from developing countries annually. Their work also inspired UNECA and the African Union to set up a High Level Panel on Illicit Financial Flows from Africa, which estimated US$50 billion of illicit flows from Africa.{2} Based on these estimates, Thabo Mbeki as chair of the panel argued that ”the bulk of illicit financial flows – 60% and more – derive from the activities of the large commercial companies”, through trade misinvoicing, with criminal activities such as drug trafficking accounting for about 30%, and corruption less than 10%.
Manipulation of import and export prices is certainly a real phenomenon. In China overpayments of imports have been used to get around the country’s currency controls. In Venezuela scammers use inflated import invoices to buy cheap dollars from the official currency control agency. There have long been concerns that exporters shipping tropical hardwoods from Papua New Guinea may be underdeclaring their value. Networks involved in smuggling people, drugs and arms use Halawa agents to transfer money, and they may settle up between themselves through shipments of licit goods under-charged. However, it is not clear that the influential and widely quoted estimates of trade misinvoicing derived from mismatches in trade statistics help us to understand the reality of illicit economies and networks in practice.
This briefing looks at some of the key problems with these estimates and argues that continuing to use them as such a bright point of light in shaping our understanding could impede, rather than support targeting of effective action in combatting corruption, organized crime, illegal exploitation of natural resources and tax evasion.
Moving away from the lamppost
Illicit flows are, by their nature, difficult to identify and this first generation of estimates have played a critical role in drawing attention to the issue. Difficulties in measurement do not mean that the problem of trade misinvoicing or broader illicit flows should be dismissed, or that the challenges to governance of natural resource revenues should be underestimated. But continuing to circle around the most convenient lamp-post provided by these big numbers is unlikely to lead to fruitful results.
Challenging these estimates is not an argument for no action on illicit flows, nor is it a quest for impossible accuracy, but it is an urgent call for a more realistic conversation that draws in the expertise of revenue authorities, statistical agencies, customs agencies, law enforcement and businesses, as well as experts in natural resource governance and organised crime. There are four areas which are particularly relevant:
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Understanding domestic realities – Domestic studies are critical to understanding the impact of illicit finance on development. Such research is being undertaken in Kenya, Tanzania, West Africa and South Africa, for example. However, the catalyst for these studies has often been the existing estimates of massive commodity trade misinvoicing. This creates a tension as the evidence that they find may challenge rather than provide confirmation of the received wisdom. Mirror trade statistics may provide one source of data for national studies, but they cannot be viewed as clear evidence of misinvoicing, and studies need to develop findings which are recognisable to practitioners. Enabling learning from across these studies about how to analyse illicit flows on the ground is a crucial step to support international understanding.
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Measuring international progress – The UN has so far been unable to reach agreement on an SDG indicator on Illicit Flows. The wished-for indicator has been “total value of inward and outward illicit financial flows” – however it is increasingly clear that this indicator does not exist, cannot be calculated and is unlikely to be meaningful given the range of impacts of different types of illicit flow. Individual-country analyses should feed into understanding of where third-countries are acting as getaway vehicles, and how this can best be addressed. Frameworks such as the Financial Secrecy Index developed by the Tax Justice Network, and the development by the EU and the OECD of criteria for identifying non-cooperative jurisdictions are relevant efforts towards exploring the second question, as are ‘mystery shopper’ exercises in testing how easy it is to register anonymous companies.
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Commodity value chains – It is clear that the extractive sector is prone to leakages, but inflated expectations of massive hidden margins can contribute to policy instability and undermine government accountability. Initiatives such as the Extractive Industry Transparency Initiative and the Natural Resource Governance Institute are doing important work to improve transparency and analysis of extractive revenues at a country level. But there is also potential to advance understanding of illicit flows within global commodity value chains. The G20 has asked the World Customs Organisation to study the issue of IFFs, and their expertise could support such an approach. Industry bodies such as the International Council for Mining and Minerals (ICMM), the oil and gas association for environmental and social issues (IPEICA) and the Swiss Trading & Shipping Association should also contribute to understanding illicit flows risk and provide insight on trading practices and commercial realities.
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The role of multinational companies – The problem of how to tax global commerce effectively is different from how to find corrupt or stolen money, or fight organised crime. Strengthening administration of tax law so that it is neither weakly enforced, nor capricious and predatory is positive for citizens, businesses and government, and ultimately critical for sustainable development. This suggests a key area of shared interest between multinational companies and others concerned with illicit flows, around the effectiveness of beneficial ownership transparency systems. Blurring the distinction between legal and illegal conduct in relation to tax by combining them into a vaguely defined composite category is not something to do lightly, and certainly not on the basis of a combination of wishful thinking and misunderstanding.
Comment by Matthew Salomon, Senior Economist, Global Financial Integrity
Broad response
Noting the increased prominence of IFFs on the development agenda in recent years and the role of trade misinvoicing in advancing general understanding of IFFs, the author (Maya Forstater) asks whether a focus on misinvoicing is not too narrow a frame for moving ahead on the IFFs agenda. She concludes that “it is not clear that the influential and widely quoted estimates of trade misinvoicing help us to understand the broader reality of illicit economies and networks in practice.” Further, the author suggests that focusing on misinvoicing is indeed looking under the wrong lamppost in the sense that it is an obstacle to progress: “continuing to allow [misinvoicing estimates] to shape understanding could impede rather than support progress in combatting corruption, organized crime, illegal exploitation of natural resources and tax evasion.”
Without question, focusing solely on misinvoicing as representative of the IFF issue is too narrow a frame – I absolutely agree with the author on this. I’d go further than the author has in this line of argument: the international community should cast as wide a net as possible in approaching a quantitative assessment of the IFFs problem. In fact, there appears to be growing international support to do this. Among a recent gathering of IFF experts at the UN there was “strong support … to keep efforts (to estimate various sources of IFFs) disaggregated and to work on improving measurement for the separate components …”
IFFs are unobservable and will remain so even as the international community makes progress in its attempts to monitor those flows. Basic principles of statistical science argue for broadening the scope of inquiry to include more indicators of illicit activity, even as indicators are uncertain and differ from each other in quality.
Translating the statistical principles into the terms of the exemplum of the man searching for his lost keys: we should be looking under all lampposts. In this context, there are no “wrong” lampposts.
However, while we welcome and support the author’s desire to broaden the scope of inquiry into IFFs, it is not at all clear why pursuing that objective requires her to discredit misinvoicing estimates. The author’s assertion that misinvoicing estimates are impeding progress is not supported in the note and remains, to us, mystifying.
Concerning methodology
While she acknowledges the existence of misinvoicing as a problem, the author also attempts to discredit the methodology used by Global Financial Integrity (GFI) and others (including IMF researchers) in estimating misinvoicing. In this context, she notes: “not all trade misinvoicing shows up as mismatches in the trade data, and conversely, not all mismatches in the trade data are evidence of misinvoicing.” Here the author conflates issues of technique and data limitations in a way that obscures matters.
The basic truth of IFFs in general, and misinvoicing in particular, is this: nothing illicit just “shows up.” IFFs are unobservable and can only be gauged, however crudely, through reasonable inference applied to available data, warts and all. In an ideal situation, we might imagine an available administrative database covering all transactions with sufficient detail to identify the problematic passage of goods through intermediate trade hubs noted by the author as well as a host of other factors that earlier critiques have noted (e.g., temporal, geographic, and commodity aggregation effects, valuation effects). The point is this: even with such an ideal database, misinvoicing would still be unobservable. Even in that case, it would still be necessary to draw reasonable inferences about misinvoicing.
The data available to researchers are far from ideal. Understanding the limitations of the data used is critical, and recognition of those limitations should pervade both the specific implementation of the partner-trade analysis and the interpretation of the results obtained. For practitioners, there is always room for improvement and necessary analytical adjustments are improvements. Such adjustments might be necessitated, for example, by the discovery of subtle deficiencies in the data for particular countries and commodities. Equally important, reporting practices must be fully transparent and must not misrepresent the findings.
GFI uses a variety of available databases and a variety of methods to draw inferences about misinvoicing. The IMF’s Direction of Trade Statistics (DOTS) are the basis of GFI’s annual estimates of trade misinvoicing for all emerging market and developing countries. The DOTS data are the most comprehensive available in terms of coverage, a fact that makes DOTS attractive for use in GFI’s global estimates. The DOTS data, however, do not provide the commodity-level detail that another, less comprehensive but more detailed, database do provide (e.g., UN COMTRADE). Furthermore, the DOTS data are adjusted when other data are available to increase the accuracy of the estimate to some extent; an example is the adjustment for re-exporting Chinese trade through Hong Kong, an adjustment that’s possible only because Hong Kong has made such data available.
In terms of its annual global estimates, GFI is attempting to provide a rough indication of the overall magnitude of misinvoicing, a measure that, by design, tends to underestimate the overall magnitude. The result that a significant share of total developing country trade is potentially misinvoiced is alarming. Moreover, there are concrete (and relatively inexpensive) steps that developing countries can take to reduce such misinvoicing. No, that will not eliminate all illicit financial flows – but curtailing misinvoicing to some degree is surely a step in the right direction.
This briefing is prepared for the project “Taxation, Institutions and Participation (TIP): The dynamics of capital flows from Africa”, funded by the Research Council of Norway.
The author would like to thank Alex Erskine, Odd-Helge Fjeldstad, Leonce Ndikumana, Kathy Nicolaou, Volker Nitsch, Vijaya Ramachandaran, Tuesday Reitano, Peter Reuter and Mathew Salomon for comments and insights. Views and conclusions expressed within this CMI Insight are those of the author alone.
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Universality: What the Sustainable Development Goals mean to business
New report by the United Nations’ SDG Fund offers private sector perspective on development goals and how companies align
The United Nations Sustainable Development Goals Fund (SDG Fund) in collaboration with its Private Sector Advisory Group and the Global Compact launched its new report Universality and the SDGs: A Business Perspective on 11 November 2016. The report highlights varied perspectives from both large and small companies working to understand the commonality of the new development agenda.
The report coincided with a special meeting that brought together the private sector, government officials, relevant United Nations entities, and local authorities to examine implementation of the SDGs and the concept of Universality. The event at UN Headquarters in New York (ECOSOC Chamber) offered a forum to examine various barriers and opportunities in implementing the SDGs, which included issues linked to partnerships, governance, leadership, monitoring and evaluation, as well alignment with the 2030 Agenda.
The program is timely as the one-year mark of the implementation of the 17 Sustainable Development Goals approaches in January. Uniquely, the report focuses on the important notion of universality as a potential driver to impact engagement with the private sector. Universality in this context is defined by the UN as “applicable to all countries, while taking into account different national realities, capacities and levels of development that respect national policies and principles.”
This report is based on interviews and input from private sector leaders through workshops in Africa, Latin America, Europe and the United States, with more than 100 firms representing various regions and industry sectors. The year-long series of workshops and interactive discussions provided valuable insight in to how companies were working to address the new set of goals. It also suggests many firms are working in the areas of SDGs, yet their work is not always linked to the goals or articulated as such.
“Looking forward, it’s clear the SDG Fund has an important role in continuing to advocate for expanded implementation of the SDGs and to build meaningful cross-cutting programs with the private sector, especially those companies who are keen to leverage synergies in the field,” said Paloma Duran, Director of the SDG Fund.
Key findings
The findings of the report reveal three key conclusions. First, companies of all sizes and sectors have shown interest in engaging with the SDGs, but did not fully comprehend the complexity and depth of the SDGs in context of their operations. For most firms, while philanthropic and Corporate Social Responsibility (CSR) initiatives remain customary, there are added benefits to framing sustainability initiatives through the SDGs, as they provide a clear and unified set of globally-accepted goals and related targets. Last, the private sector is recognizing the importance of sustainability projects, (not necessarily the SDGs) and in devising opportunities to build stronger relationships with the established “development sector” including the UN in order to leverage complimentary expertise.
The report indicates that the UN can play an important role in better educating and informing companies on the universal dimensions of the SDGs, as well as in facilitating the resources, tools and learning to better promote implementation and alignment across sectors.
Included in the report are short case studies with the SDG Fund’s Private Sector Advisory Group which highlight the value of implementing the SDGs, initiating multi-stakeholder collaboration and efforts to leverage the complementary expertise of new actors.
More broadly, the SDG Fund is already investing in 23 countries engaging a wide variety of stakeholders. The SDG Fund works to establish greater collaboration among UN agencies and in bringing business into the forefront of the universal 2030 Agenda. A number of successful multi-stakeholder partnerships are now underway, building the case for deepening the engagement with new actors, especially the private sector.
The Sustainable Development Goals Funds is a multi-donor and multi-agency mechanism created in 2014 by UNDP on behalf of the UN System to support sustainable development activities through integrated and multidimensional joint programmes. Its main objective is to bring together UN agencies, governments, academia, civil society and business to address the challenges of poverty, promote the 2030 Agenda for Sustainable Development and achieve SDGs.
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Drylands are key to global food security, says new IFAD report
A new report launched on 11 November 2016 by the UN’s International Fund for Agricultural Development (IFAD) reveals the crucial role the world’s drylands play in buffering the negative impacts of climate change, land degradation and drought.
“Drylands are absolutely key to global food security for the whole planet,” said IFAD President, Kanayo F. Nwanze. “Environment friendly and water efficient agriculture for smallholders is key to reducing poverty, boosting smallholder adaptation to climate change and rehabilitating degraded lands. We look to empower more rural farmers to sustainably manage their land, so that while they feed their families for generations to come, they can also get out of poverty.”
Present in each continent and covering over 40 per cent of the earth, drylands generally refer to arid, semi-arid and dry sub-humid areas, and are home to more than 2 billion people. Drylands also hold up to 44 per cent of the world’s cultivated agricultural systems.
The report, The Drylands Advantage: Protecting the environment, empowering people, shows how drylands support important ecosystems and a great variety of biodiversity, as well as their vital role in the livelihoods and cultural identity of many smallholders.
For example, in Swaziland, IFAD has supported communities to rehabilitate gullied land and introduce sustainable land management practices on 68,000 hectares of land, which can now generate livelihoods for people. In China’s Yanchi county, where drylands are turning to desert, farmers have increased their incomes by 20 per cent as a result of a comprehensive programme to generate alternative and sustainable livelihoods. Without this programme, desertification would likely worsen and the drylands would no longer be farmed at all.
IFAD-supported projects are helping smallholders thrive in drylands, as well as contribute to the UN’s Sustainable Development Goals under the 2030 Agenda to “protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss.”
“Despite their importance, drylands are being degraded with enormous economic consequences,” said the Director of IFAD’s Environment and Climate Division, Margarita Astralaga. “Desertification of drylands could lead to some 50 million people being displaced within the next 10 years.”
She added, “By investing in drylands, IFAD is seeing significant human and environmental dividends. Environment-friendly and water-efficient agriculture for smallholders is key to reducing poverty, boosting smallholder adaptation to climate change, as well as rehabilitating degraded lands.”
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tralac’s Daily News Selection
The selection: Friday, 11 November 2016
@BaldwinRE: Mega-regionalism, the big trend in global trade governance for 10 yrs, died this week (Trump). => Breathing room for WTO?
@CohenOnAfrica: Under Trump, AGOA will be seen as a one-way trade benefit for Africa. Trump likely to demand free trade reciprocity like the EU.
Expert consultation on trade and nutrition (hosted by FAO, 15-16 November, Rome)
The EABC will convene a private sector forum on trade and services – Leveraging the common market to create competitiveness (17-18 November, Dar es Salaam)
The Germany Africa Business Forum will be held in Nairobi (8-10 February 2017)
The inaugural Africa-ASEAN Business Expo will be held in Sandton (6-8 November 2017)
Featured resources:
tralac’s weekly newsletter: Is doing business in Sub-Saharan Africa becoming more challenging?
Presentations from ICTD’s recent workshop on gender and tax in Africa. Profiled presentation: Gender and cross-border trade: the experiences of women in Malawi (pdf, by Michael Masiya, Malawi Revenue Authority)
Performance and expenditure reviews of selected South African public programmes or policies, across six sectors. Profiled technical report: Export promotion in the IDZs (pdf, DNA Economics)
Kenya, Uganda IT e-directories (ITC)
Online businesses in Kenya and Uganda have a new tool to connect to international clients and boost their exports following the launch of e-directories for the two countries. The Ugandan Exporter Directory and the Exporter Directory for Kenya will enable tech companies in each country to showcase their products and services on a one-stop online platform. The e-directories are designed to serve as a platform for B2B interaction. The two directories have been developed as part of the International Trade Centre’s Netherlands Trust Fund (NTF III), an umbrella group of projects supported by the Dutch government.
East African Common Market Scorecard 2016: tracking EAC compliance in the movement of capital, services and goods (EABC)
The East African Common Market Scorecard initiative contributes to the implementation of the Common Market by allowing Partner States to track their progress in fulfilling their commitments to liberalization under the Common Market Protocol. The Scorecard examines selected commitments made by Partner States, outlines progress in removing East African legislative and regulatory restrictions to complying with the Protocol, and recommends reform measures. In doing so, it allows Partner States to identify key areas for improvement and, along with the EAC Secretariat and development partners, chart a path to eliminate remaining barriers to a fuller regional market.
Movement of service providers in the EAC: legal analysis (tralac)
This paper assesses the implementation of the commitments made in these professional services plus educational services. The assessment will focus on policy and regulatory changes, and examine any implementation challenges. This will contribute to the on-going mode 4 negotiations and inform the COMESA-EAC-SADC Tripartite and Continental Free Trade Area services negotiations. [The analyst: Viola Sawere]
Kenya: Flower export earnings up 18% (Bloomberg)
Kenya, which supplies more than a third of all cut flowers sold in Europe annually, said profit from stem shipments advanced 18% in the first nine months of the year as volumes exported climbed. Earnings rose to 53.9 billion shillings ($529.7m), the National Bureau of Statistics said on its website Wednesday. The volume exported increased 6.5% from a year earlier to 96,788 metric tons, it said.
Bank of Tanzania to use tanzanite to boost reserves, snubs ‘volatile’ gold (IPPMedia)
The government, facing pressure on its foreign currency reserves due to ongoing public infrastructure funding programmes, is now considering the possibility of storing tanzanite gemstones in its central bank vaults to boost its kitty. The Minister for Finance and Planning, Dr Philip Mpango, told parliament here yesterday that this follows the effective abandonment of previous plans to re-introduce the purchase of gold bullion to diversify the BoT’s reserves.
Foundations of structured trade finance: book launch (Afreximbank)
The urgent need for Africa to focus on the economic returns of knowledge and the role of trade in the development process were highlighted yesterday as the book, Foundations of Structured Trade Finance, written by Dr. Benedict Oramah (President of the African Export-Import Bank), was launched in Lagos. “While South East Asian economies realized back in the 1970s that it was a knowledge economy that could be trade–led and that it was a trade-led economy that could innovate and be competitive, African economies lost focus, consumed by commodity illusion and defensive import substitution strategies,” he lamented. Consequently, Africa, which was well ahead of developing Asia, including China, in the 1960s and early 1970s in terms of per capita income, size of exports, share of global trade and economic growth rates, was swiftly overtaken by Asia in the 1980s, he pointed out. It was to address that challenge that he had written the book, to share knowledge about the innovative approach that made it possible to lend into areas previously considered risky by splitting the risks in trade transactions and allocating them to parties best able to bear them. [At the book launch: Dangote, Duke lament difficult intra-African trade]
EAC, CUTS International Geneva to enhance cooperation (EAC)
The two officials explored further areas of cooperation, alongside the EAC Geneva Trade and Climate Change Forum. Currently CUTS runs a bi-monthly forums of East African trade negotiators to support their informed and concerted participation on issues of their interest in WTO debates. Besides CUTS’ technical analysis and on-demand papers, negotiators benefit from country updates providing a snapshot of the current on the ground realities of the issue. CUTS also intend to establish the EAC Climate Change Forum for regular online meetings of East African Climate Change negotiators. Each meeting will be serviced by a technical paper and country updates. It is intended that once a year, climate negotiators will meet with trade delegates of the EAC Geneva Forum for a Trade and Climate Change Coordination Forum.
The international trade consequences of climate change (pdf, OECD)
The literature on trade has focused mostly on the trade consequences of climate change mitigation policies or on the effects on greenhouse gas emissions of trade policies. Dedicated analyses that look at the long-term impacts of climate change on international trade are still very scarce. This paper provides an analysis of how climate change damages will affect international trade in the coming decades and how international trade can help limit the costs of climate change. It analyses the impacts of climate change on trade considering both direct effects on infrastructure and transport routes and the indirect impacts resulting from changes in endowments and production.
Enhancing the climate resilience of Africa’s infrastructure: the roads and bridges sector (World Bank)
The goal of this study is first to quantify the cost of climate change to the African roads sector, and second to assist decision makers in identifying the most cost-effective adaptation approach. To this end, the study uses detailed analysis of climate impacts for each of a wide array of possible future climates, combined with decision analysis techniques, to identify how to maximize the cost-effectiveness of investing in infrastructure resilience plans in advance of knowing how the future climate will unfold. [Modernizing African meteorological services to build climate resilience]
New OECD-UNDP report examines progress: is development co-operation becoming more effective?
Drawing on record participation, both in terms of numbers and diversity of stakeholders, the report covers 89% of development co-operation programmed for the 81 low and middle-income countries and territories that participated in the Global Partnership for Effective Development Co-operation’s Second Monitoring Round (2015-2016). The report notes the need to adapt the modalities and norms of co-operation to the changing face of development. Countries are seeing an increase in the quantity and diversity of private and public resources available, including domestic and private finance. Development co-operation can act as a catalyst for other flows, while providing critical finance for the countries most in need. [Note: country-level reports are available for 14 African countries]
ICC Commission report: Financial institutions and international arbitration
Arbitration, with its flexibility and worldwide enforcement dimension, has the potential to become the preferred alternative dispute resolution method for the world’s corporate and investment banks. A new report, released by the International Chamber of Commerce, offers an unprecedented insight into the advantages of arbitrating banking disputes and gives an overview of perceptions and experiences financial institutions have with international arbitration. The Report unveils findings based on information collected on a wide range of banking and financial sectors and products - spanning all corporate and investment banking financing, capital markets, asset management and advisory mandate fields - and in-depth interviews conducted with over 50 leading financial institutions. [India to boycott “legally untenable” Court of Arbitration set up by World Bank]
Call for Papers: Fifth Congress of African Economists (Department of Economics Affairs, AU)
The theme of the fifth edition of the AEC: “Growth, jobs and social cohesion in Africa” will offer an opportunity to consider the following sub-themes: (i) The sources of growth; (ii) the distribution of the fruits of growth; (iii) growth and exogenous shocks; (iv) financing growth; (v) the problem of unemployment in Africa; (vi) growth and integration in Africa; (vii) how to reduce unemployment in Africa?; (viii) partnership and growth; (ix) country experiences; (x) regional and world experiences; (xi) coordination experience of monetary and fiscal policies in times of crisis; (xii) monetary and fiscal policy: What options to boost growth and create employment? Further details, deadlines are available here.
Witney Schneidman: Trump and Africa (Brookings)
Rwanda–DRC launch Simplified Trade Regime programme (COMESA)
Hedge funds line up against Mozambique in tuna bond battle (Bloomberg)
Africa presents united front and calls for action at COP22 (AfDB)
Sugar, dairy and staple grains push food price index up by 0.7% cent in October (UN)
ECOWAS Commission delegation visits Arab Bank For Economic Development in Africa
SAPP orders SADC to fix different energy regulations (ESI Africa)
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New OECD-UNDP report examines progress: Is development co-operation becoming more effective?
A new report finds that 99 percent of the 81 low and middle-income countries and territories participating in a recent monitoring process have national development strategies in place.
This demonstrates that these countries are taking the lead in setting their own priorities and programmes. Strong institutional partnerships at the country level have provided a solid foundation to build mutual trust and underpin transparency and accountability for implementing the principles of effective development co-operation.
Making Development Co-operation More Effective: 2016 Progress Report outlines positive results in improving the effectiveness of development co-operation, even in the face of volatility and tightening budgets resulting from global financial and economic crises.
Co-authored by UNDP and the OECD under the auspices of the Global Partnership for Effective Development Co-operation, the report reviews progress towards more effective development co-operation against the development effectiveness principles agreed at the Fourth High-Level Forum on Aid Effectiveness in Busan (2011), and also provides a useful baseline for actions needed to make development co-operation work better to implement the 2030 Agenda for Sustainable Development.
Drawing on record participation, both in terms of numbers and diversity of stakeholders, the report covers 89 percent of development co-operation programmed for the 81 low and middle-income countries and territories that participated in the Global Partnership for Effective Development Co-operation’s Second Monitoring Round (2015-2016).
The report notes the need to adapt the modalities and norms of co-operation to the changing face of development. Countries are seeing an increase in the quantity and diversity of private and public resources available, including domestic and private finance. Development co-operation can act as a catalyst for other flows, while providing critical finance for the countries most in need.
The growing number of development co-operation partners, instruments and modalities, however, poses challenges for countries as they strive to strategically manage their development resources. They need predictable resources to plan effectively. Findings from the report indicate that short-term funding has maintained a good level of predictability, with over 80 percent of funds being disbursed as planned. Medium-term predictability, on the other hand, remains a challenge.
“Development partners have improved medium-term predictability of development co-operation only marginally (by 4 percent),” say the authors, a joint OECD and UNDP team.
Despite these challenges, the report reveals a promising evolution towards more inclusive partnerships amongst governments, civil society organisations and the private sector – another key principle underpinning effective development co-operation. Yet it acknowledges that more effort is required to unblock bottlenecks and support more systematic and strategic involvement of non-governmental stakeholders.
Complementary to this report, UNDP has also produced a series of country-specific monitoring profiles based on data collected from governments and development partners during the Second Monitoring Round. The profiles provide a snapshot of a country or territory’s progress in implementing the effective development co-operation principles and summarise national context alongside results for individual indicators, analysis, trends and policy recommendations, enabling better data comparability and quality.
The Global Partnership for Effective Development Co-operation will bring together ministers, business leaders, heads of international organisations, civil society and parliamentarians at its upcoming High-Level Meeting in Nairobi, 30 November-1 December, where they will share data and lessons from this report.
“These findings will underpin inclusive dialogue on the individual and collective action that is still needed to enhance development impact and yield sustainable results on the ground,” state the co-chairs of the Global Partnership for Effective Development Co-operation – ministers from Malawi, Mexico, and the Netherlands. The UNDP and OECD jointly support this partnership.
Is development co-operation becoming more effective? Lessons from country-monitoring
With the adoption of the 2030 Agenda for Sustainable Development in 2015, attention is now on implementation of the Sustainable Development Goals. The scale and scope of these ambitious goals necessitate new and better ways of working together. As called for in the Addis Ababa Action Agenda, we must continue to improve the quality, effectiveness and impact of development co-operation.
Work in this area is guided by the four principles of effective development co-operation. In 2011, in Busan, Korea, on the occasion of the Fourth High-Level Forum of Aid Effectiveness, a series of commitments were made with the goal of implementing these four principles across the globe. Now, five years later, we must ask, has there been any progress in implementing the Busan commitments?
The 2016 Progress Report and supporting work show that important progress has been made towards advancing the Busan commitments, but that much more effort is needed to achieve true and lasting effective development co-operation. The report also reveals that the significant initial progress, seen in the mid-2000s, seems to have levelled off. For example, more than half of participating countries did not experience a substantial change in their Country Policy and Institutional Assessment (CPIA) score over the last five years. Additionally, development partners channel only 50 percent of development co-operation finance through countries’ public financial management systems. Transparency is growing, with more information on development co-operation publicly available, but developing countries continue to have insufficient forward-looking development co-operation finance information to support sound strategic planning, which can undermine gains in improving the transparency of their budget information and process, and of financial flows for development.
These challenges are compounded by the increasing complexity of development co-operation. Countries are now faced with the challenging task of managing diverse development resources in a coherent manner. In this context, we need to ask, is development co-operation becoming more effective, supporting countries’ efforts to eliminate poverty, reduce inequality and promote prosperity for all in a cost-efficient way?
Countries are making headway in establishing and strengthening their own results frameworks and exploring ways to manage diverse financing flows in a more comprehensive manner. Development partners can support these efforts by providing capacity building and by fully aligning their country support strategies to country-owned results frameworks. While it is encouraging to see that this alignment is happening when designing and planning interventions, there is too often a parallel process for managing results. Even in countries that have made strides in strengthening their results frameworks, these frameworks are not being fully used by development partners. For example, Costa Rica built a results framework, as well as execution procedures into their National Development Plan 2014-2018, and an inter-institutional coordinating effort is geared towards strengthening capacity for implementation of the Sustainable Development Goals. More than two-thirds of development projects (72 percent) incorporate national results frameworks, plans and strategies as standard of measurement. However, less than half of the projects (40 percent) use government monitoring systems or statistical services to measure the results indicators. Governments also only rarely participate in the final project evaluations (9 percent of them), despite almost half of projects having evaluations of some kind.
At the same time that results frameworks are improving, global aggregate results indicate only limited advances in strengthening of country public financial management systems. There are, however, encouraging examples where countries have demonstrated notable progress in strengthening these systems, even in challenging contexts. Countries such as Samoa, the Cook Islands and the Marshall Islands have demonstrated remarkable improvements in strengthening public financial management systems and enhancing the coordination, and thereby effectiveness, of development partner support. Over 80 percent of development projects in Samoa use national budget planning, financial reporting, auditing and procurement procedures. The peer-review mechanism linked to the Forum Compact in the region is one of the key enabling factors for this progress.
The monitoring process also highlighted that “strong institutionalized partnerships at the country level can build mutual trust and underpin transparency and accountability.” For this, country-led monitoring itself can create a useful basis for building trust and to chart out a mutually agreed path for a truly inclusive development process. Myanmar conducted a Strategic Review of their aid architecture to further integrate effective co-operation thinking into federal institutions. The monitoring process was found to be very useful in exploring opportunities to translate learning into concrete actions to improve coordination and build stronger partnerships.
What is clear is that country context matters more than ever before. Modality, instruments and dynamics of development co-operation are different from country to country, and region to region. For example, countries such as Somalia and South Sudan require substantial capacity and political support to create stronger mechanisms to coordinate development partners. Countries such as Bangladesh and Kenya have seen a reduction of official development assistance over the last several years due to the transition to Lower-Middle Income Country status and have to explore a more holistic approach to leverage resources from the private sector and others. Countries such as Comoros and those in the Pacific Islands experience the presence of fewer development partners. Countries such as the Dominican Republic and Paraguay must explore more knowledge-based technical cooperation and innovation to provide essential services to those left furthest behind.
Approaches used to manage co-operation must be different for different countries. And, a much more granular approach is needed to take stock of implementation of the effective co-operation principles and to learn what works best to address specific challenges. There is need to support developing countries to ensure they have the technical and financial capacity to achieve sustainable development.
At the same time, despite diverse contexts and needs, overall transparency on development activities remains a crucial ingredient for building trust and stronger partnerships. There remains a significant gap in the quality and quantity of data that is available to countries to assist in planning and managing results. Substantially, more work is needed to clear bottlenecks and to improve the visibility of all resources available in a country.
In conclusion, the country-led monitoring has proven to not only be a way to assess progress on effective co-operation commitments, but to be a key component of achieving the four effective co-operation principles in itself. It has put the focus on country-level results, it has provided a useful entry point for multi-stakeholder dialogue and accountability and it has laid a solid foundation to build trust and engage new partners. Overall, a truly honest discussion on the real challenges obstructing the realization of the principles of effective development co-operation is needed to support concerted efforts of all partners to improve the quality, effectiveness and impact of development co-operation.
Will the Second High-Level Meeting of the Global Partnership provide such a space? Are we committed to deliver actions for more effective co-operation in the 2030 development landscape?
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Donald Trump and Africa
For Africa, at stake in this election of Donald Trump is the strong bipartisan consensus in Congress that has been the cornerstone of U.S. policy toward the continent for the last three administrations.
This consensus, supported by Presidents Clinton, Bush, and Obama, was predicated on the notion that Africa has opportunities worth U.S. attention and investment. In the past two decades, Congress not only passed the African Growth and Opportunity Act (AGOA), but also enacted transformative initiatives such as the President’s Emergency Program for AIDS Relief (PEPFAR), created the Millennium Challenge Corporation (MCC) and, more recently, passed the Power Africa Act, the Food Security Act, and AGOA’s extension.
Will a Trump administration seek to weaken or overturn these and other legislative initiatives? Hopefully not. Nevertheless, there is no evidence that Africa will be a priority for President Trump in the way it has been for his three immediate predecessors. In fact, there is every reason to expect that, under a Trump administration, the U.S. will be less engaged in Africa especially where it concerns the expenditure of taxpayer resources on economic development initiatives.
AGOA
AGOA could easily be the first casualty under Trump. While its benefits have been uneven, the legislation has served as a key framework for U.S.-African relations. It has led to trade and investment being at the forefront of U.S. policy in the region. AGOA has encouraged African women in trade and led to the creation of the African Trade Hubs (rebranded as Trade and Investment Hubs under Obama) to help African companies access AGOA. More recently, the Obama administration has been working to develop a new trade architecture based on reciprocity that would ultimately replace AGOA’s unilateral preference regime.
Over the last decade, however, the European Union has aggressively implemented Economic Partnership Agreements across the continent that require African governments to grant European goods, services, and companies preferential access. American products increasingly are at a significant tariff disadvantage in Africa. With the outcome of the November 8 election, Trump is more likely to see AGOA as a “bad” trade deal than an innovative economic development program based on stimulating light manufacturing and trade. Hopefully the Trump administration will make a careful assessment of AGOA and the African trade environment before acting.
Partnership or paranoia
In the post-Cold War era, the U.S. has worked with some success to transform its relationship with African governments from that of donor-recipient to one based on mutual benefit. While still a work in progress, there have been strides forward.
All U.S. assistance is now based on grants instead of loans. African governments have an increasingly significant voice in determining the programs in which the U.S. government will invest. Perhaps the best example is the MCC, which coordinates the entirety of its investments with host country teams. The Young African Leaders Initiative, which has brought 2,000 of the continent’s best and brightest to the U.S. for leadership training and meetings with President Obama and senior officials, and maintains an online network of 300,000 young professionals, is the most compelling example of the new type of partnership that the U.S. is forging.
It is difficult to see this effort being sustained by a President Trump, although it would be in U.S. interests to do so. In fact, most Africans are wondering if the Trump administration will impose a ban on Muslims, will expel the large numbers of African immigrants, and whether the U.S. will continue to be the beacon of hope, friendship, and opportunity that it has traditionally been to many on the continent.
The security challenge
The U.S. has also played a critical role in responding to Africa’s key security challenges. Over the last year it has increased its cooperation with the Nigerian and other regional governments in an effort to defeat Boko Haram, and progress is being made. U.S. support for peacekeeping efforts in the Democratic Republic of the Congo, Somalia, and South Sudan has been central to promoting stability in conflict areas and regional counter-terrorism efforts. Whether a Trump administration will continue to support these programs is an open question.
In Nigeria, where I arrived yesterday, the response to Trump’s election was summed up in several comments. President Muhammadu Buhari congratulated the president-elect and said that he looked forward to working with him. The president of Nigeria’s senate, Dr. Bukola Saraki, issued a similar statement and added that Trump’s experience in the private sector could help Nigeria restructure and diversify its own economy.
At the same time, Trump’s electoral victory was also welcomed by the Indigenous People of Biafra, which advocates a separate republic from Nigeria, and the Niger Delta Avengers, a militant group in the Niger Delta opposed to the government.
Nigeria’s former ambassador to the United Nations, Oladapo Fafowora expressed the concerns of many when he told the Vanguard: “There is nothing in [Trump’s] background to suggest that he has any durable interest in Africa. I think it is a lesson for Nigerians: people should stay home and make contributions in developing our economy.”
Witney Schneidman is Nonresident Fellow – Global Economy and Development, Africa Growth Initiative at the Brookings Institution.
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East African Common Market Scorecard 2016
Tracking EAC compliance in the movement of capital, services and goods
Achieving regional integration is not easy, but has a significant pay-off. The objective of establishing the Common Market is the realization of accelerated economic growth and development. Enhancing the movement of services and capital, eliminating barriers to movement of goods and bolstering the rights of establishment and residence will bring the region closer to achieving its dream.
Eliminating internal barriers to trade and investment can also help EAC businesses achieve economies of scale and bolster their competitiveness, helping the region move closer towards a single investment destination. The Common Market can expand opportunities for the private sector and uplift the living standards of its citizens in a way that no Partner State can do on its own.
Two years ago, in 2014, the first East African Common Market Scorecard was launched. This initiative signaled Partner States’ commitment to achieving regional integration and to doing so in a transparent way. This second publication of the Scorecard is evidence that this commitment holds strong.
The East African Common Market Scorecard initiative contributes to the implementation of the Common Market by allowing Partner States to track their progress in fulfilling their commitments to liberalization under the Common Market Protocol. The Scorecard examines selected commitments made by Partner States, outlines progress in removing East African legislative and regulatory restrictions to complying with the Protocol, and recommends reform measures. In doing so, it allows Partner States to identify key areas for improvement and, along with the EAC Secretariat and development partners, chart a path to eliminate remaining barriers to a fuller regional market.
Since 2014, Partner States have eliminated some key restrictions to further trade and investment and have become more efficient at doing so. Much remains to be done, however, before the gains of integration can be realized.
Introduction
The East Africa Community (EAC) is already the most integrated regional bloc in Africa. While intra-African trade as a percentage of total trade is well below that of other developing regions, the EAC exports nearly 20 percent of its goods to the EAC market. Since establishing the EAC Customs Union in 2005, EAC Partner States have worked to harness their joint economic potential by eliminating barriers to intra-EAC trade and investment through implementation of the EAC Common Market Protocol (CMP) on the establishment of the common market, which came into force on July 2010.
Partner States – Burundi, Kenya, Rwanda, Tanzania, and Uganda – have adopted the Common Market Scorecard (CMS) as a monitoring tool for the implementation of the Common Market Protocol. The CMS is a tool that measures legal compliance with commitments with the Common Market Protocol. The CMS aims to further EAC integration with a view to increasing its economic potential and realizing much-needed improvements in the investment climate. Since the publication of the first CMS in 2014, the EAC expanded its membership, welcoming South Sudan as a sixth member in 2016.
A 2016 article on African integration in the Economist bemoans the implementation record of most trade deals in the region, but sets the EAC as an exception, in part due to the fact that “EAC members keep good data, and a public Scorecard holds them accountable for non-tariff barriers.“ Launched in 2014, the CMS sets out a framework for Partner States to track their progress towards integration and for the EAC to assess regional implementation gaps.
This second Common Market Scorecard (CMS 2016) measures progress made since the publication of the CMS 2014 regarding the legal instruments and measures of the Common Market Protocol. In so doing, it aims to facilitate policy dialogue by tracking reforms, sharing success stories, and enabling research and analysis on the links between reforms in measured areas and desired outcomes. The CMS 2016 will bring to light, in respect of the CMS 2014 recommendations, reforms undertaken by each Partner State as well as any new restrictions or nonconforming measures.
This Scorecard’s objective is to help Partner States comply with their obligations and enable the EAC to attract more investment, expand trade, and take full advantage of its integration potential. The CMS 2016 will be used to take informed implementation and/or policy actions in the areas that requires further progress. However, the next generation of the Scorecard will need to not only track the legal compliance of implementation of the Common Market Protocol but to measuring timely implementation of measures, completion of commitments within target deadlines and outcomes.
The EAC Partner States’ commitment to enhance their regional integration by tracking their individual and collective progress sends a signal of serious commitment to their regional integration initiative. Monitoring regional integration can contribute to the development of regional trade and investment and promotion of economic growth. It also raises compelling questions about regional integration that could be constructive for other regional integration initiatives. As EAC Partner States, along with counterparts from the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC), begin to implement the Tripartite Free Trade Area (FTA) and to further negotiations of a 54-nation Continental Free Trade Area (CFTA) linking economies across Africa, the EAC’s experience can provide good lessons in best practice as well as lessons learned.
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New report ‘Transitioning from the MDGs to the SDGs’ calls for collaboration to ‘Deliver as One’
UNDP and the World Bank released its new report ‘Transitioning from the MDGs to the SDGs’ on 10 November 2016, coinciding with the UN System Chief Executives Board for Coordination's (CEB) Second Regular Session of 2016.
The session brings together United Nations System Principals to enhance UN system-wide coherence and coordination on a broad range of issues of global concern. The launch of the report is timely as the 2030 Agenda for Sustainable Development has set the vision for the next 14 years of global action.
“The 2030 Agenda is recognized as a transformative, universal and integrated agenda. Implementation should not create 17 new silos around the Sustainable Development Goals,” recommends the new report.
The report pulls together the main lessons from the Millennium Development Goals Reviews by the UN System and World Bank Group for their engagement at the country level. These reviews took place at meetings of the UN CEB from 2013 to 2015.
According to UN Secretary-General Ban Ki-moon, the CEB Reviews were “unprecedented – a truly integrated system-wide endeavour, championed jointly by World Bank Group President Jim Yong Kim and United Nations Development Programme Administrator Helen Clark”.
The report concludes, “it is time to more systematically consider the ‘how’ of the integration at the country level and draw on the comparative advantages of the UN system’s diverse areas of expertise, how to work collaboratively and deliver together, and how to work on the continuum from the normative to the operational as a comprehensive and coherent UN effort.”
UNDP Administrator Helen Clark stated, “To leave no one behind, strong engagement with local communities and civil society is required. This should include investments in the empowerment of women and girls, sustainable energy for all, and the sustainable use and conservation of biodiversity.” She further added, “Achieving sustainable development is helped by having humanitarian and development actors working closely together.”
“The World Bank Group and the United Nations have a shared vision of a world free of extreme poverty by 2030,” said World Bank Group President Jim Yong Kim. “To meet our ambitious goals, World Bank Group and UN staff must collaborate effectively with our country partners, use our comparative advantages, and remove bottlenecks that impede delivery. This report has shown that, together, we can achieve better results for people and the planet.”
“The MDG acceleration exercise not only delivered results on the MDG targets, it also provided lessons that are directly applicable to our work on the Sustainable Development Goals and the World Bank Group’s own twin goals to end poverty and boost shared prosperity. We know that to achieve those ambitious and interrelated targets at scale, World Bank Group and UN staff have to be flexible, share knowledge, and focus on measurable results,” stated Mahmoud Mohieldin, World Bank Group Senior Vice President for the 2030 Development Agenda, United Nations Relations, and Partnerships.
“The CEB reviews were the highest level of analysis the United Nation’s leadership devoted to advocating the need to work across silos, and work across the Millennium Development Goals to tackle off-track MDG targets, with an implicit aim to learn lessons for what was to come: a more integrated sustainable development horizon called the SDGs. There is a shared understanding that investing in solutions within a sector was often not sufficient to meet a particular MDG target,” said Magdy Martínez-Solimán, UN Assistant Secretary General and Director of UNDP’s Bureau for Policy and Programme Support.
Simona Petrova, Acting Secretary of the CEB and Director of the CEB Secretariat, United Nations recalled, “the MDG Reviews showed that significant development gains were possible when the UN system really came together in support of countries. A hallmark of the Reviews was the high level of coordination and cooperation between the UN Country Teams and the World Bank Group offices. To help meet the ambition of the 2030 Agenda for Sustainable Development, achieving this degree of collaboration ought to be the goal in all countries from the very beginning of the SDG implementation period.”
The new report draws attention to the three main conclusions that need to be applied to the transition to the 2030 Agenda, such as: a) Support cross-institutional collaboration between the UN and the World Bank; b) Advance better understanding of cross-sectoral work, and the interrelatedness of goals and targets; and c) Promote global and high-level advocacy.
The report discusses 16 countries and the Pacific Island sub-region – an exercise that brought together the UN and the World Bank Group, which systemically identified the country situation, the bottlenecks to attainment of the MDGs, and potential solutions to be implemented. Since many MDGs have been absorbed into the Sustainable Development Goals (SDGs), many of the observations and solutions provided are expected to prove useful to implementation of the SDGs.
Executive Summary
Lessons and recommendations from the CEB Reviews: A forward-looking perspective from the MDG Era
Many countries mainstreamed the Millennium Development Goals (MDGs) into their national and sub-national development plans and strategies, and implemented specific measures intended to achieve the associated targets. However, progress was uneven and, in spite of best efforts, many countries missed one or more of the MDG targets.
During the last three years of the MDG period, heightened efforts were made at accelerating progress. Acceleration efforts were expected to shorten the amount of time to completion and offer significant benefits to the implementation phase of the Sustainable Development Goals (SDGs). Much has been learned through efforts of the last fifteen years, and there is enough evidence to guide such efforts. This report documents the experience of 16 countries and the Pacific Islands sub-region with acceleration efforts.
One important aspect of the MDGs has been their focus on measuring and monitoring progress. Estimates for the developing world indicate that the targets for extreme poverty reduction (MDG 1.a), access to safe drinking water (MDG 7.c) and improving the lives of at least 100 million slum dwellers (MDG 7.d) were reached ahead of the 2015 deadline. The target on ending gender disparity in primary education was met in 2010. Targets on gender equality in primary and secondary education (MDG 3.a) and the incidence of malaria (MDG 6.c) were met by 2015.
In contrast, progress on the remaining MDG targets lagged, especially for the education and health-related MDGs. The primary school completion rate reached 90 percent by 2012, but progress was off track to meet the target of a universal completion rate by 2015. Progress towards MDGs related to infant, child and maternal mortality (MDGs 4a and 5a), and access to basic sanitation (MDG 7c) were lagging behind by 2015.
The heterogeneity of outcomes at the country level translates into stark differences at the regional level. At one end, the East Asia and Pacific regions are estimated to have met all of the MDGs. At the other end, sub-Saharan Africa is off target on most of the goals. The regions still falling short, in particular South Asia and sub-Saharan Africa, started from positions that required the most improvement. They have made significant progress in absolute terms, particularly on the health MDGs, which the world as a whole is struggling to meet. The relative nature by which many of the MDGs are defined tends to mask significant accomplishments in South Asia and sub-Saharan Africa.
Progress towards the MDGs also varied sharply along two key dimensions: the rural-urban divide, and demographic features. People living in cities saw far more development progress than those in rural areas, reflecting the importance of scale economies in urban centres, and the challenges of providing services in more sparsely populated rural localities. Countries where the demographic transition to low fertility and low mortality is either stalled or delayed have faced major challenges.
Although many of the MDG targets were not met in many countries, significant progress means the world we live in today is fundamentally different from the world when the MDGs were adopted. In 1990, 58 percent of the global population lived in a low-income country. In 2000, this declined to 41 percent, and in 2013, to only 12 percent. People in extreme poverty made up 36 percent of the global population in 1990 (1 out of every 3 people). This share declined to 28 percent by 2000 and 11.5 percent (1 out of 8) in 2015. Nonetheless, 850 million people still live on less than US $1.25 a day.
These developments have led to major changes in the global distribution of income. In 1988, just two years before the benchmark year for the MDG period, the world could be divided into two distinct distributions of income. These distinctions have begun to blur today, as the world becomes more like one continuous group of countries instead of one developing and one developed group. Similar conclusions can be drawn by analysing where global gross domestic product (GDP) is shifting. Keeping constant the initial grouping of countries by income category of 1990, low-income countries at that point produced approximately 5 percent of GDP. That same set of countries produced close to one-fifth of global GDP in 2013. Low-income and middle-income countries together produced close to 40 percent of global GDP in 2013, up from about 20 percent in 1990. Their economic growth rates significantly outperformed those of high-income countries.
The process of articulating the MDGs and building a consensus around core objectives as well as coalitions to achieve them played a positive role in some of these shifts. It also yielded numerous lessons to inform movement on the 2030 Agenda and its SDGs.
The Way Forward
The 2030 Agenda is recognized as a transformative, universal and integrated agenda. Implementation should not create 17 new silos around the SDGs. It is time to more systematically consider the ‘how’ of integration at the country level – how to draw on the comparative advantages of the UN system’s diverse areas of expertise, how to work collaboratively and deliver together, and how to work on the continuum from the normative to the operational as a comprehensive and coherent UN effort.
The UN system will need to embrace strong ownership at the country level. It should continue its collaboration with existing partners, including philanthropic organizations, NGOs and civil society organizations cultivated during the MDG period. It should also expand and actively seek partnerships with the private sector, particularly in the areas of financing, data and implementation of the SDGs.
The CEB reviews showed that significant gains were possible when agencies came together to support an acceleration goal. Country teams improved the alignment and coherence of UN system activities on the ground, bridged sectoral silos while still valuing the specialized expertise of individual agencies, and more effectively advocated with governments and other partners. High-level coordination between UN country teams and World Bank country offices was repeatedly recognized as an accomplishment.
Three main conclusions clearly apply to the transition to the 2030 Agenda:
Support cross-institutional collaboration between the UN system and the World Bank
Recognizing that the SDGs require more integrated responses, the CEB is an adequate forum to promote institutional coherence across the UN system. A few lessons from the CEB MDG acceleration exercise could be considered not just by the UN system, but by many if not all development actors to make interventions more effective:
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Make sure that there is a mechanism in place that identifies recurrent common bottlenecks, especially those related to integrity, governance and the rule of law, that could provide guidance, through country case studies, on how best to integrate cross-cutting issues in attaining the SDGs. These are cross-cutting themes that do not fall neatly under any one institutional mandate, but can prevent the achievement of the SDGs.
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Define incentive mechanisms to foster cross-cutting collaboration. Coordination and alignment of system-wide and partner support could be reinforced through mechanisms such as round tables around cross-cutting issues with the participation of donors, NGOs and civil society, governments and the private sector. These could effectively connect the capacities and different forms of expertise of the UN system – including in non-resident agencies – to assist countries with planning, reporting and monitoring, financing and the overall implementation of the SDGs.
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Establish joint and pooled funding mechanisms, where relevant, to instill a culture of collaboration across the UN system. Such mechanisms can act as vehicles for host country, private sector and individual giving, and potentially help manage risks.
Advance a better understanding of cross-sectoral work and the interrelatedness of goals and targets
The CEB reviews were a forward looking initiative that strongly advocated cross-sectoral and cross-institutional thinking to tackle off-track MDG targets, with an implicit aim of drawing lessons for the SDGs. There is a shared understanding that investing in solutions within a sector was often not sufficient to meet a particular MDG target. The UN system could provide leadership on this issue through various initiatives. The following are a few examples that could encourage more collaboration across UN agencies and development partners:
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Provide knowledge products and monitoring systems that explicitly recognize interlinkages among and between policies, sectors, and horizontal and vertical dimensions of development. A dashboard to monitor the attainment of the SDGs could automatically identify and report on the interrelatedness of goals and their targets. Multisectoral approaches and tools should be continuously developed to work with sectoral ones, and connect stakeholders for policy formulation and implementation, as done under the MAF.
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Discourage UN organizations from reorganizing along individual SDGs, so that a more holistic approach is applied to SDG implementation. The 2030 Agenda should be viewed by the UN system in its entirety, with an appreciation that implementation requires an integrated approach that capitalizes on the diversity and specialized strengths of individual entities.
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Support platforms for effective engagement at country level to assist governments and other stakeholders in better understanding the interrelatedness of goals and targets.
Promote global and high-level advocacy
High-level attention to specific issues encourages action at global and country levels. Recognizing the value of advocating and communicating links among different issues and results achieved by the UN system on MDG acceleration, it will be important to consider the following:
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Advocate for the sequencing of development issues that require action today to accrue results in the medium and long term critical to meeting the SDGs. These may include climate change, investments in early childhood development, and the planning of sustainable and resilient cities, among others.
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Collectively advocate that UN Member States address recurrent common bottlenecks that could prevent the achievement of the SDGs, such as fragility and conflict.
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Advocate interrelated SDG issues rather than single goals. Identify issues of global relevance that merit strategic and political engagement, and have the highest levels of the UN system conduct dedicated advocacy to achieve better results on the ground.
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Mobilize political support among UN Member States for increased national budget allocations on social services, and demonstrate how services can be extended to the hardest-to-reach individuals and social groups.
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ASEAN market seeks to increase bilateral trade with Africa
Member countries of the Association of Southeast Asian Nations will make a leap into the African continent with their first joint trade mission and business expo, the inaugural Africa-ASEAN Business Expo (AABE), in South Africa next year.
The expo, led by the Singapore Manufacturing Federation (SMF) and Conference & Exhibition Management Services (CEMS), aims to introduce African businesses to the newly established ASEAN Economic Community (AEC), as the two regions ramp up their bilateral trade and investment cooperation in the face of global economic uncertainties.
Formed in 1967, ASEAN represents the Southeast Asian countries of Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar, and Vietnam, with a total population of over 622 million people.
The ASEAN market, worth over $2.6 trillion, is one of the most important economic regions in Asia. Trade between Africa and ASEAN has shown an annual growth rate of around 15% year on year over the past decade, worth a total of $42.5 billion in 2012, and is projected to top $384 billion by 2019.
Africa an atractive growth market for ASEAN firms
As the second largest and second-most populous continent in the world, Africa is seen by ASEAN firms as an attractive growth market. Currently more than 300 companies from ASEAN operate in Africa, predominantly involved in agribusiness, manufacturing, oil and urban development.
Edward Liu, group managing director of CEMS, says the trade mission and AABE series are designed to serve as a strategic platform linking businesses between ASEAN and the African Union (AU), via the commercial hubs of Singapore and South Africa.
AABE 2017 to boost bilateral trade
Supported by the IE Singapore and other trade agencies and chambers of commerce and industries in ASEAN, the premiere AABE 2017 will kick off at the Sandton Convention Centre, Johannesburg, South Africa, from 6-8 November 2017, while the following edition will be held in Singapore, in 2018.
“The inaugural AABE will focus on boosting bilateral trade between African and ASEAN business in the fields of energy, water, housing, building and construction, healthcare, transportation and logistics, food and beverages, IT and telecoms, franchising and licensing, education and financial and business services,” says Liu.
“The event will provide a forum for importers, traders, buyers, investors and retailers to discover opportunities and negotiate mutually beneficial trade agreements.”
AABE 2017 is expected to attract some 100 key exhibitors from Africa and ASEAN countries. In addition to the myriad of exhibiting sectors, the AABE series will also feature onsite business matching services as well as a hosted buyers’ programme specially tailored to bring in quality buyers from the AU and ASEAN to the event. Held in conjunction with AABE 2017 would be an Africa-ASEAN Business Forum, highlighting the immense business opportunities in the two economic regions.
There is keen interest in the upcoming event, says Liu, with business from both Africa and ASEAN looking to explore new business collaboration in the African continent. “Enhanced trade partnerships between these two regions would be paramount to promoting economic growth for both regions, culminating in greater South-South investment and trade,” he says.
Central African Corridor cross-border trade in fish
While Africa is losing its share in the global fish trade market, even trading relatively less within the continent itself, intra-regional trade in fish on the other hand is encouraging. After sugar, fish is reported to be the second most traded agricultural commodity intra-regionally. As a commodity, fish is among the top agricultural products with significant export potential.
Africa has great potential to generate more food and nutrition security benefits from fisheries which can also help to reduce poverty, as is evidenced through the promotion of sustainable fisheries management. Moreover, increased trade can be associated with faster economic growth. Hence, expanding fish trade opportunities for small-scale fishers and fish farmers can help raise incomes as well.
Intra-regional fisheries trade in Africa is constrained by a number of factors which include inadequate hard and soft market and trade infrastructure, as well as weak policy and institutional frameworks. These challenges lead to high transport costs, unpredictable trade regimes and inadequate market information for stakeholders. Other challenges include inadequate compliance to sanitary and phytosanitary measures and the high cost of doing business on the continent.
Concerned about the low level of intra-regional trade, the African Union Heads of State and Government, during their 23rd Ordinary Summit in Malabo, Equatorial Guinea in June 2014, committed themselves to triple, by the year 2025, intra-African trade in agricultural commodities (including fish) and services.
To this end, a stakeholder consultation workshop was held from 1-3 November, in Douala, Cameroon. The workshop was convened to consolidate ongoing efforts of partners, as well as to agree on a roadmap for the establishment and implementation of the One Stop Border Post (OSBP) concept, on cross-border trade on fish and fishery products in the Central African corridor (whose member states are Cameroon, Gabon, Equatorial Guinea, Chad and Congo).
In his opening address at the workshop, the Director of Fisheries, Aquaculture and Fishery Industries in Cameroon, Dr Belal Emma, maintained that cross-border trade of fishery products in the Central African region is extremely important as fisheries and aquaculture contribute to food and nutrition security of the region’s population. Dr Belal also highlighted the importance of the sector for the creation of jobs and income.
Dr Bernice Mclean, Senior Programme Officer for Fisheries at the NEPAD Agency, reiterated the important role played by fisheries trade as a contributor to economic growth and development in Africa. She also stressed the urgent need to develop appropriate policies, certification procedures, standards and regulations embedded in national and regional trade and food security policy frameworks that can be translated to practical results on the ground.
Dr Mclean cited the OSBP and trade-related measures model as an effective tool for implementing fisheries trade policies at the regional level. She appealed to stakeholders at the workshop to agree on a roadmap for the establishment and the implementation of the OSBP concept for the Central African region.
The consultation workshop concluded with the development of a roadmap with a series of key priority actions that included among others, the:
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Harmonisation of standards, regulation and inspection procedures;
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Operationalisation of the Economic Community of Central African States’ (ECCAS) region free trade area; and
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Establishment of a data collection system for fish and fish products at important borders to address the need for statistical evidence for informed decision making.
Dr Mclean reaffirmed the NEPAD Agency’s commitment to deliver on the NEPAD Action Plan for Fisheries and Aquaculture, the Malabo Declaration, Agenda 2063 as well as the Comprehensive Africa Agriculture Development Programme.
The workshop was jointly organised by the NEPAD Agency, the African Union Inter-Africa Bureau for Animal Resources and WorldFish in collaboration with the Government of Cameroon, ECCAS and the European Union.
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New report tackles critical challenges in climate and disaster risk financing for Small Island Developing States
A new report, Climate and Disaster Resilience Financing in Small Island States shows that, in spite of increasing climate risks, only 14 percent of development aid for vulnerable small island nations addresses climate change and natural disasters.
The report, prepared by the Global Facility for Disaster Reduction and Recovery (GFDRR), the World Bank, and the Organization for Economic Cooperation and Development (OECD), shows that more than 335 major natural disasters have occurred in Small Island Developing States (SIDS) since 2000, resulting in an estimated US$22.7 billion in direct damages. Yet, efforts to build resilience to climate change and disasters are being hampered by a highly complex web of global financing, creating acute fragmentation.
The result is often a confusing array of dozens of small projects – half of which are below $200,000 each and collectively account for only 2 percent of all support – creating large inefficiencies and a lack of broad impact. The report also found that while SIDS received US$783 million a year in climate and disaster resilience financing during 2011-2014, the proportion of grant financing has been declining.
“When a single extreme weather event can cause losses that exceed a small island country’s GDP by several times, governments need a more comprehensive approach to manage risk effectively,” said John Roome, Senior Director of the Climate Change Group at the World Bank. “We are working with our partners to ensure that Small Island Developing States have the tools they need to protect both their citizens and their economies, and are able to channel incoming financing where it is most needed.”
“Sustaining development progress in the midst of an increasingly volatile climate is no easy task, especially for communities within SIDS,” says Jorge Moreira da Silva, OECD Development Director. “However, with greater international cooperation and by harnessing emerging financial innovations, governments and donors can steer vital financing to build lasting resilience for these countries, and create a safer and more prosperous future.”
The report calls for more coordinated, predictable and long-term financing for climate and disaster risk that is tailored to the needs of small islands. It also advocates for strengthened enabling policies and institutions in SIDS to ensure funds for managing climate risk are used more effectively.
Executive Summary
Relevance of climate and disaster resilience to Small Island Developing States (SIDS)
Natural disasters and climate change severely affect the growth trajectory of SIDS1 and their ability to achieve sustainable development. SIDS are located in some of the most disaster-prone regions in the world and comprise two-thirds of countries with the highest relative annual losses due to disasters. With the effects of climate change compounding the intensity of these disasters, this trend is set to continue, creating new developmental challenges for SIDS. Natural disasters and climate variability severely impact major economic sectors in SIDS, hinder economic growth and affect the most vulnerable populations. Lacking relatively stable and strong fiscal revenues and domestic savings, SIDS governments often need to divert scarce public resources from essential social and economic development investments to address disaster-related needs, compromising the pace and scope of future growth. Development in SIDS, therefore, is subject to a range of interconnected and mutually reinforcing economic, social and environmental challenges.
Building resilience at individual, institutional, and private sector levels is essential to achieve sustainable development in SIDS, but available financing for this purpose is limited and difficult to access. The responsibility, expertise and funding for climate and disaster resilient development is scattered across a large number of actors, creating a complex global architecture of funds and providers. While several market-based financing mechanisms have become available globally, they are not equally and easily accessible to all SIDS, and concessional finance from the international community remains a key source of financing to foster climate and disaster resilient development. Understanding how much SIDS are actually receiving and in what ways becomes, therefore, pivotal to help the international community more effectively support SIDS in building climate and disaster resilience.
Quantifying concessional finance trends for climate and disaster resilience in SIDS
Resources for resilience have grown significantly, but they still represent a small share of concessional finance. Between 2011 and 2014 (the timeframe used for this report), the volume of concessional finance in support of climate and disaster resilience to SIDS nearly doubled, reaching USD 1.01 billion in 2014. However, this represented only 14% of the total concessional finance directed to SIDS during this period. Bilateral providers gave the bulk of concessional finance for climate and disaster resilience – 71% for the 2011-14 period – with annual funding levels remaining fairly stable. Although multilateral organisations provided a much smaller share of this financing (29% of the total), multilateral commitments to SIDS increased rapidly, nearly doubling from 2011 (USD 226 million) to 2014 (USD 443 million). In addition to these direct contributions, multilaterals channelled close to a fifth of bilateral contributions, in effect serving as a conduit to 44% of the total resilience funding received by SIDS during the 2011-14 period.
Climate and disaster resilience financing was mostly provided as grants (73% during the period 2011-14), but recent growth was largely due to increases in concessional loans to Upper Middle-Income Countries. Concessional loans increased substantially from USD 69 million in 2011 (11%) to USD 415 million in 2014 (41%), largely because of greater concessional lending from multilateral development banks to a limited number of SIDS. While Upper Middle-Income SIDS were able to access more concessional loans – bringing their share of concessional financing to 51% in 2014 (up from 33% in 2011) – funding for Least Developed Countries (LDCs) remained fairly constant, bringing the share of concessional financing to LDCs to 24% of the total in 2014, down from 37% in 2011.
In terms of access to finance, striking differences across individual SIDS are prevalent. The smallest nations tend to receive the highest per capita annual financing allocations, largely because of the high fixed administrative costs involved. Geographic and income patterns mask the disproportionate weight of a few countries and a few large and isolated commitments.
Resilience finance is dominated by investments in resilient infrastructure in a few countries. Investments in resilient public infrastructure accounted for USD 335 million on average per year from 2011-2014, or 43% of total climate and disaster resilience financing for this period in part due to the higher cost of these investments. Large one-off commitments also skewed geographic and income patterns.
Access to greater and more effective financing is constrained by a number of challenges
SIDS are taking positive steps to address some of the challenges of mainstreaming climate and disaster resilience into development. This includes setting up coordination units within key ministries and developing strategic policy documents. However, challenges remain in identifying the risks and impacts of natural disasters, securing adequate resources in national budgets, and reducing inefficiencies and institutional fragmentation caused, in part, by some international processes and funding sources.
Many SIDS depend on a single provider for the bulk of resilience financing, exacerbating financial vulnerability. For 14 of the 35 SIDS considered in this report, across all regions, the top provider accounted for over half of the climate and disaster resilience financing during 2011-14, with this percentage increasing over time. This trend is concerning as SIDS could become overly reliant on the shifting priorities of the dominant donor(s).
The remaining resilience financing is fragmented across a large number of projects, which leads to high transaction costs and places additional stress on the capacity of SIDS. While a few large projects accounted for the bulk of resilience funding to SIDS – mostly directed to Upper-Middle Income SIDS – the vast majority of commitments were provided through smaller sized projects. During the 2011-14 period, more than half of all resilience projects were below USD 200,000 and 80% were below USD 1.5 million, yet together, these small projects accounted for only 2% and 10% of the total resilience financing to SIDS. This proliferation of small projects was widespread across all SIDS, with climate and disaster resilience financed through a total of 1,715 projects in 2011-14. Most countries were receiving an average of 10 individual projects per year with commitments of less than USD 1.5 million each. SIDS with the largest number of projects were receiving more than 30 resilience projects in a given year.
Sector-wide approaches and budget support remain limited, as does the implementation of resilience funds by recipient countries. Only 8% (USD 239 million) of the concessional finance for climate and disaster resilient development was provided as sectoral budget support from 2011-14, and financing executed by SIDS governments represented less than 35% of total funding for 20 out of the 35 SIDS examined in this report. The relatively low use of national systems and government budget execution can create an unfortunate cycle, whereby the limited use of these financing modalities by itself contributes to perpetuating low capacity, with implications for the effectiveness and sustainability of investments.
Resilience funding tends to follow large disasters, but predictable, longterm financing is still scarce. Larger disasters are prone to receive larger funding streams than smaller, more recurrent ones. Greater concessional resources for climate and disaster resilience tend to be provided in the wake of major disasters and then progressively fade away, while countries that have not recently experienced large disasters may struggle to receive resilience funding. This low predictability of funding can constrain the ability of SIDS to take more comprehensive and forward-looking steps to reduce vulnerabilities and increase resilience over the long term.
Country access to global climate funds is constrained by complex – and variable – requirements. A multiplicity of special climate funds has been established over the past decade to increase developing countries’ access to financing. For SIDS, however, tapping into these funds remains a challenge due to the complex processes and procedures to access the funds, which, for the most part, exceed the limited administrative and technical capacities of SIDS.
The international community could do more to help SIDS enhance climate and disaster resilient development by:
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Supporting SIDS to create an enabling policy environment for climate and disaster resilience. This includes public policies and regulations, which can promote climate resilience by influencing the choices of private actors in various sectors.
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Enhancing information on resilience and information management systems. This can be done through multi-country and regional partnerships and the innovative use of technology, which could prove cost-effective and increase impact.
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Supporting SIDS to integrate climate and disaster risk into national planning and budgeting. This will require supporting collaboration across a large set of ministries and departments to identify and integrate priorities, and highlight linkages and synergies across sector-level policy objectives. It may also require the adoption of contingency funds or financing buffers to allow for better preparedness and immediate response following disasters.
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Supporting public administration systems and institutions responsible for managing natural disasters, climate finance and risk. This includes supporting SIDS to further develop their public financial management systems and capacities to access and manage concessional funds – for example, by reinforcing central units as a one-stop shop for all incoming funding proposals – thus enabling investments to be prioritized and channelled more efficiently.
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Increasing the use of financing mechanisms that enhance capacity and coordination. Donors should consider further ways to pool resources to reduce SIDS reliance on a single source of concessional funds, while avoiding the high level of project fragmentation currently experienced.
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Providing predictable and more programmatic funding. Investing in preemptive measures to build resilience requires access to more reliable financing. Funding that is more programmatic and long term (typically 10-15 years) could also help foster the policy, institutional and behavioural change needed to help build resilience to climate and disaster impacts.
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Facilitating access to funding from global climate funds through simplified application and management procedures for SIDS. Development partners should use their influence to support adoption, by the global climate funds, of proportionate and streamlined approaches to encourage greater direct access and project implementation and greater national ownership.
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Facilitating access to innovative financing and risk transfer mechanisms. Development partners can, for example, support SIDS access to insurance and other forms of risk transfer and risk sharing mechanisms, as well as encourage the use of contingency funds or contingent credit lines.
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Using financing instruments that can help SIDS at risk of debt distress improve their debt situation and avoid using financing mechanisms that can undermine debt sustainability. In recent years, a number of instruments to deal with the debt situation of SIDS have emerged, which could be further scaled up and replicated. While some can provide temporary relief, the international community should also help SIDS address the drivers of debt accumulation. Furthermore, while greater concessional lending to Upper Middle-Income SIDS in recent years has increased the financing available for resilience, care should be taken to avoid endangering their debt sustainability.
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Facilitating an international dialogue on the eligibility criteria for concessional finance with the aim of ensuring that SIDS are able to access the finance they need at terms and conditions most suited to their specific circumstances. Currently, SIDS face a complex web of eligibility requirements that must be met in order to access different sources of concessional financing for resilience. With eligibility to several multilateral and bilateral funding sources relying heavily on per capita classification, SIDS have called for a coordinated effort by development partners to review the rules governing access to concessional finance. Acknowledging the multi-faceted nature of vulnerability along with increasing adverse climate-related impacts on SIDS, it may be timely to explore if and how vulnerability to climate change could be included in concessional finance eligibility criteria and allocations. This effort will require multi-partner research and consideration of all aspects of vulnerability – socio-economic and biophysical.
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Investing to build national capacities and expertise. The sustainability and ownership of resilience programmes depends on striking the right balance between temporary solutions to fill human resource gaps and longer-term investments in national capacities across the full spectrum of institutional needs. Innovative approaches and the use of new technologies could help tailor capacity-building approaches to the specific context of SIDS.
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tralac’s Daily News Selection
The selection: Thursday, 10 November 2016
G20 trade measures monitoring report (WTO)
The WTO’s sixteenth monitoring report on Group of 20 trade measures shows that the number of trade-restrictive measures applied by G20 economies remains high, despite a slight decline against the previous period. This is of particular concern given the continuing global economic uncertainty and the WTO’s recent downward revision of its trade forecasts. The steady accumulation of trade-restrictive measures since the financial crisis has gradually increased the share of global trade affected by such restrictions. As of the most recent reporting period the share of world imports covered by import-restrictive measures implemented since October 2008 and still in place is 5% and the share of G20 imports covered is 6.5%.
Peter Draper: ‘Implications of a Trump Presidency: trade, and South Africa’ (Tutwa)
These are sobering days for the world, and particularly for the fortunes of the global trade and investment system. Why? Consider two pre-elections blogs that set out the key contours of a potential Trump trade agenda, and the powers he will shortly exercise should he seek to deliver fully on his promises.
Related: CBK moves to stabilise shilling after Trump’s surprise victory (Business Daily), Trump must nurture AGOA, help defeat Shabaab (editorial comment, Business Daily), Nigeria’s Industry, Trade and Investment minister, Dr. Okechukwu Enelamah: ‘It’s opportunity to promote inter-regional trade’ (The Guardian), What will a @realDonaldTrump presidency mean for US-Africa policy? (Africa Up Close), The only way African countries can avoid being hurt by Trump is to trade with each other (Quartz)
Rwanda negotiates modalities for contributing funds to ECCAS (New Times)
Rwanda is in the process of negotiating with Economic Community of Central African States an agreeable mode of contribution of membership funds to meet cost of operations and establishment of the body’s free trade area. During a meeting of the Ministers for Trade and Finance affairs in Kinshasa, in May, a special tariff was established to be imposed on imports by member states for products originating outside the region. The body fixed a 0.4% on all imports from outside the region. However, Rwanda is negotiating to be left out of the import levy model citing other commitments with the import levy model. According to Minister for Trade and Industry, Francois Kanimba, Rwanda, as part of the East African Community, is subject to a similar import levy arrangement of 1.4% whereby proceeds are earmarked for joint infrastructure projects. Rwanda also committed to another import levy under the African Union, which was unanimously agreed upon in July. Kanimba said these import levies being decided by different organs of regional bodies of integration pose a challenge, hence Rwanda’s request to make its contribution using a different model.
Abidjan–Lagos Corridor Programme: report of the steering committee (ECOWAS)
The meeting made the following comments on the presentation by AfDB: (i) it was noted that the implementation timeline proposed by the AfDB follows the Bank’s classic procurement cycle. However, the need to fast-track the process was recognized by all parties and restricted tendering will be considered in this regard for the procurement process. Consideration will also be given to dividing the Corridor in different lots (sections) and undertake the Corridor Development Studies. (ii) it was clarified that the activities of the Corridor Authority need not wait the completion of the studies and the Authority can be operational immediately. (iii) in the spirit of making rapid progress, the specific tasks required from each Member State towards the realization of the project will be defined and a timeline indicated for the accomplishment of these activities. Each country presented the progress made in ratifying the Treaty as follows:
European Development Fund 11: joint conclusions (SADC)
The High Level Group exchanged on the global challenges and identified the following as key issues: social-economic transformation, labour and irregular migration, poverty and food insecurity, radicalisation and violent extremism, economy and demographics, climate change, democracy, elections and good governance, natural disasters and terrorism. Extract from a statement by the EAC: During the meeting, the EU underlined the need to find sustainable financing solutions for donor-funded staff positions. The EU also announced a creation of a technical facility of 14 million Euros to support capacity building of project preparation on soft infrastructure projects. Under EDF 11, the EU has allocated 600 million Euros for the five Regional Economic Communities (RECs). All the RECs have up to the end of December 2016 to finalize on the identification of priority projects.
ECOWAS ambassadors adopt memoranda for a more stable region
The memoranda adopted during the 25th session of the Mediation and Security Council (ambassadorial level) were those on the political and security situation in the region, the statutes of the ECOWAS Council of the Wise, the adoption of 23rd November as ECOWAS Human Rights Day, the implementation of the National Early Warning and Response Mechanisms as well as for the consideration of the Agenda of the 37th Ordinary Meeting of the Mediation and Security Council.
Malawi Economic Monitor (World Bank)
While the overall trend towards a depreciation in the value of the Kwacha reflects uncertainties regarding Malawi’s macroeconomic outlook, it has also been driven by a general strengthening of the US dollar relative to emerging and developing country currencies. This is reflected by the Kwacha’s relatively lower rate of depreciation against regional currencies such as the South African Rand and the Zambian Kwacha. The strengthening of the US dollar has been largely driven by expectations of an increase in the US Federal Reserve Bank’s reference lending rate; by concerns regarding the sustainability of resource-fueled growth in developing economies led by Chinese demand; and by pressure on the Euro and British Pound after the Brexit vote in June (see Box 1). A decline in the value of the Kwacha results in an increased import bill for strategic commodities such as fuel, fertilizer and pharmaceuticals. Import cover in August stood at 4.1 months, unchanged from the same point in the previous year. This is an increase from the figure of 3.6 months recorded in May 2016, though this may partially reflect the impact of IMF disbursements. A drawing-down on reserves is likely to occur in coming months as the lean foreign exchange season approaches, particularly in the context of the high level of demand for food imports necessary to implement the humanitarian response to the drought.
Namibia: 25% NEEEF clause rethink (The Namibian)
The provision in the New Equitable Economic Empowerment Framework draft bill which will have white businesses sell a mandatory 25% shares to black people can be reconsidered. This was the view of the chairperson of the Law Reform and Development Commission, Yvonne Dausab. She said this during a plenary discussion at the Invest In Namibia conference, which ended in Windhoek yesterday.
Namibia: Investment Guide launched (The Namibian)
The Ministry of Trade, together with the Namibian Investment Centre, PwC Namibia and the Namibia Chamber of Commerce and Industry, has launched the second edition of the Business and Investment Guide for Namibia. It covers all major legal and regulatory requirements, explains processes and provides general information on Namibia to help investors and business owners.
Botswana: New strategy seen boosting AGOA exports (Mmegi)
According to the deputy permanent secretary in the Ministry of Investment, Trade and Industry, Ontlametse Ward, despite the market access opportunity for goods and services granted under AGOA, Botswana’s exports remain undiversified. Addressing delegates yesterday at the validation workshop of the draft AGOA national response strategy in Gaborone, she said this impacts negatively on the export sector and growth of the country. “The strategy reflects what Botswana wishes to achieve in improving the country’s economic growth through increased trade, expanding Botswana’s capacity in business and improving trade relations with the US and other international markets,” said Ward. She added that the response strategy was not developed in isolation, noting that it takes into account other strategies and policies currently in place.
New RSA-China grape protocol opens doors (Fruitnet)
South Africa’s new protocol for table grape exports to China will remove risk from direct shipments, enabling the industry to land product in peak condition and to develop the market for seedless varieties. Rod Hill, import manager with Chinese importer-distributor Joy Wing Mau, which is part owned by Capespan, said the previous protocol was “extremely harsh on the fruit”, and engendered two key challenges.
Tanzania: Standard gauge railway tenders announced (Daily News)
The government has invited bidders for construction of the remaining stretch of $7.6 billion standard gauge railway line from Morogoro to Mwanza which is expected to be carried out in four phases. The works include design and build contract for 336 kilometre stretch of the standard gauge railway (SGR) line from Morogoro to Makutopora, a 294 kilometre stretch from Makutopora to Tabora, a 133 kilometre long Tabora to Isaka and works contract for 294 kilometre stretch from Isaka to Mwanza.
Small farmers can earn big returns by investing in climate adaptation (IFAD)
The United Nations International Fund for Agricultural Development has issued a new report which shows that for every dollar invested through its Adaptation for Smallholder Agriculture Programme, farmers could earn a return of between $1.40 and $2.60 over a 20 year period by applying climate change adaptation practices. The report, The economics advantage: assessing the value of climate change actions in agriculture (pdf), was presented today at the UN Climate Conference in Marrakech. [World Bank: Prospects for livestock-based livelihoods in Africa’s drylands]
Africa’s new climate economy: economic transformation and social and environmental change (ODI)
Efforts to elaborate the extensive links, trade-offs and synergies across these economic, social and environmental subjects have been relatively limited. This report surveys and synthesises the existing evidence within a common analytical framework, to provide a clearer overview for decision-makers. This report seeks to make three main contributions: (i) to provide an integrated approach for thinking about and tackling economic, social and environmental concerns, taking into account both trade-offs and synergies; (ii) to tailor that approach to the sub-Saharan African context, taking account of the diversity of conditions and challenges across different countries; and (iii) to provide a decision-making lens that meets the practical needs of policy-makers.
Lesotho: Helping rural farmers to become certified exporters (World Bank)
Ntofela Pasa, a 30-year-old mother of two, spends her days managing Likhothola Farm, which her family owns with eight other households. Formed in 2012, when she and the other families joined their collective 10.7 hectares of land together, the rural farm employs 38 villagers who have gained experience in plant husbandry, post-harvest handling, and other farming skills. Now, Lesotho’s farmers can also export deciduous fruit to neighboring countries. Through a World Bank-supported project, Likhothola Farm recently earned a GlobalG.A.P certification for the production and exportation of apples, plums, peaches and apricots. The project is part of the World Bank’s broader $13.1m Second Private Sector Competitiveness and Economic Diversification Project, which aims to increase private sector investment, firm growth, and job creation through development of selected non-textile industries.
Agribusiness can help to unlock the true potential of Africa (World Bank)
In Ethiopia, access to simple market knowledge has also helped small food manufacturers grow. AfricaJUICE is the first Fairtrade certified fruit juice in sub-Saharan Africa and it has been able to expand through the provision of technical expertise and understanding global markets and industry practices. This assistance came from the World Bank, alongside equity financing of $6m. Agribusiness is growing fast, yet the true potential is stymied by limited mechanization, fragmented markets, price controls and poor infrastructure. For a sector that contributes 25% to Africa’s overall gross domestic product and accounts for 70% of all employment, it is an industry that presents enormous opportunities to investors. For policymakers and investors, one of the hurdles is knowing how to find and identify those small-scale farmers or food manufacturers that have really strong commercial potential. In Angola, this challenge has been met by the creation of a state-backed organization called Fundo Activo de Capital de Risco Angolana (FACRA). It is a public venture capital fund that supports Angolan SME’s in agribusiness and other sectors in building, innovating and expanding their existing business.
How to make services work for the poor? (World Bank)
Rwanda is a good case study, as ‘progressive disengagement from extension service in favor of private extension delivery’ is part of the government’s agricultural strategy. The Land Husbandry, Water Harvesting, and Hillside Irrigation (LWH) project served as a pilot for privatization: in the LWH project areas, farmers purchase agricultural services (inputs and extension) from One Acre Fund (OAF).
Brazil-Africa Forum update: strategies for the development of agriculture in Brazil and Africa (AfDB)
Can commercial farming promote rural dynamism in sub-Saharan Africa?: evidence from Mozambique (UNU-WIDER)
Tanzania: Local content policy bears fruits in natural gas value chain (IPPMedia)
Tanzania: Manufacturers’ plea on electricity (The Citizen)
Task force gets Sh10m to review Kenya’s tourism strategy (Business Daily)
UK trade deficit widens unexpectedly as exports fall despite pound drop (The Guardian)
Why FDI inflows to India are slowing down (LiveMint)
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Trade restrictions among G20 remain high, despite slight slowdown in new measures
The WTO’s sixteenth monitoring report on Group of 20 (G20) trade measures, issued on 10 November, shows that the number of trade-restrictive measures applied by G20 economies remains high, despite a slight decline against the previous period. This is of particular concern given the continuing global economic uncertainty and the WTO’s recent downward revision of its trade forecasts.
A total of 85 new trade-restrictive measures were implemented by G20 economies during the review period (mid-May to mid-October 2016). This is an average of 17 new measures per month, down from 21 per month imposed in the previous reporting period (mid-October 2015 to mid-May 2016). This slight decline represents a return to recent trend levels after a peak in the first half of 2016. The number of new measures remains high and the rollback of existing trade-restrictive measures continues to be slow. In addition, the rate of trade facilitating measures applied each month declined against the previous period, and remains considerably below the 2009-2015 trend.
The steady accumulation of trade-restrictive measures since the financial crisis has gradually increased the share of global trade affected by such restrictions. As of the most recent reporting period the share of world imports covered by import-restrictive measures implemented since October 2008 and still in place is 5% and the share of G20 imports covered is 6.5%.
Commenting on the report, Director-General Roberto Azevêdo said:
“The continued introduction of trade-restrictive measures is a real and persistent concern. Tangible evidence of G20 progress in eliminating existing measures remains elusive.
“It is clear that the financial crisis has had a long tail and that the world economy remains in a precarious state. Many people are struggling with unemployment or low paying jobs and are concerned about broader changes in the economy. These concerns demand a concerted response from governments and the international community. One step will be for G20 members to deliver on their commitment to refrain from imposing new trade-restrictive measures and roll back existing ones.”
The initiation of trade remedy investigations remained the most frequently applied measure by far, representing 72% of trade-restrictive measures and above the average share observed since 2009. The G20 economies initiated far more trade remedy actions (61) than were terminated (36) during the latest reporting period. Metal products (in particular steel), chemicals, and plastics and rubber account for the largest shares of anti-dumping and countervailing initiations during the review period.
On the positive side, the new trade-facilitating measures include those implemented in the context of the newly expanded Information Technology Agreement (ITA) and which have very broad trade coverage. The number of these measures does not provide a complete picture of the extent of these measures nor their impact, but WTO Secretariat estimates indicate that the ITA expansion measures which were implemented by certain members during the review period cover around US$ 375 billion in annual global trade.
The G20 economies are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Republic of Korea, Japan, Mexico, the Russian Federation, the Kingdom of Saudi Arabia, South Africa, Turkey, the United Kingdom and the United States, as well as the European Union.
Key findings
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This sixteenth report on G20 trade measures for the reporting period between mid-May and mid-October 2016 has again outlined the persistent challenges faced by the international economy and for global trade.
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The latest reporting period shows a slight fall in the number of new trade restrictive measures being introduced at 17 per month – a total of 85 for the reporting period – compared to 21 measures per month in the last report.
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While this represents a reduction in the monthly figure compared to the peak in the previous period, it is actually a return to the trend level for new trade restrictions since 2009. The reduction in the monthly figure seen over this period should be placed in this broader context.
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The number of new trade-restrictive measures being introduced still remains worryingly high given continuing global economic uncertainty and the WTO's downward revision of its trade forecasts, predicting 1.7% world merchandise trade volume growth in 2016, from its earlier forecast of 2.8%. If this revised forecast is realized, this would mark the slowest pace of trade and output growth since the financial crisis of 2009.
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Of the 1,671 trade-restrictive measures recorded for G20 economies since 2008, only 408 had been removed by mid-October 2016. The overall stock of measures has increased by 5.6% compared to the previous report – with the total number of restrictive measures still in place now standing at 1,263. The rollback of trade-restrictive measures recorded since 2008 remains too slow and continues to hover just below 25%.
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During the review period, G20 economies also applied 66 measures aimed at facilitating trade. At just over 13 new trade-facilitating measures per month, this represents a slight decrease over the previous report and remains below the 2009-2015 overall average trend. Trade-facilitating measures recorded by this report include the very first measures implemented in the context of the expanded Information Technology Agreement.
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The initiation of trade remedy investigations remained the most frequently applied measure, representing 72% of trade restrictive measures and above the average share observed since 2009. The G20 economies initiated more trade remedy actions than were terminated, 61 initiations versus 36 terminations.
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It is imperative that G20 economies – collectively and individually – re-double their efforts to deliver on their commitment to refrain from taking new protectionist measures and roll back existing ones. This is particularly the case given the recent reiteration by G20 Leaders of their opposition to protectionism on trade and investment in all its forms.
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G20 Leaders also need to work together to ensure that the benefits of trade are spread more widely and are better understood. A failure to make the case for inclusive trade could pave the way to increased protectionism in the future.
WTO report on G-20 trade measures: Executive Summary
This is the sixteenth WTO monitoring Report on G20 trade measures. It covers the period from 16 May to 15 October 2016.
The Report has again outlined the persistent challenges faced by the international economy and for global trade. The overall stock of trade-restrictive measures continues to grow by roughly the same pace as identified in recent reports. Tangible evidence of G20 progress in eliminating older measures remains elusive as the share of restrictions which have been rolled back remains stable at less than a quarter of the total recorded.
The implementation of new trade-restrictive measures by G20 economies decreased over the period covered by this report. Since mid-May 2016, G20 economies applied 85 new trade‑restrictive measures – an average of 17 new measures per month, compared to almost 21 in the previous report. While this represents a reduction in the monthly figure compared to the peak in the previous period, it is actually a return to the trend level for new trade‑restrictive measures since 2009. The reduction in the monthly figure seen over this period should be placed in this broader context.
The number of new trade-restrictive measures being introduced still remains worryingly high given continuing global economic uncertainty and the WTO's downward revision of its trade forecasts, predicting 1.7% world merchandise trade volume growth in 2016, from its earlier forecast of 2.8%. If this revised forecast is realized, this would mark the slowest pace of trade and output growth since the financial crisis of 2009.
Overall, the stockpile of restrictive measures introduced by G20 economies continues to grow. Of the 1,671 trade-restrictive measures (including trade remedies) recorded for G20 economies since 2008, only 408 had been removed by mid-October 2016. The total number of these restrictive measures still in place now stands at 1,263 – up by 5.6% compared to the previous report. This report confirms that G20 economies have maintained a rate of elimination of trade-restrictive measures, which is far too low to seriously reduce the overall stockpile of restrictive measures. Of the total number of trade-restrictive measures recorded for G20 members since 2008, roll-back has remained broadly stable at just below 25%.
Between May and October, G20 economies implemented 66 measures aimed at facilitating trade. At just over 13 trade-facilitating measures per month, this represents a slight decrease over the previous report and remains below the 2009-2015 trend. These measures include a number of import-liberalizing measures implemented in the context of the ITA Expansion Agreement with very broad trade coverage implications. The numerical counting of the trade measures does not provide a complete picture of the extent of these measures nor their impact, but Secretariat estimates indicate that the ITA expansion measures which were implemented by certain Members during the review period cover around US$375 billion. If trade remedies are excluded, G20 economies implemented slightly more trade-facilitating than trade-restrictive measures over the review period confirming the positive trend identified in the last report.
The initiation of trade remedy investigations remained the most frequently applied measure, representing 72% of trade restrictive measures and above the average share observed since 2009. The G20 economies initiated more trade remedy actions than were terminated, 61 initiations versus 36 terminations. The number of trade remedy investigations initiated by G20 economies per month is broadly in line with the last report and remains above the average reported in the October 2015 report. Metal products, and in particular steel products, chemicals, and plastics and rubber account for the largest shares of anti-dumping and countervailing initiations. Around 70% of G20 trade remedy investigations targeted products from other G20 members. In line with the findings of previous reports, anti‑dumping measures made up the overwhelming majority of trade remedy actions taken.
These trends in the implementation of new trade measures by G20 economies have to be considered against the background of uncertain world economy developments. World trade and output grew more slowly than expected in the first half of this year, prompting the WTO to revise downward its trade forecast for 2016 and 2017. The organization now expects world merchandise trade volume growth of 1.7% in 2016, down from an earlier estimate of 2.8%, accompanied by world GDP growth of 2.2% at market exchange rates. If the forecast for 2016 is confirmed, this would mark the slowest pace of trade and output growth since the financial crisis of 2009 and the first time in 15 years that the ratio of world trade growth to world GDP growth has fallen below 1:1. For the first time, a range of estimates has been provided for the coming year reflecting possible changes in the relationship between trade and output. World trade growth in 2017 is now expected to be between 1.8% and 3.1%, down from 3.6% previously.
Exports and imports of developing economies fell sharply in the first quarter before staging a partial recovery in the second as concerns about slowing economic growth in China eased and as commodity prices began to rise from recent lows. Meanwhile, exports and imports of developed economies stalled as economic activity slowed in North America. For the year-to-date, world trade has been essentially flat, with the average of exports and imports in Q1 and Q2 declining by 0.3% compared to the same period last year. Europe had the fastest import growth of any region in the first half (up 3% year-on-year) while South America had the weakest (down 11.8%). Even with the downward revision, risks to the forecast remain mostly on the downside. These include financial volatility stemming from changes in monetary policy in developed countries, the possibility that growing anti-trade rhetoric will increasingly be reflected in trade policy and the uncertainty about future trading arrangements in Europe following the Brexit referendum. In July, the WTO launched a new World Trade Outlook Indicator (WTOI), which is designed to provide “real time” information on trends in global trade and serve as an early-warning for global trade downturns. With a current reading of 100.9 for the month of August, the WTOI has risen above trend, signaling accelerating trade growth in November-December. This is the first update of the WTOI since its initial release in July, when the indicator stood at 99.0. The current WTOI reading is broadly consistent with the latest WTO trade forecast issued on 27 September, which foresaw world merchandise trade volume growth of 1.7% for 2016. The forecast noted flat trade growth in the first half of the year, which would have to be offset by stronger growth in the second half, which the WTOI reading captures.
Other observations of this report covered a range of subjects. G20 economies continued to show their commitment to notifying their Sanitary and Phytosanitary (SPS) measures, accounting for seven out of every ten notifications to the SPS Committee. Moreover, more than 60% of the specific trade concerns (STCs) discussed in the Committee addressed measures maintained by G20 economies. Similarly, the top ten WTO Members raising STCs were G20 members. In the area of Technical Barriers to Trade (TBT), G20 regulations continued to represent the majority of measures discussed in the TBT Committee. About 60% of new STCs and more than three-quarters of previously raised STCs concerned measures maintained by G20 economies.
Agricultural policies of G20 economies were the subject of the overwhelming majority of questions under the review process of the Agreement on Agriculture (AoA). During the review period, more than 80% of implementation-related issues discussed in the Committee were about policies implemented by G20 economies. Two-thirds of the new issues that were discussed related to domestic support policies. Several G20 members have recently made determined efforts to bring their agriculture-related notifications up-to-date.
A decrease in the number of new general economic support measures was recorded for G20 economies during in the review period. The main beneficiaries of such support included the agriculture sector with measures for dairy producers and a number of infrastructure programmes, including construction, information technology and digital infrastructure. Some programmes provided specific support to export-related activities or enterprises, including SMEs.
Important policy developments in the area of services were recorded during the review period and continued the trend of further liberalization in the trade in services sectors. Several services laws sought to strengthen and clarify relevant regulatory frameworks. A special box in this report is dedicated to a discussion on the strengthening of the 'services-investment' nexus.
This report draws attention to the changing technological landscape and to the increasing significance of intellectual property (IP) in economic development. G20 economies are at the forefront of this trend and several adopted new national and regional policies related to IP and the digital economy.
The OECD has contributed two topical boxes to this report. The first looks at the jobs that trade and Global Value Chains (GVCs) sustain domestically and globally. The second discusses the benefits from GVCs in enhancing export performance.
This Report has shown that it is imperative that G20 economies – collectively and individually – redouble their efforts to deliver on their commitment to refrain from taking new protectionist measures and roll back existing ones. This is particularly the case given the recent reiteration by G20 Leaders of their opposition to protectionism on trade and investment in all its forms.
G20 Leaders also need to work together to ensure that the benefits of trade are spread more widely and are better understood. A failure to make the case for inclusive trade could pave the way to increased protectionism in the future.
Related News
Malawi Economic Monitor: Emerging stronger
The Malawi Economic Monitor (MEM) provides an analysis of economic and structural development issues in Malawi. This edition of the MEM was published in October 2016. It follows on from the three previous editions of the MEM, and is part of an ongoing series, with future editions to follow twice per year.
The aim of the publication is to foster better-informed policy analysis and debate regarding the key challenges that Malawi faces in its endeavors to achieve high rates of stable, inclusive and sustainable economic growth. The MEM consists of two parts: Part one presents a review of recent economic developments and a macroeconomic outlook. Part two focuses in greater depth on a special, selected topic relevant to Malawi’s development prospects.
In this edition of the MEM, the focus of the special topic is on poverty and vulnerability. At a time when Malawi is experiencing a second successive year of food insecurity, the special topic focuses on the key factors that have led to persistently high poverty rates in rural areas, with these factors contributing significantly to vulnerability to the impact of climate shocks. The special topic also identifies and describes potential pathways and reforms that could help Malawi improve its level of resilience to better manage the impact of future shocks.
Economic Developments
In 2016, with Malawi facing drought and subsequently poor harvests for a second consecutive year, it is expected to record a GDP growth rate of 2.5 percent. The severe droughts have affected agricultural production, with these droughts following both flooding and drought in the previous year. The start of the 2015/16 agricultural season was delayed, with the advent of the season being followed by erratic and below average rains, with prolonged dry spells resulting in severe crop failures, particularly in the Southern Region and parts of the Central Region. The production of maize, the key food crop, fell by 14.7 percent. This follows the decline of 30.2 percent recorded in the previous year. Thus, growth in the agricultural sector is expected to decline for a second consecutive year, with the rate of decline standing at 2.3 percent in 2016. The rate of growth for industry is expected to stand at 2.4 percent, while the rate for services is expected to stand at 4.4 percent.
Malawi is particularly vulnerable to weather shocks. The impact of shocks has intensified over the years and is likely to continue to worsen with climate change. Over the past four decades, droughts have become more frequent, widespread, and intense. The effects have been compounded by a number of other factors, including Melawi’s high rate of population growth and environmental degradation. On average, these shocks have caused annual losses to a value equivalent to 1 percent of GDP. Most drought episodes have occurred in El Niño years, during which Malawi experiences rainfall deficits.
The humanitarian impact of the drought will be significant, with around 40 percent of Malawi’s population likely to experience food insecurity. Estimates indicate that at least 6.5 million people in Malawi’s 24 drought-affected districts will not be able to meet their food requirements during the 2016/17 consumption period. The total annual maize deficit is projected to reach 768,687 metric tons, compared to the deficit of 233,000 metric tons recorded in the previous year.
With the GDP growth rate lower than the population growth rate for a second consecutive year, average living standards will fall in 2016. Given Malawi’s relatively high population growth rate of 3.1 percent, Malawi’s economy needs to expand at a faster rate than is the case for many comparable countries to ensure improvements in average living standards over time.
Malawi’s Government has limited fiscal space available to respond to the crisis. Large fiscal deficits over the past three years and high levels of debt mean that the Government has limited scope to respond to the humanitarian crisis unless it receives significant support from development partners. Following a major public financial management scandal in 2013, the level of on-budget development assistance provided by development partners to Malawi has fallen dramatically. Following this withdrawal of support, the Government has run large fiscal deficits over successive years. The Government has come under pressure to increase expenditure as a result of increasing debt service costs; rising public sector wage demands; costly subsidy schemes; and the need to settle outstanding arrears.
To finance fiscal deficits, the authorities have borrowed heavily from domestic sources. This has exerted an upward pressure on inflation and lending rates, crowding out private sector investment. More importantly, the Government has not been able to establish the necessary fiscal buffers that would enable a more robust domestic response to external weather shocks.
The Government’s recent efforts to consolidate public expenditure have produced some positive results, but these efforts will be hard to sustain in the context of the current humanitarian crisis. Efforts to consolidate expenditure; to improve budget execution; and to exercise stronger central oversight over public expenditure have enabled greater month-on-month control over spending commitments by ministries, departments and agencies. As a result of these efforts, despite the fact that the value of collected revenues stood at 3.0 percent below targeted levels by the end of the fiscal year in June 2016, the Government was able to contain expenditure growth. However, at the end of the year, domestic borrowing was still in excess of targeted levels, largely because the Government began to purchase maize towards the end of the fiscal year to prepare to implement its humanitarian response.
The FY 2016/17 budget emphasizes the allocation of resources for food purchases and for investments to increase agricultural resilience. Key elements of the budget include reforms to the contentious Farm Input Subsidy Program (FISP), with these reforms including a sizable budget cut; a reduction in the number of beneficiaries; and the significantly increased involvement of the private sector in importation and retailing. Health and education budgets have been ring-fenced, with the allocations for almost all other budget lines being reduced in real terms.
The fiscal deficit for FY 2016/17 is projected to reach a value equivalent to 4.1 percent of GDP, a decline from the figure of 4.3 percent recorded in FY 2015/16. This gap is expected to be met mostly through concessional foreign financing, the value of which is estimated to reach the equivalent of 2.6 percent of GDP, and through domestic borrowing, at 1.4 percent of GDP. However, significant additional resources will be required to meet the food deficit requirement. Unless these resources are provided by development partners, the Government will struggle to remain below its targeted domestic borrowing limit.
While the rate of inflation declined in the period up until April, it accelerated in June and July, mostly due to increased food prices, before stabilizing again. In September 2016, the year-on-year headline inflation rate stood at 21.2 percent, representing a 1.6 percentage point decrease from the previous month. The figure at this point in 2016 compares to that of 24.1 percent recorded at the same point last year. Malawi is a net energy importer, so the decline in global oil prices has provided some respite, exerting downward pressure on non-food inflation and resulting in improved terms of trade. Prices are expected to remain under upward pressure until the next harvest in early 2017. Thus, in 2016, the overall annual rate is expected to stand at 22.5 percent.
The Reserve Bank of Malawi’s tight monetary stance has constrained the pace of credit growth. Active market interventions by the authorities through the issuance of Reserve Bank of Malawi (RBM) securities have helped to mop up liquidity and to ensure continuous positive real interest rates. The RBM continues to maintain its policy rate at 27.0 percent.
A second year of drought conditions and weak economic growth has weighed on business confidence. The agricultural sector dominates Malawi’s economy, directly accounting for around a third of GDP. This share is even higher if the contribution of agricultural manufacturing and services is taken into account. However, even before the impact of recent weather shocks, Malawi’s private sector was struggling to cope with an extended period of macroeconomic instability. High interest rates and inflation rates have undermined the returns on private investments, as demonstrated by the increasing share of nonperforming bank loans. Increasingly frequent power and water supply outages in Malawi’s key economic hubs, Lilongwe and Blantyre, and the instability of the exchange rate have also sapped investor confidence.
An economic recovery is possible in 2017, although its achievement would require the implementation of a number of politically challenging reforms. In particular, the Government faces the challenge of managing the humanitarian response effectively while at the same time continuing with efforts to restore fiscal balances and to control inflation. The simultaneous achievement of these goals is not impossible, but it will certainly require prudent management and careful prioritization of expenditure. In 2017, a higher rate of growth could be driven by increased agricultural output. However, growth recovery is dependent on the implementation of a well-managed humanitarian response and careful macroeconomic management to avoid further instability.
A strong El Niño effect in Southern Africa is typically followed by a similarly strong La Niña effect, resulting in higher than average rainfalls in Malawi. This could help support a recovery in the production of key crops, including maize, and the restoration of the water resources upon which Malawi is currently dependent for electricity generation. However, there is also a risk that a La Niña effect could trigger localized flooding that would place already strained disaster response mechanisms under further pressure.
In the medium-term, improved economic performance is dependent on Malawi building its level of resilience to enable it to better withstand the impact of both internal and external shocks. It is highly likely that Malawi will continue to face weather shocks on a recurring basis. Key steps to lay the foundations for a growth recovery include the following:
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Policy reforms to reduce distortions and to ensure that agricultural markets function more effectively: Malawi’s agricultural sector continues to be dominated by smallholders oriented towards subsistence farming, with only a limited degree of commercialization. The prices for agricultural commodities in Malawi are amongst the most volatile in the region. In many instances, the impact of climate-induced shocks has been amplified by policy-induced distortions that result in market failure.
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Measures to maintain economic stability and to improve fiscal discipline: Improved levels of macroeconomic stability and fiscal discipline are essential to the achievement of a mediumterm growth recovery in Malawi. Only by breaking the current vicious cycle, characterized by large deficits, over-borrowing and the crowding-out of the private sector, can Malawi effectively control inflation and restore the basic macroeconomic conditions necessary for higher levels of investment and job creation. The Government should also implement measures to increase fiscal buffers to enable the budget to better withstand the impact of external shocks. Improved systems of public financial management and governance could result in increases to ODA flows to onbudget execution, reversing the trend of these flows to off-budget execution.
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Investments to build resilience to mitigate against climate-induced weather shocks and to diversify Malawi’s economy: These investments should include measures to develop agricultural infrastructure and extension services to facilitate a higher level of crop diversification, to improve yields, and to build resilience through the development of irrigation, market information systems and improved farmer organization.
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Rwanda negotiates modalities for contributing funds to ECCAS
Rwanda is in the process of negotiating with Economic Community of Central African States (ECCAS) an agreeable mode of contribution of membership funds to meet cost of operations and establishment of the body’s free trade area.
During a meeting of the Ministers for Trade and Finance affairs in Kinshasa, DR Congo, in May, a special tariff was established to be imposed on imports by member states for products originating outside the region.
The levy’s proceeds are earmarked as contributions to meet the body’s operating costs as well as compensate potential revenue loss resulting from the liberalisation of tariffs within the ECCAS’s free trade area.
The body fixed a 0.4 cent levy on all imports from outside the region.
The Minister for Trade and Industry, Francois Kanimba, said the ECCAS Heads of State had directed that 50 per cent of the proceeds be used for compensation of potential revenue losses resulting from the liberalisation of tariffs within the ECCAS free trade area which will be operationsalised beginning January 2017.
“Some countries get revenue from custom duties from trade with other countries within the bloc, there is a potential revenue loss. The bloc has put in place measures to establish a compensation mechanism to ensure success of the initiative,” he said.
The other 50 per cent is earmarked as countries’ contribution to fund the operating cost of the regional bloc.
However, Rwanda is negotiating to be left out of the import levy model citing other commitments with the import levy model.
According to Kanimba, Rwanda, as part of the East African Community, is subject to a similar import levy arrangement of 1.4 per cent whereby proceeds are earmarked for joint infrastructure projects.
Rwanda also committed to another import levy under the African Union, which was unanimously agreed upon in July.
During the African Union summit in Kigali, a new formula was agreed upon whereby countries’ contributions will be increased through a 0.2 per cent levy on eligible imports through which they expect to raise about $1.2 billion every year.
Beginning next year, the levy will be collected by tax collection authorities of African countries and channelled through central banks of member states.
Kanimba said these import levies being decided by different organs of regional bodies of integration pose a challenge, hence Rwanda’s request to make its contribution using a different model.
Rwanda’s proposal
Kanimba said the Ministry of Finance and Economic Planning, and that of Trade and Industry had presented Rwanda’s case, proposing that the country makes contributions by budget line whereby funds will be sent from the Treasury.
“We can agree with the body on our contribution which will be by budget line instead of earmarking specialised revenue as it has been decided. That is our position. We will take part in the Council of Ministers in January when we are expected to explain our position to our counterparts to see if there will be a possibility to reformulate the decision,” Kanimba said.
The two ministries are expected to make their case in the next Council of Ministers scheduled for January.
According to officials from ECCAS, the import levy model would raised about $192 million if all countries met their commitments.
Jules Touka, a macro-economist expert of the bloc, said, presently, the import bill for ECCAS member states is estimated at about $50b.
“The base for the collection of the 0.4 levy is $48.5 billion, which brings the proceeds to $192 million,” he said.
Chantal Marie Mfoula, the ECCAS secretary-general, called on member states to present a list of products that they will export to fellow member states on the launch of the free trade area.
Although Rwanda is yet to present its list of products, Kanimba said that previous trade missions have shown that there is a potential market for agricultural products in most Central African countries considering that at the moment most of them import from countries outside the bloc, including Europe.
He said they were also going to carry out public awareness campaigns among members of the private sector to ensure more of them take advantage of the opportunity.
Rwanda was readmitted to the 11-member state bloc last year with the government saying that it would enable the country to access duty-free access to new markets, especially among central African countries.
Rwanda was one of the founding members of the bloc that now brings together Angola, Burundi, Cameroon, Central African Republic, Congo, DR Congo, Gabon, Equatorial Guinea, Chad, and Sao Tome & Principe, in 1983.
Other than ECCAS, Rwanda is a member of the East African Community, the Common Market for Eastern and Southern Africa, and the Economic Community of the Great Lakes Countries.
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Africa’s new climate economy: Economic transformation and social and environmental change
Africa’s “Growth Miracle” in the 21st century has reversed a long standing narrative of pessimism about the region
It has emboldened hope for the future. GDP growth reached around 5% annually from 2001-2014. Rates of extreme poverty fell substantially. Yet big challenges remain.
Growth slumped in 2015 and 2016. The region lags far behind on most measures of human development. Climate change is also taking an increasing toll on many countries: the region is warming faster than the world as a whole, and many areas will experience more frequent and intense droughts and floods. The economic impacts of climate change are expected to be severe, with agriculture and poor people especially at risk.
In this uncertain environment, policymakers in African countries and Pan- African institutions – the African Union in its “Agenda 2063”, the African Development Bank, and the United Nations Economic Commission for Africa – have identified economic transformation as a critical strategy to help boost the pace of inclusive growth in decades to come.
This report aims to help decision-makers take stock of the extraordinarily rich experience of recent years and draw lessons for the future. The choices made now will have implications for the decades ahead. This report lays out five key action areas for economic transformation and social and environmental progress in Africa:
- getting the fundamentals right,
- transforming agriculture and land use,
- diversifying into manufacturing and other high-productivity sectors,
- unleashing the power of urbanisation, and
- fostering a modern energy transition.
This paper was jointly prepared by the New Climate Economy, flagship project of the Global Commission on Economy and the Climate, and the Supporting Economic Transformation Programme at the Overseas Development Institute. The work has been led by Milan Brahmbhatt (lead author) and Russell Bishop.
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tralac’s Daily News Selection
Robots and industrialization in developing countries (pdf, UNCTAD)
The current question is therefore: now that the commodity bonanza is over, capital flows are reversing and China is turning towards a more balanced growth path driven more by domestic demand than exports, how can Africa and Latin America reignite industrialization? Whatever the chosen strategy, it will have to account for the rapidly increasing spread of new automation technologies and artificial intelligence in the form of robots. Much of the debate on the economic impacts of the use of robots remains speculative, and disruptive technologies always bring a mix of benefits and risks. Whatever the impacts, final outcomes will be shaped by policies. A comprehensive approach aimed at maximizing the benefits of the use of robots for industrialization in developing countries includes consideration of the following elements: [Press release]
India: Manufacturing for the 21st century (LiveMint)
Robots in this new paradigm are not just the automatic welding bots that have been used for decades in the automobile assembly line. They are more trainable and have a very high artificial intelligence coefficient. Baxter is a cost-effective robot - available for $25,000 - that can be trained in no time by simply moving its arm through a work-cycle. And within a minute, the robot can be transformed to perform any desired activity. The second structural shift is the growth of global digital services driven by I 4.0 technologies. These services are becoming growth and profit drivers for manufacturing companies.
South Africa: Deputy Minister Mcebisi Jonas’ speech to the 2016 ABSIP Financial Service Conference (GCIS)
South Africa is often described as a fragile economy. Fragile economies are those that have become too dependent on unreliable sources of foreign investment to finance their own growth ambitions, and in South Africa’s case, even their infrastructure and social investments. What countries such as Brazil, Turkey, and South Africa have in common is their extreme vulnerability to external shocks, with susceptibility to large-scale financial crises caused by even relatively small economic shocks. The reason for this has to do with the structure of the economy, and the failure to implement the necessary economic reforms. When one compares economies such as Brazil, Turkey and South Africa with more resilient economies such as South Korea, Malaysia, and even China, a number of core differences are evident.
Economies that have enjoyed higher and more equitable growth, and have proved far more resilient in the recent global downturn, are those with more diversified economies and higher levels of manufacturing value added. South Africa’s manufacturing value added as a percentage of GDP is around 12%, Turkey’s around 13% and Brazil’s 17%, compared to China (32%), South Korea (31%) and Thailand (33%). It is especially in the high technology exports that the real differences are exposed. As a percentage of manufactured exports, high technology goods make up only 4.5% in SA and 2% in Turkey, compared to 43% in Malaysia, and 26% in both China and South Korea. This is directly attributed to government support in areas of R&D, technology development, industrial policy, export incentives and logistics efficiencies. [Minister Rob Davies on manufacturing and diversification of SA’s economy]
Towards a Mauritius-China FTA: outcomes from the Sino-Mauritius Joint Economic Commission (GoM)
The People’s Republic of China has written off Mauritius’ debts amounting to Rs 450 million in view of cementing the concrete friendly relations of cooperation between the two countries. This was announced by the Minister of Finance and Economic Development, Mr Pravind Jugnauth, yesterday during a press conference in Port Louis regarding his recent mission to China in the context of the 10th Sino-Mauritius Joint Economic Commission held in Beijing. Outcomes include: (i) signing of two MoUs pertaining to a joint feasibility study on the Mauritius-China Free Trade Agreement to boost trade and investment; and an MoU with regards reinforcing investment in the Ocean Economy sector respectively, (ii) setting up of a fishing port by the Chinese society LHF Marine Development Limited at Bain des Dames, (iii) provision of technical expertise by China in the Agricultural sector to encourage bio-farming.
Meetings were also scheduled with captains of the Chinese business community during a Business Forum organised by the Board of Investment jointly with the China-Africa Development Fund in a bid to consolidate trade relations between the two countries while extending collaboration in various sectors of business. Some 150 high-profile Chinese investors attended the forum and have demonstrated keen interest to invest in Mauritius and use the country as a stepping-stone to access Africa.
Angola: Funding granted by China reaches US$15bn (MacauHub)
The value of loans and credit lines granted by China to Angola since 2004 total US$15 billion, said Monday in Luanda the minister and chief of staff of the President, speaking at the opening of the Angola-China Investment Forum. Manuel da Cruz Neto also said that China is currently Angola’s largest trading partner and added that since last July the country has become the largest supplier of oil to China, overtaking its traditional suppliers, such as Russia and Saudi Arabia. [More than 100 Chinese investment projects identified in Angola in 2016]
Carlos Lopes: Namibia’s resources could fund its projects (The Namibian)
Former UNECA executive secretary Carlos Lopes added that since Namibia is a small country with a small economy, it has to go the extra mile to attract investors by easing the cost of doing business in the country, amongst other things. “Size matters,” he said repeatedly, giving as an example how Namibia cannot really do much when its biggest trading partner South Africa messes up. “South Africa is currently in trouble, and is bringing the bad weather to Namibia,” he noted, further emphasising why Namibia, although small, needs to grow its economy by going the extra mile to attract investors. “When you see big companies going into Congo, Ethiopia and Nigeria, it is not because those countries have better business environments than Namibia. It is because of the size [of the population]. Size matters,” he reiterated. [Investment conference: Namibia sold to the world]
Namibia: Chicken farming is a ‘low-hanging fruit’, says trade forum analyst (New Era)
Chicken farming is a “low-hanging fruit” for Namibia to create employment in the short and medium term. “This is not the time to learn, this is the time to implement,” says Maria Lisa Immanuel, senior trade and investment policy analyst of the Namibia Trade Forum. Immanuel made this statement during the official launch of the multi-million Namboer Poultry initiative last week in Windhoek, saying hard times are not coming, they are with us. Poultry production is in its infancy in Namibia. Until 2012, Namibia imported all its poultry products. Government under the Ministry of Industrialisation, Trade and SME Development decided to protect the industry through quantitative restriction measures using the Import and Export Act, No. 30 of 1994.
Nigeria: Senate to consider trade facilitation legislation (The Eagle)
Today, the 8th Senate will consider legislation to reform the administration and management of the Customs and Excise system in Nigeria. The bill, the Customs and Excise Management Act, establishes a new Nigeria Customs Service and repeals other Customs and Excise legislations. The bill creates a Custom and Excise Governing Board to oversee the administration of the Customs Service. The Board shall be responsible for formulating the general policy guidelines and matters pertaining to the governance assessment and collection of revenues.
Trade, security define Kagame’s African diplomatic offensive (The East African)
President Paul Kagame of Rwanda has in recent weeks been on a double-barrelled diplomatic offensive addressing economic and political issues. According to experts, Kagame has been seeking to open and consolidate markets for Rwandan manufacturers on the one hand and to neutralise the threat posed by dissident forces operating in Southern and Central Africa on the other.
Kenya: Tourism sector on rebound as arrivals grow by 18% (Business Daily)
Tourist arrivals grew by 17.8% in the first nine months of 2016, underlining a rebound for a sector that has been losing cash over the past six years. The number of international visitors rose to 655,058 in the year to September, up from 555,856 in a similar period last year when arrivals had slumped by 20%, according to data from Kenya Tourism Board.
Vic Falls is ours, not yours: Zim tells SA (NewsDay)
South Africa must stop advertising Victoria Falls as its own destination, as Zimbabwe is losing out in terms of tourism revenues, deputy chief secretary to the President and Cabinet, Ray Ndhlukula, has said. Speaking at an All Stakeholders Zimbabwe Image Management workshop in Harare yesterday, Ndhlukula said it was disturbing that tourists were now flying in and out of Zimbabwe on the same day.
Eight new truck stops for Kalahari Corridor (IOL)
The Trans-Kalahari Corridor Secretariat said it would set up eight new truck stops to provide rest and refreshment services for truckers operating along the road that links Namibia, Botswana and South Africa. The TKC is a key trade route and the only over-land link between Walvis Bay and Durban. The truck stops, to be set up in Gobabis and Charles Hill (on the border of Botswana and Namibia) and Kang, Sekoma, Jwaneng and Lobatse (Botswana) as well as in Zeerust (South Africa) would include ablution facilities, wellness centres and points where drivers could refill their road safety kits. [Botswana’s dry port failing to divert business from Durban]
Doing Business 2017: economy profiles for select African countries (World Bank)
The following economy profiles present the Doing Business indicators for a selection of sub-Saharan African countries. To allow useful comparison, it also provides data for other selected economies (comparator economies) for each indicator. The data in this report are current as of June 1, 2016 (except for the paying taxes indicators, which cover the period January – December 2015). Doing Business Economy Profiles available for: Botswana, Lesotho, Namibia, Swaziland, South Africa, Angola, Kenya, Rwanda, Uganda, Burundi [Why Rwanda improved in World Bank Doing Business ranking]
World Trade Outlook Indicator suggests modest pick-up in trade during fourth quarter (WTO)
The WTOI is a leading indicator of world trade, designed to provide “real time” information on the trajectory of merchandise trade three to four months ahead of trade volume statistics. Combining several trade-related indices into a single composite indicator, the WTOI measures short run performance against medium-run trends. A reading of 100 indicates trade growth in line with trend, while readings greater or less than 100 suggest above or below trend growth. With a current reading of 100.9 for the month of August, the WTOI has risen above trend, signalling accelerating trade growth in November-December. This is the first update of the WTOI since its initial release in July, when the indicator stood at 99.0.
New direct funding available for low- and middle-income countries to regulate tobacco (UN)
New funding is now available to support tobacco control implementation for low and middle income countries through the World Health Organization Framework Convention on Tobacco Control, currently the strongest global instrument to control tobacco. If current patterns continue, tobacco will kill about one billion people during the 21st century. By 2030, 80% of those who die due to tobacco use will be those who live in low- and middle-income countries. The new project will be delivered by the WHO FCTC through a collaboration with the UNDP and other partners. 179 countries and the EU are Parties to the Convention.
Accelerating climate-resilient and low-carbon development: progress report on the implementation of the Africa climate business plan (World Bank)
This report provides an overview of the progress made in 2016 in implementing the Africa Climate Business Plan (ACBP), a blueprint for climate action in Africa that the World Bank launched during the 21st meeting of the Conference of the Parties to the United Nations Framework Convention on Climate Change in Paris in November 2015. The ACBP aims to contribute to filling the climate financing gap in the region. Including the transport component added after the Paris launch, the plan’s goal is to raise $19bn by 2020, for investments that will strengthen, power, and enable resilience in the region. The plan focuses on more than a dozen priority areas, clustered in three groups, where the World Bank expects to help achieve results in the near future.
Africa urged to avoid being caught in the “capacity building syndrome” (AfDB)
Africa should avoid the “Clean Development Mechanism trap” by perpetually pushing capacity building and miss out on serious climate funding opportunities, Balgis Osman Elasha of the AfDB has said. Osman Elasha, who is the Principal Climate Change Officer with the Bank’s Quality Assurance and Results Department, says “Africa could not benefit from the CDM because it was caught up in the capacity building mode while others were taking action.” And in keeping up with the African challenge theme, Seth Osafo, Advisor to the African Group of Negotiators, lamented the lack of in-country coordination among key climate players in most African countries. “For example, the Ministries of Finance are the key financial mobilization units of most governments, but their linkages with the environment is almost not existent on matters of climate change and resource mobilization and/or allocation,” he bemoaned.
Russian-Nigerian Bi-National Commission to be held in Abuja, 11 November (African Business)
The Tanzania Investment Forum 2016 will take place on 16 November, Dar es Salaam
AfDB appoints Dr Jennifer Blanke as VP (Agriculture, Human and Social Development)
Zimbabwe: Government gazettes infrastructure sharing law (The Chronicle)
IGAD: Regional Migration Coordination Committee update
Nigeria: Economic governance, diversification and competitiveness support program - appraisal report (pdf, AfDB)
Nigeria: Footwear manufacturers lament lack of patronage (WorldStage)
Spillovers from the maturing of China’s economy (IMF)
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Robots threaten up to two thirds of developing country jobs, but could be an opportunity too
The increased use of robots threatens millions of jobs in developing countries, by undermining the advantage of low wages and facilitating the “reshoring” of industries back to industrialized countries, according to a new policy brief from UNCTAD.
The Policy Brief, “Robots and industrialization in developing countries”, finds that reshoring is happening slowly and is limited to certain sectors. It advises developing countries both to embrace the digital revolution and to build local and regional markets that will make the reshoring less likely.
“The increased use of robots in developed countries risks eroding the traditional labor-cost advantage of developing countries,” the policy brief says.
“The share of occupations that could experience significant automation is actually higher in developing countries than in more advanced ones, where many of these jobs have already disappeared, and this concerns about two thirds of all jobs,” it adds, citing World Bank research.
Some reshoring has taken place, but the economy-wide effects have been minor so far.
“The slow pace of reshoring may partly be explained by tepid investment and sluggish aggregate demand [in the global economy] more generally,” the policy brief says.
“Offshoring continues to take place, and while labor-cost differentials remain a factor in the decision of firms on where to locate production, especially of goods with a high labor content, demand factors such as the size and growth of local markets are becoming increasingly important determinants,” it adds.
The policy brief says that industrial robots have primarily been deployed in the automotive, electrical and electronics industries.
“This means that in developing countries – such as Mexico and many countries in Asia – those engaged in export activities in these two sectors are the most exposed to reshoring,” it says.
The policy brief advises developing countries to tax robots and to prevent the rising inequality – caused by loss of low-skilled jobs – through social transfers.
Much of the debate on the economic impacts of robots remains speculative, it says.
“Disruptive technologies always bring a mix of benefits and risks,” the paper says, noting that by embracing the digital revolution, developing countries could use robots to open up new opportunities.
By combining three-dimensional printing and the use of robots, small businesses in developing countries could access new possibilities to manufacture on a much larger scale.
Each year since 2013, China has bought more industrial robots than any other country. By the end of 2016, it is likely to overtake Japan as the world’s biggest operator of industrial robots, the policy brief says.