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COMESA’s Intergovernmental Committee starts Policy Week proceedings (COMESA)
The Intergovernmental Committee that brings together Permanent/Principal Secretaries was the first to kick off with a call to member States to enhance their capacities to produce goods and services that have a high technology content in order to scale up industrialization. The PSs meeting which concludes on Wednesday, will receive progress reports of various technical committees and COMESA institutions. Each Member State will have an opportunity to report on its status of implementation of COMESA Programmes. “Has the Inter-Governmental Committee lived to its promise by developing programs and action plans? Perhaps the Committee has partially developed programs but I doubt that it has developed action plans and action plans for whom,” posed the Secretary General.
East African Business and Entrepreneurship Conference and Exhibition (10-13 October, Nairobi)
AU’s Extraordinary Summit on Maritime Security, Safety and Development in Africa (11-15 October, Lomé)
Appointments: (i) Ethiopia (through its Minister of Finance, Abdulaziz Mohammed) is the incoming chair of the G-24 (ii) Zimbabwe’s Andrew Ndaamunhu Bvumbe has been elected the new ED of the World Bank, Africa Group 1 Constituency
CFTA-Negotiating Forum: update (UNECA)
The 3rd meeting of CFTA-Negotiating Forum (CFTA-NF), held from the 3-7 October 2016 at the headquarters of the AUC in Addis Ababa, focussed mainly on procedural matters. There were two main outcomes: (i) Adoption of the TORs of technical working groups on rules of origin; trade remedies; customs procedures and trade facilitation; sanitary and phytosanitary measures; and technical barriers to trade and non-tariff barriers. (ii) Discussion of the draft modalities for tariff negotiations and trade in services negotiations. The discussions built upon the preliminary inputs made by the CFTA-NF during their second meeting held in May 2016. Further work is required on the modalities and the expectation is that the CFTA-NF will meet in late November to review and adopt them. The next meeting of the CFTA-NF is tentatively scheduled for the end of November. [tralac discussion, Ashly Hope: ‘Sector development, regulation and the CFTA: a look at the financial sector’]
African Continental Free Trade Agreement and Human Rights: roundtable (21 October, New York University School of Law)
Since July 2016 (David Luke, James Gathii, Kim Burnett, Susan Mathews) have conducted a full HRIA of the CFTA which will explore three case studies: (i) how the trade liberalization likely to be integrated into the CFTA, might support and/or undermine the right to food and livelihoods; (ii) how increased intra-regional trade from the CFTA is likely to adversely impact the agro-industry sector and how to ensure the right to an adequate standard of living; and (iii) how the CFTA will affect informal cross-border traders across Africa, and women in particular, who already face many risks and challenges.
African Union Border Programme and measures for its consolidation: ministerial declaration (AU)
We, the Ministers of Member States of the AU responsible for inter-state borders held our meeting on African Border Issues in Addis Ababa on 6 October to review the implementation of the African Union Border Programme, based on the presentation and assessment of the achievements made by the AUC and on the report of the national experts, who met from 3-5 October...hereby adopt the following:
Recognize that the deadline of 2017, set by the Assembly of the Union in July 2011 in Malabo, for the delimitation and demarcation of all African inter-state borders will not be achieved. Recommend the extension of the deadline for the delimitation and demarcation of the inter-state borders of Africa from 2017 to 2022. Take note that the Niamey Declaration recommended finalizing the Draft Integrated Border Management Strategy, which is now titled the Draft AU Border Governance Strategy. We agree that the Draft should be sent to Member States for thorough review ahead of a validation meeting suggested to take place in the first quarter of 2017. Urge the Member States to develop and implement a national policy on borders and to set up and sustain a national body responsible for border issues, if not yet done, and reiterate the importance of Member States to jointly request the AUC’s assistance in the implementation of AUBP activities.
South Africa-Namibia boundary update: ‘The Heads of State also welcomed the signing of the Terms of Reference of the Joint Committee of Experts on the Orange River Boundary’ (GCIS)
Anzetse Were: ‘How economic geography has conspired to keep Africa down’
2017 World Border Security Congress (21-23 March, Casablanca)
AU-China agreement on Africa’s High-Speed Railway Network (AU)
A number of milestones are expected to be realised in the next five years including: (i) The development and agreement on relevant laws and regulations regarding railway cooperation. (ii) The establishment of a Project Implementation Unit by the AUC in the next 6 to 12 months. (iii) Collaboration in supporting and facilitating cooperation between African and Chinese enterprises, particularly, in local enterprise supplier development and development of advanced manufacturing across the African continent; transfer of technology, capacity-building for local manufacturing and content, as well as education and the development of prerequisite skills. (iv) The Chinese Government will also lead the formation of a Chinese group for Sino-Africa cooperation in railway and high-speed railway, which will integrate resources of financing institutions, railway construction companies and railway operation management companies. [SA manufacturers urged to take on African rail projects]
African Shippers’ Council seeks solutions to trade, transport challenges (Nigeria Today)
At a two-day special sub-regional meeting held in Abuja at the weekend (on the theme ‘Transport infrastructure development and maintenance: funding options and trade policies’), participants listed transport infrastructure deficit as the key factor slowing down Africa’s socio-economic growth. They also frowned at the hellish experience of shippers where goods originating from an African country will have to be routed through Asia before getting to another African nation.
Abebe Aemro Selassie (Director for the African Department): transcript of a press briefing (IMF)
You raised an existential question about Africa. I think that we should avoid generalization about what Africa needs. I think what is needed varies from country to country. So, it’s a difficult question to answer. But as a whole, do some African countries continue to need aid, official assistance? Absolutely. Some countries need this assistance to be in the form of temporary type support. In other cases, for the poorest countries, you need more grants, concessional type financing. So, the support is needed, but equally important, I think countries building the revenue mobilization -- I mean, as I mentioned in my opening in my remarks earlier, I think countries developing their tax base is going to be imperative.
Roberto Azevedo: ‘Towards a more inclusive trading system’ (WTO)
Actually trade is a relatively minor cause of job losses. The evidence shows that well over 80% of job losses in advanced economies are not due to trade, but to increased productivity through technology and innovation. Output in the US manufacturing sector continues to rise to record levels. But technological advances have meant that fewer workers are needed to produce more goods. And where jobs are created, today’s vacancies require a much more advanced set of labour skills. And this is not just a rich-country problem. An ILO study on Cambodia, Indonesia, Vietnam, Philippines and Thailand found that 56% of jobs are at high risk of automation. And that’s just on average. In some sectors over 80% of jobs are at risk. In Japan, there are 315 robots per 10,000 workers. In China that number is only 36 — but it is rising fast. In the US, the number is 164, which is still relatively low. But it is set to go up! This is the real economic revolution that is happening today. Many will find it unsettling. And that is completely understandable. But, like trade, technological progress is indispensable for sustained growth and development. The answer is not to reject these forces. Quite the opposite: we must embrace them and learn to adapt. [Text of address to National Press Club, Washington] [Vivek Dehejia: ‘Jagdish Bhagwati and trade issues today’ (LiveMint)]
Multilateral development banking for this century’s development challenges: five recommendations to shareholders of the old and new MDBs (pdf, CGD)
Second, most developing countries now have access (whether domestically or internationally) to the kinds of advisory service, policy ideas, and practical examples of good practice that seemed to be a near monopoly of the MDBs for much of the late 20th century. On economic and social policy issues, developing countries today are less reliant on - and perhaps also, given the success of alternative models reflected in China, Singapore, and Rwanda, less confident in - the single-recipe approaches they see as having dominated the creditor-influenced legacy multilaterals. The MDBs are now one among many sources of ideas and advice competing for attention in the developing world, rather than the dominant source.
The legacy MDBs have adapted too slowly and minimally to the increasing economic role and growing sophistication and capability of their borrowers and to today’s development challenges. For example, they continue to rely predominantly on lending to sovereigns, except at the EBRD, where an emphasis on private sector development was established at the founding. Their portfolio of cross-border loans is tiny in relation to needs, particularly for regional infrastructure, where there is greater complexity in negotiating an allocation of debt service among borrowers. And they rarely exploit the full range of instruments they have - grants, equity, guarantees, and policy leverage - to crowd in sustainable private investment. [Response by heads of Regional Development Banks]
Development finance institutions come of age (CSIS)
The report is the result of a research project undertaken by the Center for Strategic and International Studies and the Overseas Development Institute. The report builds on what was originally a series of four essays that were the result of consultations and research undertaken by CSIS and ODI. This work included a series of working group meetings that drew together DFIs representatives - past and present - private-sector actors, development policymakers, and other stakeholders.
Development Committee Communiqué (World Bank)
We value the commitment to a more efficient and agile WBG that follows a risk-based approach, upholds standards, exploits synergies across its institutions, and has a culture that supports these shifts. Resources should be strategically deployed to meet global and client needs and targeted to areas of the world that most need funding and have least access to capital, with a tailored value proposition to the full range of clients. The WBG should strengthen the knowledge agenda, including through enhanced monitoring, learning and evaluation frameworks and South-South flows and help enhance countries’ crisis preparedness, prevention and response frameworks. We expect a progress update on the Forward Look with clear results indicators at the 2017 Spring Meetings. [G-24 Ministers: statement] [Statement by Multilateral Development Banks Delivering on the 2030 Agenda]
Southern Africa Business Forum: update (SADC)
The institutional partners for the Southern Africa Business Forum met to complete the debriefing of the first-ever Industrialization Week and the second SABF conference which were both held in Swaziland in August 2016, as well as discuss other notable activities. Ms Chen noted that there were a number of SABF activities lined up in the near future such as the workshop of the private sector and senior officials tentatively scheduled for November 2016 to provide input on the Action Plan for the SADC Industrialization Strategy. She also noted that the Ministers of transport and ICT meeting is also scheduled in October 2016 and is intended for the approval of SADC priority infrastructure projects; while in February/March 2017, the Ministerial Task Force Responsible for Regional Economic Integration will meet to finalise the Action Plan on the Industrialization Strategy for submission to Council and the Extra Ordinary Summit. The meeting also discussed proposals on how to fund the SABF in a sustainable manner.
Zimbabwe: August exports up 10% (The Chronicle)
The country’s exports in August increased by an average 10% to $202,6m, from $183,7m the previous month, latest data from the Zimbabwe National Statistics Agency (Zimstat) shows. Although the figures show an improvement in the value of exports in August, Zimbabwe still recorded a trade deficit as the value of imports during the period under review stood at $443,9m.
AUC-Uganda African Mining Vision conference: update (AU)
The AUC and the Uganda Chamber of Mines and Petroleum, which holds the Chair of the Association of Eastern African Chamber of Mines and Petroleum, hosted from 5-6 October 2016, a high level conference in Kampala,under the theme "Attracting exploration investment to Uganda’s mineral sector to realize its maximum value”. The conference brought together Directors of National Geological Surveys and the captains of industry from the Eastern African region with particular focus on developing a Public Private Partnership (PPP) framework for mobilizing exploration investments.
Passenger growth slowed in August (IATA)
August international passenger demand rose 4.7% compared to August 2015. All regions recorded increases, but growth was dominated by airlines in the Middle East. Capacity climbed 6.5%, causing load factor to slide 1.4 percentage points to 83.9%. African airlines’ traffic climbed 1.8% in August. International growth has tracked sideways since the start of the year, reflecting challenges in the major economies. Capacity rose 3.1%, with the result that load factor slipped 1.0 percentage point to 75.6%, lowest among regions.
Ethiopia: Dubai Chamber trade mission concludes with meetings with public and private sector reps
Hollande meets Dangote, others to boost trade with France
Zimbabwe attends first ATI meeting as full member
Only 3 Egyptian construction companies investing in Africa: EFCBC member
TradeMark East Africa backs Zanzibar’s EAC region export drive
US questions India’s concept note on trade facilitation in services pact at WTO [download the document]
China moots BRICS free trade area ahead of Goa summit
Jim O’Neill: Building up the BRICS
Related News
Note on the 3rd Meeting of the CFTA-NF
The 3rd meeting of the negotiating forum of the CFTA-Negotiating Forum (CFTA-NF) was held from the 3rd to 7th of October 2016 at the headquarters of the African Union Commission (AUC) in Addis Ababa, Ethiopia, focusing mainly on procedural matters.
There were two main outcomes:
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Adoption of the TORs of technical working groups (TWGs) on rules of origin; trade remedies; customs procedures and trade facilitation; sanitary and phytosanitary measures; and technical barriers to trade and non-tariff barriers.
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Discussion of the draft modalities for tariff negotiations and trade in services negotiations. The discussions built upon the preliminary inputs made by the CFTA-NF during their second meeting held in May 2016. Further work is required on the modalities and the expectation is that the CFTA-NF will meet in late November to review and adopt them.
It will be recalled that the 2nd meeting of the CFTA-NF which was held in May 2016 negotiated the guiding principles, the terms of reference for the TWGs on trade in services and on legal and institutional affairs and exchanged views on the tariff and services modalities.
The inaugural meeting of the CFTA-NF which was held in February 2016 discussed and agreed on the rules of procedures for the negotiating institutions. Those institutions constitute the CFTA-negotiating architecture which is as follows:
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The CFTA-NF is composed of chief trade negotiators. They adopt mutually agreed positions on negotiating matters for the consideration of the Committee of Senior Officials (CSO). The CFTA-NF can also establish technical working groups to support its proceedings;
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The CSO is composed of Permanent or Principal Secretaries or other top officials of Trade Ministries. They review issues and outcomes adopted by the CFTA-NF and prepare recommendations for the approval of African Ministers of Trade (AMOT); and
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The AMOT is the highest negotiating institution. They formally adopt the recommendations of the CSO or resolve issues that remain pending.
The next meeting of the CFTA-NF is tentatively scheduled for the end of November.
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Entry into force of the SADC-EU Economic Partnership Agreement (EPA)
Joint Press Release from the Department of Trade and Industry of the Republic of South Africa and the EU Delegation to the Republic of South Africa
Benefits of a new trade deal with the European Union
South Africa has concluded a new trade deal, the Economic Partnership Agreement (EPA), with the European Union (EU) under the SADC-EU EPA framework to replace the trade provisions of the existing bilateral trade agreement between South Africa and the EU, known as the Trade, Development and Cooperation Agreement (TDCA).
The SADC EPA agreement takes effect today, 10 October 2016.
The EU and the SADC EPA group (Botswana, Lesotho, Namibia, Mozambique, South Africa, Swaziland and Angola) took more than a decade to reach this deal. The Agreement was signed by the EU representatives and the five Southern African Customs Union (SACU) member states plus Mozambique on the SADC EPA side on 10 June 2016. Angola did not sign the agreement but was part of the negotiations and may join the group anytime in the future.
One of the reasons for South Africa’s participation in the EPA negotiations while it was still phasing in the provisions of the TDCA, was that it wanted to harmonise the trading regime between SACU as a whole and the EU rather than have two separate agreements. The EPA ensures that the SACU common external tariffs are maintained. Secondly, SA had an opportunity to correct some of the imbalances of TDCA, particularly in agriculture. Thirdly, it wanted to regain policy space perceived to have been lost under the TDCA, for example being able to impose export taxes to support industrial development policy. And lastly, to gain better market access to the EU.
Almost all SA products (about 99%) will have preferential market access in the EU, compared to about 95% under the old agreement. About 96% of the products will enter EU market without being subjected to customs duties or quantitative restrictions. The other 3% will still have access, albeit partial, that is similar or improved compared to the TDCA. SACU as a group has granted EU lower market access of 86%, in line with the developmental nature of the agreement.
The EU absorbs about one-fifth of all South African exports, while imports account for one third. While SA exports have traditionally included mostly primary products, agricultural and manufactured goods have gained prominence among the top 10 SA exports, with motor vehicles comprising 21% of SA’s exports to the EU last year.
The bilateral deal concluded between SA and the EU on the protection of Geographical Indications (GIs) as part of the whole EPA is of significant benefit to both parties. SA’s favourite herbal teas would be the beneficiaries of this new trade agreement with the EU. Rooibos, Honeybush and Karoo Lamb are notable beneficiaries which are protected along with 102 wine names of areas like Paarl and Stellenbosch. In contrast, the EU will receive protection on 251 product names. About 120 names are for wines; 106 are agricultural product names such as special meats, cheese, olives, cheese, and others; 20 names are for spirits and five are beer names.
Fisheries, that were not covered by the TDCA, will be a notable beneficiary under the EPA. About 94% of fisheries’ products will now enter the EU market duty free quota free while the rest will be phased in over a specified period. Agricultural benefits range from improved market access for more than 30 SA products into the EU to the phasing out of the EU export subsidies. South Africa will now be allowed to export 150 000 tons of sugar and 80 000 tons of ethanol duty free, while the quota for wine exports to the EU more than doubles from 50 million to 110 million litres. Other products include flowers, dairy, fruit, fruit juice and yeast. On the EU side; wheat, sugar confectionery, barley, cheese, pork, cereal, butter and ice-cream will gain better market access into the SACU.
The EPA also allows more flexibility on rules of origin, so that countries can use inputs from their EPA neighbours without forfeiting EU access as well as from non EPA countries that benefit from duty free quota free access to the EU. An exporter in Namibia, for example, can source from any of the BLNS countries and Mozambique – but also from any other African country which becomes part of an EPA or any other country in general that benefits from a trade agreement with the EU.
The EPA is intended to be development-oriented and allowing for deeper regional integration. Overall, the EPA offers new opportunities for South African exporters and importers in many areas. While we can now rest assured that the Rooibos name is safe – at least in Europe – the EPA is far-reaching, and allows South Africa policymakers, with their European partners, space to advance industrial development and use the agreement to ensure the benefits of increased trade are not directed only to big business but also help roll back poverty and create jobs.
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Declaration on the African Union Border Programme and measures for its consolidation
The African Union Border Programme (AUBP) held, on 6 October 2016, a Meeting of Ministers on African Border Issues at the African Union Headquarters in Addis Ababa to review the progress made on the implementation of the AUBP and to discuss measures for its further consolidation.
The Meeting, which was preceded by a Preparatory Meeting of Governmental Experts from 3 to 5 October 2016, adopted the Addis Ababa Declaration on the AUBP which calls on all Member States to delimitate and demarcate their borders by 2022.
In his opening remarks, Ambassador Smail Chergui, Commissioner for Peace and Security, underscored the need to the principle of peaceful settlement of border disputes and the commitment to delimit and demarcate African boundaries as factors of peace, security, and economic and social progress.
“We must reflect on ways and means to find lasting and sustainable solutions to the ongoing border disputes in our continent,” he said. “This meeting comes at a crucial time when we are facing major challenges on terrorism, cross -border crime, illegal trafficking and illegal migration that calls for joint efforts for management of our borders,” he further stated.
The Ministers highlighted the significant progress made by the AUBP on the national, regional and continental levels in the areas of delimitation and demarcation, cross-border cooperation and capacity building. They also noted the challenges in the implementation of the AUBP, which reflect the need for continued efforts to strengthen African capacities regarding border issues.
The Ministers recommended for the extension of the deadline of 2017 set by the Assembly of the Union in July 2011 in Malabo for the Delimitation and Demarcation of all African boundaries from 2017 to 2022. They further recommended the establishment of an annual review mechanism on the African Border Day (June 7), to facilitate regular assessment of the AUBP’s progress and identify and manage challenges as they arise. Further, they stressed the importance of ratifying the AU Convention on Cross-Border Cooperation in order to foster regional integration and the harmonization of policies across the African continent.
The Meeting was organized in the spirit of aspiration four (4) of the AU Agenda 2063 for, “A Peaceful and Secure Africa”, and brought together Ministers from 46 AU Member States, representatives from the Regional Economic Communities (RECs), as well as representatives from the African Centre for the Constructive Resolution of Disputes (ACCORD), the Committee of Intelligence and Security Services of Africa (CISSA), the Federal Republic of Germany, the International Organization for Migration (IOM), the European Union (EU) and staff from the AU Commission.
Addis Ababa Declaration on the African Union Border Programme and measures for its consolidation
Preamble
We, the Ministers of Member States of the African Union responsible for inter-state borders held our Meeting on African Border Issues in Addis Ababa, Ethiopia, on 6 October 2016 to review the implementation of the African Union Border Programme (AUBP), based on the presentation and assessment of the achievements made by the African Union Commission (AUC) and on the report of the national experts, who met from 3-5 October 2016;
Taking note of the progress made by the AUBP at the continental, regional and national levels, as well as the ever-increasing interest in the Program from Member States of the African Union (AU) since its launch in 2007;
Acknowledging the outcomes of previous meetings held in Addis Ababa on 7 June 2007 and 25 March 2010, as well as on 17 May 2012 in Niamey;
Reiterating our determination to address the challenges in the implementation of the AUBP, including resource constraints, the slow ratification of the Niamey Convention by Member States and the 2017 deadline for the delimitation and demarcation of inter-state borders;
Reaffirming the important role AUBP plays with regard to its contribution to the structural prevention of conflicts, the promotion of regional and continental integration, the strengthening of economic and social development in Africa;
Recommitting to the principles upon which the AUBP is based, as stated in the relevant instruments of the AU, particularly the principle of the respect of borders existing at the time of accession of our countries to independence (Cairo 1964: AHG/Res.16(1)); the principle of peaceful settlement of border disputes; and the commitment to delimit and demarcate African inter-state borders, where this exercise has not yet taken place, as pillars of peace, security, economic and social progress;
Taking note of the need to provide sensitization and training on border issues to decision-makers, border professionals and communities in the border lands;
Acknowledging the challenges in conducting a clear assessment of current African borders, which would allow for a better evaluation of the needs in terms of demarcation, and to define – more accurately – a strategy for the implementation of the AUBP.
Hereby adopt the following:
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Encourage all Member States to accelerate the delimitation and demarcation of their inter-state borders, where this exercise has not yet taken place.
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Recognize that the deadline of 2017, set by the Assembly of the Union in July 2011 in Malabo, for the delimitation and demarcation of all African inter-state borders will not be achieved.
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Recommend the extension of the deadline for the delimitation and demarcation of the inter-state borders of Africa from 2017 to 2022.
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Appeal to the AUC to conduct an assessment of the status and all activities conducted within the framework of the AUBP, as well as an annual review on the African Border Day (June 7) based on annual reports by Member States – submitted jointly or individually – in order to monitor the progress and challenges of implementation.
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Take note that the Niamey Declaration recommended finalizing the Draft Integrated Border Management Strategy, which is now titled the Draft AU Border Governance Strategy. We agree that the Draft should be sent to Member States for thorough review ahead of a validation meeting suggested to take place in the first quarter of 2017.
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Urge the Member States to develop and implement a national policy on borders and to set up and sustain a national body responsible for border issues, if not yet done, and reiterate the importance of Member States to jointly request the AUC’s assistance in the implementation of AUBP activities.
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Appeal to the AUC to facilitate possible access by Member States to historical, legal and cartographic documents and technical instruments to facilitate the delimitation and demarcation of their inter-state borders.
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Recommend that Member States strive to make use of diplomatic means in settling their differences and disputes on the course of their boundary lines before taking recourse to judicial mechanisms.
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Strongly encourage Member States to accelerate the ratification and implementation of the African Union Convention on Cross-border Cooperation (Niamey Convention) and to develop and implement programs aimed at cross-border cooperation, including the joint management of resources, in order to develop borderlands, while engaging the local authorities and communities.
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Request effective coordination between the AUC and RECs regarding the implementation of activities together with Member States and partners; and encourage the full respect for the principles of subsidiarity and complementarity in order to avoid duplication of efforts.
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Request the AUC to commission research, facilitate the publication of good practices, and coordinate the development of training curricula and the organization of regional trainings.
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Call on the Member States to allocate national budget lines to fund their delimitation, demarcation and cross-border cooperation programs, and recommend to the AUC to strengthen the structure of the AUBP Unit with the necessary financial and human resources with the required competence.
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Reaffirm our appreciation to Germany and all international partners for the support provided towards the implementation of AUBP and appeal to them to sustain their support.
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Encourage all Member States to hold an annual celebration commemorating the Border Day on the 7 June.
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Reiterating our adherence to the respect of the principle of the inviolability of borders as stated in the pertinent legal instruments of the AU, the Charter of the OAU – adopted during the Assembly of the Heads of States and Government in Cairo 1963, as well as the AU Constitutive Act.
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Call upon the Chairperson of the AUC, after endorsement of the present Declaration by the Specialized Technical Committee on Defense and Safety and Security, the Executive Council and the Assembly, to take all the necessary measures for the consolidation of the AUBP and keep the competent bodies of the African Union and its Member States regularly informed on the progress made in its implementation.
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Development Committee: World Bank urged to expand work on global risks
The World Bank Group must become “better, stronger, and more agile” to confront major global challenges over the next 15 years, while also working to end extreme poverty, boost shared prosperity, and achieve the Sustainable Development Goals and the Paris Climate Change Agreement.
That was a key message of the Development Committee, a ministerial-level forum of the World Bank Group and the International Monetary Fund, in a communiqué released at the close of the institutions’ Annual Meetings.
The committee representing the Bank Group’s 189 member countries said the global development landscape will face “critical shifts” in the future, driven by climate change, natural disasters, pandemics, migration, and fragility, conflict and violence, urbanization and demographic changes. Addressing these changes will require more collaboration with others and more resources, it said.
Acknowledging an environment of “sluggish” global economic growth and geopolitical and economic uncertainties, the committee also called on the Bank Group and the International Monetary Fund (IMF) to work with countries to “enhance synergy among monetary, fiscal and structural reform policies, stimulate growth, create jobs, and strengthen the gains from multilateralism for all.”
The committee’s message capped two days of meetings of the Bank and IMF shareholders – including most of the world’s countries. Ahead of the meetings, the Bank Group released a flagship report on poverty, shared prosperity, and inequality, and World Bank Group President Jim Yong Kim outlined his vision to accelerate development and the fight against poverty for his second term in a speech at the Brookings Institution.
Kim said the Bank is increasingly involved in development challenges beyond its traditional mandate, including major new initiatives to address the refugee crisis, climate change, and the threat of pandemics.
Challenges, he said, include technological change and the automation of work, which could impact jobs and the ability of developing countries to compete globally. By 2030, it’s projected that almost half of the world’s poor will live in countries affected by fragility and conflict. Emerging markets and low-income countries currently face an annual infrastructure financing gap of up to $1.5 trillion, said Kim.
He asked member countries at the Annual Meeting plenary session to give the Bank flexibility to “solve the most important problems and make sure we have the financial capacity to change the world for the poorest and the most marginalized.”
Over the last 70 years, the World Bank has been able to leverage $15 billion in paid-in capital to provide $600 million in loans, and so increase the amount of assistance available to developing countries. The Bank Group’s private sector focused arm, IFC, leverages its capital 20 times, and the Multilateral Investment Guarantee Association (MIGA) leverages its shareholder equity 39 times, according to a paper on the Bank’s “forward look,” submitted to the Development Committee.
The committee said that it would consider options to strengthen the financial position of the Bank no later than the 2017 Annual Meetings October 13-15, 2017, in Washington.
It urged the Bank Group to “help create markets, particularly in the most challenging environments, and to mobilize private resources, including through guarantees, especially for quality infrastructure, and for small and medium enterprises.”
Kim, who was appointed last month to a second term as president of the Bank, outlined a plan to accelerate inclusive and sustainable economic growth, increase investments in human capital, and foster resilience to global shocks and threats.
He said private sector financing will be critical and the Group would aim to mobilize private sector investment in the most challenging sectors and countries, and do “much more to tackle some of those risks that constrain the private sector in these markets.”
“I want you to know that going forward, we will be much more aggressive in putting on the table, capital and specific instruments that can reduce risk. In doing so, we feel that we can create new markets and encourage investors to venture into countries and projects that they never would have considered before,” Kim said at Brookings
The Development Committee welcomed a plan to increase the financing capacity of the World Bank’s fund for the poorest countries, the International Development Association, also known as IDA. “We advocate for a strong IDA18 replenishment, with a broadened donor base. We welcome the innovative financing and policy package, including the proposal to enable IDA, which has recently received milestone triple-A ratings, to tap into capital markets to complement its resources.”
More than half the world’s poor live in countries affected by fragility, conflict, and violence, where IDA support is particularly important, it added.
The Development Committee also asked the Bank and IMF to help countries access finance for adaption to climate change, as well as mitigation and improved disaster risk management.
It urged the Bank to “focus on building resilience while expanding insurance schemes and increasing investments in climate-smart land use, green infrastructure, and sustainable cities.” Kim announced assistance for Haiti during the Meetings to respond to damage from Hurricane Matthew, as well as $20 million from the Caribbean Catastrophe Risk Insurance Facility, developed with assistance of the World Bank.
Development Committee Communiqué
World Bank/IMF Annual Meetings 2016
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The Development Committee met today, October 8, in Washington, D.C.
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Global economic growth remains sluggish in 2016, with only a modest pick-up expected in 2017. Demand has remained soft despite highly stimulative monetary policies, foreign direct investment to developing countries has decreased, commodity exporters are adjusting to declines in exports, and wider geopolitical and economic uncertainties are weighing on confidence. We call on the World Bank Group (WBG) and the International Monetary Fund (IMF) to work jointly with countries to enhance synergy among monetary, fiscal and structural reform policies, stimulate growth, create jobs, and strengthen the gains from multilateralism for all.
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We share a vision of the WBG as a premier development institution: it plays a key role in advancing policies essential for sustainable growth, poverty reduction, and economic transformation; leads on global agendas; and helps ensure that the benefits of globalization are widely shared. During the next 15 years, the development landscape will face critical shifts, including climate change; natural disasters; pandemics; fragility, conflict and violence; migration and forced displacement; urbanization; and demographic changes. Meeting these challenges, and rising to the ambition of the Twin Goals, the Sustainable Development Goals (SDGs) and the COP21 Agreement, will require a better, stronger, and more agile WBG. This task will also require deeper engagement and collaboration with international financial institutions and global partners, additional private funds, the ability to harness technological change and increased country capacity to raise domestic resources. In this regard, we welcome the report to Governors on the Forward Look: A Vision for the WBG in 2030.
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We value the commitment to a more efficient and agile WBG that follows a risk-based approach, upholds standards, exploits synergies across its institutions, and has a culture that supports these shifts. Resources should be strategically deployed to meet global and client needs and targeted to areas of the world that most need funding and have least access to capital, with a tailored value proposition to the full range of clients. The WBG should strengthen the knowledge agenda, including through enhanced monitoring, learning and evaluation frameworks and South-South flows and help enhance countries’ crisis preparedness, prevention and response frameworks. We expect a progress update on the Forward Look with clear results indicators at the 2017 Spring Meetings.
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The private sector is essential to creating jobs and delivering higher living standards. Public policies that improve governance and regulation, make markets more competitive, and increase openness and predictability are prerequisites to higher investment and better development outcomes. We urge the WBG to take a Group-wide approach to help create markets, particularly in the most challenging environments, and to mobilize private resources, including through guarantees, especially for quality infrastructure, and for small and medium enterprises. Bringing together the joint capabilities of all WBG institutions is crucial to mobilizing finance for development and delivering global public goods. We encourage the WBG to expand its strong collaboration with other multilateral development banks (MDBs), in line with their recent declaration on infrastructure. We welcome the Global Infrastructure Connectivity Alliance, announced in September 2016.
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Mobilizing domestic resources and addressing illicit financial activities will be vital to unlocking finance for development: we urge the WBG and IMF to foster policies and transparent institutions that advance these efforts and improve public expenditure management. We applaud the WBG support to the Stolen Asset Recovery Initiative. We welcome the progress that the IMF and WBG have made in reviewing the Debt Sustainability Framework for Low-Income Countries. We stress the important role that technology and the private sector can play in achieving the Universal Financial Access 2020 goal.
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An ambitious IDA18 replenishment is key for delivering the 2030 agenda. We advocate for a strong IDA18 replenishment, with a broadened donor base. We welcome the innovative financing and policy package, including the proposal to enable IDA, which has recently received milestone triple-A ratings, to tap into capital markets to complement its resources. We urge the WBG to ensure a smooth transition as countries graduate from IDA. We also welcome the enhanced Crisis Response Window and the proposal to scale up private sector activities, including an IFC and MIGA Private Sector Window.
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Large movements of people constitute a shared, long-term challenge for countries at all levels of development. More than half the world’s poor live in countries affected by fragility, conflict, and violence (FCV), where IDA support is particularly important. We welcome proposals to double financial resources in these countries and to support, through tailored efforts to their specific needs, refugees and the communities that host them. The WBG and the IMF should help tackle drivers of fragility, by improving investment climates, strengthening local governance, rebuilding state institutions, broadening access to finance, and fostering conflict prevention and resilience. The WBG should increase resources allocated to these efforts, enhance its capacity to work in these environments, expand its work on forced displacement and migration and work closely with humanitarian partners.
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We welcome the Global Crisis Response Platform, announced at the Leaders’ Summit on Refugees in September 2016, and urge its rapid implementation. We expect it to provide scaled up, systematic, and better coordinated support to address crises, including those arising from forced displacement, natural disasters and pandemics. The Global Concessional Financing Facility, the IDA Crisis Response Window, and the proposed sub-regional window for refugees in IDA18 will be important for this effort. As part of the Platform, we also welcome the launch of the Pandemic Emergency Financing Facility and look forward to its early start-up. It will, together with upgraded efforts towards universal health coverage, fill a critical gap in health financing architecture.
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We look forward to implementation of the WBG Climate Change Action Plan and support countries’ nationally determined contributions under the COP21 agreement. We urge the WBG to continue to focus on building resilience while expanding insurance schemes and increasing investments in climate-smart land use, green infrastructure, and sustainable cities. Small states are disproportionately affected by natural disasters, including rising sea levels and extreme weather events. We ask the WBG and IMF to continue supporting efforts to facilitate these countries’ access to climate finance for adaptation, mitigation and improved disaster risk management.
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Women still lag behind in most measures of economic opportunity, undermining national and global growth prospects. The ambitions enshrined in the Twin Goals and the SDGs cannot be realized unless countries make significant progress in closing gender gaps in key sectors. We strongly support the continued implementation of the WBG 2015 Gender Strategy and the progress in diversifying WBG staff.
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We welcome the approval of the Bank’s new Environmental and Social Framework, which reflects the most extensive consultations ever conducted by the WBG. The standards expand protections for people and the environment in Bank-financed investment projects and are part of a far-reaching effort by the WBG to improve development outcomes. We now ask the Bank to focus on effective implementation, ensure appropriate financial and human resources to build staff and client capacity, establish a robust accountability framework, and provide hands-on support where needed.
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As part of the Voice reform, we remain committed to the Roadmap for implementation of the Shareholding Review that was agreed at the 2015 Annual Meetings. We thank Executive Directors for completing their work on a dynamic formula that reflects the evolution of the global economy and contributions to the WBG’s mission. We look forward to the next stage of discussions, based on agreed shareholding principles, formula guidance, and the package of commitments in the Report to Governors on the Dynamic Formula.
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We also look forward to considering options to strengthen the financial position of the WBG institutions. We aim to conclude these discussions no later than the 2017 Annual Meetings in line with the Roadmap endorsed in Lima.
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We thank Mr. Bambang Brodjonegoro for his valuable leadership as Chairman of the Development Committee, and welcome his successor, Ms. Sri Mulyani Indrawati, Minister of Finance of Indonesia, as its first female Chair. We congratulate Dr. Kim for his reappointment as President of the World Bank Group for a second term.
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The next meeting of the Development Committee is scheduled for April 22, 2017.
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SA, Namibia seek improved intra-African trade
Intra-African trade must become the new economic paradigm for the continent, as it will help stimulate economic growth and improve the continent’s capacity to resolve its own challenges.
This was the message from President Jacob Zuma and his Namibian counterpart, President Hage Geingob, who were meeting in Pretoria for the 2nd Session of the South Africa-Namibia Bi-National Commission (BNC).
The session discussed, among other things, measures to strengthen trade and investment ties in the fields of transport, health, education, science and technology, agriculture, immigration and energy.
In his opening addressing at the start of the session, President Zuma said the two countries need to prioritise economic cooperation, focusing on projects that are consistent with the SADC Revised Regional Indicative Strategic Development Plan (RISDP) and the Southern African Customs Union transformation agenda.
“It is in the interest of the region that we work hard to increase intra-regional trade based on the complementarities that exist between our countries,” said President Zuma.
The RISDP is a comprehensive development and implementation framework guiding the regional integration agenda of SADC until 2020. It is designed to provide clear strategic direction with respect to SADC programmes, projects and activities in line with the SADC common agenda and strategic priorities.
The ultimate objective of the plan is to deepen integration in the region with a view to accelerate poverty eradication and the attainment of other economic and non-economic development goals.
President Hage said two countries must correct the imbalance in trade relations between the two countries, while developing potential synergies to harness trade with other African States.
South Africa is the source of 66% of Namibia’s imports and is responsible for approximately 80% of investments in key industries such as mining, retail, banking agriculture and insurance.
Imports from Namibia stood at R6 481 614 826, while exports to Namibia were at R52 862 722 906 last year.
“We should not only focus on pursuing win-win relationships with our international partners, but let us pursue and build win-win partnerships amongst ourselves as neighbours, as friends and as Africans,” said President Hage.
He shared the same message on Thursday at the Invest in Namibia international conference in Johannesburg. The conference was attended by business leaders as well as Minister in the Presidency Jeff Radebe and Gauteng Premier David Makhura.
Friday’s BNC also assessed progress in the implementation of bilateral projects and exchange views on issues of mutual concern so parties can work together to find solutions.
There are currently 71 signed agreements and Memoranda of Understanding between the two countries.
“This meeting underscores our collective commitment to the consolidation of our bilateral cooperation and strategic partnership. The BNC provides us with a platform to assess progress in all areas of cooperation and most importantly, it provides us with an opportunity to expand the areas of cooperation for the mutual benefits our respective countries and peoples,” said President Zuma.
President Hage called on the Ministers to work hard towards the implementation of the signed agreements.
“The problem in Africa is that we have beautiful policies on glossy paper but they gather dust. Our charge with this BNC is not to wait until the last minute to implement the projects… We must strive to use our friendship to create favourable conditions for our people.”
The Namibian delegation also used the opportunity to thank the South African government for drought relief.
“This is proof of good neighbourliness. This is what the big brother does for the small ones,” said President Hage.
Joint Communiqué On the Occasion of the Second Session of South Africa-Namibia Bi-National Commission
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At the invitation of the President of the Republic of South Africa, His Excellency, Mr. Jacob Gedleyihlekisa Zuma, the President of the Republic of Namibia, His Excellency, Dr. Hage G. Geingob visited South Africa from 6 to 7 October 2016.
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Both Heads of State were accompanied by delegations of Ministers and Senior Government Officials. The meeting of the two Heads of State was preceded by a Ministerial Meeting which took place on 6 October 2016 and a Senior Official’s Meeting which was held from 4-5 October 2016.
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During the official talks, the two Heads of State reviewed a wide range of bilateral, regional and international issues. They expressed satisfaction at the strong bilateral relations existing between the two countries which are informed by historical, political, economic, social and cultural ties.
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The two leaders noted with appreciation the expansive nature of the bilateral cooperation which includes, amongst others; trade and investment, energy, agriculture, tourism, infrastructure development, mining, defence and security, immigration, environment, transport and communications.
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During the official talks, the two Heads of State noted that the Memorandum of Understanding on Higher Education has been finalised. They directed the Ministers of Higher Education to sign this MoU at their earliest convenience. The Heads of State also welcomed signing of the Terms of Reference of the Joint Committee of Experts on the Orange River Boundary.
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The two Presidents directed the various Committees under the Bi-National Commission to meet regularly and expedite the implementation of strategic projects aimed at sustainable development and the well-being of the people of the two countries.
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The two Heads of State also exchanged views on the political and security developments as well as the consideration of democracy in the region. In this regard, they reaffirmed their commitment to working together in pursuit of sustainable peace and stability in the region.
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Both Presidents congratulated the people of the United Republic of Tanzania, the Republic of Seychelles and the Republic of Zambia for conducting peaceful elections.
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Furthermore, they expressed their concern on the continuing peace and security challenges in the Continent, particularly the emergence of extremism and terrorism and highlighted the need for coordinated and collaborative Continental efforts to deal with these challenges.
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They also expressed their deep commitment to African unity and implementation of Agenda 2063 and its Action Plan.
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Regarding international matters, the two Heads of State reaffirmed their commitment to the United Nations Agenda 2030 and reiterated their common view on the need to reform the United Nations Security Council and other multilateral institutions, including the Bretton Woods institutions to better represent the interests of the developing countries. In this context, the two Heads of State further agreed to coordinate positions at multilateral fora.
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The two Presidents reaffirmed their solidarity with the people of the Saharawi Arab Democratic Republic, the people of Palestine, the Leadership of the Polisario Front and the PLO respectively.
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His Excellency, President Hage G. Geingob expressed his appreciation for the invitation extended to him by the Government and the People of the Republic of South Africa and for the warm welcome and hospitality accorded to him and his delegation.
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His Excellency, President Hage G. Geingob extended an invitation to His Excellency, President Jacob Zuma to visit Namibia for the Third Session of the Bi-National Commission (BNC) during 2017 on a date to be mutually determined through diplomatic channels.
Issued by: Department of International Relations and Cooperation
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Commodities, rainfall, instability biggest challenges – African Ministers
Low commodity prices, climate change, and insecurity are forcing many countries to make significant fiscal adjustments, African finance ministers said during the IMF-World Bank Spring Meetings in Washington D.C.
Ministers from four of the hardest hit countries told journalists that falling export revenues are leaving large fiscal deficits and dampening growth prospects.
South Sudan’s finance minister, Stephen Dhieu Dau, said the sharp drop in international oil prices on top of recent political instability, has Africa’s newest country experiencing an extreme income shock. “Our currency has lost 80 percent since last year, and inflation reached 730 percent in August,” he said.
Dhieu Dau, said South Sudan is trying to implement reforms as well as a peace agreement to end the civil war that started in 2013, but the country needs help. “The international community participation to help our government and our reform agenda, I think is paramount,” Dhieu Dau said.
The effects of weak global demand is not limited to the continent’s large commodity exporters. Benin’s finance minister, Romuald Wadagni said whatever happens in neighboring Nigeria is felt in Benin. “Half of our revenues come from trade with Nigeria,” he said.
Benin is looking to expand its tourism and agriculture sectors as a means to diversify revenue sources, but the country is struggling with high debt. Wadagni said they started discussions recently with the IMF about a possible program.
Meanwhile, Guinea’s first-ever woman finance minister, Malado Kaba, said her country is on the verge of favorably concluding its macroeconomic program supported by the IMF, which helped it turn the corner from the dire circumstances left by the Ebola epidemic. “So now our growth estimate is of 5.2 percent, we’ve been able to substantially reduce inflation to about 8.4 percent, and we have reconstituted our foreign reserves to three months of imports,” Kaba said.
Zambia’s Trade and Commerce minister, Felix Mutati, said the country’s mining sector has been hit hard by copper prices that have fallen by more than 40 percent, and power shortages caused by climate change. “With poor rains, our power generation was down by 50 percent,” he said.
But when asked about Africa’s future prospects, Mutati said the problems that the region is facing can be solved through greater integration and trade. “It doesn’t matter how you fall, it’s all about how you rise,” Mutati said.
» View the webcast of the African Finance Ministers’ Press Briefing here.
Extracts from the Transcript of the African Department Press Briefing
MR. SELASSIE: Good afternoon. Thank you very much for joining us today. I'll be – I'll try and be as brief as I can. Before I take your questions, I just want to lay out the economic outlook for Sub-Saharan Africa, our assessment of what the policy requirements are to address the current challenges facing the region and how promote strong, durable and inclusive growth, that's very much needed.
Economic growth in Sub-Saharan Africa this year is set to be – to drop to its lowest level in more than 20 years. We are, at the moment, projecting close to the order of 1.4 percent as you will have seen, lower than last year's 3.5 percent and indeed, much below the 5 percent and more that the region was enjoying between 2010 and 2014. Two broad factors explain this development. The external environment facing the region has deteriorated. Notably, commodity prices, of course, but also financial market conditions have tightened. The policy response in many of the countries that have been mostly affected by these shocks has also been delayed and unfortunately, incomplete, raising uncertainty, deterring private investment and stifling new sources of growth.
All this said, I think we should guard against swinging from the strong optimism of the recent years about the region's economic prospects to the excess pessimism that seems to be seeping in. The full picture that we see is one of multi-speed growth in which the regional aggregate number of 1.4 percent growth this year considerably masks the diversity that prevails across the region. In particular, close to half the countries in the region – about 19 out of 45 odd countries in Sub-Saharan Africa continue to enjoy robust growth, including the likes of Côte d’Ivoire, Ethiopia, Senegal, and Tanzania with economic output set to expand by 6 percent or more by this year.
And speaking to this point, this year, in contrast to the weighted average growth of 1.4 percent medium growth is going to be of the order of 3.8 percent. It is, however, the commodity exporters that are under severe economic strain. This is particularly the case for oil exporters, notably, Angola and Nigeria and five of the six countries in the central African monetary – economic and monetary union. The near-term prospects have worsened significantly in recent months. In these countries, the pain is spreading from the oil sector to the non-oil part of the economy.
Conditions are also particularly difficult in South Africa at the moment, another country which relies on – to a significant degree on commodity exports with outputs expansion expected to be (inaudible) this year or next year. There are, of course, also, as you may know, challenges. With these challenges are compounded in some country cases by a – the failure of acute drought in the Lesotho, Malawi, Zambia and Zimbabwe.
Looking ahead, we are projecting a modest pickup in economic activity. We think this is possible, but provided strong action is taken. Subject to reforms being initiated promptly in the coming months, growth should recover to around 3 percent next year and to highest still rates of growth beyond that. But again, I would stress that this pickup in activity is highly predicated on countries taking action to address the large imbalances and addressing the policy and certainty in some of the largest economies in the region in particular. And, of course, a return to high growth rates is imperative to address the much needed job creation in the region and to continue to bear down on poverty.
What then are the policies called for at this juncture? The hardest hit countries, especially of oil – especially oil exporters, need to act promptly as the adverse external environment that they're facing is set to endure and existing buffers have been exhausted. In these countries, growth rebound will require a sustained adjustment effort based on a comprehensive and internally coherent, consistent set of policies to re-establish macro stability. This implies allowing exchange rates to fully absorb the external pressures that these country – that those countries particularly outside monetary unions are facing, coupled with strong and orderly adjustment to contain fiscal deficits and a tight monetary stance focused on containing inflation.
For countries within monetary unions, the fiscal adjustment requirement is likely to be stronger still in dealing with this shock and central bank financing of excessive deficits needs to be curtailed. Let me also – let me stress here that for these countries that are being impacted by low commodity prices, adjustment is unavoidable given the scale and persistent nature of the shock. The options rather are between disorderly and the more orderly adjustment process. Further delays in grappling with the elevated macro imbalances are certain to undermine near-term growth and delay robust and job rates recovery.
On the other hand, adoption of a comprehensive and internally coherent set of policies we think would allow a much more orderly adjustment process and facilitate a quicker growth recovery. Indeed, if this adjustment is anchored in a credible medium-term framework and is supported by concessional financing, the place of adjustment can be made more gradual attenuating the near-term growth impact significantly.
I think at this juncture, a few words are also in order about the countries that are continuing to enjoy strong growth in the region. In many cases, despite the strong growth outcomes of recent years, fiscal deficits have widened somewhat and debt levels have started to increase. To a large extent, this reflects the stepped up in development spending countries have been undertaking. While policy action is not as urgent for us – for the hardest hit countries that I was talking about earlier, here too, with some exceptions, there is a need to strike a better balance between increased investment spending needs and debt sustainability considerations. In this respect, we're strongly advocating reforms aimed at increasing revenue mobilization which will be particularly helpful, of course, by containing fiscal deficits while sustaining increased investments.
Wrapping up, I would like to stress that we view Sub-Saharan Africa as a region of immense economic potential, but in some cases, this potential has been stymied at the moment by elevated macroeconomic imbalances and rising policy uncertainty. Addressing these challenges promptly and forcefully will be important in the coming months.
Let me stop here and would like to just mention that our semi-annual regional economic outlook for Sub-Saharan Africa, which will discuss these issues broadly supported by some analytic studies also will be published on October 25. We'll be launching this in Cameroon and Yaounde and Nairobi on that day. Thank you for your attention and I'll take – answer your questions. Thank you.
QUESTIONER: In your view, how deep is the Zambian problem and what is the outlook of the economy – going forward? And as you may be aware, Zambian government who undertake an IMF Program in rescuing the country's economy, how best should the government handle this so that the majority poor are not harmed severely?
QUESTIONER: What would you recommend to countries like, Nigeria, Cameroon and Chad that are faced with a terrible humanitarian crisis caused by the activities of Boko Haram terrorists which is draining their resources and preventing them from investing in infrastructure and even diversifying their economy? Finally, the situation in Africa is so tragic. There's poverty almost everywhere because of corruption and maybe fond ideas of slave trade. Do you think that Africa really needs a Marshall Plan at this point in time? Thank you.
MR. SELASSIE: Let me give you – perhaps take these two questions first. On Zambia, it is indeed [true] that Zambia is one of the countries that although not an oil exporter, of course, heavily relies on cooper exports and the decline in cooper prices has been a very severe shock to the economy. This has been coupled – with more domestic sources of pressure on the fiscal accounts, particularly, elevated spending in a number of areas. So, I think the government has recognized the need for adjustment. So, I think the roots – perhaps, the – the first order of priority is going to be putting in place a significant fiscal adjustment. This needs to be coupled and supported by monetary policy steps, of course. You know, a lot of the work we do and a lot of the advice that we do with countries, we try and pay heed to the effect that fiscal policy adjustment can have on the poor. So, very important aspect of our policy advice is to provide ideas, suggestions on how the tax rates can be made – taxing – tax adjustments are required and they can be made as progressive as possible. But importantly, adjustment programs are supported by safety nets that can help to minimize the impact on the poor.
One of the challenges in Zambia, I think, is going to be trying to address the significant subsidies there are - a few subsidies in particular. In general, subsidies tends to be very regressive, so it tends to take up a lot of budgetary allocation and the beneficiaries tend to be the more wealthier segments of society. So, I think there is a way to reduce the subsidy, eliminate the subsidy while putting in place protectionist measures for the people that will be impacted most and have much lower levels of income.
I think those are the two – two-fold questions. Yes, I mean, as if the challenges caused by the commodity price decline, oil price decline for Chad, Cameroon and Nigeria wasn't bad enough. You also have parts of these countries being impacted by conflict. Of course, ensuring that there is peace and stability is the first order priority and resources are going to have to be devoted for that, but I think that there should also be ways of providing resources to address the challenges being caused by conflict in the overall context of the strong adjustment measures that all three economies need. So, it is an important allocation. It is an important priority and any work the government is doing on economic policies has to carve out resources for that.
You raised an existential question about Africa. I think that we should avoid generalization about what Africa needs. I think what is needed varies from country to country. So, it's a difficult question to answer. But as a whole, do some African countries continue to need aid, official assistance? Absolutely. Some countries need – this assistance to be in the form of temporary type support. In other cases, for the poorest countries, you need more grants, concessional type financing. So, the support is needed, but equally important, I think countries building the revenue mobilization – I mean, as I mentioned in my opening in my remarks earlier, I think countries developing their tax base is going to be imperative.
QUESTIONER: My question is about one of the general themes that the IMF is bringing to the table which is the rise in the west in Europe and the United States of this sort of populous sentiment which there is a concern that that could lead to an anti-globalization movement which could be damaging to trade links and everything else
Now, the EU and the U.S. actually do want to have more reciprocal trade with Africa, but many African countries say they aren’t ready to open up their borders as much to trade coming in. Probably because they don’t feel as if they can protect their own economies as much. They’re not as competitive.
But there is advice that’s being given to the continent as a whole about opening up those borders a lot more. So at this point, do you think it’s time for African nations to really consider changing the way that they do trade and making it more reciprocal?
» View the webcast of the African Department’s Press Briefing here.
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Repurposing the World Bank and the MDBs to meet 21st century challenges
Finance and development ministers gathered in Washington this weekend at the World Bank’s annual meetings had an ambitious agenda of topics to discuss. But the truth is, it is not nearly ambitious enough. A new CGD report by a high level commission of development and finance experts explains why and what should happen.
The report, titled Multilateral Development Banking for This Century’s Development Challenges, urges ministers to rethink priorities of the World Bank in the light of changes in the multilateral system, that now includes more than six other large and politically significant regional banks. The banks as a group need to be better equipped to tackle urgent transnational problems of our time – for example, the risk of antibiotic resistance and forced migration.
Shareholders ought to think of these banks not as individual institutions competing for scarce resources, but as a system of complementary actors. They should build on the key role of the World Bank as the only truly global bank in addressing transnational problems, while looking to the full potential of the regional banks to address their borrowing members’ growing investment needs, particularly but not only in infrastructure.
“A unique moment for the MDBs to embrace ambition”
The year-long assessment of the MDBs by CGD’s High Level Panel on the Future of Multilateral Development Banking, co-chaired by Montek Ahluwalia, Lawrence Summers, and Andres Velasco, lays out a vision for the shareholders of the World Bank and major regional MDBs for the next decade, taking into account the ambitious commitments made by the world’s leaders in 2015: the Paris climate accord and the Sustainable Development Goals. It argues that the MDBs can certainly be part of the solution to today’s global challenges.
“We see a unique moment for the MDBs to embrace ambition,” the report says. “We strongly believe that the MDB model – combining technical and financial capacity in a politically-backed cooperative – remains the best available vehicle for tackling the critical new challenges facing the global community.”
The report recognizes the fundamental importance of addressing climate change to further progress on development, and the catastrophe that will unfold in the absence of truly global-level collective action in financing and deploying climate-friendly programs in the developing world. To this end, the Panel recommends a new mandate for the World Bank to focus on global public goods, enabled with $10 billion in new grant resources to research and deployment of new energy and health technologies, to foster the nascent “green” bonds market, and to issue loans and guarantees on terms that encourage borrowers to take on the upfront costs of climate mitigation. This would be as a complement to the traditional lending operations of the bank.
Sustainability should be at the heart of what the World Bank does. So, the panel further proposes that the name of the IBRD (the World Bank’s main mechanism for lending to middle-income countries) be changed to IBRSD, the International Bank for Reconstruction and Sustainable Development.
Time for the World Bank to set the trend again
Over many decades the World Bank has set the trend, for example, taking leadership on lending to poor countries in the 1960s. Now the panel is calling on it to take leadership on raising grant money, setting priorities for collective action and deploying resources when appropriate to other institutions to address global public goods.
This proposed shift for the World Bank also highlights the need for clearer differentiation between its own role in infrastructure and that of the regional development banks. The World Bank’s role should be to do only what is truly “green.” The report suggests the regional banks take the lead in increasing MDB-supported infrastructure investment from $50 billion to $200 billion a year, with a view to crowding in much more in private capital, as well as sustaining traditional country operations in education, agriculture and other sectors.
The panel offers recommendations in five areas: global public goods, sustainable infrastructure, the role of “concessional” financing, crisis management, and a shareholder-led governance agenda. In each of these areas, CGD’s high level panel recognizes the tremendous potential of the MDBs, as well as the risks and missed opportunities associated with a business-as-usual approach.
We very much hope that the high level panel’s report will spur fresh thinking among the banks’ shareholders about the future roles and mandates of the different MDBs. Ultimately, it is the ministers gathered this weekend in Washington, and in future meetings, who have the power to set a strategic path for the MDB system as a whole. Today’s global challenges demand that they take up the charge.
Regional Development Bank heads respond to CGD’s Panel on Multilateral Development Banking
We, the Heads of the Regional Development Banks (RDBs), welcome the report of the Center for Global Development’s High-Level Panel on Multilateral Development Banking. This is an important report at a critical moment, as we move into high gear to deliver on the ambition of the 2030 Agenda for Sustainable Development and the historic Paris agreement on climate. As the Panel recognizes, the Multilateral Development Banks (MDBs) are essential and uniquely-qualified players in the international financial architecture.
In particular, we applaud the approach taken by the Panel to view the MDBs as a system; we believe that only by embracing a system-wide approach can shareholders ensure that the full potential of the MDBs is exploited. In this regard, we welcome the Panel’s suggestion for periodic system-wide reviews by shareholders to look at governance structures, capacities and needs, including capital, across institutions and regions, with a view to setting a comprehensive and coherent strategic agenda.
We take note of the Panel’s recommendations that aim to strengthen the collective MDB response to delivering global public goods. We welcome the report’s findings that the RDBs should take an increasing role in operations supporting global and regional public goods, and that RDBs – because of their regional focus – are better placed to meet financing needs for climate-smart and resilient infrastructure. We are pleased that the report also recognizes our role as a trusted partner to our client countries, which has also allowed us to support key policy and institutional reforms in a variety of areas, including education and health, as well as our role in crowding in private investment.
At the same time, we believe that any discussions of focal areas across institutions should be based on a granular assessment of areas of specialist expertise and operational capacity. Notably, the RDBs have proven track records of innovation and they have each developed areas of world-class expertise which could be leveraged more effectively across the system. Our four institutions have begun to examine how to deploy our particular strengths and further enhance our individual and collective efforts to deliver the greatest impact in our respective countries of operation.
In the coming months and years, we have only a short window of opportunity to put in place the enhancements to the MDB system which would allow us to maximize our collective impact in supporting the delivery of the 2030 Agenda. Let us work together to ensure that the system of MDBs as a whole will deliver to its maximum potential.
Akinwumi ADESINA, President of the African Development Bank
Takehiko NAKAO, President of the Asian Development Bank
Suma CHAKRABARTI, President of the European Bank for Reconstruction and Development
Luis Alberto MORENO, President of the Inter-American Bank Group
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IMFC calls for strengthening foundations for inclusive and sustainable growth
Finance ministers and central bank governors representing the International Monetary Fund’s 189 member countries convened on 8 October 2016 as the policy-guiding International Monetary and Financial Committee (IMFC) in Washington DC to discuss and explore critical economic and financial issues facing the global economy and the world’s monetary system.
Communiqué of the Thirty-Fourth Meeting of the International Monetary and Financial Committee
Chaired by Mr. Agustín Carstens, Governor of the Bank of Mexico
Global economy
The global economic recovery continues slowly and unevenly, and growth is expected to pick up only slightly next year, mostly on account of emerging market economies. Economic performance and resilience have improved in some economies and near-term risks in financial markets have largely abated. Still, the outlook remains subdued against the backdrop of modest global demand growth and remaining output gaps; a slowdown in global trade, investment, and productivity; and rising geopolitical uncertainty and medium-term financial risks. The persistently low growth has exposed underlying structural weaknesses, and risks further dampening potential growth and prospects for inclusiveness. Lower productivity growth and remaining crisis legacies in advanced economies, challenges from ongoing adjustments and vulnerabilities in some large emerging market economies, and the effects of lower commodity prices on exporting countries continue to weigh down the outlook. Overall, uncertainty and downside risks are elevated, while longstanding headwinds persist.
The global economy has benefited tremendously from globalization and technological change. However, the outlook is increasingly threatened by inward-looking policies, including protectionism, and stalled reforms. We commit to design and implement policies to address the concerns of those who have been left behind and to ensure that everyone has the opportunity to benefit from globalization and technological change.
Policy response
We reinforce our commitment to strong, sustainable, inclusive, job-rich, and more balanced growth. We will use all policy tools – structural reforms, fiscal and monetary policies – both individually and collectively. We are strengthening policies to bolster confidence and resilience, safeguard financial stability, and ensure that all members of society have the opportunity to benefit from globalization and technological change. We encourage countries hit hard by a persistent decline in their terms of trade to proceed with their policy adjustment. We recognize that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will refrain from competitive devaluations and will not target our exchange rates for competitive purposes. We reaffirm our commitment to communicate policy stances clearly and resist all forms of protectionism. We will also redouble our commitment to maintain economic openness and reinvigorate global trade as a critical means to boost global growth. Our priorities include:
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Growth-friendly fiscal policy. All countries should use fiscal policy flexibly and make tax policy and public expenditure more growth-friendly, including by prioritizing high-quality investment, while enhancing resilience and ensuring public debt as a share of GDP is on a sustainable path. Appropriate and credible fiscal policies along these lines will support growth, job creation, and confidence. Well-designed tax structures, as well as income policies where appropriate, can promote stronger growth, protect the vulnerable, and reduce inequality.
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Continued supportive monetary policy. In advanced economies where inflation is still below target and output gaps remain negative, monetary policy should remain accommodative, consistent with central banks’ mandates, mindful of financial stability risks, and underpinned by credible policy frameworks. Monetary policy by itself cannot achieve sustainable and balanced growth, and hence must be accompanied by other supportive policies.
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Prioritized structural reforms. Structural reforms are key to raising potential growth and would benefit from synergies with other policies to support demand. Tailored to country-specific circumstances, reforms must be reinvigorated, carefully chosen, and appropriately sequenced to yield the maximum growth benefits, raise productivity, and create opportunities for all, while assisting those who bear the burden of adjustment to globalization and technological change.
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Effective financial sector policies. To help ensure that the financial sector is robust enough to support growth and development, we will intensify efforts to address remaining crisis legacy issues in some advanced economies and vulnerabilities in some emerging market economies, while monitoring potential financial stability risks associated with prolonged low or negative interest rates, systemic market liquidity risks, and nonbank intermediation. Timely, full, and consistent implementation of the agreed financial sector reform agenda remains an important priority, as well as finalizing remaining elements of the regulatory framework as soon as possible.
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Stronger global cooperation. Concerted effort at the international level is key to boost global trade; sustain progress on global rebalancing; manage spillovers from economic and non-economic shocks; ensure a fair, efficient, and transparent international tax environment; tackle the sources and channels of terrorist financing, corruption, and illicit financial flows; and address the decline in correspondent banking relationships. Comprehensive, coordinated, and time-consistent policy actions that exploit synergies would amplify positive cross-border spillover effects of individual policy actions. We will continue strengthening the international financial architecture, including the global financial safety net.
IMF operations
The IMF has a key role to play in supporting the membership at this challenging time.
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Policy advice and surveillance. To improve the policy mix for strong, sustainable, inclusive, job-rich, and more balanced growth, we support the work to: further enhance the consistency of the IMF’s fiscal policy advice, including on medium-term fiscal frameworks and by finalizing the work on assessing fiscal space, consistent with debt sustainability, and integrating it into country consultations; analyze how tax systems could have an effect on macroeconomic stability risks; and examine the implications of very low or negative interest rates, including their side effects. We support efforts to identify high-priority structural reforms in line with country-specific macroeconomic circumstances and structural factors, and encourage the IMF to continue to explore synergies and tradeoffs of different domestic policies in Article IV discussions. In this context, we take note of the ongoing work on developing a toolkit to support the formulation and implementation of structural reform recommendations in surveillance, and on expanding the infrastructure policy support initiative to more pilot countries. We support the IMF’s examination of the drivers of the global productivity slowdown and the intention to provide policy recommendations. We look forward to the review of countries’ experience with the IMF’s institutional view on the liberalization and management of capital flows, with a view to identifying emerging issues, as well as the future work on macroprudential policies, which taken together will help provide tailored and consistent policy advice in addressing macroeconomic and financial stability risks. We support the analysis of macrofinancial linkages in bilateral surveillance, drawing on the recent pilot cases.
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The International Monetary System (IMS) and the support of multilateralism: We reiterate that strong domestic policies and effective IMF surveillance remain the keystone of crisis prevention. We welcome the recent work on further strengthening the global financial safety net, and call on the IMF to intensify cooperation with regional financing arrangements, including through the joint test run between the IMF and the Chiang Mai Initiative Multilateralization. We look forward to work by the IMF and other institutions on state-contingent debt instruments. We look forward to finalizing the ongoing review of the IMF’s lending toolkit to further enhance its effectiveness. We welcome the recent inclusion of the renminbi into the SDR basket, and look forward to the forthcoming examination of the possible broader use of the SDR. We call on the IMF to work toward enhancing international economic cooperation, including to facilitate the global adjustment process. We look forward to the IMF’s analysis of the drivers and policy implications of the global trade slowdown and the economic benefits of trade.
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Opportunities for all: We look forward to further work on the impacts of globalization, emerging technologies, and digitalization. We welcome further work identifying the reasons behind rising inequality in some countries, including analyzing the causes behind the declining share of labor in output and understanding the impact of policies on inequality in both advanced and developing economies.
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Low-income countries (LICs): We call on the IMF to continue efforts, in cooperation with other relevant international organizations, to help countries meet the 2030 Sustainable Development Goals and to integrate deliverables under the post-2015 development agenda into the IMF’s work. Work on LICs should focus on continued efforts to support growth and boost resilience in fragile states, and on helping those countries hardest-hit by commodity price shocks, including by designing a consistent set of policies that support growth. We call on the IMF to support LICs in their efforts to address investment needs, and provide advice on striking the appropriate balance between financing development needs and preserving debt sustainability. In this context, we support the work in progress to review the debt sustainability framework for LICs. We look forward to discussions on how to enhance countries’ access to precautionary financial support and reviewing current practices in regard to blending resources between the General Resources Account and the Poverty Reduction and Growth Trust (PRGT) under IMF programs. We look forward to the findings of the forthcoming review of social objectives in PRGT-supported programs. We welcome the extension of zero interest rates on all IMF concessional lending facilities for at least the next two years, through end-2018. We welcome the support received so far, including by new contributors, to mobilize additional loan resources for the PRGT, and call on members’ further support to the successful conclusion of these efforts.
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Capacity building: We welcome the IMF’s focus on providing technical assistance and training to complement policy analysis, especially supporting LICs as well as fragile states and small states to boost their policy formulation and implementation capacities and strengthen economic institutions. Priorities for capacity building include: enhancing domestic revenue mobilization; building fiscal capacity in small and fragile states; broadening work on international taxation, including through the Platform for Collaboration on Tax; expanding capacity to strengthen monetary and financial stability; and supporting financial sector deepening.
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Addressing other challenges facing members: We support the IMF’s work with other international organizations to address the decline in correspondent banking relationships and preserve access to financial services. This would include intensifying AML/CFT and supervisory capacity development support in respondent banks’ jurisdictions, clarifying regulatory expectations, and promoting industry solutions; promoting greater financial inclusion; and helping countries strengthen their institutions to tackle illicit financial flows. We also support work by the IMF to continue integrating inequality, gender analysis, and climate change in surveillance, when macro critical; help commodity exporters and LICs promote economic diversification; help building resilience to natural disasters and climate change; and strengthen analysis and support for countries managing spillovers from non-economic sources, such as large refugee flows and global epidemics. We welcome the entry into force of the Paris Agreement on climate change. We look forward to the forthcoming review of the Guidance Note on the Role of the Fund in Governance Issues.
We extend our sympathy to the governments and people of the Caribbean, especially Haiti, as the region grapples with the impact of Hurricane Matthew. We welcome the IMF’s readiness to help countries deal with the aftermath of this catastrophe.
IMF resources and governance
To help maintain the current lending capacity of the Fund, we welcome the pledges of SDR260 billion (US$360 billion) received from 26 members to ensure the IMF’s continued access to bilateral borrowing under the strengthened governance framework approved by the Executive Board; support the need for continued access to multilateral borrowing agreements; and call for broad participation of the IMF membership including through new agreements.
Looking ahead, we reaffirm our commitment to a strong, quota-based, and adequately resourced IMF to preserve its role at the center of the global financial safety net. We are committed to concluding the 15th General Review of Quotas and agreeing on a new quota formula as a basis for a realignment of quota shares to result in increased shares for dynamic economies in line with their relative positions in the world economy and hence likely in the share of emerging market and developing countries as a whole, while protecting the voice and representation of the poorest members. To provide adequate time to build the necessary broad consensus, we support the Managing Director’s proposal to reset the timetable for completing the 15th Review in line with the above goals by the Spring Meetings of 2019 and no later than the Annual Meetings of 2019, subject to adoption by the Board of Governors. We call on the Executive Board to establish a concrete work agenda to achieve this goal.
We support the efforts of the IMF to harness new technologies – including by improving knowledge management – to increase its agility and effectiveness. We reiterate the importance of maintaining the high quality and improving the diversity of the IMF’s staff. We also support promoting gender diversity in the Executive Board.
Our next meeting will be held in Washington, D.C., on April 22, 2017.
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Statement by Multilateral Development Banks: Delivering on the 2030 Agenda
9 October 2016
The Heads of the African Development Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank Group, the International Finance Corporation, the Islamic Development Bank, the New Development Bank, the World Bank, and the International Monetary Fund issued the following statement today:
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Last year, the Third International Conference on Financing for Development, the UN Sustainable Development Summit, and the 21st Conference of the Parties to the UN Framework Convention on Climate Change yielded some of the most ambitious global commitments ever made – commitments that are critical to improving lives and protecting the planet. The adoption of the 17 SDGs by the international community launched an ambitious 15-year global agenda to end poverty, fight inequality, and tackle climate change, while leaving no one behind.
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MDBs and the IMF play a critical role in supporting their member countries’ efforts to translate the SDGs that underpin this agenda into meaningful country-level targets, policies, programs, and projects needed to achieve them. They provide not only the necessary financing – either directly or by helping to “unlock” and catalyze additional public and private resources – but also policy advice and technical assistance supporting countries to build domestic capacity and to identify needed priority investments with the right standards. At the same time, the IMF and the World Bank are strengthening their debt sustainability assessment tools to ensure that investment scaling-up does not threaten the sustainability of public finances. To address the challenges of the 2030 Agenda for Sustainable Development, we are stepping up efforts – within our respective mandates and governance structures – to make the best possible use of our respective business models, enhance the multiplier effect of our financing, expand our technical assistance, disseminate and share our knowledge and best practices, and provide innovative and integral solutions to multidimensional development problems.
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Throughout 2016 we have continued to enhance our coordination and collaboration, and came together to agree on common actions to address critical issues of the 2030 Agenda such as forced displacement, infrastructure, urbanization, climate finance and private investment. We launched the first Global Infrastructure Forum in April, which brought together public and private partners to highlight opportunities for investment in order to bridge the infrastructure gap, and have already begun working on preparing the second Forum to be held at the same time as the IMF-World Bank Group Spring Meetings in April 2017, focusing on inclusive, sustainable infrastructure. Likewise, we committed to tackle forced displacement at the World Humanitarian Summit in Istanbul in May and we have started launching new facilities to address its root causes. Furthermore, through a special joint Task Force, the MDBs advanced on harmonizing methodologies and common metrics to quantify private finance catalyzed by our institutions. We intend to start jointly reporting measures of private direct mobilization and private cofinancing in 2017, building on existing joint MDB reporting of private climate cofinancing. We will encourage other Development Finance Institutions and OECD to adopt the same methodology, facilitating greater global transparency on the development community’s efforts to catalyze private finance. And finally, for the Habitat III Conference in Quito in October, MDBs will be joining forces to mainstream and implement the UN New Urban Agenda to promote equitable, sustainable, and productive urbanization.
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In Paris, countries committed to make a leap forward towards achieving climate resilience and net-zero emissions from 2050 onwards. MDBs are deeply committed to this agenda and are aligning our organizations and our joint actions with it. We are developing together a joint climate action partnership aimed at developing a more collaborative and coherent approach, within our respective institutional mandates, to working with countries to implement their NDCs and develop their adaptive capacities. We will focus on scaling up low-carbon and climate-resilient investments for sustainable infrastructure, including in particular speeding the energy transition consistent with the Paris Agreement. We will do this by aligning our financial flows with the countries’ pathways to low-carbon and climate-resilient development, by increasing the predictability and ease of access to concessional resources, such as the Green Climate Fund, and by leveraging private finance for climate investments. In addition, the IMF and the World Bank Group will provide technical assistance to countries seeking to implement carbon taxation as an efficient tool for containing emissions.
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Forced displacement poses a significant challenge to progress on the SDGs, and we have committed to work together on a new humanitarian-development partnership. Concessional financing and support for building institutional capacity for fragile and conflict-affected states are as important as ever. Additionally, we are working to bridge the gap between humanitarian and development assistance by ensuring support to countries hosting large numbers of refugees. Two new facilities are helping to do this: the World Bank’s Global Concessional Financing Facility, part of its Global Crisis Response Platform, and the European Investment Bank’s new Resilience Initiative for EU’s Southern Neighborhood and Western Balkans. Those complement other efforts already in place, such as IDB’s Alliance for Prosperity Plan in the Northern Triangle.
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In line with the Addis Ababa Action Agenda and the G20 call, MDBs have been individually and collectively implementing several measures to optimize our balance sheets, from exposure exchange agreements that diversify our portfolio concentration to merging and leveraging concessional windows with accumulated equity and increased liquidity. Furthermore, we are stepping up internal revenue and expenditure actions to increase available medium-term capital as part of a Value-for-Money agenda. Given the growing financing demands that the 2030 Agenda entails and the financial capacity limits which many of our institutions are reaching, efforts to optimize capital will continue. These efforts should be complemented by other mechanisms to reinforce MDB resources, including through necessary shareholder support.
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Going forward, we will redouble our efforts to scale-up financing for development as well as the capacity to achieve the SDGs by leveraging, mobilizing, and catalyzing resources at all levels. To that end, we are stepping up our efforts to further build up our range of instruments that share risk in non-sovereign operations with private investors, including syndications, structured finance, mezzanine financing, credit guarantee programs, hedging structures, and equity exposure. Moreover, we are working with our public and private sector clients, helping them create an enabling environment conducive to increased domestic and international investments. Likewise, MDBs and the IMF are expanding our policy guidance and technical assistance to support country efforts to increase their domestic resource mobilization. Furthermore, we are ramping up our support to countries to build data capacity to measure and monitor progress towards their global commitments. To build up a pipeline of well-prepared projects, in recent years, many of our institutions have launched new project preparation facilities. On the capacity building front, MDBs continue to collaborate across a number of joint platforms.
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The 2030 Agenda is a trillion-dollar one, and official assistance flows will be nowhere near enough to finance it. Meeting the SDGs will require building a financing framework that channels more resources from more sources, particularly the private sector. This requires enhancing existing partnerships and building new ones with the private sector – including institutional investors – to mobilize financing for development. With our country clients in the lead, we reaffirm our commitment as development institutions to deepen and widen our partnerships with both the private and public sectors. We will individually and collectively bring in emerging and existing global, regional, sub-regional and national partner institutions and, together, contribute to the success of the 2030 Agenda, helping countries to leverage the financing and knowledge of the MDBs and the IMF to address their most pressing development challenges and, as such, contribute to achieving the transformative outcomes that the SDGs entail.
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President Museveni hails the African Union Commission for engaging the private sector in mineral resource development policies
The African Union Commission (AUC) and the Uganda Chamber of Mines and Petroleum which holds the Chair of the Association of Eastern African Chamber of Mines and Petroleum hosted from 5-6 October 2016, a high level Conference in Kampala, Uganda under the theme: “Attracting Exploration Investment to Uganda’s Mineral Sector to realize its maximum value”.
The purpose of the Conference was to bring together the Directors of National Geological Surveys and the Captains of industry from the Eastern African Region with particular focus on developing a Public Private Partnership (PPP) framework for mobilizing exploration investments. The conference covered African countries and also brought together expertise from the African Union Commission, the Organization of African Geological Surveys (OAGS), the Mining Industries Association of Southern Africa (MIASA), the African Minerals and Geoscience Centre (AMGC), as well as experts from Australia and Brazil.
Addressing the Conference, President H. E. Yoweri Kaguta Museveni mentioned that although the Government has established an Exploration Department within the Ministry of Energy and Minerals, the Private Sector was welcome to partner with the Government in the exploration. He emphasized that Uganda was only interested in value addition. He gave example of the iron ore deposits which have a quality content of up to 99% or steel and as such exporting it in raw would be exporting a lot of jobs.
The Ugandan President, who was attending the Conference as the Guest of Honour, also welcomed the Partnership Public Private in the Minerals Sector. He highlighted the importance of the Minerals Sector, which he said, contributes a lot to the growth of African economies. He hailed the African Union Commission for constantly engaging the Private Sector in its Mineral Resource Development Policies.
In his keynote speech on behalf of H.E. Mrs. Fatima Haram Acyl, the Commissioner for Trade and Industry, Mr. Frank Mugyenyi, Senior Industry Advisor for the Department of Trade and Industry of the AUC, observed that the Africa Mining Vision (AMV) which is a forward-looking African Union framework for mineral resource development, seeks to create a transparent, equitable, and optimal exploitation of mineral resources to underpin broad-based sustainable growth and social-economic development.
He explained that the vision is motivated by the widely recognized need to unleash the broader value of the minerals sector beyond just mining and beyond just taxing and collecting rents to one that leads and contributes to the broader vision of industrialization and structural transformation of African economies.
According to the Senior Industry Advisor, a global Strategy to optimally use Africa’s resources that benefit all Africans is urgently needed for Africa. “Africa cannot afford to have it wrong this time around, there is no room for error and this can only be achieved through broadening partnerships and bringing the private sector on board in policy planning and implementation,” he stressed.
He recalled all the mineral resources related decisions made by the AU Heads of State and Governments and highlighted the progress made by the Commission in implementing these decisions. Mr. Mugyenyi furthermore underscored the fact that Africa has a clear sight of where it is going and urged participants to re-focus on how to achieve the aspirations of the African people expressed in agenda 2063 and Common African Position on Agenda 2063.
“This requires collective and concerted efforts of everybody involved in the Minerals sector development. The private sector, the public sector, the academia, the media, the civil society and other non-state actors, women, youth and indeed everyone involved in the minerals resource development,” he emphasized.
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Globalization must leave no one behind, senior UN officials tell joint meeting on socio-economic issues
At a joint meeting of the United Nations Economic and Social Council (ECOSOC) and the General Assembly’s main economic and financial committee, the respective heads of the two UN bodies on 7 October 2016 highlighted the need for the benefits of globalization to reach all countries and all peoples.
“We have a responsibility to promote narratives that acknowledge that sustainable prosperity for all will come through inclusion rather than exclusion,” said ECOSOC President Frederick Shava in his opening remarks to the joint meeting.
Similarly in his own remarks, Dian Triansyah Djani, Chair of the General Assembly’s Second Committee highlighted: “In our world of gaps, there should be special attention of enabling global environment for countries, in particular the developing countries, to provide a considerable share to the global achievements of the SDGs [Sustainable Development Goals].”
‘2030 Agenda provides answers to questions global citizens are asking’
The annual joint meeting is held every year to discuss important economic and financial issues among both bodies’ membership. This year it was under the theme The changing political economy of globalization: Multilateral institutions and the 2030 Agenda.
Further in his remarks, Mr. Djani highlighted the importance of collective action for the achievement of SDGs. “We, collectively, will have to demonstrate that the 2030 Agenda provides the answers to the questions being asked by global citizens. The many should work together so the few helpless one are not left behind because of globalization,” he emphasized.
Also, Mr. Shava underlined the need to change the “political narratives” that advocate for isolationism, “We have a responsibility to promote narratives that acknowledge that sustainable prosperity for all will come through inclusion rather than exclusion,” he said.
“Too daunting are the challenges of climate change, poverty, conflicts and terrorism, to name a few. The increasingly complex nature of these challenges calls for global solutions as no one country can deal with these issues alone,” the ECOSOC President added.
World transformed by seismic events – from iPhone to financial meltdown in 18 months
The joint meeting today also featured a keynote address by Pulitzer Prize winning journalist and New York Times Op-Ed columnist Thomas Friedman who in his speech stressed: “We were in an age of acceleration where we needed to reimagine and reflect.” The world is witnessing three non-linear accelerations all at the same time: the market (globalization), Mother Nature (climate change, population growth), and Moore’s Law (technology).
These three accelerations are reshaping the world’s politics, geopolitics, the workplace, community, and ethics, he continued.
Mr. Freidman went on to recount a series of seismic social and technological events that occurred in 2007, when, among others: Steve Jobs unveiled the iPhone beginning the smartphone/apps revolution; Facebook went global; Twitter went global; Airbnb hit the marketplace; “Amazon came out with something called the Kindle;” Github emerged; and IBM launched Watson.
Further, he said the cost of sequencing a human genome went from around $100 million down to $1, Google bought YouTube, Intel went off silicon to expand Moore’s Law, and cloud computing took off. “2007 was the biggest technological inflection point since Gutenberg invented the printing press, and we missed it [because] the 2008 economic and financial collapse happened right after,” he said.
Subsequently, the market is being fundamentally reshaped. “This is not your grandmother’s globalization,” said Mr. Friedman. Although trade in physical goods and financial products and services – the hallmarks of 20th century globalization – have flattened out and even declined in recent years, the globalization of flows means the world has never been more interconnected.
“And you haven’t seen anything yet,” he continued, noting that the flows of friends, of renters, opinions, crowdfunding, instant messages, peer-to-peer payments, pictures, education, college courses, design tools, music, video, news, cloud-based tools, searches, raw video, “all of these flows are exploding, and they are the new globalization tying us together.” As such, he argued that the country that built infrastructure and educated its people to connect up to more [of these] flows will be the country that thrives in the 21st century.
Mother Nature is exponentially changing too, through climate change, population growth, and biodiversity loss. “You’re all familiar with this one, but Mother Nature is going through her own exponential changes, which we’re seeing in Florida right now,” he noted.
Mr. Friedman went on to stress that the workplace would be irrevocably altered and it is necessary to convert artificial intelligence to intelligent assistance and algorithms to allow workers to adapt to exponential change. Lifelong learning will be essential, and “building walls will not stop this change.” Politics and geopolitics would have to adapt as well, as parties will need to become more heterodox and less ideological, or fail.
Lastly, ethics will have to evolve. “If you want to make something, you’re living in the greatest period in history, but if you want to break something, you’re also living in the greatest period in history,” he said. “What every human being believes now matters.” It will be necessary to bring back the ‘Golden Rule’ through strong families and healthy communities.
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tralac’s Daily News Selection
The selection: Friday, 7 October 2016
Starting on Monday, in Antananarivo: COMESA Summit to address integration challenges
The top decision-making organs of COMESA are scheduled to begin meeting (Monday 10 October) in Antananarivo, Madagascar ahead of the 19th Heads of State Summit on 18-19 October. The implementation of the decisions that have made by the Council of Ministers in the past which member States have not yet domesticated will be addressed. The meetings will be seeking to establish the challenges member States face with a view to assist them. Some of these include the Protocol on Gradual Relaxation and Eventual Elimination of Visas (Visa Protocol) which have been ratified by all Member States but the implementation has been slow. The same applies to the Protocol on Free Movement of Persons, Services, Labour and the Right of Establishment and Residence (Free Movement Protocol).
Other decisions expected from the policy organs meetings will be on the how to energize the implementation of the Tripartite Free Trade Area. Launched in June 2015 in Egypt, 17 countries out of the 26 in COMESA, the East African Community and the Southern African Development Community have so far signed the agreement but none has ratified. The COMESA Council of Ministers which meets on 13-14 October 2016 is expected to provide policy direction on how to hasten the pace of the implementation of the tripartite agreement.
African constituency statements at International Monetary and Financial Committee meeting:
Statement by Pravin Gordhan (Minister of Finance, South Africa, pdf): We welcome the continued focus on structural reform needs for developing countries and look forward to the finalization of a toolkit that will guide the identification and prioritization of reforms, and we re-iterate that these efforts must take country-specific macroeconomic circumstances and structural factors into account. We support the integration of macro-critical issues such as those pertaining to inequality and gender; and we look forward to finalization of the ongoing work on harnessing the demographic dividends in sub-Saharan Africa. Although we take note of the Fund’s work on trade integration in the region, we encourage a more focused effort to enhance the Fund’s contribution to achieving this goal. We support the development of a framework that will help countries identify fiscal space, and look forward to the integration of the analytical framework within Article IV consultations. Similarly, we welcome the integration of climate change issues in the Fund’s surveillance. Nevertheless, we urge that Fund surveillance includes more analysis of spillover effects of developments in advanced economies on frontier economies that are becoming more integrated to international market, as well as spillovers across the region as economies become more interconnected.
Statement by Rosine Coulibaly/Sori (Minister of Economy, Finance and Development, Burkina Faso, pdf): That said, we share the view that Fund’s surveillance should better integrate the effects and implications of climate change and security challenges given their potential macroeconomic nature. Moreover, the Fund has a toolkit on economic diversification and structural transformation which, based on the persistent dependence of many LICs on commodity exports, does not seem to fulfill its objective. Thus the Fund’s own agenda should include a stocktaking in the use of this toolkit by member countries.
Statement by Mukhisa Kituyi (Secretary-General, UNCTAD, pdf): However, even if the access to developed countries markets can and should be improved, this will not solve the problem of subdued demand from those economies. Developing countries cannot excessively rely on those markets, and need to seek instead a more balanced approach by strengthening both domestic and regional markets. In several regions, strengthening regional integration can be an important instrument for production upgrading and diversification. This is particularly true in Africa:
Trade regulators must strike a delicate balance (UNCTAD)
Regulators must strike a delicate balance between protecting consumers and the environment on the one hand and not restricting trade on the other, a top UNCTAD official said on Wednesday at a meeting on trade regulations. "Regulations should be designed and implemented in smart ways that maximize non-trade objectives – that is to protect consumers, the environment, plants and animals – while not negatively impacting the movement of goods and services," UNCTAD Secretary-General Mukhisa Kituyi said. "We have to find a balance between improving smart regulations and the facilitation of trade," he said. As tariffs have fallen to historic lows, NTMs have continued to grow. They now affect some 96% of global trade. [View the presentations from this week’s NTM/PRONTO expert meeting]
South Africa: Government asked to challenge bid to block US imports (IOL)
The United States government has asked the South African government to challenge an attempt by South African poultry and pork producers to once again block US imports of those products into South Africa. The SA Poultry Association (SAPA) and SA Pork Producers Organisation (SAPPO) have gone to court seeking orders which would block the imports again. SAPA and SAPPO said lifting the health restrictions has exposed South African consumers to salmonella bacteria in US chicken porcine reproductive and respiratory syndrome in US pork. Last week, James Sumner, president of the US Poultry and Egg Export Council said if SAPA and SAPPO won their court cases and US poultry and pork imports were again blocked, “it probably would – and should – trigger another out-of-cycle review under AGOA”.
US complains of disadvantage as EU-SADC trade deal kicks in (Business Day)
In a briefing on Thursday, Laird Treiber, economic counsellor at the US embassy in Pretoria, characterised the disadvantage "significant", affecting "maybe a couple of hundred" products. USTR Michael Froman pressed Trade and Industry Minister Rob Davies on the need to negotiate a more reciprocal trade relationship when African trade ministers met in Washington last week to discuss the future of the African Growth and Opportunity Act. A senior US trade official said Davies’s response had been disappointing.
Nigeria not gaining from international trade agreements – expert (Vanguard)
Dr John Isemede, an international trade expert with UNIDO, says Nigeria is really not gaining from its international trade agreements. Isemede told newsmen in Lagos that many of Nigeria’s trade agreements had even worked to its disadvantage due to poor export capacity in non-oil and low industrial capacity. Isemede said that that the best way out of economic recession would be to look inwards and utilise resources from all 774 local governments across the country to create jobs and food security. “Nigeria currently has signed more than 100 trade policies in the last decade, none of which has impact, because we lack adequate capacity unlike our other countries in these agreements. There is a need to review trade agreements and policies at this time because most of the developed countries we see today grew by closing down their borders for a while."
Namibia invested N$110 billion in SA last year (The Namibian)
Namibia invested N$110 billion in South Africa last year in the form of pension funds, long-term insurance and other investments, President Hage Geingob told an investment meeting in Johannesburg yesterday. “I must, however, note that the trade deficit disproportionately tilts in favour of South Africa. In 2014, Namibian imports from South Africa were recorded at N$51 billion, while exports to South Africa were recorded at N$8 billion,” he stated. Last year, the trade deficit widened, and imports were recorded at N$62 billion, while exports totaled N$11,4 billion. [Invest in Namibia 2016 conference (8-9 November): Promoting investment for inclusive growth and industrialisation]
Nine Angolan ministers prepare Angola/China investment forum in Luanda (MacauHub)
In addition to the Minister and Chief of Staff of the President, Manuel da Cruz Neto, the commission includes the ministers of Finance, Interior, Planning and Territorial Development, Economy, Industry, Energy and Water, Transport and Trade, as well as the governor the National Bank of Angola and other government officials linked to attracting private investment. The Angola/China investment forum, to be held in Luanda later this year, aims to “enhance the development of synergies for the promotion of business partnerships and investments between businesspeople from both countries,” the document said.
Mauritius: Tea sector support scheme launched (GoM)
The tea sector support scheme to give a new boost to the tea industry was launched yesterday at Nouvelle France by the Minister of Agro-Industry and Food Security, Mr Mahen Seeruttun. In the 80’s, Mauritius used to produce some 8 000 tonnes of tea annually but now we produce some 1 500 tonnes only and exportation brings a turnover of around Rs 13 million only to the economy, recalled the Minister, adding that this scheme will help better contribute to the development of the sector. A Chinese businessman has already invested some Rs 200 million for the opening of a tea factory in Mauritius, he added. Moreover, the Ministry of Agro-Industry and Food Security will work with the Tea Research Institute of China for the diversification of the tea industry and the production of new tea varieties.
ZimTrade conducts market survey in DRC (NewsDay)
ZIMTRADE, the country’s export promotion body, is currently conducting a market survey in Lubumbashi, Democratic Republic of the Congo, to identify trade and investment opportunities for Zimbabwean products and services. The survey, ZimTrade said, would also provide Zimbabwean companies with verified information on potential business counterparts, off-distribution channels, payment systems and customs procedures among others.
Kilifi could have biggest port in East Africa, Governor Kingi says (Daily Nation)
Addressing hundreds of investors and delegates at the start of the three-day Kilifi County International Investments Conference at Pwani University on Thursday afternoon, Kilifi Governor Amason Kingi said the port, if established, would open avenues for more investment opportunities in the region. “It will be able to decongest the Mombasa port, giving investors and businessmen an opportunity due to its logistical location. It will also harbour industrial parks processes zone and other components found in infrastructure,” said Mr Kingi said, while addressing investors at the conference.
Trends in remittances, 2016: a new normal of slow growth (World Bank)
Sub-Saharan Africa: Remittance flows to the region are projected to decline by 0.5% in 2016, compared to the 0.8% decline of 2015. Faced with weak earnings from commodity exports and other balance of payments difficulties, many countries in the region – Angola, Nigeria, Sudan, for example – have imposed exchange controls. Nigeria, which accounts for two-thirds of the regions’ remittance inflows, is projected to register a decline of 2.2% in 2016 following a 1.8% decline in 2015. A significant parallel market exchange rate premium - in September 2016, the market rate was around 450 Nairas/$ compared to the official rate of around 320 - has dampened flows through the official channels. Flows to Nigeria, Somalia and other countries in the region are also impacted by a disruption to the services of many money transfer operators due to de-risking behavior by international correspondent banks.
World’s food import bill expected to fall 11% on back of record harvests (FAO)
With prices for most of the internationally-traded agricultural commodities, especially for the staple grains remaining relatively ‘low and stable,’ it is expected the global food import prices will fall to a six-year low, the UN agricultural agency said today. The agency noted that the value of total food imports is expected to fall 11% (in US dollar terms) in 2016 to 1.168 trillion, as lower bills for livestock products and cereal-based foodstuffs more than offset higher bills for fish, fruit and vegetables, oils and sugar.
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Trade regulators must strike a delicate balance
Regulators must strike a delicate balance between protecting consumers and the environment on the one hand and not restricting trade on the other, a top UNCTAD official said on Wednesday at a meeting on trade regulations.
With global trade set to grow at its slowest pace since 2009, some analysts now see new opportunity for trade growth in the more efficient application of health, environmental and other regulations, commonly known as non-tariff measures (NTMs).
“Regulations should be designed and implemented in smart ways that maximize non-trade objectives – that is to protect consumers, the environment, plants and animals – while not negatively impacting the movement of goods and services,” UNCTAD Secretary-General Mukhisa Kituyi said.
“We have to find a balance between improving smart regulations and the facilitation of trade,” he said.
As tariffs have fallen to historic lows, NTMs have continued to grow. They now affect some 96% of global trade.
“When I was trade minister of Kenya, the introduction of traceability requirements for flowers and vegetables entering the European market was a nightmare,” Dr. Kituyi said.
“Most producers were small-scale women’s groups, and to ask these groups to comply with traceability for certification purposes represented a very dramatic barrier to market access,” Dr. Kituyi said.
One growing concern is that NTMs disproportionately affect the kinds of agricultural and textile goods produced in the poorest countries.
“We found that the inability of Least Developed Countries to comply with NTMs from G20 countries cost them an estimated $23 billion a year,” he said, adding that removing these measures could boost LDC exports by 15%.
Despite the growing prevalence of NTMs, researchers and policy makers still lack data and common definitions. A new NTM database, launched by UNCTAD and six other bodies in July 2016, helps to fill these gaps.
The database classifies NTMs by both product and restriction. It now covers 57 countries amounting to over 80% of world trade. It will also benefit producers.
An exporter of cut flowers from Kenya, for example, can look under “Cut Flowers” to learn about import requirements into the European Union.
A professor from the University of Sussex, Alan Winters, said the next challenge will be to aggregate the data and to look more closely at how different measures affect trade in specific sectors.
Background
Trade policy measures have shifted. The difference between trade policy, narrowly defined, and domestic regulations is increasingly blurred, and the ability to gain market access increasingly depends on compliance with trade regulatory measures.
Many such non-tariff measures (NTMs), such as sanitary and phytosanitary measures and technical barriers to trade, are also directly linked to the Sustainable Development Goals. A Multi-Agency Support Team group has developed the taxonomy – the international classification of NTMs – that has become a common language in the international trade community, including for Governments, regional and international organizations and researchers. Several members of the Multi-Agency Support Team group are also involved in the collection of data on NTMs.
What non-tariff measures are and why they are important
NTMs cover a broad range of policies, including traditional trade policy instruments, such as quotas or price controls, and regulatory and technical measures that stem from important nontrade-related objectives with regard to health and environmental protection. NTMs have become increasingly important for policymakers as tariffs have been significantly reduced, unilaterally and in trade agreements. The ability to gain and benefit from market access increasingly depends on compliance with trade regulatory measures such as sanitary requirements and goods standards, yet such NTMs represent a challenge for exporters, importers and policymakers. Many NTMs such as sanitary and phytosanitary measures and technical barriers to trade are directly linked to the Sustainable Development Goals. However, NTMs disproportionately negatively affect lower-income country trade.
Transparency on non-tariff measures needed
The Trade Analysis Information System, the largest global database on NTMs, will be launched at this meeting. This database – covering 56 countries accounting for 80 per cent of world trade, and containing more than 38,000 measures – is the most comprehensive database on NTMs, and its objective is to increase transparency in and understanding of regulations and trade control measures as, to date, systematic information on NTMs has been scarce and difficult to obtain. UNCTAD coordinates international efforts to reduce the transparency gap in NTMs.
Multi-Agency Support Team and non-tariff measures classification
The common language of the international trade community in this area is the international classification on NTMs, which was developed by the eight international organizations noted above, along with State observers.
The two-day Expert Meeting on Non-tariff Measures (NTMs) and Productivity, Non-Tariff Measures and Openness (PRONTO) will revise and further develop the classification, bringing together senior trade and development experts, policymakers, trade negotiators, academics and other stakeholders to examine challenges and progress made in the common understanding of NTMs and transparency. The event will be combined with a PRONTO meeting on NTMs. The PRONTO project is a collaborative research project on regulatory barriers to trade supported by the European Commmission.
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South African government asked to challenge bid to block US imports
The United States government has asked the South African government to challenge an attempt by South African poultry and pork producers to once again block US imports of those products into South Africa.
Health restrictions which had blocked the import of US poultry, pork and beef for many years were only lifted earlier this year after protracted negotiations between the two governments.
The SA Poultry Association (SAPA) and SA Pork Producers Organisation (SAPPO) have gone to court seeking orders which would block the imports again.
SAPA and SAPPO said lifting the health restrictions has exposed South African consumers to salmonella bacteria in US chicken porcine reproductive and respiratory syndrome (PRRS) in US pork.
Lifting the long restrictions on US meat imports was the main condition for South Africa to continue enjoying duty-free access to the US for key exports under AGOA – the African Growth and Opportunity Act.
Last week, James Sumner, president of the US Poultry and Egg Export Council (USAPEEC) said if SAPA and SAPPO won their court cases and US poultry and pork imports were again blocked, “it probably would – and should – trigger another out-of-cycle review under AGOA”.
Such a review would once again threaten South Africa’s AGOA market access benefits. Automobiles, wines and fruits have been the biggest exports.
Laird Treiber, economic counsellor at the US embassy in Pretoria, said during a phone press conference on Thursday that the US had asked the South African government to challenge the SAPA and SAPPO cases. He would not say if there would be another AGOA out of cycle review if the applications succeeded.
Treiber said the US was satisfied that trade in US poultry, pork and beef was again flowing since the health restrictions had been lifted.
However US poultry sales in SA were only about one third to one half of what the US had expected. A 65 000 ton annual quota had been negotiated.
Sumner had given various reasons for the low sales, mainly higher prices of US poultry which still carry 37 percent import duties, whereas European Union poultry enters SA duty free.
But US poultry exporters say some SA supermarket chains are not buying US poultry because SAPA has succeeded in putting a health stigma on it.
Treiber said there had been limited shipments into SA of US beef so far and only a test shipment of pork.
He also reported back on the AGOA Forum which was held in Washington last week where US and African governments discussed moving towards a more reciprocal trade relationship between the US and Africa when the current iteration of AGOA expires in 2025.
AGOA allows duty-free access to the US market for up to 6 500 different African products but does not require duty-free access for US exports into African markets.
The US wants a more balanced, reciprocal trade relationship, although Treiber stressed that Washington was not demanding fully reciprocal free trade agreements with the much smaller African economies
Other options could be considered, such as African countries binding tariff lines, or lifting tariffs in only some areas such as information and renewable energy technologies and facilitating smoother trade and improving their climates for both international and domestic business.
The US was also ready to consider giving the African countries greater access to the US market that they gave to their markets.
He added that even the US and South African governments would probably discover they were much closer to each other than South Africa now expected, once they sat down and started talking about a trade deal.
SA Trade and Industry Minister Rob Davies told Nedlac last month that he did not think SA and the other members of the Southern African Customs Union (Sacu) would be able to negotiate a free trade area with the US because the US template for free trade agreements was too demanding and inflexible.
It included things like labour and environmental standards and US access to government procurement which would clash with South Africa’s industrialisation policy, Davies had said.
But Treiber said that South Africa already had very robust laws in areas such as labour, environmental protection and protection of investment. The Economic Partnership Agreement which SA and the other SACU countries plus Mozambique had recently signed with the European Union contained much of what the US would want in a free trade agreement with them.
Treiber confirmed that it was the growing disadvantage which US exporters were suffering in African markets relative to their EU and other international competitors, that had prompted Washington to begin exploring a more reciprocal, post-AGOA trade relationship.
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Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development: Communiqué – 2016 Annual Meetings
Communiqué of the ninety-sixth meeting of the G-24 Ministers on International Monetary Affairs and Development, held in Washington, D.C. on October 6, 2016
1. We, the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development, held our ninety-sixth meeting in Washington D.C. on October 6, 2016 with Mauricio Cárdenas, Minister of Finance and Public Credit of Colombia in the Chair; Abdulaziz Mohammed, Minister of Finance and Economic Cooperation of Ethiopia as First Vice-Chair; and Ravi Karunanayake, Minister of Finance of Sri Lanka as Second Vice-Chair.
2. We congratulate Dr. Jim Yong Kim on his reappointment as President of the World Bank Group.
The Global Economy and its Implications for Developing Countries
3. We are concerned with the prolonged weakness in the global recovery and increasing levels of inequality. Global demand is weak and the growth outlook in advanced economies (AEs) remains subdued. The growth prospects of emerging market and developing countries (EMDCs) are improving but they vary greatly across countries, with some commodity exporters experiencing a sharp slowdown. High downside risks remain from monetary policy normalization in the U.S., rebalancing in China, volatile financial markets, political tensions, uncertainties related to Brexit, and the refugee crisis; all of which could further disrupt growth. A broad-based policy response from countries, including coordinated measures, is urgently needed to boost confidence and global growth. We commit to using all policy measures, including monetary and fiscal policies, and structural reforms to boost growth and global demand.
4. Multilateral actions are increasingly important to support a stronger global recovery. In this regard, we support further focus on the IMF’s lending toolkit and technical assistance to address diverse country needs, including instruments to address the negative impact of sharp drops in commodity prices and non-economic shocks. The difficulties faced by commodity-exporting countries, in particular low-income countries (LICs), require special attention. We support efforts to further strengthen the Global Financial Safety Net (GFSN) with an adequately-resourced, quota-based IMF at its center. We welcome the IMF’s initiatives to develop synergies with regional financial arrangements, while respecting their institutional arrangements. We call for more even-handed IMF surveillance, program-design, and monitoring that are better tailored to country-specific circumstances. Greater spillovers from policies implemented in systemically important economies call for enhanced surveillance and policy coordination. Against this background, we welcome the stocktaking of the effectiveness of the International Monetary System and IMF’s review of country experiences in handling capital flows. We also look forward to the review of the Multiple Currency Practices with a view to clarifying members’ obligations. We welcome the official inclusion of the Renminbi in the Special Drawing Rights (SDR) basket in October 2016 and exploring options for broader use of the SDR.
5. We note with concern the slowdown in the growth of global trade, the increase in protectionist trends, and the backlash against globalization, mainly in AEs. An increase in inward looking policies poses serious risks to global growth with adverse impact on the growth prospects of EMDCs, and calls for the implementation of coordinated policies to ensure that the benefits of global integration are more widely shared. While global inequality has shown a modest decline, due to narrowing income gaps between countries, reducing it further while addressing the currently high levels of inequality within countries can boost growth and reduce the number of people left behind by globalization. In addition, the global community has a shared responsibility to resist protectionist measures and work toward creating an enabling multilateral trade environment that fosters trade and productivity growth in goods, e-commerce, and services.
6. We continue to call on the IMF, the World Bank Group (WBG), and global financial regulators to strengthen their work toward finding concrete solutions to address the decline of correspondent banking relationships (CBRs) and avoid further financial exclusion. We note the Action Plan of the Financial Stability Board (FSB) to address this issue and look forward to tangible results. We welcome the FSB’s work to address the vulnerabilities arising from market-based finance, which have grown significantly in recent years, and its impact on EMDCs. We are concerned about the adverse effects of illicit financial flows on our countries and call for strengthened support of the IMF and the WBG in the broader effort to combat illicit financial flows, including through the Stolen Assets Recovery Initiative (StAR).
7. We welcome the WBG’s initiatives to support EMDCs that are disproportionately affected by the refugee crisis and other non-economic shocks. The newly launched Global Concessional Financing Facility is a right step in this direction. We welcome the WBG’s report on the “Forcibly Displaced” and the analytical work by IMF staff on the economic impact of conflicts and the refugee crisis in the Middle East and North Africa, which indicate a shift to a developmental approach to this challenge, and encourage continued work in the assessment of the economic costs of conflict and participation in global initiatives to manage the impact of refugee flows. We call for more work and coordination among international organizations, following the WBG’s report on migration and development, to improve the understanding of, and efficiently address, the challenges of migration.
Strengthening Foundations for Inclusive and Sustainable Growth
8. Boosting and sustaining growth and improving the livelihoods for all are central to achieving the Sustainable Development Goals (SDGs). Delivering on these priorities requires efforts at the country level as well as the global level. Economic diversification and other measures to mitigate the impact of external shocks, particularly for commodity exporting and agro-dependent countries, are more urgent than ever. Depending on our country circumstances, appropriate policies to improve agricultural productivity, further industrialize, including in agro-industry, and tap into the potential of digital technology are crucial for transforming our economies and reinvigorating growth. It is also important to integrate our economies more effectively in global value chains, whose structures are evolving in response to rapidly changing technology and direction of trade.
9. Policies should also aim at improving social protection, broadening financial inclusion, addressing under-employment and unemployment, including that of the youth, and fostering effective female labor force participation. We underscore the importance of the IMF, the WBG, and other international organizations to scale up their support to countries’ strategies and programs to achieve inclusive and sustainable growth, and to realize the SDGs. We also call on international financial institutions (IFIs) to mobilize financing for and facilitate South-South cooperation. In this context, we look forward to integration of the features of asset-based financing practices into global finance.
10. We emphasize the vital importance of increasing investment in infrastructure in EMDCs, which will boost demand, support inclusive growth, and reduce poverty. Investing in green infrastructure presents an opportunity to change the patterns of sustainable production and consumption, and contribute to climate goals. Strengthening public investments and efficiency, efforts to prepare a pipeline of bankable projects, encouraging and enhancing the participation of the private sector as an additional source of capital, are necessary to overcome the large and growing infrastructure needs and financing requirements in these countries. Although some EMDCs are able to scale up infrastructure investments, we note that other developing countries severely impacted by external shocks face serious constraints of narrowing fiscal space and tighter access to external financing. We look forward to ambitious efforts by Multilateral Development Banks (MDBs) to effectively support sustainable infrastructure financing in EMDCs and to develop effective approaches and instruments to crowd in private resources.
11. We welcome ongoing efforts of MDBs to optimize the use of their own balance sheets and encourage those that have not undertaken these efforts to do so while safeguarding their financial strength, and call for further dialogue towards ensuring the adequate capitalization of MDBs. We welcome the IMF’s infrastructure policy support initiative to strengthen the capacity of countries’ public institutions involved in infrastructure investment and raise the growth payoff of such investment while preserving debt sustainability. We welcome the G20 Hangzhou Action Plan, which emphasizes the role of infrastructure development in the growth agenda and highlights the key role of MDBs.
12. We continue to underscore the importance of enhanced support from IFIs and donors for capacity building on domestic resource mobilization in developing countries. We support the work done by the Addis Tax Initiative and welcome the Platform for Collaboration on Taxation by the IMF, OECD, UN and the WBG. We encourage all countries to join the BEPS inclusive framework on an equal footing, and developing countries in particular to commit to signing the Convention on Mutual Administrative Assistance in Tax Matters. We encourage greater participation of developing countries in the activities of the Committee of Experts on International Cooperation in Tax Matters, which should be upgraded into an intergovernmental level. We stress the importance of improving the international standards on tax transparency, as well as of enhancing the availability and the international exchange of beneficial ownership information of legal persons and legal arrangements.
13. We note the ongoing review of the Joint World Bank-IMF Debt Sustainability Framework for Low-Income Countries that is scheduled for completion by year-end. We call for a forward-looking and more flexible framework that considers that effective use of borrowed funds should enable productive and social investments, which, in turn, would boost future growth. We encourage the IMF and WBG to continue timely consultations with LICs in this process. We continue to encourage the use of the enhanced contractual clauses in sovereign debt issues to facilitate timely and orderly debt restructuring. We take note of the large stock of sovereign debt that does not include these provisions, and support work to explore solutions to address potential holdout problems for such debt.
14. Concessional finance remains an important source of development financing for LICs. We reiterate our call for developed countries to fulfill their commitments to official development assistance (ODA). We look forward to the successful 18threplenishment of International Development Association (IDA). We note the proposal to leverage IDA resources, and, in this context, we stress the necessity of preserving IDA’s concessionality. We call for taking steps to smoothen graduation of IDA countries by providing them adequate transitional support and waiving the acceleration repayments clause. We support the proposal to create an IDA private sector window under the IFC and MIGA, and are pleased with the focus on fragile and conflict situations (FCS). We also support the proposal of doubling the IDA allocations to FCS and, once approved, urge the World Bank to take appropriate measures to facilitate the implementation of projects under this significant increase in funding. We urge the international community to work with small middle-income countries to improve their debt sustainability, including through access to concessional financing. We also call for a more representative governance structure in IDA to increase the voice and participation of EMDCs.
15. As we move to climate action post-Paris Agreement, we look forward to a concrete roadmap from developed countries to meet their Climate Finance commitments, which will greatly support EMDCs in implementing climate action plans identified in their Intended Nationally Determined Contributions (INDCs). For addressing climate change, provision of finance from developed countries largely through grants is critical. We look forward to a successful COP 22 meeting in Marrakech, Morocco in November 2016.
Reform of the Bretton Woods Institutions
16. We support a quota-based, adequately resourced IMF that is less dependent on borrowed resources. We call for the full implementation of the 2010 IMF Quota and Governance Reforms, including on Board Representation. We call for early completion of the 15th General Review of Quotas, including a new quota formula that further shifts quota shares to dynamic EMDCs, reflecting their growing weight in the global economy, while protecting the quota share of the poorest countries and puts greater weight to GDP PPP, within the GDP blend. The realignment of quotas must not come at the expense of other EMDCs. We reiterate our call for a third Chair for Sub-Saharan Africa in the IMF Executive Board, provided it does not come at the expense of other EMDCs’ Chairs. We call on the Fund to update the country-classification into EMDC and AE groups consistent with their economic position on matters related to governance issues.
17. On the WBG’s ongoing shareholding review, we reiterate the centrality of the Istanbul Principles of enhancing the voice and representation of developing and transition countries (DTCs) aimed at strengthening the credibility and the legitimacy of the WBG by achieving equitable voting power between the DTCs and the developed countries, while protecting the smallest poor countries. We note the recent agreement on the dynamic formula, which will provide one important input to the next phase of realigning the voting shares. We caution against regressive outcomes that could compromise the gains of the 2010 reform. We take note of the Governors’ formula guidance, that the outcomes of the formula should be broadly acceptable to membership. As the review moves to this subsequent phase, we underscore the multilateral commitment to increasing the voting power of DTCs as a group, according to the Istanbul Principles, and call for exploring options and rules to ensure this outcome, including through forbearance, cap of dilution of individual DTCs, and increasing basic votes. We also support the consideration of different options to increase set basic votes.
18. We note the WBG’s Forward Look exercise that sets out the vision of its role in global development in the next fifteen years. We support continuing the WBG’s assistance to reduce poverty, ensure shared prosperity and achieve the SDGs across a diverse group of high, middle, and low-income countries, while also remaining focused on the poorest and countries affected by fragility and conflict. We welcome the creation of the Global Crises Response Platform. We underscore the importance of scaled-up support to boost quality infrastructure investments, build resilience to natural disasters, and cope with rapid urbanization, which will substantially contribute to both growth and the SDGs. We look forward to greater efforts to crowd in more private financing, which the WBG is well positioned to help achieve. The Forward Look proposal of a large increase in annual lending from the International Bank for Reconstruction and Development (IBRD) is necessary to carry out its ambition, and this will require building the WBG’s financial strength. In this regard, all options to strengthen the financial capacity of the IBRD and International Finance Corporation (IFC) need to be considered.
19. We welcome the WBG’s modernized Environmental and Social Framework that sets standards for sustainable development to enhance development outcomes of the WBG’s projects, gives a greater role to the use of borrower frameworks to manage environmental and social risks, and focuses on capacity and institution building. We look forward to an implementation plan and appropriate Guidance to staff to facilitate the smooth transition to nationally adaptive modalities of engagement with borrowers that is cognizant of international instruments ratified by the client countries and delivers the necessary support and funding for capacity building at the country level.
20. We call for strengthening of efforts in the IMF and the WBG towards greater representation of under-represented regions and countries in the form of recruitment and career progression to achieve balanced regional and gender representation, including at managerial levels. We reiterate the importance of staff diversity and gender balance at all levels, including diversity of educational institutions.
Other Matters
21. We thank Colombia for its Chairmanship of the Group and welcome Ethiopia as the incoming Chair. We also welcome Peru as the Second Vice-Chair. The next meeting of the G-24 Ministers is expected to take place on April 20, 2017 in Washington, D.C.
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Remittances to developing countries expected to grow at weak pace in 2016 and beyond
Amid a backdrop of weak global growth, remittances to developing countries are expected to increase only slightly in 2016, says the World Bank’s latest paper on Migration and Development.
Remittances to low and middle income countries are expected to increase 0.8 percent to $442 billion. The modest recovery this year is largely driven by increases in remittances sent to Latin America and the Caribbean. In contrast, other regions seeing a decline in the earnings sent home by migrants. This follows a decline in the level of remittances recorded in 2015.
Low oil prices continued to be a factor in reduced remittance flows from Russia and the Gulf Cooperation Council (GCC) countries. In addition, structural factors have also played a role in dampening remittances growth. Anti-money laundering efforts have prompted banks to close down accounts of money transfer operators, diverting activity to informal channels. Policies favoring employment of nationals over migrant workers have discouraged demand for migrant workers in the GCC countries. Also, exchange controls in countries from Nigeria to Venezuela have disrupted the flow of remittances.
The global growth of remittances to developing countries is projected to remain modest at about 3.5 percent over the next two years. Developing regions other than Latin America and the Caribbean are projected to have growth of 2 percent or lower.
The global average cost of sending $200 remained at 7.6 percent in the second quarter of 2016. Average costs have dropped from 9.8 percent in 2008. The highest-cost region to send money to continues to be Sub-Saharan Africa at 9.6 percent while it is the least costly to send remittances to the South Asia region.
“Remittances continue to be an important component of the global economy, surpassing international aid. However this “new normal” of weak growth in remittances could present challenges for millions of families that rely heavily on these flows. This, in turn, can seriously impact the economies of many countries around the world bringing on a new set of challenges to economic growth,” said Augusto Lopez-Claros, Director of the World Bank’s Global Indicators Group.
The World Bank paper on “Migration and Development: A Role for the World Bank Group” provides an overview of the fundamental drivers of migration and the associated economic benefits and challenges. The paper also outlines a role for the World Bank Group and International Financial Institutions (IFIs) to take on in this area, thus complementing the New York Declaration on Refugees and Migrants agreed on at the United Nations (UN) Summit on Refugees and Migrants held on September 19, 2016. IFIs can contribute to the global migration agenda in four areas: i) financing migration programs; ii) addressing the fundamental drivers of migration; iii) maximizing the benefits and managing the risks of migration in sending and receiving countries; and iv) providing knowledge for informed policy making and improving public perceptions.
The paper notes that there are about 250 million international migrants and almost three times as many internal migrants. Out of these, there are 21.3 million refugees (including 5.2 million Palestinian refugees). Although the number of refugees has increased considerably recently, it has not reached the historically high levels seen in the early 1990s. Intra-regional migration is substantial and South-South migration outpaces South-North migration. Inequality, demographics and climate change continue to be the main drivers of economic migration.
“Migration is overwhelmingly beneficial but there are some costs that bias public perceptions towards the negative. As the global community prepares to define a global compact on migration by 2018, game-changing ideas are needed to harness the benefits and mitigate the risks associated with migration. Viewing migration through a common lens of reducing poverty and boosting prosperity can provide a unifying framework for a comprehensive response,” said Dilip Ratha, a lead author of the paper and head of the Global Knowledge Partnership on Migration and Development (KNOMAD).
Regional Remittance Trends
East Asia and the Pacific: The outlook for remittance flows for the region has worsened due to weak global economic prospects and de-risking, leading to decrease in growth of remittances to 2.1 percent in 2016 compared to 4.1 percent in 2015. The Philippines is likely to see the slowest remittance expansion in the past decade, to 2.2 percent, reflecting a decline in overseas worker deployments. Remittance inflows to Vietnam’s southern hub, Ho Chi Min City, increased by 4 percent during the first seven months of 2016. Pacific Island countries have seen some pick-up of remittance inflows due to strong migrant outflows to Australia, New Zealand, and the U.S.
Europe and Central Asia: Remittances to the region are estimated to fall further, by another 4.0 percent in 2016 after a drastic 22.5 percent decrease in 2015, due to the depreciation of the Ruble against the U.S. dollar and a weak economy in Russia. Most hard hit are Turkmenistan, Uzbekistan and Tajikistan. Countries where the growth of remittances is expected to be positive in 2016 include Bulgaria (3.9 percent), Montenegro (3.8 percent), Bosnia and Herzegovina (3.3 percent), Serbia (2.9 percent), Macedonia (2.8 percent), Romania (2.7 percent), Turkey (1.6 percent), Kosovo (1.5 percent) and Albania (0.9 percent).
Latin America and the Caribbean: Remittances flows to the region increased during the first eight months of 2016. Two factors are responsible for this: i) Recovery of the US economy, which is in its seventh year of expansion, and ii) a slight recovery in Spain in the second quarter of 2016. Remittances are expected to grow by 6.3 percent and reach $72 billion by the end of 2016. From January to August 2016, the year-on-year growth rates in remittance inflows were: Mexico 6.6 percent, El Salvador 6 percent, Honduras 6.4 percent, and Guatemala 15 percent. In Colombia, remittances from the US increased by 12 percent and from Spain by 19 percent during the first half of 2016.
Middle East and North Africa: Remittances to the region are expected to increase by 1.5 percent in 2016 due to a low-base effect given the 5.7 percent decline in 2015. However, it is expected that remittances from the GCC countries would decline. Egypt, Jordan and Yemen, large recipients of remittances, would be impacted the most. In Egypt, the largest remittance recipient in the region, remittance flows through the formal channels are impacted by further depreciation of the Egyptian Pound and emergence of a black market exchange rate premium.
South Asian Region: Remittances to the region are expected to decline by 2.3 percent in 2016, following a 1.6 percent decline in 2015. Remittances from the GCC countries continued to decline due to lower oil prices and labor market ‘nationalization’ policies in Saudi Arabia. In 2016, remittance flows are expected to decline by 5 percent in India and 3.5 percent in Bangladesh, whereas they are expected to grow by 5.1 percent in Pakistan and 1.6 percent in Sri Lanka.
Sub-Saharan Africa: Remittance flows to the region are projected to decline by 0.5 percent in 2016, compared to the 0.8 percent decline of 2015. Faced with weak earnings from commodity exports and other balance of payments difficulties, many countries in the region – Angola, Nigeria, and Sudan, for example – have imposed exchange controls. Nigeria, which accounts for two-thirds of the regions’ remittance inflows, is projected to register a decline of 2.2 percent in 2016 following a 1.8 percent decline in 2015. A significant parallel market exchange rate premium – in September 2016, the market rate was around 450 Nairas/$ compared to the official rate of around 320 – has dampened flows through the official channels. Flows to Nigeria, Somalia and other countries in the region are also impacted by a disruption to the services of many money transfer operators due to de-risking behavior by international correspondent banks.
UN Summit on Large Movements of Refugees and Migrants
The year 2016 marks an important turning point in global migration governance: the United Nations General Assembly (UNGA) hosted a summit meeting, on September 19, to address large movements of refugees and migrants, and welcomed the International Organization for Migration (IOM) to become a UN-related organization. The New York Declaration on Refugees and Migrants proposes two global compacts: A Comprehensive Refugee Response Framework and a Global Compact for Safe, Orderly, and Regular Migration. Negotiations on both compacts are expected to continue through 2017, with final adoption expected in 2018.
The multi-faceted nature of migration will require partnerships with other UN organizations, multilateral development banks, civil society, and the private sector. Viewing migration through the lens of reducing poverty and sharing prosperity while respecting human rights can provide a unifying framework for operationalizing the Bank Group’s knowledge on migration and mobilizing its financial resources and convening power.
Also, on September 20 2016, the United States hosted a Leaders’ Summit on Refugees. The outcome of this Summit include: i) an increase of funding to humanitarian appeals and international organizations by approximately $4.5 billion over 2015 levels; ii) almost doubled the number of refugees through resettlement or other legal pathways in 2016; and iii) access to education for one million refugee children globally and access to lawful work for one million refugees globally. President Obama also announced the launch of the World Bank’s new Global Concessional Financing Facility.
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Nigeria not gaining from international trade agreements – expert
Dr John Isemede, an international trade expert with UNIDO, says Nigeria is really not gaining from its international trade agreements. Isemede told newsmen in Lagos that many of Nigeria’s trade agreements had even worked to its disadvantage due to poor export capacity in non-oil and low industrial capacity.
He said that it was regrettable that in spite of its over 550 trade agreements, Nigeria could still be in a recession “It is a bitter truth that Nigeria has gained almost nothing from trade agreements that we are into. Nigeria is not really doing business with the world, but just trading,” he said.
Isemede said that that the best way out of economic recession would be to look inwards and utilise resources from all 774 local governments across the country to create jobs and food security.
“Nigeria currently has signed more than 100 trade policies in the last decade, none of which has impact, because we lack adequate capacity unlike our other countries in these agreements.
“There is a need to review trade agreements and policies at this time because most of the developed countries we see today grew by closing down their borders for a while.
“Take a look at AGOA for instance. For 10 years, only very few exporters have been able to export under the platform due to lack of poor information and proper documentation.
“We have rice mills and farms that are barely functioning, except for the new intervention of the UNIDO and Bank of Industry to empower farmers and this apparently is not enough.
“Most of the nation’s farm produce have been rejected in the EU countries due to the high amount of pesticides, and poor storage methods, yet we are the highest producer of most of those foods. For instance, our yams, cassava, sesame seeds, shea butter are being freely exported under documentation from countries like Ghana, Cote’d Voire,” he said.
Isemede said that these countries were beating us to it because of poor marketing capacity.
“Informal export and import trade has also taken over the country and smuggling accounts for up to 80 per cent,” he said.
Isemede appealed to the Federal Government to introduce new policies to boost the export potential of valued added products in sectors like mining, agriculture and manufacturing.
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The selection: Thursday, 6 October 2016
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Tackling "non-tariff measures", the new frontier for global trade (UNCTAD)
The real untapped potential for further trade growth lies in regulation. Some 96% of world trade is affected by at least one regulation, often referred to as a "non-tariff measure", or NTM. Meeting these formidable, complex and often opaque rules requires financial and technical resources, which means that the smallest and most vulnerable companies and countries pay the heftiest price. This is especially true for exporters from the 48 least developed countries, who lose an estimated $23bn a year – that’s 15% of their exports, which far exceeds the loss incurred by remaining tariffs – because they are unable to comply with non-tariff measures. While these measures and other regulations are legitimate, the sheer number of them continues to fragment trade. And we can expect the importance of regulation – particularly when related to public health, safety and the environment – to increase in the future, increasing costs to trade as they do so. This chart shows the percentage by which exports from each of the 48 least developed countries into advanced, G20 countries would increase if not affected by non-tariff measures (in red) and traditional tariffs (blue).
Concluding today, in Geneva: Expert meeting on Non-tariff Measures, and Productivity, Non-Tariff Measures and Openness (PRONTO) meeting
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Simon Barber: ‘US getting its second-hand knickers in a knot’ (Business Day)
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South Africa: Cape business, government meet to minimise the effect of Brexit (Wesgro)
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Bankole calls for stronger trade relations between Nigeria, Britain (Vanguard)
Former speaker of the House of Representatives, Dimeji Bankole, has called on Nigeria and Britain to discuss modalities that would help strengthen trade relations between the two countries. Bankole, who was earlier announced as the new voluntary Honorary Vice President of Africa House and the Africa for Growth Initiative, made the call at the United Kingdom Houses of Parliament, where he addressed VIPs from the world of politics and commerce.
Ethiopia: First International Agro-Industry Investment Forum (UNIDO)
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Angola: study estimates extent of post-harvest loss (FAO)
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Dar, DRC for stronger trade ties (Daily News)
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Egypt, Sudan sign cooperation agreements: highlight need for free trade (Aswat Masriya)
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The path to partnership: the way forward for IGAD and the AU (ISS)
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Illicit financial flows: Zambia losing $3bn annually (Daily Mail)
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South Africa: State corruption and private cartels corrode public trust – Patel (Fin24)
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2016 SME Competitiveness Outlook (ITC)
In addition to 35 country profiles detailing strengths and weaknesses in SME competitiveness performance, this year’s SME Competitiveness Outlook includes regional snapshots highlighting product lines with unexploited export and diversification opportunities. The Outlook finds that most regions could tap into significant unexploited export potential by directing regulatory efforts to boost SME competitiveness. In sub-Saharan Africa, the fresh food sector accounts for over 30% of the region’s unexploited export potential; metal and basic manufacturing for another 20%. The main diversification opportunities lie within the latter sector. A factor undermining the region’s diversification potential is the relatively weak adoption of international management standards, as these standards imply transferable managerial expertise.
Economic integration across Latin America: evidence from labor markets, 1990-2013 (World Bank)
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Global talent flows (World Bank)
A remarkable and underappreciated component of this high-skilled migration surge is the role of females. Figure 1 shows that the stock of high-skilled female immigrants in OECD countries grew by 152% between 1990 and 2010, from 5.7 to 14.4 million. Indeed, in 2010, the stock of high-skilled female migrants surpassed the stock of high-skilled male migrants. The root causes of this surge have yet to be traced out fully. Africa and Asia experienced the largest growth of high-skilled female emigration, indicating the potential role of gender inequalities and labor market challenges in origin countries as push factors.
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Burdensome regulations add costs, stifle small firms’ ability to export
2016 SME Competitiveness Outlook finds that a 10% increase in regulatory burden decreases the value of small-firm exports by 3.2%
Small firms are hit twice as hard as larger enterprises by difficulties in complying with standards and regulations required to do business internationally. According to the International Trade Centre’s (ITC) new 2016 SME Competitiveness Outlook: meeting the standard for trade, a 10% increase in regulatory burden decreases the value of large-firm exports by 1.6% – but cuts small-firm exports by 3.2%. However, when policymakers, standard-setters, and business managers work to reduce compliance costs, it helps improve the competitiveness of small and medium-sized enterprises (SMEs), which can open up new market opportunities for businesses in developing countries.
Released today, the 2016 SME Competitiveness Outlook focuses on standards and regulations. Often described by trade practitioners as non-tariff measures, they are crucial for consumer protection, social and environmental sustainability, as well as for companies’ ability to access markets. Standards matter for running a business and for accessing markets, and are closely linked to the quality and inclusiveness of trade.
Whereas three-quarters of voluntary sustainability standards – those created by business and non-governmental organizations – still originate in countries belonging to the Organisation for Economic Cooperation and Development, the SME Competitiveness Outlook finds that 36% of new voluntary standards are based in developing countries, up from 8% in 1990.
Public and private standards: friends not foes
The Outlook reveals that there is a close relationship between public and voluntary sustainability standards. In fact, 58% of the close to 200 voluntary standards listed on ITC’s Standards Map website reference to the ILO Declaration of Fundamental Principles and Rights at Work. Some 69 voluntary standards reference other ILO conventions. Norms set by the World Health Organization and the UN Universal Declaration on Human Rights are referenced in 44 and 42 standards respectively.
‘Trade in the 21st century is increasingly consumer-centric,’ said ITC Executive Director Arancha González. ‘Standards are an important means to respond to consumer demands for “good trade”, one that is environmentally sustainable, socially responsible and protective of consumers. But standards can also represent an impossible burden, in particular for SMEs.’
Offering insights for policymakers, business managers and standard setters, the Outlook argues that businesses and countries complying with standards associated with international value chains are more likely to enjoy tangible economic benefits from increased exports.
The way a standard operates has major implications for whom bear the burden of compliance costs. When standards are defined by companies, the Outlook suggests, producers and consumers are more likely to share costs related to implementation and certification of standards. The likelihood of lead firms – often multinationals – taking on more of those costs increases when they have been included in setting a standard. Joining international value chains can therefore be beneficial for SMEs, as it reduces their costs of meeting international standards. However, SMEs need to reach a certain level of competitiveness before becoming players within international value chains.
Women face procedural obstacles
Even when gender-neutral on paper, regulations can have disproportionate effects on women-owned enterprises as compared to those owned by men, according to the SME Competitiveness Outlook. Based on ITC business surveys, the report finds that a higher share of procedural obstacles resulting from non-tariff measures are due to ‘information and transparency issues’, ‘informal or high payments’ and ‘discriminatory behaviour’. It further suggests that an unintended consequence of such procedural obstacles is lower participation of women entrepreneurs in international value chains.
Exploiting SME export potential when standards matter
In addition to 35 country profiles detailing strengths and weaknesses in SME competitiveness performance, this year’s SME Competitiveness Outlook includes regional snapshots highlighting product lines with unexploited export and diversification opportunities.
The Outlook finds that most regions could tap into significant unexploited export potential by directing regulatory efforts to boost SME competitiveness.
For example, the report suggests that in the Middle East and North Africa (MENA) region, there is a huge, untapped export potential in the fresh and processed food sectors, of which 43% would be among the region’s countries themselves. Yet MENA countries subject such imports to four times more technical regulations than other regions do. Regional efforts to reduce these burdens could yield substantial commercial benefits.
Meanwhile, the Asia-Pacific region still has unrealized export potential in IT and consumer electronics, but the chemicals sector appears to offer the highest potential for diversification. 21% of the top 200 products with diversification potential can be found in that sector. While standards in electronics and IT value chains tend to be more about ensuring compatibility – that nuts and bolts fit together – those in the chemicals sector are more about guaranteeing safety, for example, ensuring that toy paint is safe for children, or that a particular mixture will not explode. Complicating the necessary change in orientation is an additional challenge: a wide discrepancy in adoption rates of international management and quality standards: these tend to be high in the region’s larger economies, but low in small and poor economies.
In Latin America and the Caribbean, the fresh foods and transport equipment sectors account for about 50% of the region’s untapped export potential, in addition to processed food and chemicals. Reducing the time that businesses spend dealing with regulations by streamlining processes and improving the institutional support environment for them would be beneficial in exploiting this potential.
In sub-Saharan Africa, the fresh food sector accounts for over 30% of the region’s unexploited export potential; metal and basic manufacturing for another 20%. The main diversification opportunities lie within the latter sector. A factor undermining the region’s diversification potential is the relatively weak adoption of international management standards, as these standards imply transferable managerial expertise.
In Eastern Europe and Central Asia, metal and basic manufacturing represent 28.4% of the regions unexploited export potential. Chemicals are another promising sector for product diversification. The time managers spend on regulations and the extent to which firms adopt international management standards may warrant improvement, if the region aims to take advantage of diversification opportunities.
‘The SME Competitiveness Outlook provides a compass for governments to understand where the challenges for SMEs are, and what areas they should exploit. It also sets out a five-point plan for policymakers and business leaders on how to comply with standards and regulations, which can help their SMEs to become more competitive,’ González said. ‘If you are serious about inclusive trade, the SME Outlook will help you understand how better planning and better regulation will help your SMEs and your women in business.’