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UNCTAD updates its Global Action Menu for Investment Facilitation
UNCTAD’s Global Action Menu for Investment Facilitation is widely welcomed, strongly supported by the investment-development community, and endorsed by policymakers worldwide. The updated version is a timely response to the push by G20 leaders to advance work on investment facilitation.
The September 2016 update of UNCTAD’s Global Action Menu for Investment Facilitation incorporates feedback and lessons learnt from multi-stakeholder consultations and intergovernmental processes, including endorsement by policymakers worldwide, as received at UNCTAD’s 14th Ministerial Conference and the fifth World Investment Forum, held in Nairobi, Kenya, in July 2016, as well as other fora.
Although facilitating investment is crucial for growth and sustainable development, national and international investment policies have paid relatively little attention to investment facilitation to date. Earlier this year UNCTAD took a step towards closing this gap, formulating its Global Action Menu for Investment Facilitation. It was based on the organization’s rich experience with investment promotion and facilitation efforts worldwide over the past decades, and on the 2012 edition of UNCTAD’s Investment Policy Framework, as well as UNCTAD’s SDG Investment Action Plan (2014). The Action Menu was first presented to the investment community in January 2016.
Following an initial web-based, multi-stakeholder consultation process on the Investment Policy Hub, an upgraded version of the Global Action Menu was officially launched in June 2016 as part of UNCTAD’s flagship World Investment Report (WIR), resulting in media coverage in over 100 countries. The subsequent World Investment Forum, which convened over 3,000 investment stakeholders from more than 150 countries, provided a platform for disseminating, field-testing and further improving the Action Menu.
At the 2016 World Investment Forum, the Global Action Menu benefited from substantive inputs and comments from a multitude of investment-development stakeholders, including high-level policymakers from developing, developed and transition economies, as well as intergovernmental organizations and the private sector. Ministers, heads of investment promotion agencies (IPAs), senior investment treaty negotiators, and other investment stakeholders all supported the initiative and requested UNCTAD to further develop policy advice, technical assistance and global consensus building activity in the area of investment facilitation.
The 2016 World Investment Forum and UNCTAD 14 thus served as a launch pad for an important new UNCTAD policy drive on investment facilitation and for the broad dissemination of the organization’s Global Action Menu for Investment Facilitation.
This update of the Menu thus comes as a timely response to the renewed mandate from the UNCTAD 14th Ministerial Conference to further develop its efforts in investment facilitation through policy formulation, technical assistance and consensus-building.
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COMESA visa expected in two years
Talks are now at an advanced stage to establish the Comesa Business Visa, an initiative seeking to make it easy for business persons from countries that make up the Common Market for eastern and Southern Africa (Comesa) to move across borders.
The Comesa Secretariat has confirmed that once adopted, the visa could be operational in the next two years.
Representatives from Comesa member states are expected to meet this week in Zambia to review and validate proposals that have been made so far.
The dialogue is further expected to enhance deliberations between the private sector and governments on pertinent migration issues to ensure that the existing policies contribute to increased trade, tourism flows, and business engagement in the region, according to a statement from the Comesa secretariat.
Key recommendations arising from the dialogue will be streamlined into an advocacy position for the Comesa Business Council and the proposed instrument is expected to be tabled for adoption before the Comesa policy organs and Summit meetings that will take place in Madagascar from October 10 to 19.
The common visa initiative is a follow-up to the recommendations that were presented to the Comesa Council of Ministers by the private sector in 2012 on the need to come up with an interim solution to facilitate the movement of business persons in the region.
Since then, the Comesa Business Council has been working on developing the proposed instruments that can be adopted as a Comesa Business Visa which will provide for multiple entries for business persons in the region.
According to Chief Executive Officer of the Comesa Business Council, Sandra Uwera, the proposed visa will help to facilitate and expedite the movement of business persons in the Comesa region as well as increasing trade and integration.
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$2,7bn poverty reduction strategy for Zimbabwe launched
Government has launched the Interim Poverty Reduction Strategy Paper (I-PRSP) for Zimbabwe, which requires $2,7 billion to implement in the period 2016 to 2018.
Speaking at the launch of the document on 26 September 2016, Finance minister Patrick Chinamasa said government and development organisations have secured $800 million so far for the implementation of the I-PRSP, leaving a funding gap of $1,9 billion.
He said the $1,9 billion would be mobilised through the budget and other domestic savings and the private sector.
“Any piecemeal approach will not work. This strategy for 2016-2018 is a precursor to the full strategy over approximately five years for sustained poverty eradication,” he said.
Chinamasa said the social sector was one of the major illnesses of the economy, evident through unemployment and shortage of drugs in hospitals.
“The voice was that if you sort out the agriculture problem you will have attended to the other issues. The common outcome throughout the consultation was agriculture is the backbone of the economy,” he said.
“On our part for the 2016/17 agricultural season we are putting our money where our mouth is. Already the government secured more than $423 million towards supporting the 2016/2017 agricultural season and the objective is to be self-sufficient in food security in the event that the heavens smile on us and give us normal rains this season.”
Chinamasa said if government does not get revenues, it would not be able to carry some of its programmes hence the need to have a fat and healthier private sector and a thin public sector.
He said the paper would be used by government to source funding from the World Bank after clearing the arrears.
The national consultant for I-PRSP, Jesimen Chipika said the consultation on strategy began in March this year and was linked to the Zimbabwe Agenda for Sustainable Socio Economic Transformation, President Robert Mugabe’s 10 point plan and the Sustainable Development Goals.
She said the paper seeks to eradicate poverty and ensures inclusive growth, improvement in the livelihoods of citizens. Chipika said the economy need to grow at 7% growth rates, receive normal rainfall and continue to use the multicurrency system.
The strategy paper is anchored on seven pillars that include, agriculture productivity, social sectors, private sector, infrastructure sector, environment and climate change, gender women and youth development and strengthening governance.
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IOM-COMESA launches flagship training programme on Free Movement
The International Organization for Migration (IOM) and the Common Market for Eastern and Southern Africa (COMESA) Secretariat have launched a flagship training programme on the signature and ratification of the COMESA Protocol on the Free Movement of Persons, Labour, Services, Right of Establishment and Residence (otherwise known as the Free Movement Protocol).
This training, the first of its kind targets Zambia and Zimbabwe and represents a significant milestone for the COMESA free movement agenda. It brought together representatives from a cross-section of government departments, including Ministries of Home Affairs, Labour, Trade, Foreign Affairs, among others.
The training was intended to contribute to the expedited signature and ratification of the Free Movement Protocol, which despite having been established in 2001 has not yet entered in to force. A minimum of seven ratifications are required for this to happen, and so far, only four Member States have signed, and two have ratified the Protocol.
At the launch of the training in Lusaka this week, Dr. Chileshe Mulenga, the Permanent Secretary Ministry of Home Affairs Zambia, commended COMESA and IOM for this initiative, and underscored the need for building the capacity of member States to propel the free movement agenda forward.
Dr. Kipyego Cheluget, COMESA Assistant Secretary General (Programmes), observed that migration holds considerable potential for economic and social growth and development for countries of origin and destination alike, as well as for individual migrants and their families.
“COMESA recognizes the great importance of migration in the context of free trade, and for regional integration to be fully realized, citizens of our member States must be allowed to move freely in order to provide and enhance services, tourism, labour, cultural activities, among other aspects that deepen integration,” Dr Cheluget said.
He stressed that a “genuine Common Market”, shall be achieved only when the citizens of Member States can move freely within the Common Market.
IOM Zambia Chief of Mission Ms Abibatou Wane emphasized IOM’s commitment to support the COMESA Secretariat and Member States.
“IOM will continue to assist COMESA in the implementation of the Free Movement Protocol in order to make the COMESA objectives on free movement, and indeed the AU Agenda 2063 on regional integration a reality.”
The training programme is being piloted in Zambia and Zimbabwe and will later be rolled out in the 19 COMESA Member States.
The IOM Development Fund supported the programme through a capacity building and awareness raising project for COMESA Member States designed to implement the Free Movement Agenda. This was in response to a request from the COMESA Secretary General, as well as the Governments of Zambia and Zimbabwe.
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tralac’s Daily News Selection
The selection: Monday, 26 September 2016
Profiled conference listings for this week:
Operationalization of Liberia National Trade Facilitation Committee (26-27 Sept, Monrovia), Senegal Trade Facilitation Committee (28-29 Sept, Dakar)
WTO’s Public Forum 2016: Inclusive trade (27-29 Sept, Geneva)
West Africa: corridor management co-ordination meeting (27-28 Sept, Abidjan)
East, Central Africa Roads and Rail Infrastructure Summit (27-28 Sept, Dar es Salaam)
African Ministerial Consultative Group on AGOA: the future of the US-Africa relationship beyond AGOA: talking points by David Luke (coordinator, ATPC)
The US perspective of the CFTA and engagement at the continental level is agnostic at best. Underlying this are concerns about the overlapping “spaghetti bowl” of regional economic communities in the African continent, the limited evidence of implementation of agreed integration, that continental integration in particular remains “behind schedule” and that it is not known in it what “disciplines will ultimately be included”.
In concluding this presentation it is important that I re-emphasise the cautions mentioned before. Principally this is to safe-guard African regional integration at the continental level. The benefits of doing so represent a more coherent and valuable partner for the US as well as being vital in promoting a prosperous Africa in line with Africa’s policy agenda at the African Union level. Lessons must be learned from the EU’s EPA experiences in Africa, as well as from the experiences of Latin America and South-East Asia. And efforts should be made to ensure that the least developed African countries are not prematurely pressed into liberalising when they are not ready. Ultimately the US is, and will remain, a highly important partner of Africa – not just in terms of trade, trade assistance and investment, but in development and strategic interests more broadly. [USTR’s Beyond AGOA report: looking to the future of US-Africa trade and investment]
Michael Froman, Amina Mohamed: ‘Tapping Africa’s full potential’ (Project Syndicate)
Last year, Congress reauthorized AGOA and extended it for another ten years. As a result, many companies are taking a fresh look at investment opportunities and sourcing options in countries such as Kenya and Ethiopia. But, because it focuses mainly on tariffs, AGOA has limited capacity to address other economic challenges in African countries, such as supply-side constraints to regional and global trade, and the need for greater value-added production and export diversification. Silicon Savannah companies, for example, are facing new and evolving challenges far outside the scope of tariff-preference programs, which are primarily a development tool. These challenges may be better addressed by policies resembling free-trade agreements, which define the rules of the road for bilateral trade. Silicon Savannah companies need, among other things, freer data flows, more transparent regulation, and access to services markets. Eliminating barriers in these areas will be critical for African entrepreneurs seeking to offer their products and services to American consumers, and to American entrepreneurs seeking opportunities in Africa. An updated policy framework is urgently needed.
Moody’s: US post-election shift in trade policy poses limited overall risk for Sub-Saharan Africa
The credit implications for sovereigns in Sub-Saharan Africa of a potential shift in the United States of America policies after the November election would materialize through trade, investment and remittances, but would be limited, says Zuzana Brixiova, a VP-Senior Analyst at Moody’s Investors Service. [Tony Elumelu: Changing the narrative on Africa in a changing administration]
AGOA: Nigeria calls for establishment of Africa skills fund (National Mirror)
Nigeria has called on the United States to assist in establishing an Africa Skills Development Fund to facilitate the training of skilled manpower among the army of unemployed African youths. A statement issued in Abuja said the Minister of Labour and Employment, Chris Ngige, made the call at the Labour and Trade Ministerial roundtable of the Africa Growth and Opportunity Act, held in Washington. Ngige who is the leader of the Nigerian Joint Labour and Trade delegation to the forum underscored the importance of such a fund in tackling unemployment and stemming the tide of poverty factors that hinder fair labour practices on the continent. [Ngige lists poverty, trade imbalance as bane of AGOA] [President Buhari’s speech at US-Africa Business Forum]
Mauritius’ Africa Strategy: MoU to facilitate movement of business persons and professionals (GoM)
Mauritius has signed a Memorandum of Understanding for the facilitation of movement of business persons and professionals between Accelerated Programme for Economic Integration countries, namely Malawi, Mauritius, Mozambique, the Seychelles and Zambia. The MoU is in line with the Africa Strategy aiming at expanding our economic horizons and providing, subject to relevant national legislation, Business Permits or short-term flexible Employment Permits with multiple entries to enable business persons and professionals to undertake a wide range of business activities. It is to be recalled that in line with the African Strategy, Mauritius has signed agreements with Senegal, Madagascar and Ghana for the establishment and management of Special Economic Zones.
AUC Balanced Scorecard: update (World Bank)
The African Union Scorecard is envisioned to be a tool which will provide performance data and analysis to ensure adequate programme development, management, monitoring and evaluation, and enable verification of progress made on AUC programs and projects consistent with the Agenda 2063 priorities and its 10 year plan. Some of the AUC scorecard features (to be implemented at the levels of the AUC, AU Organs, AU agencies, RECs, member states) will include: [Note: the EOI closing date has closed, posted for policy information purposes]
EALA joins push for legislative powers at ECOWAS Parliament (EAC)
The EALA Speaker, Rt Hon. Daniel Fred Kidega says the time for the ECOWAS Parliament to get legislative powers is now. Such a move, Rt Hon. Kidega notes would be a precursor to capacitate the legislature to enact laws and respond to demands of the populace of the West African region. Rt Hon. Daniel Fred Kidega made the remarks on 22 September as he delivered a solidarity message to the Assembly at the commencement of the 2nd Ordinary Session of the ECOWAS Parliament at the Parliamentary buildings in Garki, Abuja, Nigeria. He said EALA had contributed to strengthening of the integration process at the EAC - given its legislative powers, by passing over 70 pieces of legislation, all key to upping the stakes for stability and development in the EAC region. The EALA Speaker remarked that it was also necessary for the discourse on legislative powers to be scaled-up to the continental level. At the moment, the South African based Pan-African Parliament is also campaigning for the ratification of the new Protocol that is envisaged to give it powers to pass model laws for the continent. The new Protocol needs at least 28 ratifications to be enforced. At the moment, 10 countries have ratified the instrument but only two have returned (deposited) the same with PAP.
Malaria in the SADC region: situation and response analysis (SADC)
As national borders become increasingly porous, a harmonised and coordinated effort within the region is essential for malaria control. It is with that intention that the SADC Secretariat has commissioned the development of harmonised regional standards for malaria. The “Malaria Elimination Pathway”, a dynamic framework that tracks Member States through the various stages of malaria control and elimination was used to analyse the findings. A literature review followed by a site assessment visit by a group of malaria experts was used to gather information—and the findings are presented in this report.
DBSA eyes Brics Bank and diversification (IPPMedia)
In the DBSA’s annual report (pdf) CEO Patrick Dlamini noted that the new bank could be a threat as well as an opportunity – to a large extent, it will play in the same space as the DBSA. “Of concern is the ability of the New Development Bank to potentially provide preferential rates to clients due to its funding structures and financial strengths of the key founding countries,” wrote Dlamini. Speaking to City Press, however, he said that he “would be lying if he said this was a serious concern”. “At this point, they are still looking at their model for sub-sovereigns,” he said about the potential competitor for projects. “We need more partners,” he added.
Sudan: Realizing the potential for diversified development (World Bank)
A retrospective review, entitled Realizing the potential for diversified development (pdf), shows that Sudan’s economy has undergone three distinct periods of varying economic growth between 1988 and 2013. Sudan’s export markets are found to be highly concentrated as evidenced in large shares of the country’s top export items. There is hope however that the relatively low degree of concentration for non-oil products is a sign that the country already started to diversify its non-oil (export) products after the cessation of South Sudan. The report makes the following five policy recommendations for Sudan to make use of its potential for diversified growth and development:
Egypt: Country Strategy Paper 2015-2019 (pdf, AfDB)
The private sector contributes 62% of Egypt’s GDP, and over 65% and 70% of total investment and employment, respectively. Micro (1 to 4 employees), and small and medium enterprises (SMEs) (5 to 500 employees) comprise respectively 91% and 8% of the Egyptian private sector. Available indicators show that private sector competitiveness needs improvement. Indeed, Egypt ranked 116 (out of 140 countries) on the 2015/2016 Global Competiveness Index published by the World Economic Forum. Notably, Egypt ranks at or below the 100 mark on the three sub-components of the index: basic requirements (115), efficiency enhancers (100) and innovation and sophistication factors (113). Note, however, that the country gained 3 notches in overall ranking compared to last year ranking. The range of problems deterring private sector development and competitiveness are diverse.
Kenya will not stop maize imports from Uganda, farmers told (Business Daily Africa)
Kenya will not stop maize imports from Uganda as the two countries have signed East African trade protocol, Agriculture Cabinet Secretary Willy Bett has said. According to Mr Bett business between Kenya and Uganda will move seamlessly so long as the goods meet required standard. “We are not supposed to stop maize from coming in we are a block, we are East African Community and we have signed protocol. We challenge our farmers to be more competitive in crops production in order to remain relevant in the market,” said Mr Bett.
Maritime border row: Experts advise Kenya, Somalia to join hands (The EastAfrican)
Maritime experts are advising Kenya and Somalia to enter into a partnership in the exploitation of natural resources in the disputed maritime border, even as they continue to negotiate. They refer to the Nigeria and Sao Tome and Principe example, where the two states established Joint Development Zones in 2003 after it became clear that they could not agree on a maritime border. Kenya and Somalia are at the International Court of Justice (ICJ) where Mogadishu filed a suit in 2014 accusing Kenya of encroaching on 100,000 square kilometres of marine territory with potential oil and gas deposits in the Indian Ocean. The diplomatic negotiations had dragged for six years without success.
Raphael Kaplinsky: ‘Inclusive and sustainable growth: the SDG value chains nexus’ (ICTSD)
It is important to pay close attention while reading Section 4 of this framework paper which sets out an ambitious programme for a holistic analysis of the impact of GVCs on all of the SDGs. It is very unlikely that any one project will seek to undertake such comprehensive enquiry. Moreover, context differs between different types of GVCs and different types of economies. For example, the challenges faced by least developed economies with very large informal sectors and high levels of absolute poverty are different from those faced by middle and upper middle income economies. Similarly, the challenges faced and opportunities opened in sectors involving labour-intensive assembly are qualitatively different from those involved in the service sector and in high-tech industries. In addition, the resources available for the investigation and analysis of GVCs may be constrained in terms of both time and human effort. [Related ICTSD paper: Trade policies and sustainable development in the context of global value chains (pdf)]
Market access for products and services of export interest to LDCs: summary of recent developments (WTO)
LDC exports of goods and services grew by an annual average of 7.6% over the 2005-2015 period and, thus, slightly more than the exports of other developing economies (7.3% average). However, this fact is due to distinctly higher growth rates in the first part of the period. In recent years, LDCs’ exports were constrained by unfavourable developments in the prices of commodities. In 2015, LDC exports of goods and commercial services decreased by 20.1% to US$195.5bn, while LDC imports fell by 7.5% to US$303.6bn, resulting in an overall trade deficit of US$108.1bn. LDCs were able to increase their share in world exports of goods and commercial services from 0.7% in 2005 to 1.03% in 2014. However, in 2015, their share stood at 0.9% and hence fell below 1% for the first time since the crisis year 2009. This recent decrease reflected lower values of merchandise exports, due to falling prices of commodities. In 2015, merchandise exports of the LDCs contracted by 25%, a significantly bigger drop than in 2014. As a result, the share of LDCs in world merchandise exports decreased to 0.97%. As their imports declined by “only” 9% in 2015, the LDCs recorded a new high in their merchandise trade deficit (of US$87bn in 2015). [Addendum, pdf]
Tony Elumelu crowned Africa’s Investor of the Year
Mauritius: Towards the operationalisation of the Commonwealth Climate Finance Access Hub
UNCTAD issues new investment facilitation advice
OECD Working Party on Competition and Regulation: summary of hearing on disruptive innovation in the financial sector
Christopher Rooney: Tourism energizes South Africa’s jobs market
Deputy Secretary-General calls on development partners to boost aid for Lake Chad Basin, Lake Chad Basin Emergency (pdf)
Sahel and West Africa Club Secretariat: latest newsbrief
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African Ministerial Consultative Group on AGOA: The future of the US-Africa relationship beyond AGOA
Review of USTR Report on ‘Beyond AGOA’
Talking points by David Luke, Coordinator, ATPC, UNECA at the African Ministerial Consultative Group on AGOA – 15th AGOA Forum, Washington DC, 25 September 2016
Greetings today audience members. It is a pleasure to be before you to present and comment on the latest USTR report, Beyond AGOA – Looking to the Future of US-Africa Trade and Investment. In doing so I will outline the key conclusions of the report and how these relate to African trade policy, before delving into the implications for regional integration in Africa, the lessons that can be learned from similar engagements, the importance of negotiating with Africa at the continental level, and the capacity for least developed African countries to undertake trade liberalising reforms.
Objectives of USTR Report
The principal objective of the report is to prepare the ground and build the justifications for a new US trade policy towards Africa to succeed AGOA. To do so it couches a summary of AGOA and US-Africa relations within developments in the global trading system, possible foundational “building blocks” for future relations, and recommendations for moving beyond AGOA. This is buttressed by a selection of case studies which are supportive of these recommendations.
The end of US unilateral preferences
The linchpin underlying the Report recommendations is the desire for reciprocal trade arrangements with Africa. The provision of unilateral preferences towards Africa is cited as being untenable while Africa negotiates reciprocal agreements with other regions and countries, and while other providers of non-reciprocal preferences to Africa, such as the EU and Canada, move towards reciprocal arrangements.
It frequently alludes to increasing commercial and domestic pressure in the US for reciprocal arrangements. It also presents Africa’s rising economic significance, in terms of development improvements and increasing economic size, suggesting that with these opportunities American businesses could be at risk of “being left out” in competition with other trading partners with which Africa is has, or is developing, reciprocal agreements.
Chief among this competitive scramble is the EU, with its Economic Partnership Agreements, and China, which is mentioned no less than 51 times in the Report. China does not yet actually have serious reciprocal agreements under negotiation in Africa, but overtook the US in 2004 as the second biggest supplier of Africa’s imports (after the EU) and in 2012 as the second biggest destination for African exports (again after the EU).
Also suggested is that “unilateral preferences are shrinking”, based on a reduction in the number of countries eligible for EU GSP preferences in 2014 from 176 to 89 countries (mostly based on existing countries establishing alternative arrangements with the EU). However what isn’t mentioned is the EU’s Everything But Arms – which amounts to an extension of unilateral access for LDCs. Or DFQF access developments at the WTO which seek to expand duty-free access for LDCs to all developed countries.
The Form of Future US-Africa Integration
It is acknowledged that US-Africa trade and investment continues to be overly focused on a small number of African countries, particularly South Africa and Nigeria, and especially concentrated on the extractive resource sector. The American consumer market and partnerships with American on-line and creative industries are cited as Africa’s opportunities for further US-Africa engagement. Greater integration is posited as a potential solution, drawing from the case studies of Vietnam to Peru.
Here a broad range of potential ‘policy building blocks’ are given for such integration including trade facilitation, intellectual property rights, labour, sanitary and phytosanitary measures, market access, services, investment, environment, technical barriers to trade, and transparency and anti-corruption, which can all be built into future US-Africa arrangements. The point here is to prepare the ground for comprehensive US agreements that go far beyond merely market access, incorporating a selection of suitable ‘policy blocks’.
This is contextualised by highlighted changes in the global trading landscape: the increasing number and depth of preferential trade agreements which address behind the border issues such as investment rules and protections, intellectual property rights, sanitary and phytosanitary measures, technical requirements, services, labour and environmental policies.
The report details 4 potential options for what Beyond AGOA trade agreements could look like with Africa:
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US Style trade arrangements: these would be comprehensive, involving many behind the border issues. These would also include limited asymmetry, with all countries agreeing to the same obligations with at most a longer transition period for implementation.
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Asymmetrical EU-type agreements: these would be modelled on the EPAs and demand fewer obligations of African countries. However it is indicated that the US does not have a history of establishing such agreements, and that US negotiators would ostensibly find these difficult to sell at home.
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Stepping Stone arrangements for countries with limited capacity: these would be collaborative arrangements in which the US helps African countries reach international standards on, for instance, SPS, TBT and trade facilitation with the aim of bringing these countries to a level form which negotiations of an FTA could be completed.
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And finally, continued unilateral preferences: however these would come with further requirements for African countries to meet higher standards to incentivise them to undertake policy reforms conducive to allowing more trade and investment from the US.
Regional Integration and Beyond AGOA Arrangements
The Report hints heavily at a multi-layered approach to engaging different African countries based on their divergent characteristics and appetites, such as levels of development, wealth and readiness for expanded trade engagements.
This suggests an approach of pre-selecting ‘can do’ countries as ‘regional leaders’ for individual FTAs, after which other countries can be possibly folded into these agreements when they are ready.
This presents a clear challenge to African regional integration, with the risk of fragmenting, rather than consolidating African integration. This is despite “African regional integration” being stated as one of the three underlying principles of any new US-Africa trade framework and the report also identifying “small fragmented markets” as among Africa’s key challenges to its competitiveness.
Learning Lessons: EPAs and FTAAs
Here lessons can be drawn from the EU and the EPAs. An EPAs type approach to US-Africa trade relations after AGOA should be avoided. Not only did the EPAS create fragmented regional entities, adding another layer to the challenge of rationalizing multiple trade arrangements, they have little popular support and indeed were forced through under the threat of preferential market access withdrawal for non-LDCs. Aside from the SADC region, the EPAS have not been fully concluded anywhere else. A recent implication in this is Brexit, which has introduced further complications for the future viability of the EPAs as the UK is a significant trade partner for several African countries.
Yet here the report takes an entirely different perspective, suggesting that the failure of EPA negotiations is due to regional approaches which draw in too many countries of divergent characteristics and interests. Ironically the one concluded EPA with SADC is actually that with the continent’s most divergent countries because of its inclusion of South Africa, Africa’s most advanced economy.
The US is likely drawing lessons instead from its experiences in Latin America and the failure of the US-led Free Trade Area of the Americas (FTAA) initiative, in which a one-size fits all trade agreement with no flexibilities for its less developed members was ultimately rejected by the 34 countries of the Americas.
However, there is a caution for Africa from the FTAA experience also. After the FTAA was finally buried in 2005 the U.S. subsequently picked individual ‘can do’ Latin American countries for bilateral negotiations. While many of these FTAs were concluded and have now entered into force, they created a split in Latin America: those which had trade agreements with the U.S. and those which didn’t, and weren’t willing to. To this day the split remains, evidenced by the MERCOSUR countries to the East of South America as a separate block from those in West South America, many of whom are now involved in the TPP negotiations and closer integration with the US.
This approach can clearly be highly divisive for the process of regional integration, as seen in Latin America. In considering the Beyond AGOA options, Africa should remain cautious of such fragmentations and should instead press for a comprehensive continental agreement.
In this context, we should be cognizant of the fact that such an individual ‘can do’ FTA approach may again be the desire of the U.S. This is all the more reason for us to ensure conclusion and implementation of the CFTA before 2025, such that we are prepared to address the U.S. as a single, coherent, and stronger entity so that individual FTAs do not pick apart the African regional integration agenda and the considerable benefits it can provide.
U.S. Engagement at the African Continental Level
The US perspective of the CFTA and engagement at the continental level is agnostic at best. Underlying this are concerns about the overlapping “spaghetti bowl” of regional economic communities in the African continent, the limited evidence of implementation of agreed integration, that continental integration in particular remains “behind schedule” and that it is not known in it what “disciplines will ultimately be included”.
For here we can draw lessons from the Association of Southeast Asian Nations (ASEAN), which was until recently regarded as both behind schedule and limited in implementation, but which today amounts to a highly integrated economic community with a single market and widely considered a big success.
Furthermore, there is currently considerable policy commitment to the continental integration within Africa, with the CFTA being a major flagship policy of the African Union’s Agenda. The recent Kigali Summit recommitted to the 2017 deadline and instructed that the negotiations should be conducted on the basis of a template. The template, which is now completed, includes pro-development disciplines on goods, services, movement of persons and investment.
Implementation will be a challenge but there are no grounds at this stage for US pessimism. In fact US support will help make the CFTA a success.
Moreover, the CFTA is aimed specifically at the rationalisation of overlapping trade regimes, and the creation of a continental market with common rules for goods, services and investment. It will facilitate trade policy coherence with external partners. Post-AGOA , the US should aim at a comprehensive partnership with the CFTA and including elements of the trade and investment capacity support that have been built into the EAC Trade Africa initiative.
Here it is short-sighted for the US to focus on ‘sub-Sahara Africa’ – and even within this configuration to cherry pick the most promising countries – when the ambition is for a continental market to facilitate regional value chains. The role of Egypt in COMESA is a case in point. UMA’s trade strategy is focused on its southern neighbours and we now see countries like Algeria exploring how to engage. Just this Friday Morocco asked to re-join the African Union after four decades outside.
What cannot be lost from sight are the tremendous attractions to regional integration in Africa, which are ostensibly recognised in the Report’s identification of African regional integration as a “guiding principle”. Research from the ECA shows that this integration will help make Africa’s markets more attractive to inward investment, it will help improve Africa’s scope for innovation, facilitate intra-Africa trade for regional value-chains to help Africa engage with external trading partners at a greater level of value-added trade and boost African industrialisation, as well as fostering improved allocation of food security crops to address droughts and shortages related to climate change.
Capacity for least developed African countries to undertake trade liberalising reforms
Finally, the US approach to Africa beyond AGOA needs to be cautious of Africa’s level of development, its scope for innovative policy space, and of not pushing the poorest African countries into liberalisation prematurely.
The Report uses the case of Liberia to emphasise how least developed countries can take on liberalising commitments. Yet the Liberia example in the report is disingenuous. Arguably Liberia took on WTO+ commitments. On the other hand Vietnam avoided this route, but this is not mentioned in the Vietnam case study nor is highlighted the considerable benefits Vietnam derived from regional integration with ASEAN which helped establish the regional value chains that aided its development. And Ethiopia too is avoiding WTO+ commitments in its accession – yet is currently among the fastest growing countries in the world.
The report’s “research shows a strong correlation between developing countries that have reformed, liberalized, and integrated their economies into the global trading system and those that have experienced the most significant improvements in development outcomes”. Yet the first lesson of statistics is correlation does not equal causation. The case for rapid liberalisation remains highly controversial for good reason, and the US should be cautious of pressing African countries into situations for which they are not ready.
However, with these poorest of African countries, significant value can be provided by US leadership, which is required to complete the Doha round including the development-friendly disciplines that Africa has prioritized.
Concluding remarks
In concluding this presentation it is important that I re-emphasise the cautions mentioned before. Principally this is to safe-guard African regional integration at the continental level. The benefits of doing so represent a more coherent and valuable partner for the US as well as being vital in promoting a prosperous Africa in line with Africa’s policy agenda at the African Union level. Lessons must be learned from the EU’s EPA experiences in Africa, as well as from the experiences of Latin America and South-East Asia. And efforts should be made to ensure that the least developed African countries are not prematurely pressed into liberalising when they are not ready. Ultimately the US is, and will remain, a highly important partner of Africa – not just in terms of trade, trade assistance and investment, but in development and strategic interests more broadly.
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Inclusive and sustainable growth and trade policies in the context of global value chains
The global development landscape witnessed a significant shift in emphasis and commitment in 2015 with the adoption of the 2030 Agenda for Sustainable Development. This universal framework includes the 17 Sustainable Development Goals (SDGs), underpinned by the Addis Ababa Action Agenda on Financing for Development. Explicit recognition of the role that trade and investment policies can play in advancing sustainable development is included in the agenda.
The SDGs provide an opportunity to mainstream an inclusive and comprehensive approach to development in the national strategies of low income countries and least developed countries (LDCs). The goals are mutually reinforcing and will be strengthened by the application of well-articulated trade and investment policies. For example, efforts to design policies that consider the gender dimensions of trade in achieving SDG 5 (gender equality) will have ramifications not only for the goal in question and related targets, but also for competitiveness and growth (SDG 8), ending poverty (SDG 1), reducing inequality (SDG 10), and promoting peaceful and inclusive societies (SDG 16).
The emphasis on the need to enhance inclusive and sustainable growth in the current policy debate is particularly important in the context of global value chains (GVCs) driving the geographic dispersion of production across borders. From a policy perspective, the discussion around GVCs is increasingly concerned with how to spread the distribution of gains along the chain rather than concentrating the rents in the hands of lead firms governing the processes along the chain. This focus on inclusive growth and the distribution of gains naturally flows into a discussion on how the processes driving value chains on a global and regional level dovetail with the global aims for the SDGs.
The following papers were produced under ICTSD’s Programme on Development and Least Developed Countries as the inaugural component of a research and publication series on GVCs. The papers were conceived as framework documents to provide an analytic and policy agenda that scholars and policymakers can use when they undertake detailed and in-depth analysis of the impact of GVCs on sustainable development on a sectoral and geographic basis. The objective of the series is to provide input into the policy debate on how LDCs and low-income countries can utilise value chains to achieve sustainable and inclusive development.
Inclusive and Sustainable Growth: The SDG Value Chains Nexus
Executive Summary
The Sustainable Development Goals (SDGs) have been established in an era of deepening globalisation. Although many economies, firms, farms, and individuals have benefited greatly from globalisation, these gains are not automatic – the challenge is not whether to participate in the global economy, but how to do so beneficially. This applies to growth as well as SDG targets of employment, equity, nutrition, and longevity. A key to a positive outcome is for producers to position themselves appropriately in the global value chains (GVCs), which now account for more than two-thirds of total global trade.
Market forces have an important role to play in achieving the SDGs – both positive and negative. On the positive side, economic growth allows the state to deliver developmental services to its population. It also provides employment and incomes, not just in the large-scale formal sector, but also in the small and micro enterprises that relate directly to the poor. On the negative side, growth as we have known it over the past few decades has tended to exclude much of the population from the fruits of economic expansion. Thus, the challenge is to fashion growth into a more inclusive path, which includes the SDGs. This is as true for low per capita income southern economies as it is for the middle and higher income northern economies.
One important contributor to growth is outward-oriented production through the framework of GVCs. We know from experience that GVCs are not undifferentiated – some enhanced, and others undermined achieving the Millennium Development Goals (MDGs). These two different faces of GVC-led growth did not happen by accident or the simple extension of market-led expansion. They resulted from the concerted action of five key sets of stakeholders: international agencies, national governments, lead firms, civil society organisations, and public-private partnerships. Sometimes these lead actors acted in isolation; in other cases, they worked together to achieve MDG-friendly outcomes.
The SDG task is to learn from the GVC-MDG experience to ensure that GVC-led growth does not result in excluding patterns of growth. A clear lesson from the past two decades is that for developmental goals to be achieved, policy interventions by each of the five major sets of GVC stakeholders must be evidence-based. If policies are not built on real dynamics, their unintended consequences may be adverse. It may not just be that alternative policies may have delivered better results, but in the worst cases, they may work against promoting sustainable development.
This paper provides the framework to generate policy-relevant data to reinforce the maximum achievement of SDGs in GVC-led economic growth. In the same way that growth in itself is highly unlikely to achieve the SDGs, routinely collecting data in market-led growth will not provide evidence that the key stakeholders require to achieve SDG-friendly developmental outcomes.
Introduction
The global community has set itself an ambitious programme of Sustainable Development Goals (SDGs) to be achieved by 2030. The SDGs build on many of the Millennium Development Goal (MDG) targets set in 2000 to be achieved by 2015. But the SDGs go beyond the MDG targets in broadening the objectives to include a wider set of equity goals and a more decisive targeting of environmental objectives.
Since the MDG targets were defined in the last decade of the twentieth century, global economic integration has increased. The major driver of this deepening integration has been the ever-widening spread of Global Value Chains (GVCs), which currently account for two-thirds of total global trade. The pressing policy challenge which now has to be faced by the development community is how these two sets of developments – a commitment to new and wider SDGs in a context in which deepening global economic integration is driven by the extension of GVCs – can be brought into alignment.
In seeking to address this policy challenge, we begin (in Section 2) by reviewing the nature and significance of GVCs in the extension of global integration. It is clear from this that although there are many gains to be realised from a deepening presence in the global economy, the issue is not whether an economy should pursue this outward growth trajectory, but how it does so. Incorrect positioning in the global economy, particularly by low-income countries, can lead to the undermining of SDGs, or a less than optimal rate of progress. This being the case, the question then is what steps need to be taken to ensure favourable outcomes, and how might progress on these fronts be measured. This is the subject matter of Section 3. But not all SDGs are centrally relevant in GVCs. Hence, Section 4 of this framework paper focuses on those SDGs which are most likely to be affected by the character of involvement in GVCs. In each case we seek to identify the nature of the SDG-GVC nexus, the data required to assess this interaction, and the problems which might emerge in data collection. The ultimate goal is to assist in the evidence informed rollout of policies designed to further progress with respect to the SDGs, particularly (but not exclusively) in the least developed economies.
It is important to pay close attention while reading Section 4 of this framework paper which sets out an ambitious programme for a holistic analysis of the impact of GVCs on all of the SDGs. It is very unlikely that any one project will seek to undertake such comprehensive enquiry. Moreover, context differs between different types of GVCs and different types of economies. For example, the challenges faced by least developed economies with very large informal sectors and high levels of absolute poverty are different from those faced by middle and upper middle income economies. Similarly, the challenges faced and opportunities opened in sectors involving labour-intensive assembly are qualitatively different from those involved in the service sector and in high-tech industries. In addition, the resources available for the investigation and analysis of GVCs may be constrained in terms of both time and human effort.
Thus, analysis of specific GVCs and specific SDGs will necessarily selectively draw on this methodological toolkit. Therefore, the first step required in drawing on this toolkit is a strategic judgment which begins with a reasoned assessment of the particular context, the objectives of the data-gathering exercise, and the constraints imposed by time and investigative resources. Without this fit-for-purpose lens to the analysis of GVCs and the SDGs, there is a danger that the search for appropriate and effective policy will be drowned, rather than facilitated, by the investigative process.
Trade Policies and Sustainable Development in the Context of Global Value Chains
Executive summary
Global value chains (GVCs) have become a major feature of the 21st century economy as a result of sharply reduced costs of transportation and communication, coupled with decades of trade liberalisation. The expansion and increased sophistication of GVCs has created a new “trade-investment-services-technology nexus.” This nexus involves not just the movement of final goods but also that of intermediates, capital, ideas, and data flows, as well as increasing demand for services to coordinate these dispersed production and distribution networks. As a result, GVCs have brought to the fore issues that were not as important in a world of trade in final goods and more discrete markets.
This paper explores the types of trade and trade-related policies that are the most relevant to support the development of country participation and upgrading in GVCs; it also explores the implications these policies may have for GVCs to contribute to sustainable development. It stresses the fact that appropriate policies, while crucial, are by themselves insufficient to achieve participation in GVCs and must necessarily be supplemented by a number of supportive and mutually reinforcing domestic policies.
Enabling policies dealing with trade, investment, and the distribution of gains must be set in the context of the new GVC trading framework. Today’s exports and imports are inextricably entwined in the globalisation of production. Open and predictable trade and investment regimes, accompanied by efficient logistics and supportive domestic policies, are all necessary to achieve sustainable development outcomes.
The present paper emphasises the following main findings with regard to GVCs, trade policy, and sustainable development:
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Foreign direct investment (FDI) is the driving force behind GVCs;
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There are many factors that determine competitiveness for participation in GVCs, of which trade policy is only one;
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Efficient services are critical components of GVC participation as they are the glue that links the supply chains together in fragmented production networks;
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Participation in regional trade agreements may help to shape GVC operations, as these agreements (and their rules of origin) provide a normative framework of rules within which firms can operate in a larger economic space;
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Openness is important as interventionist trade policies can affect the competitiveness of both goods and services, and divide markets;
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This applies equally to both tariffs and non-tariff measures such as subsidies and local content requirements; however, governments may choose to have recourse to these interventionist policies if they are pursuing goals other than economic efficiency (such as encouraging technology transfer, pursuing environmental clean energy objectives, creating employment, or promoting the economic development of particular sectors) and consider that these policies would be the best way to achieve such outcomes;
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There are many sustainable development considerations surrounding participation in GVCs, particularly for developing countries;
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These include questions over who captures value in supply chains; whether and under what conditions it is possible to upgrade and avoid being caught in low value tasks; the type of employment and social gains that GVCs may generate and whether they foster greater gender equality in the work place; and, lastly, whether GVCs increase the vulnerability and exposure of a country to footloose investors and external shocks.
As discussed in the paper, many of these questions are only now being explored in the literature. In a world of GVCs, trade policy needs to be understood in a different way. This begins with the recognition that exports are only a small part of the development equation. The existence of large and growing trade in intermediates and services inputs, associated with FDI and the globalisation of production, greatly raises the stakes for developing countries to have open and predictable trade and investment regimes, supported by efficient domestic services and logistics.
The paper underlines that while participation in GVCs can generate economic benefits, it does not automatically bring all of the desired developmental impacts such as the creation of more employment and better-paid jobs, the increased participation of women in the labour force, and a transfer of skills and technology. It may also increase the vulnerability of GVC participants to external shocks and a downturn in business cycles through greater dependence on production and demand links with third markets. Participation in GVCs is also not guaranteed to lead to an upgrading trajectory along the value chain.
All of these outcomes will be a function of a number of factors, some of which may lie outside the ability of a country to influence, such as geographical location, the sector in which the GVC operates, and the origin and characteristics of the lead firm and investor, among others. Nonetheless, many of these outcomes can be influenced by appropriate and proactive government policies, including policies of a horizontal nature, which have economy-wide effects.
The paper concludes that GVCs can be an important avenue for developing countries to build productive capacity, increase their participation in world markets, and help to create opportunities for manufacturing and services upgrading in their economies. However, such potential benefits from GVCs are not automatic. Policies matter and must include a set of coherent and mutually reinforcing trade, investment, and domestic enabling policies that will help generate sustainable development outcomes.
Introduction
Global value chains (GVCs) have become a major feature of the 21st century economy. Costs of transportation and communication have been sharply reduced. Decades of trade liberalisation through multilateral, regional, and unilateral efforts, combined with the transformative power of information technology (IT), have allowed firms to split up their production and source intermediate inputs and services throughout the global market in a seamless fashion to deliver final products. A GVC usually involves a collection of firms located in different countries that jointly form a production line. Depending on the location of a firm, participation may either involve forward linkages – where a firm produces an output that is used in production for export in another nation – or backward linkages where a firm uses imported parts or components used as input into production that is exported. While GVCs permit enterprises in different locations to concentrate on specific tasks, they also increase interdependence. Each link in the chain relies on upstream producers delivering their output on time and meeting the required quality and safety standards.
The origin of GVCs has been explained by Richard Baldwin (2006) as a process of “unbundling” or a transformation of the various constraints around the way in which goods are produced. While the “first unbundling” was caused by a rapid decline in transportation costs that removed the need for goods to be produced close to the point of their consumption, the “second unbundling” was caused by rapidly falling communication and coordination costs that have allowed producers to separate components of their production in various locations, not only within one country but also around the world. As Baldwin emphasised, the second unbundling opened up firms to global competition on a task-by-task basis, rather than on a firm-by-firm or sector-by-sector basis.
The application of low-cost information communication technology has thus transformed trade to the extent the flow of goods, services, people, investment, technology, and data now takes place across borders rather than just within borders. This new, fragmented production structure and the resulting GVCs have created a new “trade-investment-services-technology nexus” or an intertwining of trade in intermediates, of the movement of capital, of ideas and data flows, together with a demand for services to coordinate these dispersed production and distribution networks.1 As a result of such a nexus, GVCs have brought to the forefront issues that were not as important under the “first unbundling” where the only separation, according to Baldwin (2006), was between markets and consumers.
The most critical among these issues is foreign direct investment (FDI), not least because GVCs remain largely driven by investment decisions of multinational corporations (MNCs), through their outsourcing and offshoring activities. Secondly, services play a key role in the operation of international production networks, especially transport, communications, and other business services. Services act as the “glue” that binds together the geographically dispersed production stages involved in GVC networks. They are both embodied and embedded activities across the whole value chain for manufactured, agricultural, and natural resource products. Thirdly, as firms unbundle their production processes, logistics costs and efficient border operations become crucial. This includes all aspects of clearance procedures, port operations, cargo handlers, storage facilities, as well as transport and trade-related infrastructure. Finally, another element often included in this new paradigm is information technology (IT), which allows the supporting data flows to be moved around the world at almost zero cost.
This Issue Paper explores the types of trade and trade-related policies that are the most relevant to support the participation of developing countries and their upgrading in global value chains, as well as the implications of these policies for the sustainable development potential of GVCs. It stresses the fact that appropriate trade and trade-related policies, while crucial, are by themselves insufficient for achieving participation in GVCs. It underlines the numerous supportive and mutually reinforcing domestic policies that must also be brought into play in order for GVCs to lead to sustainable development outcomes.
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MDG Transition Report: Reliable statistics and integrated policy approach key to successful SDG and Agenda 2063 implementation
The 2016 Transition Report highlights the need for countries to strengthen capacities for evidence-based policy-making and to improve institutional coordination
African countries will need better data, statistics, and policy coordination to ensure successful implementation of the Sustainable Development Goals (SDGs) and congruence with the African Union’s Agenda 2063.
Such is the conclusion of a high-level panel convened on 21 September 2016 in New York on the margins of the United Nations 71st General Assembly to discuss Africa’s development prospects and preside over the launch of MDGs to SDGs – Transition Report 2016: Towards an Integrated and Coherent Approach to Sustainable Development in Africa.
This latest publication which is the last in a series of MDG reports, takes stock of Africa’s performance during the 15 year development campaign and reflects on the challenges and opportunities associated with the dual transition to the new global and continental development agendas adopted in 2015: the 2030 Agenda for Sustainable Development and the African Union’s Agenda 2063, Africa’s roadmap for development.
The report highlights important strides made by the continent in improving net primary enrolment; enhancing gender equality and empowerment of women; reducing child mortality; combating the spread of HIV and AIDS; and ensuring environmental sustainability.
On the other hand, it calls attention to the partial fulfillment of Overseas Development Assistance (ODA) commitments by development partners, raises concern about Africa’s persistently low share of Africa global trade and calls on African Member States to take further steps to reduce maternal deaths and the incidence of extreme poverty.
Currently 42.8 percent of the African population earns less than $1.90 per day. Based on the most recent data, there are 109 million more people in extreme poverty today than there were in 1990.
To ensure effective implementation of the new global and continental agendas, the 2016 Transition Report highlights the need for countries to strengthen capacities for evidence-based policy-making and to improve institutional coordination to ensure that implementation of the two agendas takes into account the three dimensions of sustainable development in a balanced manner.
Panelists present at the event also included Carlos Lopes Executive Secretary for the Economic Commission for Africa, Albéric Kacou Vice-President of the African Development Bank, Jeffrey T. Radebe Minister in the Presidency of South Africa, Dr. Ibrahim Assane Mayaki Chief Executive Officer of NEPAD, African Union Commission, Babatunde Osotimehin UNFPA Executive Director, Mario Pezzini, Director of the OECD Development Centre, and Ayodele Odusola, UNDP Africa Chief Economist.
Reflecting on the recent trends on the MDGs, Carlos Lopes called on member States to “accelerate efforts to diversify their economies and add value to their primary commodities so as to expand decent employment opportunities for their population.”
The African Union Commission noted that “the convergence of the Sustainable Development Goals with Agenda 2063 calls for coherent implementation of both agendas by African Member States”, while Mr. Kacou reiterated AfDB’s support for the implementation of the two agendas and observed that “the Bank’s priorities as reflected in the High 5s provide substantial leverage in a practical sense for the implementation of the SDGs and Agenda 2063.”
Mr. Ayodele Odusola underlined UNDP’s commitment towards “strengthening national capacities, enhancing synergies between and among goals and building coalitions for effective implementation of the two agendas”.
The participants’ other key message is that African countries have already started the hard work of implementing Agenda 2063 and 2030 and that success will require among others, strengthened capacities for integration of both agendas in national planning frameworks, effective institutional coordination and strong statistical systems to support evidenced based policymaking and follow-up.
Acknowledging the sea change that has occurred in the development landscape and the need to formulate gender-sensitive development policies, UNFPA Executive Director concluded: “We have to contend with the fact that Africa is the only continent where population will continue to grow for another 20 to 30 yrs. We cannot go forth as a continent without ensuring gender equality.”
UNDP’s recently published Africa Human Development Report estimated the total annual losses due to gender gap in the labor market to 95 billion USD.
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Market access for products and services of export interest to least developed countries: Summary of recent developments
Executive summary
LDC exports of goods and services grew by an annual average of 7.6% over the 2005-2015 period and, thus, slightly more than the exports of other developing economies (7.3% average). However, this fact is due to distinctly higher growth rates in the first part of the period. In recent years, LDCs’ exports were constrained by unfavourable developments in the prices of commodities. In 2015, LDC exports of goods and commercial services decreased by 20.1% to US$195.5 billion, while LDC imports fell by 7.5% to US$303.6 billion, resulting in an overall trade deficit of US$108.1 billion.
LDCs were able to increase their share in world exports of goods and commercial services from 0.7% in 2005 to 1.03% in 2014. However, in 2015, their share stood at 0.9% and hence fell below 1% for the first time since the crisis year 2009. This recent decrease reflected lower values of merchandise exports, due to falling prices of commodities.
In 2015, merchandise exports of the LDCs contracted by 25%, a significantly bigger drop than in 2014. As a result, the share of LDCs in world merchandise exports decreased to 0.97%. As their imports declined by “only” 9% in 2015, the LDCs recorded a new high in their merchandise trade deficit (of US$87 billion in 2015).
The year 2015 has seen a steep reduction in the price of commodities, especially fuels; also due to the slow-down in the Chinese economy and an increase in world supply. For exporting countries, this decline has been partially compensated by an increase in the US dollar exchange rate.
Petroleum oils (HS 27.09) dominated LDC exports in 2015, even if their share in exports fell to 28% (48% back in 2005). The importance of clothing products has increased though: in 2015, six out of the top ten products belonged to clothing, accounting for 20% of LDC merchandise exports.
1.6. In 2015, China was the top destination for LDC merchandise exports, followed by the European Union (EU) and the United States. The EU was the largest destination for LDC exports of agricultural and manufacturing products.
In 2015, LDCs’ exports of commercial services expanded to US$36 billion, up by 1%. This trend contrasts with the performances recorded by other developing economies and developed economies, which experienced sharp declines. As a result, the share of LDCs in world exports of commercial services increased to 0.8%. LDCs’ services exports continue to be dominated by low- to middle-skilled services sectors, such as travel (tourism) and transport. In 2015, LDCs’ services exports growth was fostered by the sustained expansion of the tourism sector.
In 2015, LDCs’ services trade remained concentrated within a few economies. The top ten leading exporters accounted for more than two-thirds of the group’s services receipts, a proportion virtually unchanged since 2005. The LDCs, as a group, are net commercial services importers. Over the years, the LDCs’ services trade deficit has widened from US$16.3 billion in 2005 to US$39 billion in 2015.
Progress has continued in advancing market access opportunities for LDCs. Most of the developed country Members accord either full or nearly full duty-free and quota-free (DFQF) market access to LDC products. A number of developing country Members have significantly expanded their DFQF coverage and now offer almost comprehensive DFQF market access to LDC products. Continuous improvements are being noted in the provision of DFQF market access to LDC products, including the further easing of rules of origin conditions in certain markets. Since the last report, several Members have submitted notifications regarding preferential treatment for services and services suppliers from LDCs – pushing up the number of notifications to 23.
LDCs’ trade profile
Trends in Goods and Commercial Services
LDC exports of goods and services grew by an annual average of 7.6% over the 2005-2015 period and, thus, slightly more than the exports of other developing economies (7.3% average). However, this fact is due to distinctly higher growth rates in the first part of the period. During 2005-2010, the annual average growth rate was 14.7% for LDCs and 11.2% for other developing economies. In contrast, during 2010-2015, annual export growth was only 0.9% in LDCs as compared to 3.6% in other developing economies. After 2011, the growth in the total value of LDCs’ exports was constrained by unfavourable developments in the price of commodities, on which they depend more than the other developing economies.
In 2015, LDC exports of goods and commercial services decreased by 20.1%, down to US$195.5 billion, while LDC imports fell by “only” 7.5% to US$303.6 billion, resulting in an overall trade deficit of US$108.1 billion in 2015. In 2005, the overall trade deficit stood at US$9.8 billion, thus had increased by more than 11 times during this period – in nominal terms.
In volume terms, LDC merchandise exports grew by 7.9% in 2015, while their imports expanded by 3.1%. In comparison to 2005, the export volume increased by almost 1.5 times while the import volume more than doubled. This development in volume terms shows, inter alia, the high impact of the decrease in prices on the trade figures in nominal terms.
Regarding LDCs’ integration in global trade, LDCs were able to increase their share in world exports of goods and commercial services from 0.7% in 2005 to 1.03% in 2014. However, in 2015, their share fell to below 1.0% for the first time since the crisis year 2009. This recent decrease reflected lower values of goods, due to falling prices of commodities, particularly fuels. For exports of commercial services, LDCs were able to further increase their market share to 0.8% in 2015.
In 2015, the trade balance ratio of goods was positive for only four out of the 48 LDCs – namely for Angola, Equatorial Guinea, Chad and Guinea-Bissau. However, for all of the first three, the ratio had deteriorated in comparison to 2005; only Guinea-Bissau was in position to turn the negative ratio of 2005 into a positive one in 2015. All the other LDCs had negative ratios in both years – with the exception of Myanmar, Yemen, Guinea, and Zambia that had positive ratios in 2005. Especially Eritrea, Burkina Faso and the Solomon Islands could reduce their negative ratios markedly between 2005 and 2015. Eritrea, for example, had a ratio of -90% in 2005 (i.e. their negative trade balance of 2005 reached a value of 90% of the nominal trade turnover of 2005) and a ratio of “only” -56% in 2015. The economies with the highest negative normalised trade balances in 2015 were Timor-Leste, Afghanistan, and Sao Tome and Principe.
Regarding trade of commercial services, eleven out of the 48 LDCs showed positive normalised trade balances in 2015, with Eritrea, The Gambia and Cambodia on the top positions. Equatorial Guinea, the Democratic Republic of the Congo and Lesotho were the LDCs with the highest negative normalised trade balances in 2015, between -96% (Equatorial Guinea) and -83% (Lesotho).
Merchandise Trade Developments
Overall trend
In 2015, merchandise exports of the LDCs contracted by 25%, thus by an even more distinct degree than the 3% decrease in 2014. Merchandise imports of LDCs declined by 9% in 2015. As LDCs depend to a high degree on exports of fuels and mining products, this mirrors the general negative trend of decreased prices and demand in 2015, but concerns the LDCs more intensively than most other economic groupings.
The share of LDCs merchandise exports in world exports dropped to 0.97% in 2015 – for the first time below 1% since 2007. Their share in world merchandise imports though, slightly increased from 1.4% in 2014 to 1.5% in 2015. Taking trade of developing economies as basis, the LDC share dropped to 2.1% in 2015 (2.4% in 2014) for merchandise exports while the imports share increased to 3.4% (3.3 % in 2014). Regarding exports of manufactured goods, LDCs’ share in world exports of these products decreased from 0.5% in 2014 to 0.4% in 2015.
The LDCs’ collective trade deficit continues to increase and hit a record level of US$87 billion in 2015, 44% higher than in 2014 and 134% higher than in 2013. In 2015, the LDCs’ oil exporters registered for the first time in more than 15 years a trade deficit of US$12 billion, from an average surplus of US$38 billion during the previous nine years. The LDCs’ manufacturing and agricultural exporters recorded a US$34 billion and US$20 billion trade deficit, respectively.
Commodity price movements
The year 2015 has seen a steep reduction in the prices of commodities, especially those of fuels (-45% against 2014). For exporting countries, this decline has been partially compensated by an appreciation in the US dollar exchange rate (actually, the short term fluctuations between the US dollar and the commodity prices are often negatively correlated). But the decline in commodity prices was also due to the slow-down in the Chinese economy and an increase in world supply as many projects – fuelled by high prices after 2003 – reached maturity. Financial volatility is also responsible for higher uncertainty and lower investment worldwide, leading to a further reduction in demand for minerals and oil.
Trends in product composition
The decreased demand from emerging economies and fallen commodity prices of recent years, led to a shrinking share of primary products in total exports of LDCs – from 73% in 2005 to estimated 58% in 2015. The share of manufactured products on the other hand increased from 21% in 2005 to 35% in 2015, mainly due to an increasing importance of clothing exports. During the same period, the share of agricultural products in LDC exports increased from 11% in 2005 to 13% in 2015.
Major products and markets of LDCs
Regarding the top ten products (in HS-4-digits classification) exported by LDCs, for 2005 and 2015, petroleum oils (HS 27.09) dominated LDC exports in both years. Back in 2005, almost half (48%) of total LDCs exports were allocated to this product. In 2015, petroleum oils were still the most important export product (in value terms), but their share had distinctly fallen – down to 28% (mostly due to the fall in prices). The opposite development could be observed for petroleum gases/hydrocarbons (HS 27.11), with the share more than doubled between 2005 and 2015 (from 2% in 2005 up to almost 5% in 2015) – but on a much smaller scale (in nominal figures).
The importance of clothing products increased between the two years; in 2005, four out of the top ten export products were part of this product group, reaching a cumulative share of 11% in LDC exports. Ten years later, six out of the top ten products belonged to clothing, with a total share of 20% in LDC merchandise exports. While back in 2005, the top ten products still covered more than two-thirds of LDCs total merchandise exports, their share had gone down to less than 60% in 2015. This might be interpreted as a factual decrease in product concentration of LDCs’ exports on the first sight, but is in fact just mostly a result of price effects (of especially petroleum oils).
LDCs’ merchandise imports are less concentrated than exports. Also for imports, petroleum oils (HS 27.10) represent the most important product. However, its share in total imports is much lower (8% in both years) than in the case for exports. Otherwise, cars, trucks and other vehicles as well as ships/vessels played important roles in both years – reaching cumulative shares of 11% in 2005 and 5% in 2015. Imports of textiles such as “fabrics of cotton” (HS 52.08) reflect the LDCs’ role in global value chains, using imported fabrics as inputs into the production of final clothing products for export. Two of the top ten imported products in both years are food products (rice and wheat/meslin). The value of imports of medicaments (HS 30.04) almost tripled between 2005 and 2015.
At the level of individual economies, some heterogeneity in the product structure of exports and imports can be observed. The top exports/imports products by individual LDC are shown in Table 1 of the Addendum.
While in 2005, the EU, with an export market share of almost 30%, was the most important destination for overall LDC exports, China was the top destination in 2015 (market share of 33%). In 2015, exports of fuels and mining products to China accounted for 13% of total LDC exports and for almost half of LDC exports of fuels and mining products – in spite of fallen energy prices and lower demand from China. Regarding agricultural and manufactured products, the EU was still the most important market for the LDCs in 2015, as it was in 2005. For agricultural products, the EU’s share decreased however from 41% in 2005 to 31% in 2015, while China’s share increased from 14% in 2005 to 23% in 2015. The share of the EU as market for LDCs’ exports of manufactures increased slightly, from 53% in 2005 to 54% in 2015.
Services Trade Developments
Statistics on trade in commercial services reflect the new services classification contained in the 6th edition of the IMF Balance of Payments Manual (BPM6). Thus, data presented in this paper are not comparable to previous editions.
In 2015, LDCs’ exports of commercial services expanded to US$36 billion, up by 1%. This trend contrasts with the performances recorded by other developing economies and by the developed group, which saw sharp declines. As a result, the share of LDCs in world exports of commercial services increased to 0.8%. Although in a steady rise over recent years, LDCs’ export participation remained overall negligible. On the imports side, LDCs’ payments for services reached US$75 billion in 2015, contracting by 8%, due to dropping imports of other commercial services. Participation in global imports stood at 1.6%.
LDCs’ services exports continue to be dominated by low- to middle-skilled services sectors, such as travel (tourism) and transport. Their aggregate contribution, in 2015, reached 73.4% of total services exports compared to 56.7% for other developing economies and 37.7% for developed economies.
In 2015, LDCs’ services exports growth was fostered by the sustained expansion of the tourism sector. Travel exports rose by 6%, reaching some US$19 billion, led in particular by LDCs in Asia (+8%). Rapid growth reflected increasing inflows of international tourists in particular to leading LDC travel exporters. For example, in 2015, international tourist arrivals to Myanmar grew by 52% and in Cambodia by 6%. However, LDCs’ payments for travelling abroad also increased, estimated to have expanded by 3% in 2015. Tanzania remained the largest travel spender among the group.
LDCs’ transport receipts contracted only by 1%, much less than for the rest of the world (-10%) as exports from Ethiopia, the main LDC transport exporter, recorded positive growth. Transport imports decreased by 2%. Trade other commercial services fell, with exports down by 9%, and imports by 15%.7 Goods–related services exports grew by 6%, while imports stagnated.
Goods-related services is a new aggregation of services in BOP statistics, which includes “manufacturing services on physical inputs owned by others” and “maintenance and repair services n.i.e.”. The first category covers essentially manufacturing on a contract basis including activities such as processing, assembly, labelling, packing, etc. The second comprises maintenance and repair work by residents of an economy on goods that are owned by non-residents and vice versa. Many economies, in particular LDCs, are not yet collecting statistics for these new services arising from globalization and the fragmentation of the production process across different economies. Thus, data should be taken with caution.
In 2015, LDCs’ services trade remains concentrated within a few economies. The top ten leading exporters accounted for more than two-thirds of the group’s services receipts, a proportion virtually unchanged since 2005. Starting in 2014, Myanmar ranks as the largest exporter of services among the LDCs, boosted by rising exports of goods-related services, which, as mentioned above, are not yet recorded by most LDCs. For imports, Angola alone represented one-quarter of the group’s total commercial services payments. Annex Table 5 provides services exports for individual LDCs by sector.
The LDCs, as a group, are net commercial services importers. Over the years, the LDCs’ services trade deficit has widened reaching US$39 billion in 2015 up from US$16.3 billion in 2005. However, while both the transport sector and “other commercial services” sectors have experienced persistent trade deficits, travel (tourism) has been recording an expanding surplus since 2005. In 2015, the travel surplus attained US$11.4 billion.
Market access for products of export interest to LDCs
Duty-free market access granted by selected Members
The preferential LDC schemes of Australia, New Zealand, Norway and Switzerland provides full duty-free market access for LDC exports. For Canada, Chile, the EU and Japan, 97% or more of their tariff lines are free of duty for products originating from LDCs. In 2014, China and India considerably improved the duty-free coverage of their LDC schemes, with around 95% of their tariff lines being free of any import duty. Imports from LDCs were subject to trade-weighted average duties of 0.3% and 1.4% in China and India, respectively.
In 2014, LDCs exported the highest number of products (in terms of national tariff lines) to the EU, followed by China, Canada and the United States. In dollar terms, half of LDC exports were dutiable under the Unites States’ GSP LDC scheme, with a trade-weighted average tariff of 8.2%. However, eligible LDCs enjoy significant duty-free access to its market under the Africa Growth and Opportunity Act (AGOA) and the Caribbean Basin Initiative. For instance, the United States provided 97.5% duty-free market access to LDC beneficiaries of the AGOA. Hong Kong, China; and Singapore, have no LDC preference scheme but almost all LDC products enter their markets duty-free on an MFN basis.
Recent initiatives to improve market access for LDCs
Annex Table 6 provides a non-exhaustive list of major multilateral non-reciprocal market access schemes undertaken by Members in favour of LDCs. It updates the previous year’s information based on Members’ notifications and statements at the WTO as well as submissions made to WTO’s IDB. The Table does not include regional or bilateral agreements/initiatives under which, too, LDCs receive preferences.
A few Members notified changes or updates regarding their preference schemes. In February 2016, the United States submitted a notification regarding its GSP Programme, containing, inter alia, changes to country and product eligibility resulting from GSP annual reviews (WT/COMTD/N/1/Add.9). As a result of the 2014/2015 limited product review, the United States has designated five additional cotton products as eligible for duty-free treatment for LDCs only. At the Committee on Trade and Development (CTD) meeting on 8 July 2016, the United States informed Members that, as of 1 July 2016, duty-free status has been added for a range of travel goods imported from LDC beneficiaries of its GSP scheme, as well as from beneficiaries of the African Growth and Opportunity Act (AGOA) (WT/COMTD/M/99).
On 17 November 2015, India submitted a communication containing updated information on the product coverage and the rules of origin of its Duty-Free Tariff Preference (DFTP) scheme (WT/COMTD/N/38/Add.1).
As has been reported in the past, most of the developed country Members grant either full or nearly full DFQF market access. Developing country Members have also taken concrete steps to provide duty-free access to LDC products. In this regard, so far, six developing country Members have made notifications pursuant to the established procedure including under the Transparency Mechanism for the Preferential Trade Arrangements: Chile; China; India; Republic of Korea; Chinese Taipei; and Thailand.9 Most of them grant a significant degree of DFQF market access to LDC products, and a number of them have reached or are in the process of attaining comprehensive DFQF coverage for LDCs.
Members have continued discussions on DFQF implementation in the CTD. In this regard, on 27 June 2016, the LDC Group submitted a proposal for a Secretariat study concerning the implementation of DFQF market access for LDC products (WT/COMTD/W/218).
Continuous efforts are being made to help the LDCs with preferential rules of origin. In line with the Decision on Preferential Rules of Origin for LDCs of the Bali Ministerial Conference, the Committee on Rules of Origin (CRO) has been holding annual reviews on developments in preferential rules of origin. The last review was held in October 2015. At the Ministerial Conference in Nairobi in 2015, Ministers adopted a set of provisions with a view to further improving preferential rules of origin applicable to imports from LDCs (WT/L/917/Add.1). At the CRO meeting on 22 April 2016, the LDC Group presented a submission asking preference-granting Members specific questions about the measures they were taking to implement the Nairobi Decision (G/RO/W/159). On 19 July 2016, the LDC Group submitted a communication containing a draft template for notification of preferential rules of origin for the consideration of the CRO (G/RO/W/160).
On 3 November 2015, Japan submitted a notification concerning the simplification of its preferential rules of origin for products classified in HS Chapter 61 – Articles of apparel and clothing accessories (WT/COMTD/N/2/Add.16). At the LDC Sub-Committee meeting on 24 June 2016, the delegation of the EU reiterated that under its GSP scheme a new system of self-certification of origin, the Registered Exporter System (REX), which will enter into force on 1 January 2017 (WT/COMTD/LDC/M/78).
Progress has been made with respect to preferential treatment of services and services suppliers from LDCs. In Nairobi in 2015, Ministers decided, inter alia, to extend the life span of the Waiver, initially adopted in 2011 (WT/L/847), for an additional four years until 31 December 2030 (WT/L/982). As stipulated by the Nairobi Decision, the CTS maintains a standing agenda item to review and promote the operationalization of the Waiver.
Since the 2015 LDC market access report (WT/COMTD/LDC/W/60), eight Members have submitted new notifications. Two Members (Canada and Turkey) have revised their notifications. As of end September 2016, a total of 23 Members had notified preferences.
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Diversification: The key to unleashing Sudan’s economic potential?
Sudan’s economy lags behind many countries in attaining structural change through high productivity sectors such as manufacturing and non-traditional services sectors, according to the World Bank’s latest Country Economic Memorandum (CEM).
A retrospective review, the report entitled Realizing the Potential for Diversified Development, shows that Sudan’s economy has undergone three distinct periods of varying economic growth between 1988 and 2013.
Between 1989 and 1997, Sudan’s gross domestic product (GDP) averaged 4.9 percentage points, mainly due to growing labor and total factor productivity (TFP). Between 1998 and 2007, GDP growth picked up the pace and economic activity increased by 6.1 percentage points due to the advent of oil revenue; in the “oil economy”, physical capital became the major driver of the country’s economy. However, the oil economy started to decline in 2008 where negative TFP growth set in. This was compounded by the secession of South Sudan in 2011, which resulted in the loss of the majority of oil reserves and related fiscal revenues and dealt a heavy blow to Sudan’s economy.
“The loss of major oil reserves has had a significant impact on the economy,” said Michael Geiger, Senior Economist and lead author of the report. “Oil accounted for 75% of Sudan’s foreign currency earnings which at its peak in 2008 was around $8.3 billion.”
It has since achieved some recovery driven by exploiting other export possibilities, notably gold and livestock. But to reach a more diversified, non-natural resource economy it is essential that Sudan undertakes a combination of institutional, macroeconomic, and sectoral reforms to reach a more stable growth path, the CEM says.
To increase growth, the report recommends economic diversification through the broadening of its endowment base, which is the country’s foundation to pursue efficient economic opportunities, and increasing productivity particularly in agriculture. Economic diversification was already important during the years of the “oil economy” between 1999 and 2011, but it is even more important now that the country is in need of alternative sources of foreign exchange earnings through exports.
“Economic diversification is high on the Government of Sudan’s agenda,” said Michael Geiger, Lead Author of the Report. ”While the authorities have succeeded in reducing inflation and slightly recovering from the negative growth rates of 2011 and 2012, more must be done to ensure a more stable medium-term outlook.”
The report identifies a number of barriers that have been preventing Sudan from effective economic diversification. These include high and volatile inflation, a long overvalued exchange rate, low productivity in agriculture, among others.
To address these challenges, the report proposes a series of interlinked recommendations that address sector-specific concerns as well as broader challenges facing Sudan’s macro economy. These include removal of exchange restrictions to unify the official and black market rates, increasing agricultural productivity through key policy changes, improving the management of natural resources rents, addressing broader business environment constraints and building human capital to support structural change.
“The World Bank’s CEM argues that a combination of direct and indirect approaches will help Sudan embark on the structural transformation necessary to accelerate inclusive economic growth leading to sustained poverty reduction,” said Carolyn Turk, World Bank Country Director for Ethiopia, Sudan and South Sudan.
“It is essential that Sudan undertakes a broad set of reforms so as to successfully diversify its economy,” said Xavier Furtado, World Bank Country Representative for Sudan. “This includes exchange rate reforms as well as ensuring a key role for the agriculture sector, which suffers from under-investment and very low yields, yet holds so much potential.”
“In order to help support the authorities in some of these areas, the World Bank plans to launch several new initiatives in the coming months, including support for public-private partnerships and greater financial inclusion in the agriculture sector,” Furtado added.
The report notes that economies with successful diversification endeavors have three things in common: the ability to manage natural resource rents, provide public services, and create a business enabling environment. Sudan has major weaknesses in all these areas, which are often complicated by conflict, fragility, and lack of clarity in the assignment of responsibilities in a decentralized public administration. The report also emphasizes the need for a sectoral focus, as agriculture is expected to pay a bigger role in the country’s economy in the foreseeable future in the absence of dominant resource-based exports.
Major findings of the report indicate that with no lasting structural change, the contribution of higher productivity economic activities will remain marginal and it will be difficult to achieve enough growth momentum in the country to reduce poverty. High, and volatile inflation, budget deficits and low savings brought on by the dramatic decline of oil revenues have also been identified as key challenges. The report argues that Sudan’s real exchange rate (RER) has been greatly overvalued for most of the past 40 years with detrimental effects on competitiveness and export sectors.
Sudan’s export markets are found to be highly concentrated as evidenced in large shares of the country’s top export items. There is hope however that the relatively low degree of concentration for non-oil products is a sign that the country already started to diversify its non-oil (export) products after the cessation of South Sudan. The report makes the following five policy recommendations for Sudan to make use of its potential for diversified growth and development:
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Remove exchange restrictions to unify official and black-market rates and enhance policy consistency. Given the ever-changing black market rate and the earlier attempts in 2012 and 2013, gradual but ongoing devaluation may be the approach of choice for Sudan.
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Increase agriculture productivity through a set of key (policy) changes in the areas of centralized markets, subsidies, and the promotion of fertilizer usage.
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Improve the management of natural resource rents through strengthening institutions for diversification and rethinking the role of natural resource exploration in the economy.
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Address broader business constraints to create space for structural transformation. There is a need to improve the regulatory framework for economic activity particularly to facilitate the development of an agro-processing and light manufacturing sector.
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Build human capital to support skills-intensive modern services and reduce spatial disparities, especially by increasing education levels across the board to address the lack of an educated workforce in Sudan.
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Global integration key to attaining development and climate goals, African leaders tell UN Assembly
Stressing the primacy of the United Nations in forging the collective momentum needed to achieve the Sustainable Development Goals (SDGs) and tackle climate change, Prime Minister Sibusiso Barnabas Dlamini of Swaziland told the General Assembly on 24 September 2016 that global integration is crucial to transforming the world.
“Integration has become a universal subject that transcends all aspect s of life. It has been proven that any development achieved by individual countries is because its nationals have purposed to work together as a collective entity,” he said at the Assembly’s annual general debate.
“This is true with the United Nations family, whereby the basis of all our success is togetherness and unity in diversity. We have come together in our different sizes and with our diverse cultures, traditions, economies, political and social inclinations to cooperate to become a formidable family ready to address any challenge and achieve any objectives we set ourselves.”
He noted that many countries have succeeded in developing their economies by collectively observing common regional rules to promote a regional agenda.
“Countries have agreed to opening their markets in order to facilitate a high degree of economic activity, boosting trade and job creation, among others,” he said. Peaceful societies have been created through integration. Integration is one of the key ingredients that propel the push to transform our world.”
Mr. Dlamini also urged expanding the 15-member Security Council along the lines of the African Union’s Ezulweni Consensus, adopted in Ezulweni, Swaziland, in 2005, which calls for 11 additional seats, including two permanent and two non-permanent seats for Africa, with the new permanent members having the same veto rights as the current five permanent members.
Gabon’s Foreign Minister Emmanuel Issoze-Ngondet highlighted the need to develop Africa’s energy resources as part of the drive to attain the SDGs and combat climate change. “Two thirds of Africans are deprived of electricity and we must mobilize to address this injustice,” he said.
“Eradication of poverty, protection of the environment, the shared prosperity to which we all aspire are necessities which demand both human and financial resources and greater involvement of the private sector.”
He also noted the need to end the conflicts in Syria and Libya in order to combat the threat of terrorism and stop the unprecedented flow of refugees and migrants resulting from them.
Also addressing the General Assembly, the Minister for Foreign Affairs of Mauritania, Isselkou Ould Ahmed Izid Bih, stressed that climate change is a major threat to sustainable development, for not only his country, but for others in the region. As such, he expressed the hope that the international community will respect their commitments under the Paris Agreement.
“We have to integrate the environment issue as a cross cutting issue in all of our national policies, particularly those pertaining to economic development, if we are to pursue sustainable development,” he said noting that Mauritania has been able to limit desertification thanks to its efforts.
The Minister also noted the Mauritania’s role, in collaboration with other regional countries and organizations, including the UN, in peace and security matters, and called for crisis such as those in Syria, Libya and Yemen to be resolved through political negotiation.
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DBSA delivers record development impact while maintaining financial sustainability
The Development Bank of Southern Africa (DBSA) on 22 September 2016 announced financial results for the 12-month period to 31 March 2016.
Amid economic headwinds, the DBSA delivered R28bn across the total infrastructure value chain, with development assets now standing at R77bn and total assets at R82bn.
Salient features of the financial year include:
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Total infrastructure development impact of R28 bn of which
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R7.6bn approved in project preparation funding;
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R17.1 bn in total disbursements;
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R3.3bn in total funds under management for infrastructure delivery.
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Increased support to under-capacitated municipalities, with increased planning and implementation support.
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70 infrastructure projects completed in the electricity, water, sanitation, roads and storm water sectors for secondary and under resourced municipalities, benefitting more than 63 000 households.
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638,000 households to benefit from new or upgraded infrastructure through funding activities
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R3.5bn in disbursements outside South Africa
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DBSA awarded accreditation to the Green Climate Fund, thus enabling access to the US$10 billion committed to this United Nations initiative, which was created to provide funding to projects that invest in low-emission and climate-resilient development.
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DBSA receives two awards from IJ Global for infrastructure finance projects
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Net profit of R2.6bn and sustainable earnings of R1.4bn
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Cost to income ratio improved to 29% from 34%
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Non-performing loan book after specific impairments reduced to 1.1% from previous year’s 1.9%
Speaking at the release of the results, Patrick Dlamini, Chief Executive of the DBSA said, “Despite a challenging operating environment, we delivered a credible set of results in line with our expectations. The need for infrastructure development in South Africa and throughout Africa remains critical and although we were faced with subdued economic environment and falling commodity prices, we at the DBSA remain committed to playing a significant role in ensuring that the country’s infrastructure gaps are met.”
Continued success in bringing projects to bankability
Over the past financial year, the DBSA’s Project Preparation unit has built on past successes in creating a good investment portfolio.
For the period under review, 13 projects to the value of R7.6bn were approved for funding, up 18% from R6.4 billion in 2015. It is estimated that in excess of R24 billion will be unlocked from third party funders.
The DBSA is currently assessing projects to the value of R216bn, most of which are in the energy and transport sectors.
New disbursement record set – R17.1billion
The DBSA achieved a new disbursement record of R17.1bn – up 32% from the 2015 financial year with disbursements largely allocated to metros (7.5bn), economic infrastructure sector (R4.9bn) and projects outside South Africa (R3.5bn).
The DBSA continues to play a role in supporting municipalities by providing not only infrastructure financing but planning and implementation support services. “We remain a critical component of the national infrastructure system, contributing to the rollout of government infrastructure programmes and increasing the performance of under-capacitated municipalities,” commented Dlamini.
Impact of Municipal Funding includes:
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R8.1bn disbursed to municipalities, up from R5.5bn in 2014/2015
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R1.2bn in approvals to secondary municipalities and commitments of R546m
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R430m and R173m disbursed to secondary and under resourced municipalities respectively
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70 projects completed in secondary and under-resourced municipalities in the electricity, water, sanitation, roads, storm water and fleet management sectors.
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Through implementation support, DBSA indirectly contributed to creating 5 240 actual job opportunities
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63 242 households will benefit from completed and still under construction projects.
Increased progress in infrastructure delivery
The Bank’s Infrastructure Delivery Division (IDD) delivered its infrastructure projects successfully and timeously, playing a crucial role in co-ordinating delivery in key priority sectors such as schools, housing and health facilities.
Highlights of the past financial year include:
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The completion of 35 schools, as part of the Accelerated School Infrastructure Delivery Initiative, benefitting 17 916 learners.
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1 382 affordable houses completed with more than 4 000 households to benefit from the houses completed.
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111 health facilities completed
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665 SMME’s benefitted from construction contracts to the value of R709m, with 6421 jobs created through projects completed by Infrastructure Delivery Division.
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Value of infrastructure delivered increased to R3.3 billion with funds under management from R2bn in the previous year. R2.6bn infrastructure was delivered during the year.
Financial performance
The DBSA delivered strong financial results underpinned by the continued focus on improving margins and cost management. Sustainable earnings improved to R1.4bn from R805m in 2014/15. The bank recorded a net profit of R2.6bn against the R1.2bn in 2014/2015. Sustainable earnings represents profit earned before foreign exchange and certain financial instruments adjustments.
The Bank’s total assets grew by 16% to R82bn, with the total development asset book increasing by 22% to R77bn. The debt/equity ratio of 177.8% remained well below the 250% statutory threshold. Non-performing loans, after specific provisions improved to 1.1% from 1.9% in the previous financial year against a target of 3.3%.
The DBSA also achieved a cost-to-income ratio of 28.7%, against a ratio of 34.4% in the previous financial year.
Outlook
“Although the economic outlook remains uncertain, we believe that as the price of commodities recovers, this will feed positively into our business. The DBSA is therefore well positioned to achieve maximum development impact across the full infrastructure development value chain and will seek to unlock R35bn in infrastructure development in the next financial year.
We believe the DBSA is well-placed to continue its central role as the financial engine room of South African development, and to play a major role in the development of the continent.”
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tralac’s Daily News Selection
The selection: Friday, 23 September 2016
South Africa: Status report on trade negotiations, by Dr Rob Davies, Minister of Trade and Industry (pdf, AgBiz)
On US-SA bilateral trade: The US have a very specific model for their FTA negotiations and require countries to make comprehensive commitments on a wide range of areas including investment and public procurement. It will therefore be very difficult for SA/ SACU to negotiate a FTA with the US since it will limit policy space in many areas. A study on the future of SA-US trade relations has been commissioned by NEDLAC. SA will need to use the time to develop a clear position on the long term relations with the US post-AGOA.
Guiding principles for investment policy-making: a South Africa scorecard (tralac newsletter)
At the 2016 Hangzhou Summit, G20 leaders endorsed a new set of “Guiding Principles for Investment Policy-Making”. The nine non-binding principles are intended to promote inclusive and sustainable growth via a coherent, open and conducive international environment for investment. As a member of the G20, South Africa has endorsed these principles, however, changes to investment laws – including the controversial Protection of Investment Act; and the cancellation of bilateral investment treaties in recent years has created some negative sentiment about investment in the country. At the same time, South Africa’s FDI inflows have decreased to the lowest level in a decade dropping from US$5.77bn in 2014 to US$1.77bn in 2015. In light of this, we assess South Africa’s foreign investment regime and environment against the new principles. [The analysts: Ashly Hope, Talkmore Chidede]
European MPs warn EAC to be cautious on EU trade deal (New Times)
The proposed Economic Partnership Agreement (EPA) between the East African Community and the European Union is not ideal for the region and could stifle the infant industries if passed as it is, some European Union Members of parliament told The New Times, yesterday. The agreement, they said, could pose a risk to regional economies as their infant industries will face unfair competition due to products from the European Union. Marie Arena, a European Parliamentarian, told The New Times that the agreement was unfair as it is and, if enforced in its current form, it could promote unfair competition in the region. [Inside the EU’s multi-billion dollar investment plan for Africa]
Global growth warning: weak trade, financial distortions (OECD Interim Economic Outlook)
The OECD projects that the global economy will grow by 2.9% this year and 3.2% in 2017, which is well below long-run averages of around 3¾%. The small downgrade in the global outlook since the previous Economic Outlook in June 2016 reflects downgrades in major advanced economies, notably the United Kingdom for 2017, offset by a gradual improvement in major emerging-market commodity producers. Growth among the major advanced economies will be subdued. In the United States, where solid consumption and job growth is countered by weak investment, growth is estimated at 1.4% this year and 2.1% in 2017. The euro area is projected to grow at a 1.5% rate in 2016 and a 1.4% pace in 2017.
High-Level Panel for Women’s Economic Empowerment: 7 primary drivers (UN Women)
The report highlights seven primary drivers to unlock the potential of women to fully participate in the economy and achieve financial independence: tackling adverse norms and promoting positive role models; ensuring legal protections and reforming discriminatory laws and regulations; recognizing, reducing and redistributing unpaid work and care; building digital, financial and property assets; changing corporate culture and practice, improving public sector practices in employment and procurement, and strengthening visibility, collective voice and representation.
Regional meeting of RCs/UNCT members on El Niño-induced drought in southern Africa: summary of conclusions, recommendations
Economic impacts and risk management solutions: Policy choices of countries continue to weaken their capacity to manage shocks. There has been little progress in the past 10 years in the countries’ capacity to manage shocks. There may be scope to review further why this is the case and why policies to reduce risks to natural hazards have not been adopted more widely by governments. Lessons from previous shocks are still challenging to implement: lack of fiscal buffers and maize mono-cropping makes southern Africa uniquely exposed to drought. However, some progress has been made on government safety nets, and the crisis presents window of opportunity to further promote their development. [Southern Africa: Vulnerability Assessment Committee Results 2016 (pdf)]
Agriculture and food system transformation needed on pathway to zero hunger – Ban (UN)
While the world has seen some progress on combating the root causes of hunger and malnutrition, the challenge of providing the fundamental right to adequate food to all people must remain a priority, United Nations Secretary-General Ban Ki-moon said on 22 September 2016, urging Member States to continue to work together to tackle the problem. “It is unacceptable in a world of plenty that nearly 800 million people still suffer from hunger,” the UN chief said at a high-level event on “Pathways to Zero Hunger” at UN Headquarters. The event, co-organized by the FAO, IFAD and the WFP, seeks to galvanize momentum for the Zero Hunger Challenge launched by the Secretary-General in 2012. [‘This is no longer a time for promises,’ African leaders tell UN, urging action on Global Goals]
Report reveals 11% growth of air travel to East Africa (The Citizen)
The number of international air travel to East Africa rose by 11.2% during the first eight months of this year compared with a similar period last year, a new study shows, putting the region ahead of the entire continent. ForwardKeys - which predicts future travel patterns by crunching and analysing 14 million booking transactions a day - says countries like Algeria, Egypt, Morocco and Tunisia saw little growth or even a decline. “We are seeing a tale of two Africas, with North African countries suffering from political instability and terror activities and sub-Saharan African countries powering ahead,” said the ForwardKeys chief executive officer, Mr Olivier Jager. Kenya, Mauritius, South Africa, Tanzania and Ethiopia led the pack of high growth destinations with 14.9%, 11.6%, 11.4%, 10.6 and 9.6% respectively.
Namibia: Govt plans rand-denominated loans and bonds (The Namibian)
Namibia will seek to raise about US$5bn in loans and bonds over the next decade to help diversify and industrialise its economy with any debt sales to take place in South Africa, President Hage Geingob told Bloomberg this week in an interview in New York. The President said the government plans to issue rand-denominated bonds and get funding from countries including the US, China, India and Japan. “We’re looking at the South African bond market, and some concessional loans. Rand bonds would be much better than dollar-denominated Eurobonds”, he said.
South Africa, World Bank Treasury design risk management tool for SA’s debt portfolio (World Bank)
South Africa has made significant progress to improve the financial risk management of its public debt portfolio thanks to a tailor-made model designed to analyze the costs and risk factors. This tool, developed through a partnership between the Government of South Africa and the World Bank Treasury, allows the country to be better positioned to absorb fiscal shocks going forward. Emerging market economies, of which South Africa is one, became a viable outlet for investors who flooded these markets with capital in the aftermath of the global economic crisis of 2008, when the gross domestic products of advanced economies fell by 3.4%. But in the last three years, growing volatility in emerging countries has led to vast outflows from emerging market countries to other currencies and investment options.
Tanzania: Online mining info platform touted (Daily News)
An online platform for sharing information to Tanzania Revenue Authority over exploration, development and production of mineral and petroleum resources should be established for proper implementation of the transfer pricing system in the extractive industry, a new study report suggests. The ‘Transfer price case study on Tanzania’, which was launched in Dar es Salaam yesterday by the Natural Resource Governance Institute, made the recommendation after it found out that there was inadequate information flow from the Tanzania Minerals Audit Agency and Tanzania Petroleum Development Corporation to the taxman. [Preventing tax revenue loss from extractive sector in Tanzania]
Rwanda agents happy as Dar shipping lines waive container deposit fees: Maersk and Safmarine shipping lines recently agreed to give a waiver on container cash deposit to members of the Rwanda Freight Forwarders Association to reduce the cost of doing business. The scheme will first be rolled out as a pilot phase before it can be fully adopted. The development follows bilateral talks held last month between Rwanda and Tanzania to address the current constraints affecting traders at the port, including the question of cash deposits. Fred Seka, the chairperson, Rwanda Freight Forwarders Association (ADR), said both parties agreed to use an insurance guarantee covered by UAP Insurance to facilitate ease of doing business at the port.
DRC traders assured of better port services: TPA Director General, Engineer Deusdedit Kakoko gave the assurance after meeting traders from Bukavu and Goma towns in Kivu province. He told them that the government of Tanzania is constructing standard gauge railways that will simplify goods transportation along the central corridor. Also in the plan, he said, is putting up modern infrastructure at Isaka dry port. “With such measures, DRC business members will not necessarily travel all the way to Dar es Salaam to follow up their cargo,” he noted, adding that Isaka dry port will have rail connection, revenue office centre and other services to carter for neighbouring business community.
No Dutch aid for Kenya after 2020, minister tells parliament (Business Daily)
Kenya will not receive financial assistance from the Netherlands beginning 2020, the European nation has said, citing “significant” economic growth in the past decade that has turned the East African state into a middle-income country. The Netherlands assistance to Kenya has been concentrated in supporting food security programmes, governance and human rights, improvement of the business climate, environmental conservation, sanitation as well as culture and sports. Dutch Minister for Foreign Trade and Development Co-operation, Lilianne Ploumen, told her country’s Parliament that the relationship between the Netherlands and Kenya - after 2020 – will become purely that of “trade partners” hence the decision to stop aid.
Botswana: Choppies profits halve on expansion costs (Mmegi)
Budget retailer, Choppies Enterprises saw its profit after tax for the year ended June 30, 2016 almost halve from the prior year as a difficult economic climate in Zimbabwe and South African mining towns slowed revenue growth while start up costs in Kenya and Zambia pushed up expenses.
Dangote’s low cement prices upset East African firms (The EastAfrican)
The entry of low cost Dangote Cement products into the Kenya and Tanzania market is starting to unsettle large cement players in the region by increasing competition and reducing profit margins for regional firms. The cement firm, owned by Africa’s richest man, Aliko Dangote, is using his factories in Ethiopia and Tanzania to gain a foothold in the regional cement market. Dangote’s cement is 20 to 40% cent cheaper than locally produced cement; this is expected to finally drive down retail prices, which have been static for close to a decade. [Related: Cheap imports, high power costs pushing manufacturers out of Kenya, Ethiopia wins big as cement, flower, shoe firms set up shop]
Kenya’s sugar sector reels in uncertainty as COMESA deal nears end (Business Daily)
As the clock ticks towards next year’s removal of the protection for Kenya’s sugar sector from cheaper imports, Agriculture Cabinet Secretary Willy Bett is a worried man. While Mumias Sugar Company’s privatisation was supposed to offer a roadmap on how to revive the industry, it has become the laughing stock of the sector. “We are ashamed of Mumias because they negated our principle that privatisation is the key to keeping the sector alive. We are really very sorry about Mumias,” he says. Even with that classic failure, Mr Bett still thinks that privatisation is the panacea for the woes of the struggling factories, weighed down by ineptitude, lack of cane and corruption. Others think the sector should encourage block farming first and reorganise itself before privatisation.
Mali, Africa’s second-biggest cotton producer, expects record crop (Bloomberg)
“A total output of 725,000 tons is expected this year - it’s a record high,” Modibo Kone, CEO of the Compagnie Malienne pour le Developpement du Textile, said in an interview Wednesday. Besides favorable weather, subsidies for fertilizers had also helped boost the harvest due to end in March. “Our goal is to reach 800,000 tons in 2018,” Kone said.
Zambia: REOI for value chain development specialist (pdf, AfDB)
The main components of the Project related to support to light manufacturing through the development of industrial clusters with the promotion of access to markets, finance, technology and business skills for MSMEs operating in selected subsectors. In the second area of focus, the Project will address the key prerequisites for unlocking the full value addition potential of cassava as a commercial crop, while supporting women and youth as stakeholders along the value chain.
Zimbabwe: Mnangagwa hails SI64
Kenya’s North Rift region woos Chinese investors after WB ranking
International air travel to Kenya rises 14.9%
US fund opens Nairobi office in hunt for mega deals
Transport CS James Macharia: Delayed SGR project to be back on track in 2 weeks
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OECD warns weak trade and financial distortions damage global growth prospects
Weak trade growth and financial distortions are exacerbating slow global economic growth, according to the OECD’s latest Interim Economic Outlook.
The global economy is projected to grow at a slower pace this year than in 2015, with only a modest uptick expected in 2017. The Outlook warns that a low-growth trap has taken root, as poor growth expectations further depress trade, investment, productivity and wages.
Over the past few years, the rate of global trade growth has halved relative to the pre-crisis period, and it declined further in recent quarters, with the weakness concentrated in Asia. While low investment has played a role, rebalancing in China and a reversal in the development of global value chains could signal permanently lower trade growth, leading to weaker productivity growth. Lack of progress – together with some backtracking – on the opening of global markets to trade has added to the slowdown.
Exceptionally low – and in some cases negative – interest rates are distorting financial markets and raising risks across the financial system. A disconnect between rising bond and equity prices and falling profit and growth expectations, combined with over-heating real estate markets in many countries, increases the vulnerability of investors to a sharp correction in asset prices.
“The marked slowdown in world trade underlines concerns about the robustness of the economy and the difficulties in exiting the low-growth trap,” said OECD Chief Economist Catherine L. Mann. “While weak demand is surely playing a role in the trade slowdown, a lack of political support for trade policies whose benefits could be widely shared is of deep concern.
”Monetary policy is becoming over-burdened. Countries must implement fiscal and structural policy actions to reduce the over-reliance on central banks and ensure opportunity and prosperity for future generations.”
The OECD projects that the global economy will grow by 2.9 percent this year and 3.2 percent in 2017, which is well below long-run averages of around 3¾ percent.
The small downgrade in the global outlook since the previous Economic Outlook in June 2016 reflects downgrades in major advanced economies, notably the United Kingdom for 2017, offset by a gradual improvement in major emerging-market commodity producers.
Growth among the major advanced economies will be subdued. In the United States, where solid consumption and job growth is countered by weak investment, growth is estimated at 1.4 percent this year and 2.1 percent in 2017. The euro area is projected to grow at a 1.5 percent rate in 2016 and a 1.4 percent pace in 2017. Germany is forecast to grow by 1.8 percent in 2016 and 1.5 percent in 2017, France by 1.3 percent in both 2016 and 2017, while Italy will see a 0.8 percent growth rate this year and next.
In the United Kingdom, growth is slowing following the 23 June referendum to leave the European Union. While a strong response from the Bank of England has helped stabilise markets, uncertainty remains extremely high and risks are clearly on the downside. In this environment, the UK is projected to grow by 1.8 percent in 2016 and 1 percent in 2017, well below the pace in recent years.
Growth in Japan will remain weak and uneven, at 0.6 percent in 2016 and 0.7 percent in 2017, with the appreciation of the yen and weak Asian trade weighing on exports. Canadian growth is projected at 1.2 percent this year and 2.3 percent in 2017.
China is expected to continue facing challenges as it rebalances its economy from manufacturing-led demand toward consumption and services. Chinese growth is forecast at 6.5 percent in 2016 and 6.2 percent in 2017. India will continue to grow robustly, by 7.4 percent in 2016 and 7.5 percent in 2017. Despite some improvements, Brazil’s economy continues experiencing a deep recession, and is expected to shrink by 3.3 percent this year and a further 0.3 percent in 2017.
The Interim Economic Outlook renews calls for a stronger collective response using fiscal, structural and trade policies to boost growth. On the fiscal front, low interest rates offer governments additional fiscal space for investing in human capital and physical infrastructure to promote short-term demand, long-term output and inclusiveness.
On the structural side, more ambitious policies are needed, particularly those that boost trade, including commitments to stand still on new protectionist measures, roll back existing ones and urgently tackle other obstacles to trade and investment.
The OECD also released an Economics Policy Paper, Cardiac Arrest or Dizzy Spell: Why is World Trade So Weak and What can Policy Do About It? in conjunction with the Outlook.
Cardiac arrest or dizzy spell: Why is world trade so weak and what can policy do about it?
World trade growth was rapid in the two decades prior to the global financial crisis but has halved subsequently. There are both structural and cyclical reasons for the slowdown. A deceleration in the rate of trade liberalisation post 2000 was initially obscured by the ongoing expansion of global value chains and associated rapid emergence of China in the world economy. Post the financial crisis global value chains started to unwind and, possibly associated with this, Chinese and Asian trade weakened markedly. These structural changes were compounded by insipid demand due to anaemic growth of global investment, as well as intra-euro area trade, both of which are trade intensive.
The slowdown in world trade growth post crisis, if sustained, will have serious consequences for the medium-term growth of productivity and living standards. Trade policy has significant potential to reinvigorate trade growth but the political environment for reforms is difficult, with a growing polarisation of OECD electorates into pro- and anti- globalisation supporters. Further trade and investment policy liberalisation should be introduced as part of a wider package of structural reforms to spread the benefits of freer trade and investment more widely.
Introduction and summary
A remarkable two decade period of rapid globalisation, during which the trade intensity of global GDP increased rapidly, came to an end with the financial crisis. Instead of world trade growing at more than double the rate of global GDP, in the wake of the crisis it has barely exceeded the growth rate of global GDP, slowing sharply from an average of 6½ per cent per annum over the two decades to 2008 to 3¼ per cent per annum over 2012-2015. During 2015 trade volume growth weakened further to 2½ per cent, and was again anaemic in the first half of 2016.
There are both cyclical and structural contributions to this slowdown. Trade growth in the pre-crisis period was boosted by world-wide liberalisation of trade policy, particularly through multi-lateral agreements, NAFTA and deepening of the EU single market during the 1990s. A further boost to trade came from the growing importance of global value added chains (GVCs), whereby production processes are fragmented across countries and so increased trade, particularly in intermediate products. As trade liberalisation measures slowed around 2000, world trade remained supported by the ongoing expansion of GVCs and was given a further boost by a growing contribution from the rapid emergence of China into the world economy.
Since the financial crisis the contribution to world trade from GVCs and trade liberalisation has plateaued and with creeping protectionism from a myriad of small measures has gone into reverse. The fading of the impetus from these structural factors has been compounded by cyclical weakness following the 2008-09 global financial crisis. Weak demand in Europe, which is a trade-intensive region, and weak investment, which is a trade-intensive component of expenditure, have both exacerbated the weakness in world trade. More recently in 2015, the weakness is explained by faltering trade in China and other Asian countries, possibly associated with some withdrawal of China from GVCs.
The exceptional nature and coincidence of favourable structural factors that boosted trade in the precrisis period suggests that, world trade is unlikely to return to sustained high growth rates without substantial policy action. Any recovery in world trade will also partly depend on how changing production specialisation in China and other emerging markets affect the expansion of GVCs. A more rapid entry of lower income countries in Africa and Asia into manufacturing GVCs would boost their productivity and counter-balance the effect on world trade of greater concentration of China in more domestically focussed services.
Additionally, how far world trade growth recovers from the current nadir will also depend on policy action. Policy action would ideally take place across a range of fronts, including rolling back protectionist measures, implementing agreements already reached (trade facilitation and the Trans-Pacific Partnership), concluding on-going sectorial negotiations in services and reviving multilateral negotiations on new issues such as digital trade. Empirical estimates presented in this paper suggest that trade liberalisation at the same pace as occurred during the 1990s could boost world trade growth by 1-2% per annum.
Such policy action is warranted because trade is an important engine of growth, in a context where growth and productivity performance in many countries has been poor. Trade, and the related expansion of global value chains, boosts growth through increased productivity by improving resource allocation, increasing scale and specialisation, encouraging innovation activities, facilitating knowledge transfer, fostering the expansion of more productive firms and the exit of the least productive ones. Policy action to restore growth in world trade intensity might be expected to raise mediumterm total factor productivity growth on average by around 0.2% per annum, based on recent OECD estimates of the effect of trade intensity on productivity. This is substantial in the context of OECD total factor productivity growth, which has averaged only 0.5% per annum over the past ten years.
The political environment for trade related reform in the OECD is, however, difficult, with the electorate increasingly polarized into pro- and anti-globalisation groups. A pre-requisite for reform is better evidence and communication of the net benefits of freer trade as well as acknowledging the costs and how these will be tackled. The benefits of greater trade do not affect all parts of the economy and society equally and the associated income re-distribution and reallocation of resources has also likely affected the level of political and social opposition to freer trade, which has grown in Europe and North America in recent years. Trade and investment reforms need to be introduced as part of a package of structural reforms to improve labour and product markets and to spread the benefits of freer trade more widely.
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European MPs warn EAC to be cautious on EU trade deal
The proposed Economic Partnership Agreement (EPA) between the East African Community and the European Union is not ideal for the region and could stifle the infant industries if passed as it is, some European Union Members of parliament told The New Times, yesterday.
The agreement, they said, could pose a risk to regional economies as their infant industries will face unfair competition due to products from the European Union.
Marie Arena, a European Parliamentarian, told The New Times that the agreement was unfair as it is and, if enforced in its current form, it could promote unfair competition in the region.
She pointed out that the European Union had pushed a hard bargain in the deal largely by ‘arm twisting’ Kenya which risked to lose access to the European market.
“I think this kind of agreement is unfair for the East African region. Europe is pushing a very hard satance and they have taken Kenya as a leader. Kenya is the only one that has interest in this trade agreement because they are not a least developed country. They (Kenya) need the agreement to maintain access to the European market,” she said.
There were fears that if the deal is not signed by September 30, 2016, Kenya could lose its access to the European Union market as it is not grouped among Least Developed Countries like her partners in the bloc who are granted duty free access to the EU for all products, except arms and ammunition.
Arena, who is part of the Parliament’s Trade Committee, said that a consequence of signing the agreement was that regional countries could lose preference of what products should enter the region.
“If the agreement goes through, you (EAC) have no more preferences; you will receive all products coming from Europe in your market which will promote unfair competition. European competitiveness is higher. You will lose your tax because it will not be possible to impose tax for these products. You could also lose your infant industries as the European products are more competitive than local products,” she said.
In an attempt to correct the situation, Arena said that a section of parliamentarians opposed to the deal were lobbying to convince the August House that the agreement was not good in building the relationship with Africa.
However, they said that the lobbying process would require support from EAC countries in pointing out their infant industries need to be protected from unfair competition.
“We will have to convince the European parliament that going through with this agreement is not a good relationship with Africa. We want to have a new partnership with Africa, not the old one that we have had in our history. We need the support of these countries, they need to say that they would like some protection,” she said.
So far, they have been able to guarantee Kenya access to the EU market even without the agreement.
“We have guaranteed Kenya that they will still have access to the European market and to help them make it an internal African market. This can work without having to sign the agreement,” she said.
The parliamentarians went on to caution the region not to rush into the deal and take time to assess the state of industries within the region as well as their plans for coming years.
Considering that more countries within the bloc hope to move from Least Developed countries status in coming years which could necessitate such an agreement, they called on the region to negotiate such agreements based on the status of their economies.
Julie Ward, a EU parliamentarian from UK said that the EPA was not suitable as it comes at a time when EAC member states are working to expand their manufacturing base and improving trade amongst themselves.
An ideal agreement, she said, should support infant industries and sustainable development for all trade parties.
“There should be more protection for infant industries. We have to protect them, it should not only be about making business, it should be about making sustainable development, for people and environment,” Ward said.
“We are for trade but not destroying the local business environment. I could not understand why they are not for sustainable development. We should ensure that no trade deals harm people’s wellbeing,” she added.
The comments by the parliamentarians come days after East African Heads of State requested for additional time to review the proposed agreement before going ahead to sign it as a bloc.
During the summit held in Dar es Salaam, Tanzania, on September 8, the Heads of State said that they needed additional time to review and reach a unanimous decision on the way forward. They had further called on the European Union not to penalise Kenya for failure to sign the agreement by 30th of this month.
The agreement between the two blocs has been under negotiation since 2007 with an aim to create a deal giving a duty- and quota-free access to the EU market.
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First report by High-Level Panel on Women’s Economic Empowerment outlines drivers to advance gender equality
The High-Level Panel (HLP) for Women’s Economic Empowerment on 22 September 2016 presented its first findings to the UN Secretary-General at an event in New York, held in the context of the UN General Assembly.
The HLP, created by UN Secretary-General Ban Ki-moon in January 2016, aims at placing women’s economic empowerment at the top of the global agenda to accelerate progress under the 2030 Agenda for Sustainable Development.
The report aims to draw attention to the challenges faced by the most disadvantaged women, to bring informal work from the margins to the mainstream, to highlight how discriminatory laws limit choice and to shed light on the centrality of unpaid work and care, which is one of the most pervasive and significant barriers to women’s economic empowerment.
“The launch of this first report, which has been enriched by passionate and vigorous debates, represents a major milestone for the work of the HLP. It has drawn on the substantial and robust evidence about key issues, identified the fundamental drivers and principles and delivered a call to action,” said Luis Guillermo Solis Rivera, President of Costa Rica and Co-Chair of the HLP.
“Something all panel members agree upon is that economic empowerment is about rights, justice and creating a movement that will leave no woman behind. This report provides the added value of concreteness by showing good examples on how society can come together to accelerate women’s economic empowerment. After all, if we do not act, we are missing out on huge gains for global sustainable development and economic growth,” added Simona Scarpaleggia, CEO of IKEA Switzerland and Co-Chair of the HLP.
The report highlights seven primary drivers to unlock the potential of women to fully participate in the economy and achieve financial independence: tackling adverse norms and promoting positive role models; ensuring legal protections and reforming discriminatory laws and regulations; recognizing, reducing and redistributing unpaid work and care; building digital, financial and property assets; changing corporate culture and practice, improving public sector practices in employment and procurement, and strengthening visibility, collective voice and representation.
The HLP brings together a diverse group of stakeholders including governments, private sector, trade unions, commercial banks, civil society organizations and multilateral organizations, such as UN Women, all of which are crucial to building greater economic empowerment and realizing rights for women.
“Closing the pay gap between women and men and finding solutions to the unpaid work done by millions of women and girls will have a huge impact on women’s ability to shape change in their live – especially the poorest. With money in their pocket and increased control over their own time and resources, women can make decisions about how to make life safer and better for themselves and their children, whether that is completed education or further skills training, health care, including their sexual and reproductive health, or simply better food for the family. This is the time, for us, and for the world, to put gender equality and women’s empowerment at the centre of the changes to which we all aspire, and make a real impact on poverty,” said Phumzile Mlambo-Ngcuka, Executive Director of UN Women.
Research shows that women invest their income back into their families and communities, including in health and education. McKinsey Global Institute estimates that if women in every country were to play an identical role to men in markets, as much as $28 trillion would be added to the global economy by 2025.
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Agriculture and food system transformation needed on pathway to zero hunger – Ban
While the world has seen some progress on combatting the root causes of hunger and malnutrition, the challenge of providing the fundamental right to adequate food to all people must remain a priority, United Nations Secretary-General Ban Ki-moon said on 22 September 2016, urging Member States to continue to work together to tackle the problem.
“It is unacceptable in a world of plenty that nearly 800 million people still suffer from hunger,” the UN chief said at a high-level event on “Pathways to Zero Hunger” at UN Headquarters this afternoon.
“This represents a collective moral and political failure,” he added.
The event, co-organized by the UN Food and Agriculture Organization (FAO), the International Fund for Agricultural Development (IFAD) and the World Food Programme (WFP), seeks to galvanize momentum for the Zero Hunger Challenge launched by the Secretary-General in 2012.
The Zero Hunger Challenge reflects five elements from within the Sustainable Development Goals (SDGs), which, taken together, can end hunger, eliminate all forms of malnutrition, and build inclusive and sustainable food systems.
At the event, the Secretary-General recalled that when he invited world leaders and development partners, through the Challenge, to share his vision of a world free from hunger and malnutrition within a generation, he challenged them to build a world where all people enjoy the fundamental right to adequate food, and a world where food systems are inclusive, resilient and sustainable.
“This vision now lies at the heart the Sustainable Development Goals,” Mr. Ban emphasized. “With the 2030 Agenda we have the opportunity to silence once and for all the deafening cry of hunger and malnutrition that has echoed down through history.”
Noting that the pledge of the SDGs is to “leave no one behind,” the Secretary-General said that the common goal is to transform agriculture and food systems to drive rural prosperity and end poverty; to put agriculture at the heart of the solution to climate change; and to build peaceful societies through food security.
“By tackling the root causes of hunger and malnutrition we can support all the SDGs,” he said.
The UN chief highlighted that he has seen “real progress” in the past four years, citing that the global population of undernourished people has fallen by nearly 70 million since 2012.
In addition, he said that tackling the problem of food waste has become a “global cause,” while sustainable agriculture and food systems are at the heart of the Paris Agreement on climate change and Member States have now committed to ‘Zero Hunger’ as part of the 2030 Agenda.
“The Zero Hunger Challenge will continue to offer a space for diverse partners to come together behind a common objective,” Mr. Ban said. “As I end my term in office, I am asking FAO, WFP and IFAD to take my challenge forward.”
“I am confident that they will not rest until zero hunger is a reality. Together, we can meet the challenge of securing a future of health, prosperity, dignity and opportunity for all on a healthy planet,” he concluded.
The event was held in partnership with the Executive Office of the Secretary-General, the Office of the Secretary-General’s Envoy on Youth, and the UN Global Compact.
United Nations agencies in Rome vow to take forward Zero Hunger Challenge
FAO, IFAD and WFP to pursue initiative first launched by Ban Ki-moon
The heads of the Rome-based food and agriculture agencies on 22 September 2016 thanked United Nations Secretary-General Ban Ki-moon for his personal commitment and leadership in challenging the world to reach Zero Hunger. They promised to maintain momentum to reach the ambitious target by 2030.
The Zero Hunger Challenge was launched in 2012 by Secretary-General Ban who handed the Zero Hunger initiative on to the three agencies today at an event in New York on the sidelines of the UN General Assembly.
“Many have responded to the Zero Hunger Challenge,” the Secretary-General said. “As I end my term in office, I am asking FAO, WFP and IFAD to take my Challenge forward. I am confident they will not rest until Zero Hunger is a reality.”
The Director-General of the Food and Agriculture Organization, José Graziano da Silva, the President of the International Fund for Agricultural Development, Kanayo F. Nwanze, and the Executive Director of the World Food Programme, Ertharin Cousin, committed their organizations to take 0ver the Zero Hunger Challenge and pursue its goals
Speaking ahead of the “Pathways to Zero Hunger” event, FAO Director-General José Graziano da Silva said: “There was a time when food security, nutrition, rural livelihoods, and sustainable agriculture were viewed as separate tasks, as the responsibility of different actors, and with different purposes.
“The success of the Zero Hunger pioneered in Brazil and adopted and adapted in countries throughout the world show that these issues should be tackled together, in an all out effort involving governments, international institutions, family farmers, civil society and the private sector,” said Graziano da Silva.
“The Secretary-General has always urged us to work as partners and build a truly global movement towards Zero Hunger. His leadership is an inspiration and we in Rome must now play an even greater role to generate momentum and strengthen partnerships to realize his vision of a world free from hunger,” said WFP Executive Director Ertharin Cousin.
In Rome, ahead of the New York event, IFAD President Kanayo F. Nwanze said, “With almost 800 million people going to bed hungry every night, it is vital that we build on the momentum generated by the Zero Hunger Challenge and the Secretary-General. Together we can deliver zero hunger, but only if we focus on rural areas of developing countries where most of the world’s poorest and hungriest people live.”
The Zero Hunger Challenge calls on leaders, businesses and civil society to step up efforts to end hunger in our lifetimes. It is based around five objectives: access to enough food and a healthy diet for all people, all year round; an end to malnutrition in all its forms; sustainable food systems form production to consumption; an end to rural poverty – doubling smallholder productivity and incomes; adapting food systems to eliminate loss and waste.
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Designing a better financial shock absorber to improve risk management of South Africa’s debt portfolio
South Africa has made significant progress to improve the financial risk management of its public debt portfolio thanks to a tailor-made model designed to analyze the costs and risk factors. This tool, developed through a partnership between the Government of South Africa and the World Bank Treasury, allows the country to be better positioned to absorb fiscal shocks going forward.
Emerging market economies, of which South Africa is one, became a viable outlet for investors who flooded these markets with capital in the aftermath of the global economic crisis of 2008, when the gross domestic products of advanced economies fell by 3.4%. But in the last three years, growing volatility in emerging countries has led to vast outflows from emerging market countries to other currencies and investment options.
“Eight years after the global crisis hit, the South African economy, along with many other economies in the world, continues to struggle for a sustained recovery. Although developing economies have fared better, short to medium term prospects remain uncertain,” noted Lungisa Fuzile, Director General of South Africa’s National Treasury.
A fiscally conservative upper-middle-income country, South Africa borrows 90%of its public debt in local currency from its well-developed domestic market. However, more than one-third of this domestic market debt actually comes from foreign investors, exposing South Africa to financial risks and capital fluctuations, making it necessary to create a better shock absorber.
In order to mitigate its financial risks, South Africa partnered with the Government Debt and Risk Management (GDRM) program, a World Bank Treasury initiative sponsored by the Swiss State Secretariat for Economic Affairs (SECO), to develop better benchmarks for managing South Africa’s risk exposure and find a more suitable modeling tool to analyze the cost and risk factors in their debt portfolio. The joint team developed a powerful tailor-made medium-term model to conduct “what if” scenarios to analyze the cost and risk trade-offs of alternative strategies under different shock scenarios. South African authorities have used the output of the model to select a new set of benchmarks since 2014.
“The benchmarks should also be seen as a communication tool. A well-chosen set of strategic benchmarks conveys key dimensions of the debt portfolio in a succinct way,” said Çiğdem Aslan, Lead Financial Officer for Public Debt Management at the World Bank Treasury.
There are multiple benefits to defining and following strategic benchmarks. They help the government clarify cost and risk preferences, promote transparency, and systematize the analysis process. Furthermore, strategic benchmarks add structure to the operational side of debt management. For instance, when decisions are made such as determining the term of a government bond, they must be within the range defined by the strategic benchmarks.
Using the right model, the joint South Africa National Treasury and World Bank GDRM Program team revised and built upon previous benchmarks to make the country’s risk exposure more resilient to financial shocks. While South Africa was capturing exchange rate and interest rate risks, some benchmarks needed further clarity and separate indicators for inflation and refinancing risks. They developed a more suitable modeling tool for running different debt and risk exposure scenarios to arrive at the right numbers. Separate benchmarks linked to limits or ranges were created to assess the share of treasury bills (T-bills), fixed rate bonds, inflation linked bonds (ILBs), and the average time to maturity for nominal bonds and ILBs.
“Establishing a new system, like these benchmarks, takes time. Different stakeholders challenge the system however with each new iteration, ownership and implementation become easier,” explained Sebastien Dessus, World Bank Program Leader for South Africa.
The new benchmarks are in line with international practice, allowing increased credibility and accountability for the National Treasury. Despite market volatility, South Africa has stayed within their benchmark ranges during the last three years. The partnership with the World Bank continues with further support on assessing credit risk stemming from government guarantees.
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‘This is no longer a time for promises,’ African leaders tell UN, urging action on Global Goals
While the current session of the United Nations General Assembly has opened in a context marked by turmoil, Paul Biya, the President of Cameroon said on Thursday morning there are nevertheless some “bright spots and glimmers of hope,” including the adoption by Member States of landmark agreements on climate change, development financing and sustainable development.
Welcoming the decision to focus on implementation of the 2030 Agenda for Sustainable Development as the theme of this year’s general debate, President Biya said that under that ambitious framework, “our common goals is to eradicate poverty and leave no one behind. This is a challenge we have set for ourselves and which we must take up together […] to answer the calls of both our people and history.
At the same time, he recalled that the international community had in the past adopted similarly promising agendas and action plans that had raised the world’s hopes, only to see the multilateral system fail to meet expectations when the agreed actions were only partially implemented.
“Let us get organized and make sure the Sustainable Development Goals (SDGs) fair better; since the Agenda is transformational, let us rally to meet our ambitions,” Mr. Biya continued, urging constant political will that does not “wax and wane” with changing circumstances; the mobilization of sufficient resources; and ensuring the requisite solidarity.
In this way, the international could achieve the Global Goals which will lead to ‘the world we want,’” he said, emphasizing: “This is no longer a time for promises; this is the time for commitment; this is a time for action.”
Noting that wider efforts to achieve the Global Goals would indeed meet serious obstacles, President Biya cited terrorism as a specific challenge for his county. Indeed, it is in “a veritable war” against the scourge.
Combatting terrorism, he said, requires “a collective response, collective determination and collective action,” in line with the targets of SDG 16, which focuses on the promotion and advent of peaceful and inclusive societies, and should serve as a guide for helping to strengthen Cameroon and the wide region by assisting with building capacity at all levels to effectively fight to confront Boko Haram and combat other criminal activity.
“The outcomes of previous agendas and programmes have shown us the urgent need to find wherewithal to achieve our ambitions. If we decide, here and now, to effectively and concretely mobilize our immense resources, and if we decide to devote them to achieving the Sustainable Development Goals, then [they] will truly become the push to transform today's world into [one] of peace and shared prosperity,” Mr. Biya concluded.
In his remarks, Patrice Athanase Guillaume Talon, the President of Benin, also welcomed the theme of the general debate, saying the subject of SDG implementation is timely and necessary. Indeed, the world has always managed to mobilize and organize itself when confronted with immense challenges or faced with global threats, such as climate change.
“Our world, as open as it is today, will more than ever suffer from the consequences of poverty, in particular the migration movements, unruly and destabilizing as they are, if nothing is done. Mass poverty has now become a major threat to humanity,” he said that with the same determination that led the world to adopt the Paris Agreement on climate change, “it has become urgent to put in place a global programme to eradicate mass poverty.”
With this in mind, Mr. Talon called on the most developed countries and the development finance institutions to implement a strong collective action plan with a view to eradicating poverty, which he said is dangerously side-lining most African countries.
“The international community has the capacity and has recently proved so when preventing Greece and Ukraine from collapsing. Efforts made to that end did not ruin the countries or the institutions that mobilized themselves for this rescue operation,” he said, stressing that quickly and efficiently eradicating poverty and underdevelopment in Africa world require “the same will but not necessarily more means.”
Acknowledging that African countries will of course need to take their part of responsibility by doing more for political stability and above all, good governance, he noted that Benin is taking relevant action in that regard. “One can add to this nearly half a century of political stability, as well as a mature democracy; all these elements give Benin the capacity to achieve the Sustainable Development Goals, provided the country receives adequate support,” he concluded.
For his part, Roch Marc Christian Kaboré, President of Burkina Faso, said that achieving real sustainable development requires the international community to eradicate poverty and fight inequality. His country had developed a national plan to integrate the goals of the 2030 Agenda and the African Union’s Agenda 2063. In Burkina Faso’s endeavour to efficiently implement those goals, his Government knew that it could count on the active solidarity of all.
Terrorist attacks and unprecedented violence have manifested as a worldwide scourge, he said, and continued by acknowledging the memories of all victims of terrorism. “Our fight will only bear fruit if we destroy the rear-guard and manage to cut the supply source of terrorism,” he continued. That should be done parallel to managing the root causes of terrorism: injustice, exclusivism and poverty.
Peace, security and development are monumental challenges for the world, and Africa in particular, he said. His Government welcomed the progress made in the region, although hotbeds and flashpoints remain.
The security situation in northern Mali continues to cause great concern, requiring a strengthened mandate for UN Multidimensional Integrated Stabilization Mission (MINUSMA) and the implementation of the rapid intervention force of the Group of Five Sahel, known as the G-5 Sahel. South Sudan and Somalia are other countries that had to “close the chapter on violence”. Furthermore, his country reiterated its appeal for a political solution to the conflict in Western Sahara.
UN 2030 Agenda and climate accord must ‘transform peoples’ lives’ – Rwandan President
Recalling that over the past year, the United Nations concluded landmark agreements on sustainable development and climate change, and renewed its commitment to work together to combat violent extremism, Paul Kagame, the President of Rwanda, told the General Assembly on 22 September 2016 that these are the most serious issues before the international community “and our efforts offer the prospect of transforming our world as a whole, rather than just part of it.”
“After all, the progress of one country was closely linked to the progress of every other, and we all have a role to play,” told the Assembly’s annual general debate, adding: “Now is the time for implementation.”
The international community could stay on course if it recognized that the ultimate purpose of all these efforts is to transform the lives of real people by enhancing their well-being, safety, and access to opportunity. Member States should also realize the importance on building on lessons learned, especially ensuring that such goals and targets are inclusive, particularly of women. “If they are not reaching their potential then none of us are,” President Kagame said, expressing pride that he has joined the HeForShe campaign and encouraged others to support it.
He went on to stress that access to technology must be part of the strategy for achieving all the global goals, he said. Everyone in the world needs access to high speed Internet. Rwanda has seen the importance of forging meaningful partnerships with the private sector to improve the speed and scale of delivery. Rwanda was pleased to host the new Sustainable Development Government Centre for Africa.
Real continuity between the 2030 Agenda, the Paris Agreement and the other frameworks that guides the international community’s collective action is necessary, he stressed. “These agreements are not slogans or fashions, but hard-won statements of global consensus,” he added.
Next month, more than 1,000 delegates would gather in the Rwandan capital, Kigali, to consider a ground-breaking amendment to the Montreal Protocol to phase out hydrofluorocarbons, a major source of greenhouse gas emissions. Already one of the most successful international agreements, the 30-year old Montreal Protocol now affords the international community the opportunity to take a significant step forward in implementing the one-year-old Paris Agreement on climate change. Rwanda urged all Member States to join it in passing those important measures.
“The world is changing for the better,” he continued. The preservation of international peace and security depends on maintaining a shared vision of the desired outcomes for the world. This accounts for the continued relevance and durability of the UN. The international community’s collective responsibility for the rights and welfare of refugees and immigrants needed to be seen in that light, and the issue needed to be addressed with consistency and compassion at all times.
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Kenya denies Somalia’s claim on maritime boundary dispute
Kenya has rebutted Somalia’s claim that negotiations to resolve the maritime boundary dispute between the two had been exhausted before it moved to the International Court of Justice (ICJ).
In their second bid to oppose the case, Kenya’s legal team argued all the meetings between the two countries over the issue were only preparatory and were meant to draw up agenda for discussion.
British lawyer, Prof Vaughan Lowe told the Court that Somalia did not in inform Kenya that it was getting fatigued with the talks, and only, suddenly went to Court.
“Objectively, there is no evidence that the parties had reached deadlock on the negotiations. Subjectively, Kenya remained committed to negotiations. It remains open to date,” Kenya argued.
Somalia sued Kenya in August 2014 before the ICJ seeking a determination of the actual flow of a sea boundary between the two countries.
Mogadishu wants the Court to help determine whether the borderline should flow eastwards as demanded by Kenya or diagonally to the south from the land border as it wants, insisting “diplomatic negotiations, in which their respective views have been fully exchanged, have failed to resolve this disagreement.”
Kenya’s Attorney-General Githu Muigai said the Somali case should be dropped because it was introducing an element of uncertainty in the relations between the two countries as well as the general cooperation for maritime security in the region.
“Maritime boundary delimitation requires sensitive bilateral negotiations. After a volatile transitional period, preliminary negotiations began in 2014, but they were cut short by Somalia… This dispute is a test in our new era in our bilateral relations.”
“Kenya does not want deadlock or perpetual uncertainty. We want a solution that will contribute to permanent peace in the region.”
The disputed area is thought to have rich deposits of oil, but Prof Muigai said Kenya had suspended any exploratory activities as a sign of commitment to await a solution, through negotiations.
On Tuesday, Somalia insisted that it was Kenya which pulled the plug on negotiations after it failed to turn up for a meeting in Mogadishu in August of 2014.
Those talks were part of a MoU the two countries signed in 2009 to specifically deal with the dispute through negotiations and with guidance from the UN Commission on the Limits of the Continental Shelf.
Kenya agrees that there had been two meetings in 2014 up to July 2014, but which were only at “technical level” and meant to boost confidence between the two sides that there was a solution on the horizon.
The said that meeting which was to happen in August failed because Kenya did not show up citing, in court documents, that its delegation would not be assured of safety. Somalia accused Kenya of a no-show without explanation, but Nairobi argues even the third meeting was only about “bridging the gap of differences between the two sides.
Bridgeable gaps
“The parties were still operating on the basis that there were bridgeable gaps between them…” Kenya said in turn criticising Mogadishu of going to court just three days after the meeting failed.
The Kenyan legal team argued the Court lacked jurisdiction since both Kenya and Mogadishu had agreed on an alternative dispute settlement.
Prof Lowe for example argued that when Kenya joined the UN, it indicated in 1965 that it would agree to the Court’s general jurisdiction only as long as there were no alternative methods of resolving disagreements.
“There is no reason to suggest that the parties were ignorant of their obligations when they signed on the agreement. The MoU stipulated a method and a time, after the CLOS (UN Commission for the Limitation of Continental Shelf) determination for delimitation. That time hadn’t arrived,” Prof Lowe said.
“At the time when the rest of the world is moving for non-judicial methods of dispute settlement, Somalia seems to be swimming in the opposite direction. Somalia cannot simply ignore its obligations to the MoU.”
Mogadishu had on Tuesday refuted the argument that the 2009 deal prevented it from resorting to courts, saying the agreement was not even specific about the boundary but was to deal with the limits of each country’s continental shelf.
Somalia is basing its arguments on Articles 15, 74 and 83 of the 1982 United Nations Convention on the Law of the Sea, which both countries ratified in 1989.
The cited articles state that where two states share coasts adjacent or opposite each other, neither state should extend territorial boundaries beyond the median line “every point of which is equidistant from the nearest points on the baselines from which the breadth of the territorial seas of each of the two states is measured” except where there is an agreement to do so.
In Kenya’s situation, it means Somalia wants the boundary to extend diagonally to the south at Kiunga into the sea, and not eastwards as it is today. But that may also affect Kenya’s sea border with Tanzania.
The area in contest is about 100,000 square kilometres, forming a triangle east of the Kenya coast. In 2009, Kenya and Somalia reached an MoU, which was then deposited to the UN in 2011.
The agreement had stated that the border would run east along the line of latitude although further negotiations were to be held through the UN Commission on the Limits of the Continental Shelf.
This agreement also stated that maritime boundary adjustments would only occur after the commission had established the outer limits of shelf and that both sides would avoid courts as much as possible over the matter.
At UN debate, Kenyan Vice-President implores Security Council to take Somalia situation ‘seriously’
Addressing the United Nations General Assembly on 21 September 2016, the Vice-President of Kenya implored the UN Security Council to align the mandate of the African Union Mission in Somalia (AMISOM) to the threat levels in that neighbouring country, and to provide adequate, predictable funding and other support for the Mission.
“For the last two and half decades, the region has been seized with the situation in Somalia,” Vice-President William Ruto said. “Throughout this time, Kenya has stood with Somalia, provided a safe haven for refugees, joined peacekeeping missions, and invested resources in combating al-Shabaab and its affiliates.”
This solidarity has helped to substantially weaken the al-Shabaab militant group, liberated large swathes of land in Somalia and provided the space for its Government to begin the journey of rehabilitation and reconstruction, he explained.
On its part, Kenya has committed to $10 million in new funds to support the safe, dignified and orderly repatriation of the more than 400,000 Somali refugees in Kenya. “Sadly, the efforts of the region and Somalia's neighbours have not been matched by the international community,” he stated.
Instead of supporting regional activities, the European Union this year cut support for AMISOM by 20 per cent. Despite repeated appeals, the UN Security Council has failed to provide adequate, predictable funding, as well as force multipliers for AMISOM.
“I once again implore members of the Security Council to take this matter seriously and align the mandate of AMISOM to the threat levels in Somalia on land, air and sea,” he said.
On South Sudan, Vice-President Ruto said that Kenya, as a guarantor of the 2005 comprehensive peace agreement and the 2015 Agreement on the Resolution of the Conflict, has been spearheading the search for sustainable peace, continues to invest significantly in efforts to build peace.
Echoing an earlier statement made by Ghana’s President, Mr. Ruto said that Africa accounted for only three per cent of global trade. Meanwhile, Africa’s population is set to surpass that of India and China combined by 2050. “Unless the trade imbalance is reversed as a matter of urgency, this will accentuate vulnerability, poverty, risk of insecurity and instability for both Africa and the rest of the world,” he said.
In the pursuit of sustainable solutions to global challenges, Kenya hosted the UN Environmental Assembly in May, the 14th session of the UN Conference on Trade and Development (UNCTAD) in July, and the Sixth Tokyo International Conference on African Development (TICAD VI) in August. Kenya will also host the second high-level meeting of the Global Partnership for Effective Development Cooperation in Nairobi later this year.
As the current chair of the UN Peacebuilding Commission, Kenya has been at the forefront of advocating for a new peacebuilding architecture for sustainable peace throughout the world, he said, drawing attention to a pledging conference Kenya will co-host later today to boost the Secretary-General’s Peacebuilding Fund.
“For us the message is clear: If we are ever to enjoy a peaceful world for all, we cannot invest any less in peacebuilding than we do in peacekeeping,” he said.