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EAC heads put off EPA signing for three months
Heads of State of the East African Community (EAC) have delayed the signing of the Economic Partnership Agreement (EPA) with the European Union (EU) for three months pending further consultations over the pact.
The leaders of the block have directed the EAC Secretariat to communicate to EU over the decision that was reached at the 17th Extraordinary Summit held in Dar es Salaam yesterday.
Europe has been pushing for the signing of the free trade pact by the EAC member states on October 1, 2016. Tanzania exclusively maintained on Wednesday that it would not append its signature on the agreement until the country’s demands that focus on the best interests of the people were met.
Already, Kenya and Rwanda have signed the trade pact. Yesterday, the EPA deal was a subject of discussion by the EAC leaders who took more than six hours to deliberate on whether they should sign as a block or individually.
According to the EAC Chairperson, President John Magufuli, it was not an easy job to reach to the decision and for delaying the signing of the EU pact.
“Our discussions took a lot of time but as usual when we have any sensitive matter, we agree collectively to reach at a collective consensus in the best interest of our people,” he said at a press briefing after the closed door meeting.
Dr Magufuli added: “Today, we have shown the world that we are capable of seeking solutions in complex matters.” Uganda President Yoweri Museveni said the three-month extension of signing and ratifying the EU-EAC agreement was meant to synchronise their understanding on the pact that has 146 articles.
“The EU should wait until January when we shall convene again so that we give a collective answer than giving fragmented ones,” he added.
According to Kenyan Deputy President William Ruto, who represented President Uhuru Kenyatta, the leaders had a candid conversation but fruitful. “Our decision to move together is a decision that is not debatable,” he said.
His Rwandan counterpart, President Paul Kagame, underscored the need for unity as the region, saying the postponement of a joint signing by the block was the right decision to strengthen unity.
The economic partnership agreements are intended to enhance regional integration and economic development in the African, Caribbean and Pacific (ACP) countries. They are based on the principle of asymmetrical market opening, meaning that they provide a better access to the EU market for ACP partners. They notably offer unprecedented market opportunities for agricultural and fisheries products.
EPAs replace the previous market access regime of unilateral preferences for ACP countries. The EAC Heads of State further asked the EU to refrain from penalising Kenya, directing the secretariat to issue a communication to the Union that had initially stated that if Kenya would not sign the deal by October it was likely to be the biggest casualty.
“The EU should not punish Kenya just because it is two inches taller than other countries in the block,” said Mr Museveni in his remarks. Kenya and Rwanda signed the deal in Brussels two weeks ago while Uganda was set to confirm its approval at the extraordinary summit of EAC heads of state. Apart from the EPA issue, the EAC Heads of State yesterday received a detailed report of the facilitator of the Burundi crisis.
The EAC Chairman, Dr Magufuli said the report had indicated every sign that the solution to the Burundi crisis would be obtained.
“I encourage all parties in Burundi to collaborate with the mediator, President Museveni so that peace is restored and enable people to concentrate on development activities.” The summit further appointed Rwandan Christopher Bazivamo as (EAC) Deputy Secretary General for a period of three years.
After his appointment, Mr Bazivamo, one of the country’s representatives in the East African Legislative Assembly (EALA), took the oath of secrecy and allegiance before resuming his new duties.
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Civil Society Statement on the current state of play of the EPAs after the European Commission’s latest ultimatum
The undersigned civil society organisations attending the Conference “The future of integration in the content of Europe-Africa trade relations – Overcoming paradoxical patterns” in Arusha, Tanzania from 7 to 9 September 2016 deliberated on the present state of play of the EPAs between the EU and EAC/Africa.
We recall that the original objectives of the EPA as articulated in the Cotonou agreement, included, inter alia, fostering the sustainable development and regional integration of the ACP countries while respecting their political objectives. We also recall the promise of the EU to non-LDCs as per Article 37 para 6 of the Cotonou agreement that it will examine all possible alternatives in order to provide a trade framework equivalent to their existing situation.
It is regrettable that the EU has reneged on this promise and has instead continuously used the strong arm tactics throughout the EPA negotiations, in order to secure its offensive interests. The introduction of the regulation to withdraw preferences from countries which had not concluded an EPA, pressured African regions into accepting EPAs in 2014. In July 2016 once again the European Commission threatened ACP countries with the withdrawal of trade preferences if they would not ratify EPAs by 1 October 2016.
Despite the fact that this threat was not endorsed by the Council and the European Parliament and even if the European Parliament has postponed its decision and therefore the deadline until 1 February 2017, the threat of withdrawal of preferences has pushed some individual countries within regional blocks to sign and ratify the EPAs separately thereby jeopardising regional integration and solidarity.
The premature and unilateral move of the European Commission has and is preventing a careful and deeper analysis of the possible impacts of the EPA on sustainable development and regional integration both in the short and long term. This includes the consequences of the BREXIT – which would substantially reduce the value of the market access offered by the EPA, especially for countries who have the UK as their main European export destination; the elusive EU market, given the preferential erosion as it is signing FTAs with other regions; and the inherent dangers for policy space embedded in the rendez-vous and MFN clauses.
We stress that the future of Africa’s structural transformation and sustainable development lies in fostering regional integration and strengthening manufacturing industry, in supplying local and regional markets and providing employment, food, consumer goods and services to their fast growing population that will double by 2050. Already today for countries like Kenya, the exports of value added products to the regional market are more important than export of traditional raw materials to the EU market, the value of which has been eroded by EU trade agreements with Latin American and Asian countries. We do not want to see the future of Africa being negotiated away in order to maintain the trade of traditional raw material exports of the past; and remind that the cost of avoiding increase import taxes in European is much less than the costs of eliminating taxes on imports from Europe.
We also underscore the enormous implications that the in-built agenda of the EPAs may have. The EAC commitment to conclude within five years agreements on services, investment, governments, intellectual property rights, etc. will undermine the necessary policy space of the EAC countries to foster sustainable development. In other words, the main price for maintaining the traditional exports to Europe, is yet to come.
We are convinced after a careful reading of the EAC EPA that it will not serve the long term interests of the region and will greatly circumscribe the policy space of our countries to pursue their development interests.
We stress that alternatives to EPAs have always remained possible, depending on the political will, in particular of the EU: a WTO waiver, GSP+, regional solidarity funds to compensate for increase duties for non-LDCS countries. The focus of the alternatives should be the strengthening of regional integration and structural transformation.
We call upon the EU and the EAC partner states to develop these alternatives. The EAC partner states should use the extension of the deadline by the EU to 1st February 2017 to reach a consensus on the way forward. We remain committed to work together for fair, just and sustainable trade relations that foster human development.
The undersigned,
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East Africa govts urged to set up regional arbitration centre
As East Africa embarks on major infrastructure projects in oil and gas industry, roads and railways, arbitrators in the region are calling for the creation of a dispute resolution centre.
The arbitrators argue that such a tribunal located in East Africa could benefit from flexible local laws and reduce the cost of international arbitration.
The arbiters, at the 4th East African International Arbitration Conference in Kampala on September 8, also debated on whether the tribunal should be independent from the regional governments or based on a public-private partnership.
Some argued that the region would only be trusted by foreign investors, if they are assured that commercial disputes would be handled by an autonomous arbitration tribunal.
“If we are to harness the potential of investment in East Africa and to avoid transferring arbitration cases abroad we need to embrace proper resolution of disputes regionally to reduce on the cost of these case in Europe and USA,” said Uganda’s deputy Attorney-General, Mwesigwa Rukutana, while opening the conference.
The meeting’s theme is “Infrastructure and Natural Resources” aimed at capacity building for actors in the region’s legal system.
Although the East African Court of Justice has jurisdiction over arbitration, the court has not handled any such cases. However, common regional rules are being made to govern national arbitration centres.
“We want to offer a more cost-friendly environment to investors especially with the increase in infrastructure investments,” said Jacquiline Pimer, a project manager-Trade, at Arcadia Advocates Uganda.
Mr Rukutana urged universities to include international arbitration in their syllabi to strengthen legal and business systems and also avoid outsourcing arbitrators.
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A BRICS-only arbitration forum will not be the panacea imagined
Reforming existing arbitration forums to ensure better representation from developing countries may be a better solution to the bloc’s cooperation problems.
Although the importance of intensified cooperation among BRICS countries in the field of arbitration cannot be overestimated, a separate dispute resolution centre for the five emerging economies, as proposed by finance minister Arun Jaitley at the Conference on International Arbitration in BRICS on August 27, is not necessarily the most efficient way to address the deficiencies of the existing arbitration system.
Comparing arbitration with traditional litigation, Aristotle said: “An arbitrator goes by the equity of a case, a judge by the law, and arbitration was invented with the express purpose of securing full power for equity.” In a similar spirit, various advantages of arbitration were discussed during the ‘Conference on International Arbitration in BRICS – Challenges, Opportunities and Road Ahead’ hosted by India on August 27 in the run-up to the BRICS summit scheduled to take place in Goa in October. The conference outlined opportunities for further collaboration among the emerging economies in the field of arbitration and explored the possibility of setting up a specialised institution to settle disputes between BRICS partners.
Each of the BRICS countries already has a legal framework based on international standards in place. When it comes to resolving domestic disputes, an increasing number of businessmen favour arbitration over the overburdened domestic litigation systems in their countries. Notably, a number of Indian businesses are actively involved in various international arbitration institutions. In 2015, India was the top foreign user of the Singapore International Arbitration Centre (SIAC), followed by China. Although arbitration rules have not always conformed with international practices in the past, a recent push for arbitration from the judiciary along with some legislative reforms is changing things for the better. For instance, last year India amended the Indian Arbitration and Conciliation Act 1996, significantly altering its arbitration landscape while also bringing it in line with international norms.
Cohesion problems
Despite the growing popularity of arbitration within each country, international cooperation among BRICS countries has been limited. To start with a particularly obvious example of limited cooperation, some countries in the bloc do not recognise each other’s arbitral awards. In India’s case, local courts will only enforce a foreign arbitral decision if the country the decision comes from meets certain requirements. The country where the award was issued has to have ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards for Indian courts to consider it valid. Additionally, the central government has to declare that particular country a territory that falls under the purview of the convention. Thus far, only 48 countries have been listed by the government. Although all BRICS countries have ratified the convention, India has not officially notified Brazil or South Africa yet. Consequently, arbitral awards issued in these two countries are not enforceable under India’s Arbitration Act.
In addition to this, many countries take a long time with enforcement proceedings, leading to judicial delays. For instance, the process can take up to four years in China. The execution of foreign awards is a major issue for business operators and so making arbitration a speedier mechanism will ensure that they consider it a more attractive option than domestic litigation.
A reliable and representative dispute resolution process is essential for the expanding economies of BRICS countries. According to World Bank data, the BRICS countries combined account for over 20% world GDP, while their share in world merchandise trade, has increased from 7% in 2001 to over 17% in 2015. Also, last year, the group received $256 billion of investment inflows, i.e. 15% of world total. The UN Conference on Trade and Development (UNCTAD) expects that as the emerging economies continue growing, the number of disputes between them will also increase. This is concerning since developing countries are hugely under-represented in existing arbitration institutions, which are dominated by experts and practitioners from the West. This under-representation points to negative implications for ensuring inclusive and sustainable growth in developing countries, since the structural bias of the current mechanism could pose trouble in solving disputes involving developing countries’ socio-economic and public interests. Coordination among the BRICS countries may help address some of these concerns and help to bridge some of the cultural, regulatory and judicial disparities in their approaches to arbitration. Which in turn will fuel investment and trade in these countries.
A golden solution?
Yet, the question arises of whether a separate arbitration forum, designated for business partners from BRICS countries, is the best way to approach these problems. Despite demonstrated political support for the initiative, the modest figures for intra-BRICS trade undermine the economic raison d’être of such a centre. Although intra-BRICS commerce has doubled as a percentage of total BRICS trade since 2001, it still accounted for only 12% in 2015. Also, the nations are not actively investing in each other’s economies: according to the UNCTAD World Investment Report, the share of intra-group investment in total FDI flows to the BRICS countries was less than 1% between 2010 and 2014.
Arbitration institutions are facing a number of challenges when it comes to ensuring long-term stability for themselves. Most recently, the London Court of International Arbitration (LCIA) decided to close its Delhi office due to an insufficient number of cases. Another example is the BRICS Dispute Resolution Centre Shanghai, which was established by the Shanghai International Economic and Trade Arbitration Commission last year for hearing commercial disputes between partners from BRICS countries. It has not received a single arbitration application since its inception. Finally, the existence of other reputed and well-trusted arbitration forums such as the International Court of Arbitration, LCIA or SIAC, poses a major challenge to these new institutions. Thus, it might be more preferable to advocate structurally reforming the existing platforms as that would ensure developing countries are adequately represented on arbitration panels.
The BRICS countries are evidently suffering from insufficient cooperation in the field of arbitration; however, setting up a separate institution designed specifically for them is not necessarily going to be the golden solution to all their problems.
Katarzyna Kaszubska is a fellow at Observer Research Foundation, New Delhi.
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The impact of the UK’s post-Brexit trade policy on development
Following the vote for Brexit, the UK is facing a formidable challenge: designing a new trade policy to address its new strategic interests. Considering the different and frequently opposing interests, this task is far from straightforward.
Many Brexit supporters have argued for a need to redefine the role of the UK in international politics, with trade at the centre. From the use of international development assistance to the negotiation of trade agreements, trade is regarded as the basis on which to pursue national interests as well as retain global leadership. Unfortunately, little attention has focused on how a new UK trade policy could contribute to development.
The potential to define a new trade strategy, agree new trade agreements and use new aid and trade tools constitutes a major opportunity for the UK to continue championing the cause of trade and development. It is also an opportunity for the UK to make trade policy work more effectively and efficiently in delivering development opportunities.
At the same time, there are significant concerns over whether the UK is willing and able to assume such a role. The challenge of defining a new trade policy is considerable, and one for which the UK Government is ill-prepared. Given the magnitude of the tasks and the number of negotiations that the UK will face in the next few years, there is a major risk that developing countries will be overlooked.
This collection of essays offers a number of perspectives on how a new UK trade policy towards developing countries and regions could be designed and implemented, in both the short and longer term. It also conveys the concerns, opportunities and expectations from a group of leading trade specialists from academia, international organisations and think tanks in the UK and elsewhere.
The essays are structured into five sections:
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Principles for a new UK trade policy and the relationship with developing countries
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The potential effects of a new UK trade policy on developing countries: some scenarios
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The value of preferential access to the UK market for developing countries
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A new UK trade policy: opportunities beyond tariffs
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Regional perspectives on a new UK trade policy
Options for the UK’s offer to developing countries on international trade: a perspective from Africa
by David Luke and Jamie MacLeod, UN Economic Commission for Africa
Beyond the headlines in reaction to the vote to leave the EU – which have dominated both the UK and world media alike – are the emerging nuances of Brexit. Most importantly, these include development-friendly options for the UK’s post-Brexit trading arrangements with Africa. From an African perspective, we highlight, the three principles that should underline the UK’s trading engagements with the continent: support for Africa’s regional integration priorities, pro-poor and pro-development trade arrangements, and market access continuity.
Anglo-African Trade
When the UK joined the European Economic Community (EEC) 43 years ago, it transferred all authority for its trading arrangements to the EEC. In 2014, the UK’s $1.1 trillion in trade was channelled through these clear and predictable legal and institutional frameworks.
For Africa, this included the Cotonou Agreement, which expanded preferential access to the EU market while setting up the Economic Partnership Agreements (EPAs) through which Africa is poised to gradually open up 75-80% of its own market to the EU.
Once outside the EU, the UK must design and build its own replacement trade policy for Africa, drawing lessons (where applicable) from the EPA experiences, recognising Africa’s policy priorities, being an ally to Africa at the World Trade Organization (WTO) and ensuring continuity and certainty for African businesses and countries reliant on the UK market.
Supporting Africa’s regional integration priorities
The UK must consider foremost a continental approach to a comprehensive trade agreement with all 54 African countries. This would align with Africa’s plans for continental regional integration as proposed by the African Union’s Agenda 2063, in particular the Continental Free Trade Area (currently under negotiation) and an eventual Continental Customs Union. Complementary to this would be the scaling-up of the UK’s investment in support of Africa’s integration efforts. Doing so will help realise the development of Africa’s intra-regional value chains and markets for industrialisation.
A single continental approach would also reduce the multiplicity of new arrangements facing UK negotiators, easing the post-Brexit negotiating burden. The US has proposed such an approach as the successor arrangement to its Africa Growth and Opportunity Act, which is scheduled to be phased out after 2025.
Pro-poor, pro-development
A continent-wide trade agreement with Africa should incorporate limited reciprocity, immediate access to the UK market, flexible rules of origin that allow for cross-cumulation and phased-in access to the African market. Indeed, these are core elements of the EPAs that would likely form the basis for discussions.
But the UK should aspire to a truly development-oriented trade agreement that includes references to the environment and climate change, and in particular green technology transfer; that removes subsidies that unfairly disadvantage African agriculture, fostering a rural poverty trap; and that creates partnerships in services to help African countries learn from the UK’s strengths.
The UK should also address EU technical barriers to trade, which restrict the UK market for products in which Africa has a comparative advantage, such as tropical fruits and vegetables, fish products and bovine meats. The Citrus Growers’ Association of Southern Africa has suggested that revised UK plant health regulations on citrus imports could be easier to comply with than present EU regulations. Similar improvements could be arranged for fish and beef, of which African exports to the EU have fallen following compulsory and expensive regulations. An example is provided by the regulations to prevent bovine spongiform encephalopathy (BSE), which are applied to African countries in which BSE has never been diagnosed. In realising these advantages, the UK could continue to recognise EU standards so as not to duplicate regulations where unnecessary.
Beyond trade agreements, the UK should prove itself an ally to Africa at the WTO, championing African priorities such as special and differential treatment and eliminating agriculture subsidies.
Market access continuity
Transitional trading arrangements will be required while any continental agreement is determined. The UK will have many negotiating priorities during Brexit, and these transitional arrangements must bridge the gap to a more comprehensive and progressive trade agreement, which is likely to take more time.
The preferable option is for the UK to incorporate transitional arrangements into its EU leaving conditions such that it temporarily continues to participate in EU-Africa trade arrangements. Article 50 does not define the scope and content of the withdrawal arrangements, so it is feasible that the UK could negotiate to retain transitional membership of certain agreements. This would provide legal certainty and assurance for African exporters and investors, and continuity for African businesses.
Conclusion
The UK faces a considerable range of negotiating priorities. Africa, as a rapidly developing and historically linked trading partner, should not be overlooked in these. In crafting its trade policy approach to Africa, the UK must reinforce the continent’s regional integration initiatives; it must ensure market access continuity and certainty; and it should base its agreements on a pro-poor and pro-development principle.
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tralac’s Daily News Selection
The selection: Thursday, 8 September 2016
Featured trade infographics:
@StanChart - China’s commodity demand drove trade with Africa. Expect diversification further supporting economic recovery.
@UNUWIDER - Countries where extractives are over 30% of exports. Like it or not dependency is increasing.
The EAC Heads of State summit takes place today in Dar es Salaam. Selected previews:
EAC-Europe deal stalemate calls into question regional integration (The EastAfrican): The EAC’s solidarity came into question on Monday during the Council of Ministers meeting, when member states were accused for prioritising national interests ahead of regional integration. This was in connection to the Economic Partnership Agreement with the European Union that the economic bloc was expected to sign, which some countries have now opposed. On the one hand, Rwanda and Kenya were criticised for breaching a proposal made earlier in May, requesting EAC partner states to sign the EPA on the same date in order to project the region as a functional Customs Union. On the other hand, Tanzania and Burundi were slammed for declining to sign the deal after they had been informed that delays in its signing will potentially hamper the bloc’s exports to the EU. Tanzania and Burundi were also criticised for being indifferent to Kenya’s, after it had been pointed out that the country would suffer more than others EAC states if the EPA is not signed urgently.
Tanzania backs out of EAC deal with EU over Brexit (IPPMedia): Minister for Foreign Affairs, East Africa, Regional and International Cooperation, Dr Augustine Mahiga told journalists yesterday in Dar es Salaam that Tanzania wanted its industrial economy policy be included in the agreement and the exit of Britain from EU be discussed before signing the agreement. He explained that another issue was whether signing EPA would not affect other trade agreements within the EAC especially the EAC Single Customs Territory. “We want to ensure that treaties within the EAC treaties were safeguarded unless we decide otherwise such as making changes but this should be through official meetings within the block,’’ he further explained.
Secrecy clouds proposed EAC trade pact with Europe (Business Daily): As the haggling continues, the region’s citizens remain helpless bystanders. A lack of mass participation has relegated public discourse to a two-side showdown between Tanzania — led by former President Benjamin Mkapa — and Kenya (read flower industry). Mr Mkapa, board chairperson of South Centre, a regional economic think-tank, maintains that, among other things, EAC stands to lose Sh25.1 billion per year in tax revenues if it signs EPA to cushion Kenya from EU taxes totalling Sh10 billion a year. According to Kenya’s EAC ministry, the EAC states will gradually open up 82.6 per cent of its total trade European Union firms in 25 years under EPA. The previous drafts had proposed a 15-year period for trade liberalisation.
Launching, 15 September - Lions on the move II: Six years ago, McKinsey Global Institute launched a groundbreaking report on Africa: Lions on the move - the progress and potential of African economies. On 15 September, we’re releasing brand-new research to refresh our perspective on Africa.
Credit on the cusp: strengthening credit markets for upward mobility in Africa (pdf, FSD)
According to the report, a new class of consumers referred to as the “Cusp Group” is emerging in sub-Saharan Africa. This group accounts for 23% of sub-Saharan Africa’s population, covering a segment of active earners that straddle the formal and informal worlds and get by on $2-$5 per day. For this group, healthy credit markets could expand opportunity and enable upward mobility, helping to build a true middle class. However, for this to happen, credit needs to expand in healthy ways. Commenting on the research, Juliet Munro, the Director, Inclusive Programmes at FSD Africa says: "While ‘Africa Rising’ told an optimistic story, our research is showing a more nuanced reality. What we are seeing is not an emerging middle class but rather an expanding group who are living on the “cusp” between poverty and the middle class. They have emerged from absolute poverty, but they still lack the kinds of assets, job security, purchasing power and stability we associate with middle class livelihoods. In Africa’s political and economic discourse, this ‘cusp’ group has been overlooked, drowned out by the ‘Africa Rising’ narrative."
Dr Patrick Njoroge: ‘Joint action needed to stop illicit cash flows’ (Business Daily)
Weak banking regulatory and supervisory frameworks have largely hindered the effective implementation of initiatives aimed at reducing illicit financial flows from Africa. This is reflected at the national level, given that most African countries are yet to fully adopt and implement the 2012 Financial Action Taskforce recommendations, the international standards on combating money laundering and the financing of terrorism. I would therefore urge the continent’s legislatures to consider implementing changes to our national laws that would enhance our national registries, particularly as relates to the obtaining and sharing of beneficial ownership information. In the past year, the Central Bank of Kenya has adopted several initiatives to foster transparency in the Kenyan financial system. [The author is Central Bank of Kenya governor]
Invest in Africa Forum: China creates company with $500m initial capital for infrastructure in Africa (Ghana Business News)
The Chinese government announced at the Second Invest in Africa Forum a $500m initial capitalization, with the creation of the China Overseas Infrastructure Development and Investment Corporation Limited (COIDIC). According to a press release the COIDIC is a for-profit company that invests in and manages projects from concept to feasibility studies, financial close and commercial operations. “Its founding shareholders include: China Development Bank’s China-Africa Development Fund (CADFund); China Gezhouba Group Overseas Investments Co. Ltd; China Telecom Global Limited; Changjiang Survey, Planning, Design and Research Co., Ltd (CISPDR); China ENFI Engineering Corporation; and HCIG Energy Investment Co., Ltd. In 2017 COIDIC expects to add more shareholders,” it said.
Mihir Sharma: ‘Japan’s aid needs more imagination’ (Bloomberg)
Shinzo Abe’s recent promise of $30bn in financing to African countries over the next three years shouldn’t have come as a great surprise. Quietly, over decades, Japan has become the leading financier of growth-supporting infrastructure across large swathes of the developing world. Perhaps too quietly. In fact, few people outside the country appreciate the scope of Japan’s overseas development assistance. In several South and Southeast Asian countries, the country is the largest provider of foreign assistance and low-cost loans, larger than the U.S. or the World Bank. Japanese development aid to India, for example, totaled $1.4bn in 2013 - almost double Germany’s effort. (American aid to India that year was only $100m.) Japan occupies a similarly dominant position in concessional lending to Indonesia, Vietnam and Myanmar.
Triangular co-operation: findings from a 2015 survey (pdf, OECD)
Detailed information was obtained on over 400 triangular co-operation programmes, projects and activities from 60 respondents. Based on the 60 responses received, the most active countries in triangular co-operation were Japan, Chile, Brazil, Norway, Spain, Guatemala, Germany, South Africa, Mexico, and Colombia (with 20 to 160 activities each). The majority of triangular co-operation projects can be found in Latin America and the Caribbean (LAC), followed by Africa, Asia-Pacific, the Middle East and North Africa region and Eastern Europe. Triangular co-operation between countries in the same region is still the most common arrangement, with 55% of all reported projects being implemented in Latin America and the Caribbean, 14% of projects in Africa and 13% in Asia-Pacific. In addition, 18% of the triangular co-operation projects reported involved more than one region. [Download the report, in French]
SADC’s ICT sector: outcome statement from Mauritius (pdf)
The ICT SCOM noted that completion of the SADC Regional and National Integrated Broadband Infrastructure Study and the resulting proposed baskets of ICT infrastructure projects responding to the infrastructure gaps identified in the SADC Region, which Member States can now pursue. The SADC Secretariat will convene the SADC Ministers’ Meeting and the SADC ICT Investment Conference in October 2016 in Swaziland, where the latter would further promote ICT infrastructure projects for both the RIDMP and the recently revised RISDP to potential investors and partners.
India-Namibia joint trade committee: statement by India’s Commerce Ministry
On the issue of bilateral trade, it was shared that during 2015, India was the seventh largest country from whom Namibia sourced its imports. The Indian side conveyed to the Namibian side that leather, Gems and Jewellery, food processing products and engineering goods like electrical and mechanical appliances are sectors that India can cooperate with Namibia to meet Namibia’s requirements. Metals and mineral from Namibia was sought for the Indian requirement. The Namibian side encouraged joint ventures in mining and mineral exploration with Epangelo Mining and Exploration company, trade of precious and semi-precious gems and stones was discussed. Namibia expressed interest in development of skills through training in the fields of gems and jewellery to encourage local value addition and employment opportunity in Namibia. Namibia also expressed willingness to utilise $100m of Line of Credit for them.
Lesotho: Free Basotho Movement wants Lesotho to merge with SA (The Citizen)
The Free Movement of Basotho wants Lesotho to be incorporated into South Africa, its leader Letsema Morolong said on Wednesday. “Our lawyers have wrote [a letter] to SADC calling for Lesotho to have a referendum where Basotho will vote whether they want to be part of South Africa,” he told supporters in Rustenburg. He said the majority of Basotho regarded themselves as South Africa citizens. Secretary of the Free Basotho Movement Mokhobo Mokhobo said they also wanted Basotho to have dual citizenship. [Lesotho Special Permit: Ministerial briefing]
South Africa: State-business relationships in the formulation, implementation of industrial policy (Mail and Guardian)
Text of the Alice Amsden Memorial Lecture, delivered by Minister Malusi Gigaba: The consequence of the above dynamics is that many large companies, which can be the corner-stone of our industrial policy, are completely out of kilter with the national interest. This is aggravated by a trust impasse between stakeholders. This, I think, reflects the growing political fragmentation as the gaps in the 1994 political settlement become apparent and points to the need for a revisiting of critical elements of the political settlement to create a greater alignment between large business and of the state. However, while necessary, this will be an extremely complex process, and our industrialisation project cannot wait.[Industrial Parks Revitalization Programme: dti’s parliamentary presentation (pdf)]
Kenya Economic Report 2016 (pdf, KIPPRA)
Trade and Foreign Policy: The domestic retail and wholesale trade sector has been evolving with greater concentration of firms as well as developments in electronic commerce, making Kenya a regional business hub. However, there is need to strengthen and rationalize the regulatory framework, taking into account the roles of the national and county governments in order to increase the sector’s contribution to GDP and wage employment. To expand trade, there is need to improve the commercial environment by addressing domestic constraints to international business development, and through projects that could facilitate regional sharing of production, as well as diversification into new export lines.
#AGRF2016 in Nairobi: Uhuru Kenyatta’s opening speech (GoK)
In fact, I am certain that together we can and will make bigger pledges and bolder commitments. And it is in the spirit of that conviction that, today I commit the Kenya Government to invest KSh2 billion, equivalent to US Dollar 200 million over the next five years. This support is intended to enable 150,000 young farmers and agriculture entrepreneurs gain access to markets, finance and insurance, improving access to modern machinery and other agriculture technology, and increasing value addition and agro-processing in our country. This commitment is just one way, our way, of actualizing the spirit of the Malabo declaration.
USAID funding to spark ‘new era’ in agricultural data collection (FAO)
USAID and FAO have signed a $15m agreement aimed at boosting the capacity of developing countries to track key agricultural data -information that is essential to good policymaking and that will help track progress toward achieving the SDGs. The USAID donation will cover the first phase of an FAO-led project that will run from 2016 to 2021 starting with pilot efforts in four developing countries, two in Sub-Saharan Africa, one in Latin America and one in Asia. A dialogue is under way with eligible countries. The goal: To design and implement a new and cost-effective approach to agricultural data collection in developing world contexts, known as agricultural integrated surveys. [IFAD’s Kanayo Nwanze awarded the First Africa Food Prize]
A food-secure 2030: a global vision and call to action (Feed the Future)
In this paper, the US Government agencies charged with strengthening global food security call on the international community - particularly country leaders and donors - to build upon unprecedented recent progress and continue the fight against global food insecurity and malnutrition. The vision for a food-secure 2030 cannot be achieved without steadfast country leadership, political will and commitment to results, evidence-based action and accountability. Indeed, progress thus far has been underpinned by this leadership. When developing countries own, lead and guide these cross-sectoral, whole-of-government efforts, it ensures sustained success. Strong country leadership includes:
A new tool for monitoring global value chains (World Bank Blog)
The World Bank Group’s World Integrated Trade System (WITS) offers a new tool for analyzing countries’ participation in three key global value chains: apparel and footwear, electronics, and automotive goods. This new data tool will help researchers by enabling the tracking of GVCs at the sector and product level, revealing their linkages at different stages of the production process and across countries and regions. It differs from the widely-used approach of tracking GVCs using value-added data derived from global input-output tables in that it provides more disaggregated information for goods, is easier to implement for small countries, and is more accessible mathematically.
Today’s Quick Links:
The Global African Investment Summit postscript: What can advance intra-Africa trade?
SADC air traffic controllers meeting starts in Luanda
Nigeria’s four major airports must be concessioned – Aviation Minister
Angola’s SE4All Action Agenda and Investment Prospectus: report on Luanda meeting
Nearly 60 stock exchanges sign up to UNCTAD sustainability initiative
South Africa’s tourism minister appoints expert team to improve tourism planning
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EAC-Europe deal stalemate calls into question regional integration
The East African Community (EAC’s) solidarity came into question on Monday during the Council of Ministers meeting, when member states were accused for prioritising national interests ahead of regional integration.
This was in connection to the Economic Partnership Agreement (EPA) with the European Union (EU) that the economic bloc was expected to sign, which some countries have now opposed.
On the one hand, Rwanda and Kenya were criticised for breaching a proposal made earlier in May, requesting EAC partner states to sign the EPA on the same date in order to project the region as a functional Customs Union.
On the other hand, Tanzania and Burundi were slammed for declining to sign the deal after they had been informed that delays in its signing will potentially hamper the bloc’s exports to the EU.
Tanzania and Burundi were also criticised for being indifferent to Kenya’s, after it had been pointed out that the country would suffer more than others EAC states if the EPA is not signed urgently.
“Kenya and Rwanda signed the EPA on September 1… It would have been desirable for the partner states to sign the EPA together,” Mr Kirunda Kivejinja, Uganda’s deputy prime minister and minister for EAC Affairs told the Council.
Mr Kivejinja confirmed that Uganda would sign the EPA at “an appropriate time soon” but that the country needs more details on the circumstances with a view to informing discussions at a higher level.
Both Kenya and Rwanda defended their decisions to sign the EPA as a “logical and natural course of action” since the commitment to do so was made in 2014 after conclusion of negotiations with EU.
“What is at stake is not the substance of the agreement but the process of signing the agreement,” Ms Valentine Rugwabiza, Rwanda’s minister of EAC Affairs said.
“The issue of solidarity is important for the bloc, and since the negotiations were completed, the next logical step was to sign the agreement.”
She was supported by Kenya, which reiterated that when the EAC missed the deadline to sign the EPA in October 2014, the country suffered major losses due to the high tariffs imposed on her exports to the EU – a situation that the country hoped would not occur again.
“After we missed the deadline, Kenya was removed from the EU Market Access Regulation, and was later reinstated in December 2014. During this period, our exports to Europe suffered a great deal,” Ms Phyllis Kandie, Kenya’s Cabinet Secretary for EAC Affairs, said.
“Kenya therefore took a decision to sign with a view to petitioning the EU against its removal of current deal for Kenyan exports to the EU, and to demonstrate our commitment to ratify the deal alongside Rwanda pending signing by the other partner states.”
Tanzania however appears to be softening its strong stance against the EPA, saying it needs to conduct an in-depth analysis first.
“Tanzania’s decision not to sign the EPA has been a very difficult decision considering the amount of time and costs involved in the process over the last 14 years. However, we are convinced that it is important that we undertake an in-depth analysis in our national interest,” Charles J. Tizeba, Tanzania’s Minister Ministry of Agriculture, said.
“The bloc needs to appeal to the EU to push the deadline so that partner states do not lose out as a result of Tanzania not signing the agreement. Therefore, with the principles of national sovereignty, Tanzania is not able to sign the EPA at this moment in time.”
Burundi so far offers the greatest hurdle ahead of ratifying the EPA, after the country said that the current deal does not take into account her economic interests.
“Burundi expresses solidarity with partner states, but not at the expense of the lives of Burundians,” Mr Alain Nyamitwe, Burundi’s Minister of External Relations, said.
“Burundi’s economy is not capable of taking on the obligations enshrined in the agreement until her economy is strong enough. Burundi has always been in solidarity with Kenya, but we have national issues that we need to resolve prior to engaging in the signing of the EPA.”
Citing these indifferences from member states, the Council directed the EAC Secretariat to prepare an analytical paper on the implications of not signing the EPA, which will be presented at the EAC heads of state summit in Dar es Salaam on Thursday.
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Joint action needed to stop illicit cash flows
Stemming illicit financial flows from developing countries is one of the key issues shaping the global development agenda.
Goal No. 16 of the Sustainable Development Goals (SDGs) under the United Nations 2030 Agenda for Sustainable Development, commits to “significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organised crime”.
There are good reasons for this: First, the amounts involved are massive. With assistance from the IMF and the World Bank, the advocacy group Global Financial Integrity (GFI) has estimated that Africa loses about $50 billion annually to illicit financial flows.
Additionally, according to the Report of the High Level Panel on Illicit Financial Flows, between 1970 and 2008, Africa lost an estimated $854 billion in illicit financial flows.
This amount is equivalent to the development assistance received by the continent over the same period.
Second, illicit financial flows have far-reaching effects, particularly on the African continent.
These flows and the activities that support them have been shown to lead to increasing inequality in the source countries, in addition to undermining the economic and social institutions, discouraging transparency, and undermining international development co-operation.
Third, all countries are involved in this fight, and there are no winners if illicit financial flows are not dealt with.
The financial sector is the most common conduit. This is largely due to the interconnection between national and international financial systems, which can provide a wider geographical reach through which illicit financial assets are moved and laundered.
Enable or facilitate
The financial sector, therefore, has to be at the forefront of the agenda to stem the flows. Nevertheless, in order to develop and implement policies that would appropriately address the issue, it is important to appreciate the vulnerabilities of African financial systems. More importantly, to understand how they enable or facilitate the movement of money.
Most of our economieshave informal financial systems that are primarily cash based. However, significant gains have been made in increasing the level of financial inclusion, most notably in sub-Saharan Africa, where countries like Kenya and Tanzania have embraced mobile and financial products and services.
But the overall level of financial inclusion in Africa remains low. Only a small percentage of the population has bank accounts, and the percentage of those owning insurance policies and securities is even lower. This is relevant given that it serves to hamper efforts to trace illicit financial flows from the continent.
Weak banking regulatory and supervisory frameworks has largely hindered the effective implementation of initiatives aimed at reducing illicit financial flows from Africa.
This is reflected at the national level, given that most African countries are yet to fully adopt and implement the 2012 Financial Action Taskforce (FATF) recommendations, the international standards on combating money laundering and the financing of terrorism.
The FATF standards are a comprehensive framework of preventive measures for financial institutions to address threats to the financial system including illicit financial flows.
Recent assessments of several African countries Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regimes conducted by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), a FATF regional body, revealed that most countries generally exhibit a low level of compliance with preventive measures.
The implementation of customer due diligence, in particular the identification and verification of beneficial owners of corporate entities remains a significant challenge. Closer international cooperation is also needed.
The lack of institutional, technical and human capacity also hampers financial sector regulators’ ability to curtail the movement of illicit financial outflows from financial institutions in Africa.
The infrastructure that would support regulators efforts to combat illicit financial flows such as Financial Intelligence Units (FIUs), beneficial ownership registries or asset recovery units are either non-existent or in the early stages of development. As a result, the skills required for tracking illicit financial flows, including the ability to profile money laundering risks and analyse suspicious transactions, are severely lacking in the continent.
New technologies
New technologies can help but could also facilitate illicit financial flows. In addition, lifting the veil of secrecy and determining who ultimately owns and controls corporate entities that have established business relationships with financial institutions exposes wrongdoing and disrupts a key vehicle for illicit financial flows.
I would therefore urge the continent’s legislatures to consider implementing changes to our national laws that would enhance our national registries, particularly as relates to the obtaining and sharing of beneficial ownership information. In the past year, the Central Bank of Kenya (CBK) has adopted several initiatives to foster transparency in the Kenyan financial system.
It has stepped up close collaboration with the Financial Reporting Centre (FRC) – Kenya’s financial intelligence unit (FIU) – to foster a culture of compliance in the banking sector. Emphasis has been placed on the preventive measures outlined in the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA), Kenya’s primary anti-money laundering legislation.
It has also provided additional clarity on reporting obligations under POCAMLA including the issuance of guidelines on large transactions in January 2016, intended to provide a clear trail of large cash transactions conducted over the counter in banks.
Further, AML/CFT on-site inspections have been enhanced. CBK is currently developing a risk based AML/CFT supervisory framework with assistance from the International Monetary Fund (IMF). CBK has also required greater transparency on the part of banks to ensure public confidence.
Transparency extends to disclosures on their corporate governance and risk management structures. CBK has enhanced the disclosures by banks on their significant shareholders. Banks are now required to disclose on their websites details of significant shareholders who own five per cent or more shareholding.
Kenya’s financial sector is very vulnerable given its strategic position in the region, facilitated by easy access through sea ports, airports and land. Kenya is a fast growing economy with high potential especially in the financial sector.
It is therefore attractive to both well-intentioned and ill-intentioned investors. Inter-agency cooperation between the financial sector regulators, law enforcement agencies and the financial institutions has had a positive effect in stemming illicit financial flows.
Regular interaction with international bodies tasked with the responsibility of preventing money laundering is key in shaping or improving a country’s institutional, legal and regulatory framework in combating illicit financial flows.
The battle against illicit financial flows in Africa cannot be won singlehandedly. Governments, legislatures, the judiciary and the private sector must come together.
Tackling the underlying sources of illicit financial flows is imperative. For the African financial sector, investment must be made in strengthening preventive measures.
Surveillance, detection and recovery procedures must be enhanced. With this comprehensive approach, Africa will be well armed to combat the scourge of illicit financial flows.
Dr Njoroge is the Governor, Central Bank of Kenya.
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More than $60 billion pledged for agricultural financing as President Kenyatta asks Africa to invest heavily in sector
More than Sh6 trillion was pledged for investment in agriculture at the African Green Revolution Forum 2016 in Nairobi on 7 September.
The pledges came after President Uhuru Kenyatta challenged African governments and the private sector to invest massively in agriculture if Africa is to make meaningful progress.
President Kenyatta said Africa is capable of investing more than $400 billion in agriculture through government and private sector funding over the next five years.
The President started by announcing that the Kenya Government committed to spend Sh20 billion to support 150, 000 young farmers and agriculture entrepreneurs to gain access to markets, finance and insurance, improving access to modern machinery and other agriculture technology, and increasing value addition and agro-processing in Kenya.
The President said this when he officially opened the three-day forum at the United Nations Headquarters, Gigiri, Nairobi, where he was also joined by Rwandan President Paul Kagame.
The forum, whose theme is ‘Securing Africa’s Rise Through Agricultural Transformation’ brings together policy makers and other stakeholders in African agriculture to share their experience and expertise to make the sector progress.
“We all committed to the goal of increasing financing for agriculture. Today, let us make that commitment specific. I propose we pledge to mobilise at least $400 billion of public and private sector investment over the next five years. With goodwill and partnership, this is more than possible,” said President Kenyatta.
The pledges of trillions targeted at agricultural financing, that came after President Kenyatta’s challenge, came from among others a pledge by Econet Wireless chairman Strive Masiyiwa pledging to invest $35 billion (Sh3.5 trillion) and the African Development Bank (AfDB) which pledged $2.4 billion (Sh240 billion) each year for the next 10 years which translates to $24 billion (Sh2.4 trillion). AfDB has previously been allocating $600 million for agricultural financing.
The Bill and Melinda Gates Foundations that pledged $5 billion (Sh500 billion).
The Kenya Commercial Bank (KCB) pledged $350 million (Sh35 billion) and the Rockefeller Foundation pledged $180 million (Sh18 billion).
The World Food Program (WFP) pledged $120 million (Sh12 billion) to cater for countries including Kenya while OCP Africa pledged $30 million (Sh3 billion).
Rockefeller Foundation and Bill and Melinda Gates Foundation also gave a pledge to fund the operational cost of the African Green Revolution Forum for the next five years.
President Kenyatta also called for integration of Africa’s agriculture policies because without unity no one country or region can make progress.
“It is clear that without integrating our shared continental vision into our respective domestic policies, we will not only hold back one another, more significantly, we will keep our citizens from experiencing a range of benefits,” said the President.
He called for streamlining of national plans and strategies so that they align with the 2014 Malabo commitments which agreed on a comprehensive development of African agriculture.
“Together, we outlined a bold and daring vision for our Continent. Now, we must take bold actions to give effect to our shared dream,” said President Kenyatta.
The Head of State also noted that Africa is witnessing greater involvement in agriculture by its private sector.
He said with the rise of agri-business initiatives, governments are paying attention to the policy needs of the agricultural sector and farmers as a whole.
“Our progress is a partial fulfilment of our continent’s potential, and of the past promises we have made as leaders of this great Continent,” he said.
He said agriculture is too important in Africa to be ignored since hundreds of millions of men and women depend on agriculture to eke out a living.
“But agriculture also provides an avenue for all our nations to open up opportunities for decent jobs, and dignified lives to millions of African youth,” added the President.
After the official opening ceremony President Kenyatta, President Kagame and the African Union Commissioner for agriculture Rhoda Peace Tumusime chaired a panel discussion where they fielded questions.
The two Presidents said technology has to be utilised in agriculture in order to attract the youth to the sector.
Ms Tumusime urged African governments to implement commitments and pledges they have made previously to transform agriculture in Africa.
They said the sector will create more job opportunities if technology is used as a tool in transforming the sector and making it a business venture rather than a subsistence activity.
Other speakers at the forum included the Chairman of Econet Wireless Strive Masiyiwa.
Speech by his Excellency Hon. Uhuru Kenyatta During the Opening of #AGRF2016
Let me take this early opportunity to state how delighted we are to have all of you with us. Your decision to attend this Forum is a testimony of the confidence you have in our beloved country and the people of Kenya.
It is in this context I would like to encourage you, to seize the opportunity to enjoy the best Nairobi has to offer.
Let me also at this early moment recognize my very good friend and brother, President Kagame. We do not take your presence for granted knowing how busy you are working hard to transform the lives of your citizens. Your presence with us, therefore, attests to the critical significance of today’s meeting.
Indeed, let me emphasize that this meeting is not only important but urgent.
Why do I say it is urgent? I say so because we are coming together, at a time when our Continent is faced with incredible opportunity, but at the same time, it is faced with profound threats in almost equal measure in terms of food insecurity and youth unemployment problem. Therefore, to broach a discussion that speaks to the daily realities of millions of Africa’s citizens is, by any measure, important.
Across the Continent, hundreds of millions of people live as men and women of the soil: tilling the land to eke out a living for themselves and for their families.
The vast majority … seventy percent … of Africans either directly or indirectly derive their livelihood from agriculture. And across the Continent we depend on agriculture to enhance food security and nutrition.
In the shadow of a shared, pervasive, continental challenge of youth unemployment, and in the wake of a ‘demographic dividend’ versus ‘ticking time-bomb’ debate, agriculture also provides an avenue for all our nations to open up opportunities for decent jobs, and dignified lives to millions of African youth.
Now, as a Continent we all know the significance of this sector. We understand that it is not just the backbone of our national economies it is the bread and butter of our people.
We are aware that growth in agriculture is up to 11 times more effective at reducing poverty than growth in any other sector.
And we recognize that until this sector is transformed, our hopes for industrialization, for a flourishing manufacturing sector, will be little more than a pipe dream.
That is why we all, as a Continent, stood in agreement during the Malabo Declaration, to usher in Africa’s Agenda 2063. The agenda emphasizes the need to invest in agriculture.
That is why we are here – because we cannot, in good conscience, do anything less than our best to build a robust and resilient agricultural sector in all our countries. And, we should admit, we have been making steady progress.
Increasingly, we are seeing greater private sector investment in agriculture. We are witnessing the rise of agri-business initiatives, governments are paying attention to the policy needs of the agricultural sector and farmers as a whole.
Every day farmers are proving how much they can achieve when given access to high quality seeds, and fertilizers, and a market.
Our progress is a partial fulfillment of our continent’s potential, and of the past promises we have made as leaders of this great Continent.
We pledged in Malabo to pursue a future of prosperity that is led by agriculture. We promised to double our 2014 agricultural productivity levels by the year 2025. We vowed to make agriculture a multi-trillion dollar industry.
Together, we outlined a bold and daring vision for our Continent. Now, we must take bold actions to give effect to our shared dream.
As I move to close, let me propose three such steps for your consideration: First: I call on us to collectively agree to streamline our national plans and strategies so that they clearly align to our Malabo commitments, and to give specific time frames in which this will happen.
Delegates, it is clear that without integrating our shared continental vision into our respective domestic policies, we will not only hold back one another, more significantly, we will keep our citizens from experiencing a range of benefits.
Second, we all committed to the goal of increasing financing for agriculture. Today, let us make that commitment specific. I propose we pledge to mobilise at least $400 billion of public and private sector investment over the next five years. With goodwill and partnership, this is more than possible. Delegates, let us make it happen.
Third, I propose that we make a greater push for accountability by creating a continental agricultural performance scorecard. A scorecard to measure and track our progress against all of the commitments we agree to here in Nairobi, and those previously made through the Malabo and such other forums.
Delegates, I believe these three practical steps forward are not only reasonable, but do-able. More importantly, they are extremely beneficial to our people and hence the reason why we cannot fail to implement them.
In fact, I am certain that together we can and will make bigger pledges and bolder commitments. And it is in the spirit of that conviction that, today I commit the Kenya Government to invest KSh2 billion, equivalent to US Dollar 200 million over the next five years. This support is intended to enable 150,000 young farmers and agriculture entrepreneurs gain access to markets, finance and insurance, improving access to modern machinery and other agriculture technology, and increasing value addition and agro-processing in our country.
This commitment is just one way, our way, of actualizing the spirit of the Malabo declaration. But Brothers and Sisters, Colleagues, Partners, Friends of Africa – the more important question is what will we do together; what ambitious measures will we take?
I am confident that as this meeting unfolds, those questions will give due urgency to our dialogue and impetus to our expected final outcomes. As always, I look forward with great confidence to all that we will achieve both now and hereafter, together.
With those remarks, it is now my profound pleasure to declare this forum officially open.
Thank You.
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Japan’s aid needs more imagination
Shinzo Abe’s recent promise of $30 billion in financing to African countries over the next three years shouldn’t have come as a great surprise. Quietly, over decades, Japan has become the leading financier of growth-supporting infrastructure across large swathes of the developing world. Perhaps too quietly.
In fact, few people outside the country appreciate the scope of Japan’s overseas development assistance (ODA). In several South and Southeast Asian countries, the country is the largest provider of foreign assistance and low-cost loans, larger than the U.S. or the World Bank. Japanese development aid to India, for example, totaled $1.4 billion in 2013 – almost double Germany’s effort. (American aid to India that year was only $100 million.) Japan occupies a similarly dominant position in concessional lending to Indonesia, Vietnam and Myanmar.
It’s now begun to expand its footprint in Central Asia, particularly in Kazakhstan, as well as Africa. The strategic motivation is obvious. Rival China has invested billions in both regions in recent years, with Chinese President Xi Jinping recently promising another $60 billion to Africa alone. The difference is that China’s aid money has captured imaginations there and elsewhere in a way that Japan’s generosity – it’s spent nearly $50 billion in Africa in recent decades – simply hasn’t.
I’m frequently puzzled about the wild excitement wherever I go about China’s “One Belt, One Road” plan to lay roads, ports, pipelines and other infrastructure between China and Europe. The optimism seems excessive compared to the amount of money that’s actually been disbursed so far, not to mention the scheme’s lack of detail and the very real doubts about its sustainability. There’s no guarantee it’ll even survive past Xi Jinping’s tenure in office, given that it’s so very much his baby.
Better known as the New Silk Road, the scheme has reinforced the idea that China will be central to the development of countries far from its shores – indeed, that the Middle Kingdom will one day be the anchor of economic relations from the North Sea to the South China Sea. Xi has thus created a brand that’s taken on a life of its own – one that promises to deliver concrete strategic and commercial benefits to China.
By contrast, many people in countries in which Japan is already funding OBOR-scale projects are blissfully unaware of its contribution. India’s a case in point. In Tokyo recently, more than one person gloomily remarked to me on the contrast between visits to India by Xi Jinping and by the Emperor of Japan. The Chinese president was rarely off the front pages. But the Japanese emperor’s trip – a relatively rare event – created barely a ripple. (Granted, Japanese Prime Minister Shinzo Abe did win a few headlines during his own trip to India last year.)
Partly this represents a failure of imagination on Japan’s part. Its bureaucrats are comfortable with the idea of supporting Southeast Asian integration or development along the Mekong River. But the idea that the Japanese are already helping create the arteries of the global economy – since ports that they are financing in, say, Bangladesh and Indonesia will be trading with each other and putting goods on rail lines that Japan might also finance – has been harder for them to promote. By contrast, the name “Silk Road” virtually sells itself.
There’s no reason Japan can’t compete better for mind share in Asia and beyond. After all, it’s easy to differentiate Japanese investment from China’s. In Africa, for example, the Japanese have admitted that they can’t win by competing with China on the amount of assistance alone. That’s why they’ve emphasized “quality” and the lower life-cycle costs of the infrastructure they help create.
Unlike China, too, Japan isn’t trying to put itself at the center of the developing world’s economy, with everyone else on the periphery. While Japan’s ODA programs prioritize Japanese companies, they’re far more focused on the needs of recipient countries than China’s are – and are driven by the choices made by those nations’ voters and politicians.
Most importantly, Abe’s more muscular foreign policy opens up opportunities for rebranding Japan overseas that would be positive both for its companies and for large parts of the developing world. As a democracy, Japan naturally prefers to deal with other democracies. Its engagement with Myanmar has stepped up dramatically now that generals have begun to give way to civilians in Naypyidaw, for example.
Democracies have to work harder to build consensus behind big infrastructure projects. But projects with popular buy-in are, in the long run, far more sustainable. Large democracies like India or Indonesia are natural targets for Japanese assistance and investment; if Japan manages to get its narrative right, then the arteries of world trade will flow through democracies. That would be a far more ambitious – and laudable – aim than anything China has in mind at the moment.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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Black capitalists behave like, if not worse than, their white counterparts – Gigaba
Address by the Minister of Home Affairs, Malusi Gigaba MP, on the occasion of the Alice Amsden Memorial Lecture in Johannesburg in September 2016
I wish to thank you for the opportunity to deliver this Alice Amsden Memorial Lecture.
I had the privilege to meet Alice Amsden just once during her visit to South Africa a few years ago, when we requested her to address the top management of the Department of Public Enterprises as well as some of our State-Owned Companies.
She made a deep impression in all of us and left us enthused about the direction we were taking with regard to the vision of the Department and the SOCs in our portfolio.
Without a doubt, Alice was a visionary who courageously challenged the neo-liberal Washington Consensus Economics.
She belonged among that group of economists and social scientists that believed that the current paradigm propounded for growth and development is inadequate.
She did this not by proposing a competing dogma, but by actually studying how successful economies had achieved their success in practice.
She then produced a body of knowledge that demonstrated the critical role of the state in channelling investment into sectors with strong long-term positive externalities.
In other words, she taught us that any development trajectory is intrinsically linked to a broader, highly contested, political economy.
She replaced an ideological dogma that effectively served as a smoke-screen for the interests of advanced economies, with a complex framework to understand how emerging countries learn, or fail to learn, how to industrialise.
The underlying theme of her work was to give emerging economies the space to introduce the most appropriate policies for their situations, rather than those imposed by the USA.
This evening I wish to talk about the importance of the state and business relationship in the formulation and implementation of industrial policy.
Industrial policy has the primary objective of increasing the productive capabilities of an economy to produce and service products of increasing complexity and value so as to ultimately improve the welfare of all citizens.
While manufacturing is core to advancing the industrialisation agenda, primary industries such as mining and agriculture have become increasingly technologically complex and industrial in nature and so should not be neglected.
The commercial enterprise in the capitalist economy is the core institutional vehicle that mobilises and invests capital in required plant, skills and technology.
As Marx illustrated, in the age of monopoly capitalism, large businesses driven by massive economies of scale and scope, have the capacity and capabilities to manage extremely complex processes of investment and continuous operational improvement and innovation.
The challenge for the developmental state is to provide incentives and sanctions that will channel these investments towards productive activities that may not be the most profitable in the short term, but will result in a highly productive and stable economy and society in the medium term.
This process Alice Amsden called “getting the prices wrong”.
This is an inherently difficult process both politically and technically.
Politically, in that there will always be social forces that are profiting from the status quo and have no interest in long-term development and will resist any attempts at change.
Technically, it is difficult because it is almost impossible to define and coordinate the implementation of the right combination of incentives and sanctions to drive long-term development, particularly in a highly volatile and disenabling global context.
Industrial policy succeeds when there is rapid adjustment as a result of a process of continuous learning by doing.
In this sense, it requires a leap of faith and is ultimately a product of political vision and will where there are always competing uses of state resources, which need careful management and mediation by the ruling elites or political parties.
Success in achieving sustained alignment between the state’s developmental agenda and the process of capital accumulation is so critical that Kohli uses it as the single most important feature to separate successful from unsuccessful developmental states.
This leads to the call that the fundamental problem is that business is not patriotic.
If only things were so simple.
Thinkers such as Fanon and Rodney have pointed out the anti-developmental impact, of the post-colonial comprador business class.
This decidedly unpatriotic class colludes with the interests of monopoly capital to advance its narrow economic interest.
It is content to undermine the national developmental project for the sake of profit and comfort, concerning itself with luxury consumption and the spiriting of capital abroad, rather than productive investment, increasing employment at fair wages, and capability building.
Asian developmental states have been more successful in creating a patriotic business class, in part through a combination of a complex and dynamic set of incentives and sanctions that saw companies focus their efforts on achieving capability building and export targets.
Those that failed lost their businesses whereas those that succeeded grew into industrial giants that could take Korea onto the global economic stage.
In other words, patriotic businesses are a consequence of effective industrial policy and a genuinely developmental state, rather than a consequence of luck or national character.
In South Africa, in the late nineties and 2000’s, we engaged in puerile debates about the patriotism of the emerging black bourgeois class, calling them patriotic merely because they were black and admonishing them when they disappointed us through their comprador practices.
Yet, what we missed was the point that the black capitalist class would behave precisely the same way as, if not worse than, their white counterparts, given how they were emerging, their accumulation methods, and the fact many were merely being co-opted onto the table of privilege of white business on the latter’s terms and all they were to fulfil was provide political connections and ensure superficial compliance.
In part, this emanated, amongst others, from the absence of an industrial strategy for the greater part of the first decade of freedom and the nature of the 1994 political settlement that had given rise to this moment.
A political settlement is an agreement amongst potentially conflicting social groups and elites around how power will be organised, exercised and maintained in a given society.
Intrinsic to a political settlement is how the benefits of the economy will be shared, though this may not always be the case, or may at times fail to materialise.
It was exactly for this reason that in one of his political lectures to new MK recruits in Angola, Prof. Jack Simons drew the conclusion that “independence from colonial rule is not enough to bring about a revolutionary change which will transfer power to the great mass of people.”
He argued that whilst African independence has meant the transfer of power from one class to another, this had not meant that the new African governments had carried out a social revolution, but instead when they achieved independence, the tendency in many African countries had been to maintain the old economic as well as political system.
As a result, he said that there had been continuity but not revolution.
In our case, the Apartheid political settlement was based on a coalition between the mining industry, state-owned corporations and development finance institutions to develop the South African economy as a whole, transfer rents into agriculture in particular, implement a system of Afrikaner (and white) empowerment and sustain a political and ideological system of racial domination (and associated labour control).
Anglo-American together with three other conglomerates effectively drove and coordinated investments across the economy.
In the course of advancing their interests, white capital divided labour according to race and co-opted the white segment of labour into the white political and economic establishment, offering them incentives in the process in order to buy out their allegiance, knowing that they could not win them merely through blind racial patriotism.
Indeed, white labour bought into the settlement and vowed to defend the settlement with their own lives, whilst for black labour, marginalisation from the political and economic settlement as well as impoverishment became the order of the day.
Accordingly, in his famous 1978 article, “The Historic Injustice”, Thabo Mbeki argued that:
“We see therefore that the methods and practices of primitive accumulation which represented a transitional phase in the development of capital in Europe, assumed permanence in the South African economy and lifestyle of the Boers. They acquired a fixity characteristic of feudal society, legitimised by the use of force and sanctified by a supposedly Calvinistic Christianity.”
However, it must be noted that this political settlement was not without serious contradictions as seeking cheap and unskilled black labour – “beasts of burden” – negated the need for a stable and growing semi-skilled to skilled non-racial labour force to drive a robust industrialisation project and a growing middle-class to increase the local market.
Furthermore, black labour, while cheap, proved difficult to control and even in the context of apartheid, could not be trained to bring the costs of skilled labour down.
The 1994 political settlement in South Africa constituted a complex negotiated compromise between a range of powerful but vulnerable social forces.
Neither the apartheid forces nor the national liberation movement with all their social support bases could have claimed an outright victory against one another, forcing them into negotiations.
The political settlement that was reached thus reflected mainly the global and domestic balance of power, with all realising that the country could not be allowed to burn to ashes through a mindless civil war.
The essence of the political settlement was that political rights would be extended to the black population whilst white property rights would be preserved, regardless of how unjustly that property was accumulated during the Apartheid era.
A core part of the settlement was that the state would play a role in using policies and other instruments to facilitate the redistribution of wealth towards the historically disadvantaged in a context where market institutions would ultimately still regulate economic investment.
The RDP had made a clear choice against the neo-liberal view that sought to separate growth and development, reconciliation and reconstruction, and stated its preference for growth and development, for redistribution in order to address the legacy of the injustices of the past.
The clear winner in the deal was the financial services sector as the coordination of the economy would move from the mining – SOC developmental coalition which was the case during apartheid’s glory days to a liberalised financial services sector.
Future policy would be debated in forums involving government, business and labour.
The social constituencies that swept the ANC to victory did not have unabated sway over the formulation and determination of policy, they always had to negotiate and reach compromises with their class mortal enemies.
Clearly the settlement swept a lot under the carpet, reflecting the balance of power at the time.
The political economy of South Africa was and is extremely fragmented; and the structure of the South African economy remains to this day unchanged.
Even in its discussions on the “second phase of the transition”, the ANC has not theorised enough what this should entail as the battle rages on between the different schools of thought within the “broad church” about whether the national democratic revolution has arrived at its destination or whether the structure of the apartheid-colonial economy needs to be fundamentally turned on its head.
White monopoly capital remains to this day the single most significant anti-transformation sector in South Africa, with significant influence in the vital sections of the government.
The responsibility for mediating between competing social forces and interest groups to sustain political stability in the context of the settlement would fall on the ruling party who would have to deploy state resources and its political capital towards this end.
What compounds this mediation is, as I have said above, the lack of an organising philosophy or consensus among the different schools of political-economic thought within the ruling party.
With hind-sight, this was probably an impossible task.
The post-apartheid government inherited large private sector conglomerates as well as large State Owned Enterprises, which are an important site of ideological contestation.
On the one hand, from a market fundamentalist perspective, the state had no place to be directly involved in the economy and SOEs were supposed to be privatised, which could also advance the process of black capitalist class formation.
On the other hand, from a progressive developmentalist point of view, SOEs could be important instruments to support a growing economy, provide services and access to historically neglected communities, develop a cadre of black managers and support the development and transformation of upstream suppliers and downstream customers.
Accordingly, at their most strategic, SOEs can be critical instruments to drive an inclusive and growing economy.
In the private sector, black professionals continue to complain that they are marginalised in senior and top management in the private sectors.
They are viewed as unqualified unless proven otherwise, where their white counterparts are assumed to be competent.
Senior black professionals must have rafts of degrees and decades of experience to be taken seriously and earn the same income as their white counterparts.
SOEs have played a critical role in the advancement of black professionals, managers and skilled workers, as environments where the revolutionary assumption is simply that black people are capable of excellence if given the same leadership and growth opportunities as white people.
The same holds true for procurement.
The South African economy is monopolistic or oligopolistic in character, making it very difficult for emerging small and medium sized businesses to integrate into the value chains of large companies as suppliers.
Again, the experience of BBBEE has shown that companies will only buy services from black and women-owned enterprises when forced to by regulation or their customers.
SOEs like Eskom, Transnet and SAA, are multi-billion rand companies by revenue, with enormous value chains.
We have increasingly begun to use these strategically, incorporating localization and preferential procurement into their operation philosophy and investment plans.
Thus, for example, at Transnet we established a trend of appointing black accounting firms as external auditors, a contract worth tens of millions of rands annually.
In addition to the revenue flowing to these companies, it helps advance their growth in making it more difficult for large private-sector companies to exclude them on the basis that they have not proven their ability to service large, complex enterprises.
This is an illustration of the developmental impact of SOEs, if leveraged strategically.
However, some of the major inhibiting factors in South African SOEs include, among others,
- Absence of an organising philosophy within the ruling party, which makes Chinese SOEs so successful as their political and development agenda is clearer whilst in our case we are confused between privatising them and leaving them as state-owned, and some have a broader and more strategic vision that others under different shareholder ministries do not have;
- There is no clarity as to the relationship, rather than the distinction, between the commercial / corporate interests vis-à-vis their developmental mandates; and
- Their governance philosophy varies, as others have activist shareholders that provide a more developmental strategic mandate while others are simply Board led, with the shareholders providing no strategic direction and hence could be said to be on “auto-pilot”.
All this has fatal impact on their performance as there is no clarity as to which measure to assess their performance by, and others are gravely mis-governed and hence the Shareholder, which is broadly government and society, does not realise value in these institutions.
On the other side of the coin, it needs to be noted that those key SOEs, such as Sasol and Iscor, which were privatised during the latter years of Apartheid as well as those privatised in the first decade post-Apartheid, such as Telkom, immediately leveraged their market power to extract rents, under-invest and undermine the national development process.
Whilst this may have benefited their shareholders, both black and white, it clearly points to a system that is providing the wrong incentives and sanctions.
Turning to large private sector organisations, I wish to focus on the mining sector, which was the key driver of investment in Apartheid South Africa.
The mining sector post 1994 is complicated by a number of factors:
- Minerals are a non-renewable resource and part of a national endowment that ideally should benefit future generations. Consequently, there is an inherent tension around the division of rents from mining between the state (acting as a trustee of the resource for future generations) and industry (that brings the capital, technology and skills to extract the resource).
- The system of migrant labour and associated “reserves” was a corner-stone of both Apartheid and the mining industry.
- The Apartheid state dramatically limited worker rights which was taken advantage of by the industry through a high level of recklessness relating to worker living conditions, health and safety.
- In the absence of stringent regulations, the industry left a legacy of serious environmental degradation, including acid mine drainage.
- Communities adjacent to mines were forced to experience the negative impacts of mining without recourse.
- Post 1994, the industry never owned this legacy or took voluntary initiatives to not just transform the industry but to proactively address the legacy and demonstrate remorse for its historic behaviour.
Consequently, the policy department was left with a situation where they felt that they had to take the industry ‘kicking and screaming” to address the specific complex negative legacies associated with the mining industry.
The result, over time, was the creation of a very uneasy partnership between the government pursuing transformation and the industry seeking to preserve the status quo, and ultimately the attempt to legislative instruments – licensing regime, legislation and mining charter – to enforce compliance and transformation in the sector.
Hence, a culture of top-down, command and control, regulation came into being, in the absence of the Regulator and the industry reaching a true alignment on developmental and transformation objectives and how these should be achieved.
The consequence was that large parts of industry have been in compliance mode, while areas of common interest have been neglected as the focus of engagement is around areas of conflict.
This also creates an environment where mines look to politically-connected empowerment partners for protection from the state, rather than for empowerment partners who can become captains of industry.
The consequence of the above dynamics is that many large companies, which can be the corner-stone of our industrial policy, are completely out of kilter with the national interest.
This is aggravated by a trust impasse between stakeholders.
This, I think, reflects the growing political fragmentation as the gaps in the 1994 political settlement become apparent and points to the need for a revisiting of critical elements of the political settlement to create a greater alignment between large business and of the state.
However, while necessary, this will be an extremely complex process and our industrialisation project cannot wait.
Ultimately, white-owned South African big companies must regard it to be in their commercial interests to transform, to support industrialisation and have a genuine relationship with government – it makes business sense!
Parochialism and a political agenda – with-holding investment in the hope this government will collapse – on the part of some business is destructive and, in the long run, will not pay off.
Given the complexity of our political economy, we need to develop our own model of industrial strategy.
It is critical that we now start building bottom-up developmental coalitions and associated programmes with those large companies that have recognised the need for a new model of engagement that goes beyond compliance, but seeks to link corporate objectives to national development.
Companies have to come to see the development of South Africa as in their enlightened self-interest.
A single dominant company that is developmental in its practices can change the outlook for an entire sector.
There are an infinite number of logical sounding sector strategies – we need to discover those strategies which will result in business investment.
We need to learn to provide the incentives that channel rents into productive investment.
We need to have the maturity to focus on achieving common objectives whilst constructively debating those areas where we disagree.
Trust needs to be built, not just through dialogue, but through joint actions.
Through the mining Phakisa process and the SOE Competitive Supplier Development Programmes we can see some rudimentary examples of the success of this approach.
Alice Amsden showed us that industrialisation is ultimately a process of learning by doing at the factory level and within government.
We need to have the confidence to roll up our sleeves and have tough, but constructive, engagements.
As Alice impressed on us, it is ultimately government’s role to lead and we must have the courage to embrace this challenge.
All sectors of society, perhaps to varying degrees, have accepted government’s long term vision to create the South Africa that we want, the National Development Plan.
The plan is merely a blueprint; the difficulty is in the doing.
It requires us as social partners and interest groups – the state, political parties, trade unions, workers, owners and managers of capital, civil society – to find areas of convergence.
It requires us to become greater than the sum of our parts.
It requires us to focus not only on our narrow needs and interests, but on the greater good.
With key actors working in productive alignment, a resource-poor country like South Korea – famously on par with Ghana economically in the 1950s – rapidly developed into one of the world’s leading economies in a generation.
Widely shared prosperity in South Africa is and must be possible.
Achieving it will require us to forge a new, more just elite pact – the first of its kind in our nation’s divisive history – a pact formed for development, inclusion and social justice.
We owe it to all South Africans, and to future generations, to come together in this way.
I thank you.
Related News
tralac’s Daily News Selection
The selection: Wednesday, 7 September 2016
Starting today, in Guangzhou: the Second Investing in Africa Forum
The Forum (7-8 Sept) is one of important outcomes of the first IAF held in Addis Ababa in July 2015. It aims to promote experience sharing between China and Africa and build accelerated investment in Africa. Under this overarching goal, the Forum will address five themes, namely: Agriculture and agribusiness; Cooperation to expand capacity in manufacturing and industrialization; Infrastructure development, regional connectivity and renewable energy; Skills development, vocational training and job creation; and Trade and tourism. The Forum will be predominantly forward-looking and results-oriented, and will also showcase a number of projects in Africa with committed or prospective investments from China as well as Guangdong Province. The Guangdong Province is in the frontier in China’s economic reform and opening up process. It is also the fastest growing economy in the country for over three decades and has long been a champion for cooperation with African countries with bilateral trade totaling over $ 40bn a year. [Download the themed background papers]
5th Macau Forum Ministerial Conference between China and Portuguese-speaking countries: update
The ministerial meeting (11-12 October) is based on the “One Belt, One Road” initiative and focuses on the highest common denominator, i.e. development, in order to promote economic and trade relations between China and the Portuguese-speaking countries, whilst also supporting Macau in building the region up as a Service Platform for Trade Cooperation between China and the Portuguese-speaking countries. During the ministerial conference the Action Plan for Economic and Trade Cooperation (2017-2019) and other documents will be signed, which set out the key areas and guidelines for development of economic and trade cooperation between China and the Portuguese-speaking for the next three years.
Kenya: Sign long term deals, Chinese firms urged (Daily Nation)
Chinese firms have been urged to adopt long-term strategies and engage the local workforce and partnerships if they are to gain greater acceptance in the Kenyan market. Guangdong Chamber of Commerce in Kenya Chairman Liu Yanmei told a private sector delegation from Foshan city in central Guangdong province, visiting Nairobi to go for the long haul. “Short-sighted prospects have failed so you need to think long-term, and you have to fit in with the local people. In Guangdong, Peugeot was unfriendly with the locals and was not successful but when Honda came, their attitude helped them; they respected the locals and fit in and were very successful,” said Mr Liu.
Rebalancing in China: progress and prospects (IMF)
China is transitioning to a greener, more inclusive, more consumer and service based, and less credit-driven economy. This paper defines a framework for assessing rebalancing, reviews progress, and discusses medium-term prospects. The service sector will continue to gain importance, helping reduce the carbon intensity of output and increase labour’s share of national income and household consumption. Reducing the credit intensity of growth is likely to progress slowly unless decisive corporate restructuring and SOE reforms are implemented. [The analyst: Longmei Zhang]
Why Africa should be keen on the Tripartite Free Trade Area (New Times)
The words ‘Tripartite Free Trade Area’ were among the most commonly used phrases at the Global African Investment Summit, which closed yesterday, at the Kigali Convention Centre. In the negotiation process, insiders say that there is fear among countries that by being part of a larger bloc, their local industries would be stifled due to competition from imports. However, Uganda’s President Yoweri Museveni moved to reassure countries that their local industries will not be stifled by opening up their market to fellow members of the proposed bloc. He said that to protect their local industries, the bloc would adopt a common external tariff which will ensure that local industries in the various member countries remain competitive.
GAFI pledges to support Egypt’s private sector to broaden its business in Africa (Daily News)
Executive chairperson of the General Authority for Investment and Free Zones (GAFI) Mohamed Khodeir pledged to grant Egypt’s private sector the necessary support and information to enable it to play a greater role in investment in Africa, and to provide it with the available investment opportunities for discussion. Egypt’s government is concerned with developing economic and investment relations with Africa as it believes in the importance of continuous integration and ongoing cooperation among all African governments to achieve sustainable development for all African countries, Khodeir said on the sidelines of the Global African Investment Summit which currently is underway in Kigali, Rwanda.
Kenya: Ease of Doing Business Index for counties key to investment growth (Business Daily)
Trade and investment opportunities that were initially held at the national level have now been devolved. Counties now compete with each other to attract investments. This has led to increased trade and investment promotion at the county level. This sub national index similar to the one that the World Bank did for Russia, Mexico and Nigeria will be an invaluable guide to investors seeking to set-up or expand their businesses to counties. The move by World Bank to partner with Kenya to fund this research geared towards ranking the 47 counties on the ease of doing business will go a long way in opening up counties for real economic growth and help Kenya to climb to a higher rank on the ease of doing business globally. [Governors adopt plan for regional trade blocs]
World Manufacturing Production: statistics for Quarter 2 (UNIDO)
Manufacturing output in developing and emerging industrial economies slightly increased compared to previous quarters by 4.9% in the second quarter of 2016. Despite this improvement, the risk of another slowdown looms over developing economies as long as economic and political instability persist in industrialized countries. Growth performance varied considerably between the regions - Asian economies persevered, while manufacturing output in Latin America dropped yet increased in Africa compared to the second quarter of 2015. Manufacturing output in Africa rose on account of a significant strengthening of South African manufacturing in the second quarter of 2016. On the contrary, a sharp plunge in production was observed in Brazil as a result of the economic recession which dragged down the overall manufacturing performance of Latin America in the second quarter of 2016.
G20 Inclusive Business: report for the G20 2016 Summit
Leaders at the G20 Leaders Summit in Antalya, Turkey issued a call to action to public and private sector representatives, international organizations and civil society to advance the ability of businesses around the world to integrate low-income people into their value chains. The following report was prepared for the G20 Leaders Summit. Findings discussed include: how inclusive business can support the Sustainable Development Goals established in the 2030 Agenda; the obstacles for businesses looking to work with the base of the economic pyramid; and policy and financing approaches to fostering inclusive business.
South Africa: Economic cluster to accelerate implementation of the Nine-Point Plan (GCIS)
The Economic Cluster is at an advanced stage in preparing for the implementation of 40 high-impact investment projects in Agriculture and Agro-processing, Agri-parks, Energy, Infrastructure, Beneficiation and Manufacturing subsectors. Of these 40 projects, 10 have been assigned high-priority status and will be fast-tracked and monitored by the Investment Inter-Ministerial Committee. Across the 40 projects, InvestSA is co-ordinating the completion of feasibility studies, and the provision of regulatory and incentive support. [Economic indicators spoil SA’s GDP cheer]
Tanzania: July 2016 Monthly Economic Review (pdf, BoT)
The performance of exports of goods and services slightly improved to $10,096.9 million compared with the $9,310.6 million in the year ending June 2015 due to a diverse domestic and external factors. The improvement, however, was manifested in non-traditional export commodities and services receipts. In fact, a large part of the improvement occurred in travel (which is mainly tourism), manufactured goods and gold. Foreign exchange earnings from traditional exports were lower than in the corresponding period in 2015. The value of traditional exports dropped by 8.8%, to $828 million, driven by volume and prices.
Nigeria: Exports grow by 63% in Q2 (National Bureau of Statistics)
The total value of Nigeria’s merchandise trade in Q2, 2016 was ₦3,942.0bn. This was 49.0% more than the value of ₦2,645.5bn recorded in the preceding quarter. This development arose from a rise of ₦725.6bn (or 63.3%) in the value of exports (largely due to exchange rate gains) combined with a rise of ₦570.8bn (or 38.1%) in the value of imports against the levels recorded in the preceding quarter. The current trade position brought Nigeria's negative trade balance to - ₦196.5bn during the period under review. This shows a ₦154.8bn reduction in the country’s trade deficit over the previous quarter.
Kenya: Tea farmers set for windfall earnings as industry income hits Sh84 billion (Business Daily)
At Sh84 billion, the earnings are Sh21 billion more than last season’s income that stood at Sh63 billion, according to the Kenya Tea Development Agency. The growth in earnings has been attributed to a stable exchange rate and high pricing of the tea in the global market arising from depressed output from major tea growing nations such as Sri Lanka. The outstanding performance means that growers affiliated to the KTDA are set to share Sh44.72 billion in the second round of the payments, popularly known as bonuses -- a major increase compared to the Sh28 billion they earned in a similar period the previous year.
Tony Elumelu: Role of private sector in fighting poverty (ThisDay)
This October, we will host another class of 1,000 budding entrepreneurs from 53 countries in Africa, at the Elumelu Entrepreneurship Forum in Lagos. The programme and the forum will aim at empowering them, inspiring them and, most importantly, teach these young African men and women how to become fishermen. I am proud to tell you that in the Class of 2015, Nigerian entrepreneurs numbered 480, and all 36 states were represented. This year, Nigerians make up 601 (or 60%) of the top 1,000, bringing the total number of Nigerian entrepreneurs in our programme to 1,081.
ECOWAS, Elumelu Foundation sign MoU on youth empowerment (ThisDay)
The MoU, which has been endorsed, is for a period of two years. It allows both organisations to leverage their respective capacities and sharpen their focus on entrepreneurship as a tool of development. Specifically, a statement explained that the collaboration is expected to help formalise and instill competitiveness in the West-African entrepreneurship ecosystem by developing and implementing a Regional Strategy and Charter to promote best practices in MSME governance, better access to finance, access to regional and international markets, and capacity building.
Tanzania: DRC to review visas procedure for local truck drivers (IPPMedia)
At a meeting held yesterday in Kinshasa between Central Corridor Transit Facilitation Agency delegation led by Executive Secretary, Captain Dieudonné Dukundane, DRC’s Director of Immigration, Francois Kasonga promised to look into the problem saying concerns raised by Tanzanian truck drivers will swiftly be addressed. The CCTTFA said the meeting was part of implementation of the TTFA Inter-Ministerial Council of Ministers’ directive last August to follow up on solving the visa issue with authorities in DRC.
Uganda: Traders want equal access as Kenya opens new terminal (Daily Monitor)
The spokesperson of the Kampala City Traders Association (Kacita), Mr Issa Sekitto, has called for equal treatment and access to systems of clearance as Kenya Ports Authority (KPA) launched a new terminal at Mombasa port. “Equal accessibility to the tax system will help speed up the clearing process for goods. Uganda’s tax system ESCUDA is open to the Kenyans unlike the SIMBA, clearing system which is only accessible to Kenyans,” he said. “As long as the issues are not addressed, we shall only benefit from the increase in capacity at the port but will still face challenges trying to clear the goods,” Mr Sekitto said.
Uganda MPs give foreigners in retail trade 3-month ultimatum to close shop (The EastAfrican)
Uganda has given foreigners operating retail outlets in Kampala a three-month ultimatum to either invest in bigger businesses or return to their home countries. The decision was reached Monday during a meeting between the members of the parliamentary Trade, Industry and Cooperatives committee and Kampala traders after the latter petitioned Parliament about the influx of foreigners in retail business.
Accra hosts 2-day African Ports Evolution, West African forum (News Ghana)
Port of Antwerp invests in West Africa (Maritime Executive)
ECOWAS Ministers adopt Action Plan to address illicit drug trafficking, organized crimes
G20 Inclusive Business Report for the 2016 Summit
G20 Leaders welcome launch of platform on inclusive business
Leaders at the G20 Summit in Hangzhou, China emphasized the need for sustainable and inclusive growth, and welcomed the launch of the G20 Global Platform on Inclusive Business. The platform is a global partnership that seeks to accelerate the adoption of inclusive business policies and programs.
“We will work to ensure that our economic growth serves the needs of everyone and benefits all countries and all people including in particular women, youth and disadvantaged groups, generating more quality jobs, addressing inequalities and eradicating poverty so that no one is left behind,” the G20 leaders said in their year-end Communiqué.
“We acknowledge the important role of inclusive business in development, and welcome the establishment of the G20 Global Platform on Inclusive Business and its future actions. We welcome the G20 Inclusive Business Report for the 2016 Summit.”
Inclusive businesses directly reach people living at the base of the economic pyramid. The G20’s latest inclusive business report highlights inclusive business’ important role in contributing to the 2030 Agenda by reducing poverty, shrinking inequality, and contributing to sustainable economic growth. It identifies the challenges facing inclusive businesses and outlines possibilities for future action by the G20.
“The G20’s leadership on inclusive business has been powerful. The launch of the Platform on Inclusive Business and the high level of engagement by G20 members to share their experience in supporting inclusive business brings a much-needed focus on the policy challenges that these companies face in trying to reach people at the base of the pyramid,” said Eriko Ishikawa, Global Head of the Inclusive Business Team at International Finance Corporation (IFC), a member of the World Bank Group.
“Inclusive business approaches can contribute greatly towards the Sustainable Development Goals. The G20 is clearly supporting this potential with their leaders’ statement and endorsement of the Global Platform on Inclusive Business, giving policy makers a platform to learn from good practices and create enabling environments for pro-poor and pro-business solutions,” said Magdy Martínez-Solimán, UNDP Assistant Administrator and Director of Bureau for Policy and Programme Support.
As part of its work on inclusive business in 2016, the G20 conducted research on how specific policy instruments support inclusive business and ran a series of workshops to help policymakers learn from each other’s experiences on the topic. The G20 also invited companies to voice their opinions on inclusive business policy challenges. All of the results of the 2016 activities, including a series of country case studies, are posted on the G20 Global Platform on Inclusive Business website.
The G20’s efforts on inclusive business are jointly supported by the World Bank Group and the United Nations Development Programme (UNDP).
G20 Inclusive Business Report for the 2016 Summit
Leaders at the G20 Leaders Summit in Antalya, Turkey issued a call to action to public and private sector representatives, international organizations and civil society to advance the ability of businesses around the world to integrate low-income people into their value chains.
The following report was prepared for the G20 Leaders Summit held in Hangzhou, China on 4-5 September 2016.
1. Inclusive business is at the core of the G20 Agenda
Inclusive businesses – companies that work with people living at the base of the economic pyramid (BOP) – can make important, multi-dimensional contributions to sustainable development. By connecting low-income segments of the population with markets, inclusive businesses contribute to strong, sustainable, inclusive, and balanced economic growth, and have the potential to support G20 objectives, such as boosting employment and quality and decent jobs, including for women and youth.
Inclusive businesses were characterized in the G20 Inclusive Business Framework as those that “provide goods, services, and livelihoods on a commercially viable basis, either at scale or scalable, to people living at the base of the economic pyramid, making them part of the value chain of companies´core business as suppliers, distributors, retailers, or customers.” Inclusive Business should be socially and environmentally sound. These businesses can be classified as those that integrate the BOP into their core business strategy (inclusive business models), those for whom the low-income segment is part of but not central to their model (inclusive business activities), and other entities with a mission to maximize the social return (social enterprise initiatives). There are common elements to the three approaches.
These businesses can promote sustainable development in all its dimensions – economic, social, and environmental. They can improve access to affordable quality products and services, enhance productivity and resource efficiency, and/or generate new income – through decent work and livelihood opportunities – across the BOP. In short, they can enable inclusive growth and advance sustainable development.
This Summit Report builds on the G20 Leaders’ Call issued under the Turkish G20 Presidency and draws from the G20 Global Platform on Inclusive Business (GPIB), a global partnership launched in April 2016 in Nanjing, China, and currently implemented by the United Nations Development Programme (UNDP) and the World Bank Group. GPIB’s goal is to provide support to policymakers and accelerate the adoption of inclusive business policies and programs. Primary activities so far have included policy research, country case studies, company surveys, and policymaker workshops.
Findings discussed here include: how inclusive business can support the Sustainable Development Goals established in the 2030 Agenda; the obstacles for businesses looking to work with the base of the economic pyramid; and policy and financing approaches to fostering inclusive business.
2. Inclusive business and the 2030 Agenda
The 2030 Agenda for Sustainable Development, which includes the Sustainable Development Goals (SDGs), lays out universal and ambitious aspirations to “transform our world” towards economic, social, and environmental sustainability. The engagement of the private sector is critical to achieving the SDGs. The 2030 Agenda calls on businesses ranging from microenterprises to multinational corporations “to apply their creativity and innovation to solving sustainable development challenges.”
While all businesses pursue the generation of revenue and seek to grow in new markets, many businesses also provide social benefits such as strengthening stakeholder and community relations and contributing to stable markets and societies.
Inclusive businesses, however, go a step further by integrating low-income segments of the population into their business strategies. The impact of these businesses goes beyond the usual private sector contributions to development – creating jobs, hiring and training individuals, and generating government revenue through taxes. Inclusive businesses create decent work and livelihood opportunities for men and women at the base of the economic pyramid and/or provide them with quality and affordable goods and services they may not otherwise have access to, including by integrating those people into their value chains.
Thus, inclusive businesses can make an important contribution to the 2030 Agenda, by reducing poverty (enhancing livelihoods and access to goods and services), shrinking inequality (not just of income or wealth, but of access to services, goods, and resources), and contributing to sustainable economic growth as well as a global sustainable development partnership (by including individuals at the base of the economic pyramid in their profitable business ventures, as suppliers, distributors, or customers). The G20 has clearly recognized the potential contribution of inclusive business in its G20 Action Plan on 2030 Agenda for Sustainable Development.
Depending on the business’ specific engagement, inclusive businesses may additionally contribute to SDGs. For example, some inclusive businesses are addressing the potential of 2.5 billion low-income, smallholder farmers and their families who produce nearly 70 percent of food consumed worldwide on 60 percent of the planet's arable land. Their business models include directly sourcing products from smallholder farmers; providing critical inputs and training; improving distribution in deprived areas; providing mobile-enabled services; and becoming aggregators by organizing the supply from smallholders and cooperatives to large buyers while providing credit, storage, and transport to help farmers improve yields and guarantee a more stable supply.
Other inclusive businesses are providing “last-mile” infrastructure to underserved communities, such as water kiosks in slums and other off-grid utilities. There is a large market of low-income people who invest some $710 billion a year in housing, modern energy services, communications, and water services. Inclusive businesses seek, for example, to leverage flexible pay-per-use schemes that allow access to services depending on individual economic situations and household liquidity.
3. Obstacles to inclusive business
A survey conducted for the G20 Global Platform on Inclusive Business found that working with the base of the economic pyramid poses several challenges.
Lack of financing affects inclusive businesses, as well as the BOP in their value chains. Of all policy areas, access to finance for BOP individuals in the company’s value chain was rated as the biggest obstacle. Financing for the business was rated as a much more difficult obstacle for those companies that had worked with the BOP for less than five years. Of respondents aware of financial incentives to incorporate the BOP in their value chain (37 percent), the majority found those incentives at least somewhat beneficial. Financing was found to be a common issue across all regions.
Inclusive businesses are constrained by the lack of skills among the BOP in their value chain. Few respondents were aware of any government efforts to build BOP capacity through training, while almost all indicated that the lack of government programs in this area is at least somewhat constraining their business. 70% of respondents had their own initiative to increase the capacity of the BOP in their value chain.
Existing government rules related to inclusive business are not always beneficial. Survey results identified four categories of rules and regulations as potential obstacles, two stemming from existing regulation and two calling for new regulation. A third of respondents said they did not find the existing inclusive business rules beneficial. Many respondents suggested that their needs would be best met through sector-specific support such as agricultural, financial, or educational-based inclusive business rules. Further investigation on intermediation between the BOP and enterprises is required.
Lack of research on BOP markets is the most common information-related obstacle. There is still a general lack of data available to companies interested in inclusive business. Where companies were aware of government efforts to share information, such efforts were found to be beneficial. For example, consumer market data enabled inclusive businesses to understand better the preferences of the BOP population.
Policy recommendations vary depending on the approach to inclusive business. When asked what specific policies would be most helpful, overall, over half of respondents pointed to improving access to finance and/or providing financial incentives to businesses. However, financing solutions were suggested by 59 percent of companies identified as having an inclusive business model, 42 percent of those with inclusive business activities, and 38 percent of social enterprise activities. Companies with inclusive business activities provided the most recommendations for rules (42%) and social enterprise initiatives had the most recommendations related to capacity (25%).
4. Policies for inclusive business
How policymakers can take action on inclusive business policy
Government policies supporting inclusive business range from overarching national development plans to sector-specific policies and programs. These policies go further than merely creating a business environment conducive to business – they focus on facilitating, intermediating, and fostering the specific relationship between businesses and the base of the pyramid. They also require participation by a broad range of government ministries and direct engagement with the private sector. Helping inclusive businesses meet their financing needs is central to any government effort or policy reform in this space. Yet a one-size-fits-all policy is inadequate, as the different types of inclusive businesses require distinctly different approaches.
The Global Platform on Inclusive business conducted a series of policymaker workshops and country case studies throughout 2016. (Country case studies include Brazil, Canada, Colombia, France, Germany, Italy, Philippines, Sweden, and the United Kingdom.) This work revealed the importance of a series of factors that are relevant across countries and sectors in designing and implementing policies to support inclusive business. These factors include the following:
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Applying the inclusive business typology
Understanding the distinctions and differences among the various inclusive business approaches and the landscape of inclusive business in the domestic context is essential to any government developing its strategy. That means defining a set of criteria or guidelines and analyzing the sectors in which inclusive businesses operate, their unique needs and challenges, and how they differ from those faced by other businesses.
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Targeting the relevant approach
The impact of policy interventions often depends on the businesses’ approach to working with the BOP. For example, companies that have already reached scale and financial sustainability – through their business models or business activities – can often replicate their existing model or activity into another region or country much more rapidly compared to initiatives that have yet to reach scale. Such companies are more likely to reach a larger number of women and men at the BOP than start-up organizations.
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Empowering a government champion
An advocate within the government is often critical to driving the agenda and building public awareness about inclusive business. This advocate – an influential individual, a small team, or a dedicated agency – is more effective when it can leverage an inter-agency, coordinated, and integrated approach with stakeholders in the inclusive business ecosystem.
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Developing a comprehensive and integrated policy approach
Governments must recognize how inclusive business policies align with and fit into national development plans, anti-poverty efforts, agency-level initiatives, and future plans for the implementation of the Sustainable Development Goals. National development plans and anti-poverty programs can further their principal goals by including policies to foster and facilitate inclusive business. Inclusive business can also be anchored in broader social and economic policy frameworks.
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Avoiding preferential treatment of individual companies
Inclusive business policies should be designed to support broad subsectors, activities or technologies, and should avoid focusing on individual firms. Government programs and support initiatives should be open and accessible to all companies based on open and clearly defined criteria.
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Engaging all relevant actors
A range of different actors can facilitate inclusive businesses. They include – in addition to the government – local financial institutions, development finance institutions, multilateral development banks, private investors, United Nations agencies, development partners, non-profit organizations, civil society, grassroots organizations, cooperatives, research institutions, universities, business intermediaries, and the media. Consistent with the G20 Framework on Inclusive Business, some actors work in multiple areas of the typology covering business models, business activities and social enterprises initiatives (International Finance Corporation, Asian Development Bank, Inter-American Development Bank, UNDP’s Istanbul International Center for Private Sector in Development, Business Call to Action, Inclusive Business Action Network, etc.). Some organizations target a broader agenda faced by global companies, including environmental and social issues and sustainable value chains (Shared Value Initiative, World Business Council for Sustainable Development, etc.). Still the greatest number of actors concentrate solely on social entrepreneurs and impact investment funds (Skoll World Forum on Social Entrepreneurship, Sankalp, Global Initiative on Impact Investment, Rockefeller Foundation, etc.).
How policy instruments are being used to enable and support inclusive business
A growing number of countries around the world are supporting their inclusive businesses through a variety of specific policy instruments. These efforts are driven by the governments’ desire to engage the private sector in order to accelerate the pace of addressing poverty, while creating opportunities to address social and environmental challenges. Government approaches typically focus on:
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Enabling inclusive businesses to enter and operate in low-income markets (i.e. by removing obstructive policies or making information on consumption patterns of the BOP more available)
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Assisting inclusive businesses with the integration of the low-income segment into their value chains (by encouraging companies to source from BOP producers)
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Empowering low-income communities to participate in inclusive business value chains (by building the BOP’s capacity and by providing the BOP with access to finance)
In 2015, the G20 Inclusive Business Framework identified a list of policy instruments available to governments to support inclusive business. These instruments were organized around the core challenges faced by inclusive businesses – rules and regulations, financing, information, and capacity Throughout 2016, the G20 initiative on inclusive business sought to understand better specific policy instruments by: examining design options, identifying common elements and good practices, exploring success factors and prerequisites for effective implementation, recognizing barriers and risks, and providing evidence of effectiveness and results. This effort considered challenge funds, insurance programs, development partnerships, legal forms of business, certification and accreditation, public procurement, and awareness raising initiatives.
The findings reveal extensive government efforts especially in the area of legal frameworks to enable social enterprises to operate more like corporate entities. What is lacking, however, are efforts targeting existing businesses. This applies to both local firms in developing countries as well as multinational corporations with subsidiaries or programs that target the BOP.
The research identified three potential pathways for governments to support inclusive business:
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Establishing and scaling up policies and programs designed specifically for inclusive business
Countries have adopted a range of policy instruments and programs specifically designed to enable inclusive business. At the sector level government programs may facilitate inclusive business by leveraging them to reach the BOP. For example, government-supported insurance schemes can create platforms through which companies can offer insurance services to low-income communities or can pay premiums for BOP customers. Governments can also provide risk-sharing mechanisms or fully or partially subsidized coverage for specific services.
Programs designed to support the growth of inclusive business at the firm level often take the form of a partnership. For example, development partnerships are agreements between public and private-sector entities to pursue a shared set of goals. Ideally, such partnerships are open to any company that meets a defined set of criteria and combine public sector outreach and resources with private sector entrepreneurialism and skills. In addition to the government entity and the lead private company, partners can include subnational governments, donors, business associations, and civil society organizations, among others. A government can increase the appeal of such partnerships by offering incentives such as favorable tax terms, co-financing, infrastructure access, and policy reforms.
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Reorienting existing initiatives to focus them on inclusive business
Many countries have programs to foster business growth, entrepreneurship, or small and medium-size enterprise development. While these programs are sometimes designed with broad objectives in mind, they can be tailored and modified to fit the needs of inclusive business. In some cases, refocusing a program requires rather straight-forward modifications. For instance, enterprise challenge funds or business plan competitions are common programs in many countries to foster entrepreneurship. Their design structure lends them to relatively easy adaptation for inclusive business. Enterprise funds can award grants or subsidies through a competitive process to private-sector organizations that submit solutions with an explicit public or social purpose. These funds can trigger new ideas and innovative solutions, or promote the scale-up of existing solutions. They may focus on one issue, sector, or country, or address a combination.
Priority lending initiatives targeting small and medium-size enterprises are another example of programs that can be adapted to an inclusive business agenda. For example, incorporating clearly defined criteria for inclusiveness in investment and lending can better direct capital toward those businesses that engage the BOP. Furthermore, the development of lending programs in previously underserved markets can support more inclusive growth.
In other cases, adjusting inclusive business policies may be more complex and require a more thorough analysis to determine their appropriateness. For example, some countries have designed procurement policies to allow preferential access to specific segments of the private sector, including small and medium-size enterprises as well as businesses representing disadvantaged groups. In these instances there are several commonly used preferential procurement strategies that could be applied to inclusive businesses. These include setasides that require a certain percentage of government contracts be awarded to inclusive business, bidprice discounts, preferential award criteria, and procurement based on whole cost accounting.
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Considering policies and programs initiated in other countries and adapting them domestically
Due to the nascent nature of inclusive business policies, it is often helpful for emerging market policymakers to look at the experience of other countries. Many advanced economies, for example, have designed initiatives to support businesses with a social mission or those that integrate disadvantaged groups into their value chains. The cooperative movement is another example in case.
For example, in Europe and North America new laws have been enacted to facilitate the creation of social enterprises that go beyond the traditional not-for-profit organizations. The names for this legal form varies by country, but their purpose is similar – establishing a stable conceptual definition that creates and enables a rationale for direct support, financial or otherwise. From the social enterprise’s perspective, a specific legal form can create a clear market differentiation, broad legal protection to directors and officers, differentiated shareholder rights, and greater access to capital than current not-for-profit approaches.
Adopting this concept in emerging economies would require policymakers to consider the context of where such reforms were first developed, where it can be replicated, and the particular approaches to inclusive businesses for which it would be most relevant – since to-date it has been primarily used for the creation of social enterprises.
Despite overall progress in designing and implementing inclusive business policies, the following are just a few of the many questions that require further research and analysis:
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What is the evidence regarding the effectiveness of current inclusive business policies?
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How do different inclusive business policy instruments interact to achieve greater effectiveness?
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What are the success factors for the policymaking process to take root, given that inclusive business policies often cut across established government departments and involve multiple stakeholders?
5. Coordinated support for inclusive business
The G20 can help drive the focus on inclusive business among their membership and can support policymakers in a clear and cohesive manner. They can play a key role in bringing inclusive businesses, governments, development finance institutions, United Nations agencies, and civil society together to promote inclusive business models, activities and social enterprises.
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Building awareness through clear and consistent messaging
Policymakers will be more effective in promoting inclusive business if they are able to convey the basic tenets of the concept to the public and to their colleagues. Country cases and policymaker workshops convened by the G20 Global Platform on Inclusive Business revealed the need to build the knowledge base around inclusive business among stakeholders. This is an effort that must be sustained over time in order to reinforce the message and ensure that the concept is fully understood. Bilateral, international, and member organizations can reinforce this effort, prevent confusion, and focus the discussion by delivering clear and consistent messaging. The G20’s Inclusive Business Framework offers a common definition and framework that other organizations have begun to adopt. Policymakers have also indicated that the typology of inclusive business approaches as laid out in the Framework has helped to build their understanding. At such an early stage of development, consistent messaging is critical, and all G20 members can help deliver a clear and consistent message that the private sector can and must play a role in combatting poverty by adopting an inclusive business approach.
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Encouraging action among members
Country cases show that the G7 (formerly G8) task force on social impact investment spurred members to create their own task forces, agree upon principles, and consider their local context. G20 members can take a similar role with respect to inclusive business, as recommendations from the G20 (and other member-based organizations) can drive countries to take action within their local context. Indeed, the G20 and its members must assume leadership on the issue going forward.
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Driving comprehensive analysis of the inclusive business ecosystem
Comprehensively supporting inclusive business requires consideration of all three approaches to inclusive business. Depending on the local context, certain inclusive business approaches may be further along than others in terms of policy support and awareness.
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Sharing knowledge and developing partnerships
All organizations are able to share knowledge on inclusive business policy and develop partnerships with policymakers. The Global Platform on Inclusive Business survey found that companies believe organizations like the G20 can play an important role in sharing information on BOP markets. There are many new entities vying for resources and a voice on the issue of using inclusive business to alleviate global poverty. The G20 can encourage and help them to share their experience and knowledge.
6. Increasing financing for inclusive business
While it is crucial to have customized and integrated approaches to supporting inclusive businesses, a common challenge for new ventures and across the life cycle of inclusive businesses relates to financing. Helping inclusive businesses meet their financing needs is central to any government effort or policy alteration in this space, and access to appropriate finance is consistently raised as an issue.
A one-size-fits-all financing policy is inadequate, as the different types of inclusive businesses require distinctly different approaches. As noted in Section 3, nearly 60 percent of business for whom the base of the pyramid is central to their strategy said policies that improve financing would be most helpful to them, while only about four in ten businesses taking one of the other two approaches to inclusive businesses had the same view. There is clearly a financing gap that needs to be bridged. In fact, many multinational corporations are able to initially self-fund pilot ventures into inclusive business activities, but some type of grant through challenge funds or feasibility study support can accelerate this process. By contrast, for developing country companies replicating or expanding an inclusive business model, access to long-term funding is limited and many rely on development finance institutions. Policymakers must keep these differences in mind when considering financing options.
The type of support provided will also depend on the lifecycle of the overall company, as well as the scale of the company’s specific inclusive business effort. For example, start-ups and social enterprise initiatives most often require venture capital, returnable capital, or grant funding because of the higher risk profile inherent to such enterprises that have not yet scaled. The Global Platform survey revealed that, of the inclusive businesses that find financing to be the biggest obstacles, two-thirds are those that have been working with the BOP for five years or less.
The Global Platform’s peer-learning events revealed that policymakers are exploring new methods of financing, including various forms of returnable capital, and that evaluating the long-term financial sustainability of the company is a major issue. Closer coordination between government efforts on inclusive business and development finance institutions could facilitate more effective outcomes. Areas of collaboration include:
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Reviewing financial sustainability of early-stage inclusive businesses
Designing appropriate selection criteria for public and private investors and reviewing applicants in ways that increase chances of financial sustainability is critical to securing financial support for inclusive businesses, especially social enterprises that need the most support at the start-up phase. Connecting with those who will likely be next-stage financiers – multilateral development banks, development finance institutions, commercial banks, and investment funds – early on in the process is beneficial and can address the hand-over issue and ease the company’s transition to the next stage of financing post-grant, a phase which often involves scaling a business for a much larger impact.
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Mobilizing additional resources for inclusive businesses
Donor-funded concessional financing can mitigate risk and enable development finance institutions to match it with market-rate financing for all three approaches to inclusive business. Development financing institutions’ ability to crowd-in funding from other investors can also enable them to mobilize capital from other development finance institutions and from additional sources. Global Platform research found that successful examples of inclusive business financing, especially early-stage businesses or activities, are often complemented by some form of technical assistance. Close coordination between financier and technical assistance providers could help to ensure that any advisory support is closely aligned with business needs and will help to accelerate scaling.
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Sharing information and collaboration case studies
Bridging the information gap is key. Policymakers indicated that it would be helpful to look at specific examples of successful collaborations between bilateral agencies and DFIs on inclusive business. They also suggested that many companies are unaware of the full range of financial tools available to them. Bringing together relevant, practical funding information for both companies and government agencies would be of value.
7. Way forward
Producing this report was possible given the G20’s convening power, member support, and contributions by international organizations to highlight policy insights on fostering inclusive business. These insights present a priority selection rather than a comprehensive assessment. As the global community works toward sustainable development and implementing the 2030 Agenda, continuing and expanding upon efforts to facilitate inclusive business can open up a wide range of possibilities. Specifically, the G20 encourages action in the following areas:
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Quick wins in financing
Access to finance for both inclusive businesses and for those at the base of the pyramid are key areas that warrant a priority focus. The G20 supports strengthened consideration of inclusive business as a strategic priority by development financing institutions, both multilateral and bilateral, including through scorecards and other relevant processes. The G20 also requests increased coordination and collaboration, specifically on definitions, data on financial flows, and results measurement.
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Driving the inclusive business ecosystem approach
Building on individual policy lessons, taking a comprehensive ecosystem approach allows governments to harness the synergies of interacting policy instruments while also addressing all stakeholders. The G20 can further develop collective and domestic action on policy, financing and reporting towards inclusive business ecosystems. It can build on the Global Platform on Inclusive Business to this end and promote good examples, including by launching an award.
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Measuring for 2030
Inclusive business has great potential to contribute to the Sustainable Development Goals and the 2030 Agenda processes being spearheaded by the United Nations. G20 supports a better understanding of inclusive business outcome and impact measurement for sustainable development, including reporting successes. This may also comprise harmonization of measurement methodologies, adequate third-party validation as well as integration of private sector contributions in national review process.
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Championing peer learning and action
Advancing inclusive business requires leadership. The G20 encourages member to identify inclusive business champions to coordinate inter-agency collaboration and to fully utilize the GPIB peer-to-peer learning mechanism. The platform can be a powerful tool if members and non-members actively contribute their experiences. The G20 supports its members and non-members to apply the G20 Inclusive Business Framework to their domestic contexts as relevant and in their overseas investments and development cooperation. The G20 also encourages additional research on policy and financing mechanisms, including on global value chains and specific sectors, in order to deepen their understanding on how to support inclusive business environments in their context.
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Why Africa should be keen on the Tripartite Free Trade Area
The words ‘Tripartite Free Trade Area’ (TFTA) were among the most commonly used phrases at the Global African Investment Summit, which closed yesterday, at the Kigali Convention Centre.
The tripartite region, launched last year in Egypt, aims at economically integrating Africa’s three major regional economic blocs – the Common Market for Eastern and Southern Africa (COMESA), the Southern African Development Community (SADC), and the East African Community (EAC).
The three economic blocs would create the largest trading bloc in Africa, comprising 26 countries, with about 620 million consumers and a combined GDP of almost $1.2 trillion.
So far, 17 countries have ratified membership to the region with the remaining nine expected to follow suit.
Experts say that realisation of the free trade area hold great potential on Africa’s development as it will promote intra-Africa trade and develop the African market.
The TFTA is expected to contribute to Africa’s development, experts citing the opportunity to open up a reliable market that spans across the continent to allow free movement of labour and services.
Rather than rely on negotiations with the West, promoters of the free trade area say that countries will be able to reduce the cost of doing business among them.
In an interview with The New Times at the sidelines of the summit, Sidiso Ngwenya, the secretary-general of COMESA, said the new bloc will have trade values worth more than $50 billion.
This, he said, will be a welcome boost in Intra-Africa trade, where he noted that most regions had significantly low levels of trade with African countries.
“For example, in COMESA, our trade from products being traded within the region stands at about $11 billion whereas products being imported to the same countries stand at about $ 90 billion. This shows that we need to change something,” he said.
Ngwenya said that to achieve sustainability the new bloc will promote three pillars; market integration, infrastructure and industrialisation.
The development comes at time African countries, including members of the East African Community, are seeking stronger trade ties with Western partners to increase their volumes of trade.
However, Ngwenya argues that rather than look for markets and trade partners outside the continent, the countries will find more value and better terms by ratifying and implementing the free trade area agreement.
The COMESA head said that the bloc will also boost the region’s competitiveness as countries will work more in a complementary nature as opposed to negative competition.
As a bloc, experts say, the region would easily attract the attention of international funding bodies to avail finances necessary for heavy infrastructure and energy projects.
Admassu Tadesse, the president and chief executive of PTA Bank, a Pan-African Bank, said implementation of the Tripartite Free Trade Area would help sustain the growth witnessed in a number of economies on the continent.
Tadesse said that a number of countries that feature in the bloc such as Rwanda, Uganda, Kenya, Ethiopia, have in recent times been listed among the most promising economies in the world.
“By working together, these countries’ economies will attract investments and partners as they have already shown commitment and growth potential,” he said.
In the negotiation process, insiders say that there is fear among countries that by being part of a larger bloc, their local industries would be stifled due to competition from imports.
However, Uganda’s President Yoweri Museveni moved to reassure countries that their local industries will not be stifled by opening up their market to fellow members of the proposed bloc.
He said that to protect their local industries, the bloc would adopt a common external tariff which will ensure that local industries in the various member countries remain competitive.
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African leaders gather in Nairobi to “seize the moment” and deliver major new investments for African agriculture
Heads of state and high-level officials from over 40 countries are among 1500 agriculture experts gathering in Nairobi, Kenya for the Sixth African Green Revolution Forum, where they have promised to “seize the moment” and deliver hundreds of millions of dollars in new investments for African farmers and agriculture businesses.
“There is unprecedented agreement here in Kenya and across Africa that big investments in agriculture are the key to food security and strong economic growth,” said H.E. Uhuru Kenyatta, President of the Republic of Kenya, who is hosting the Forum. “We need to capitalize on this consensus – particularly with drought exposing long-standing vulnerabilities in food production and crashing commodity prices demanding more sustainable economic strategies that agriculture clearly can provide.”
AGRF 2016’s official slogan is “Seize the Moment” – Securing Africa’s Rise through Agricultural Transformation. “Seize the Moment” is also the name of an ambitious Africa-wide agriculture campaign launched by the African Union Commission, the New Partnership for Africa’s Development (NEPAD), the African Development Bank (AfDB) and key NGOs and donor countries. There is hope that it will soon be backed by hundreds of millions of dollars in new investments from African governments, development partners, the private sector and financial institutions.
The “Seize the Moment” campaign is expected to bring a world-wide call to action from the United States Agency for International Development (USAID), energized by President Obama’s Global Food Security initiative—the largest development commitment from the administration and one that is aligned closely with the African Union’s agriculture agenda.
In addition, both the Rockefeller Foundation and the Bill & Melinda Gates Foundation are expected to endorse the campaign and continue their strong backing of efforts to boost production and income for smallholder farmers and local agriculture businesses. Ten years ago, funding from the two organizations launched the Nairobi-based Alliance for a Green Revolution in Africa (AGRA). Today, they continue to work closely with AGRA, which has developed an extensive network of partners in the public and private sector across 18 countries.
Meanwhile, following the lead of President Kenyatta, heads of state from Rwanda and Ghana are expected to highlight detailed, nationwide agriculture development strategies covering multi-year spending plans, policy reforms and accountability scorecards. In addition, the Kenya Commercial Bank (KCB) will outline efforts to give agriculture a higher profile in its loan portfolio and seek a similar commitment from other leading financial institutions.
“While much has been accomplished over the last decade, we need to work far more aggressively to tap the potential of agriculture to be a powerful engine of economic growth across Africa,” said Mr. Strive Masiyiwa, Founder and Executive Chairman of Econet Wireless who also chairs AGRA’s Board.
“Just as we have seen in Africa’s telecom revolution, I believe the private sector can become a force for social change by transforming African agriculture,” he added. “Business-focused investments in production, processing and marketing can ensure that the soaring demand for food products among Africa’s urban consumers delivers new economic opportunities for rural communities and African youth.”
A major highlight of the meeting will be the release of a landmark annual African Agriculture Status Report (AASR). Subtitled “Progress towards an Agriculture Transformation in Sub-Saharan Africa,” AASR 2016 offers a detailed analysis of a decade-long agriculture expansion effort that has been the most successful development initiative in African history. The report also offers a frank assessment of the challenges that lie ahead and recommends strategies for overcoming them.
Another groundbreaking moment at the AGRF will be the inaugural award of the newly-created Africa Food Prize. The accolade calls attention to individuals and institutions that are inspiring and driving agricultural innovation throughout Africa. The Africa Food Prize Committee is chaired by H.E. Olusegun Obasanjo, former President of Nigeria.
This year’s AGRF will feature many other heroes of African agriculture who are committed to mobilizing the investments and partnerships that can “seize the moment” for making Africa’s agriculture potential a reality.
“We believe Kenya is the appropriate venue for this historic gathering because farming and food production are the lifeblood of the Kenyan economy and we want to set an example that others can follow,” said Kenya’s Agriculture Cabinet Secretary Hon. Willy Bett. “We are committed to pushing through the policy and financial reforms that can make farming and other agriculture businesses an economically and environmentally sustainable way of life.”
Sending the hoe to the museum: Innovative lease finance for African agriculture
Sending the hoe to the museum and promoting sustainable agricultural mechanization has been key to revolutionizing Africa’s agricultural sector.
In a session moderated by Richard Jones, Chief of Party of the Scaling Seeds and Technologies Partnerships in Africa (SSTP), AGRA, we heard on Monday about the need for Africa to embrace mechanization as a key way to improve the efficiency and productivity of farming operations.
“Mechanization is a major factor contributing to the efficiency and productivity of all the other inputs used in crop production such as seeds, fertilizer, water, labor and time,” explained one panelist.
“The agricultural sector’s ability to feed an ever growing population and playing a competitive, significant role in international markets for agricultural products will remain a pipe dream if African agriculture remains dependent on primitive technologies like the hoe,” said Dr. Subrata Rana, Founder and CEO, EcoDev.
Mechanization in Africa is still at the early adoption stage, with a large majority of smallholder farmers still relying on rudimentary methods. One of the major challenges faced by these farmers is the lack of access to credit, with agriculture often being considered a risky business. For example, many smallholder farmers cannot afford the initial outlay of USD 200-500 needed for equipment to facilitate post-harvest management activities. As panelists noted, this ready market demand offers a great opportunity for lease finance organizations to step-in and fill the gap.
The demand for lease financing also includes smallholder farmer groups – self-help groups, cooperatives and small and media enterprises – that require higher value equipment. Entrepreneurs that provide services along the value chain can also be integral players in the adoption of mechanization and dissemination of technologies.
“When it comes to lease finance not every equipment is leasable and there is need to find optimal solutions that can generate a return to the investors,” explained Kinoti Kaburu, Start Up Technician & Regional Manager (EA), Insta-Pro international. Lease finance models, he added, need to factor in both return on investment and social impact.
David Resnik, COO, Innovare Advisors explained that for mechanization to be a success, there is a need to involve all stakeholders. “Implementation frameworks must invite other players to actively get involved in the process,” he noted. These players include donors, the private sector and farmer organizations, among others. For mechanization to achieve scale, public funding also has a vital role to play.
Other key components of a successful mechanization process include: identifying the right equipment, a working service system, training, risk management and security systems.
In “Seizing the Moment” to transform Africa’s agriculture, the good news is that there are role models to emulate. “Countries that have achieved significant economic growth and worked on resolving their food problems have also advanced in agricultural mechanization, while countries with stagnating economies and deeper poverty have lagged behind in areas such as mechanization,” said Dr. Richard Jones in his closing remarks.
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Global manufacturing growth expected to remain low in 2016 amid weakened financial support, says UNIDO report
World manufacturing growth is expected to remain low in 2016 due to weakened financial support for productive activities, according to a report released on 5 September 2016 by the United Nations Industrial Development Organization (UNIDO).
The report states that, with financial uncertainty still looming across Europe, foreign direct investment has not yet reached the 2007 pre-crisis level.
According to UNIDO, world manufacturing output is expected to increase by 2.8 per cent in 2016. The current trend indicates that, in contrast to recent years, there will be no breakout from the low-growth trap in 2016. Manufacturing production is likely to rise by 1.3 per cent in industrialized countries and by 4.7 per cent in developing economies.
By the end of 2016, the growth rate performance of China, the world’s largest manufacturer, is likely to further decline from last year’s 7.1 per cent to to 6.5 per cent this year. Similarly, downward growth rate trends are expected in Japan, Europe, and the United States.
The report contains expected annual growth rate estimates for 2016, as well as observed growth rates for the second quarter of this year.
According to UNIDO, lower industrial growth rates pose a challenge for the implementation of Sustainable Development Goal 9, which aims to significantly raise the share of manufacturing in the economies of developing countries.
World manufacturing output rose by 2.2 per cent in the second quarter compared to the same period in the previous year. Most of the growth was contributed by developing and emerging industrial economies where manufacturing output rose by 4.9 per cent. In industrialized countries growth was marginal at 0.2 per cent.
In Europe, the uncertainty following the Brexit affected the growth rate performance in manufacturing in the second quarter of 2016, below 1.0 per cent for the first time since 2013. Lower growth was also observed in the Russian Federation and the United States, where manufacturing output rose at the marginal rate of 1.0 per cent and 0.3 per cent respectively. In Japan, manufacturing output fell by 1.8 per cent.
Among Latin American economies, manufacturing output fell by 3.2 per cent in the second quarter, amid a continuing production decline in the region. Manufacturing output plunged by 6.7 per cent in Brazil, and by 4.2 per cent in Argentina.
Asian countries largely maintained higher growth rates. Manufacturing output rose by 5.6 per cent in Indonesia, 3.9 per cent in Malaysia and 13.5 per cent in Viet Nam. However, the growth figures showed a sudden 0.7 per cent drop in production in India.
Estimates from the limited available data showed that manufacturing output rose by 2.5 per cent in Africa. South Africa, the continent’s largest manufacturer, significantly improved its growth performance to 3.3 per cent in the second quarter. Higher growth rates of 8.3 per cent and 7.6 per cent were achieved in Cameron and Senegal.
The UNIDO report also presents growth estimates by manufacturing sectors. The production of tobacco fell for the second consecutive quarter, declining by 2.6 per cent. Developing economies maintained higher growth in the production of textiles, chemical products and fabricated metal products, while the growth performance of industrialized economies was higher in the pharmaceutical industry and in production of motor vehicles.
Findings by country group
Developing and emerging industrial economies
A slowdown in China and a downturn in Latin America have impacted the overall growth of manufacturing in developing and emerging industrial economies. In the second quarter of 2016, manufacturing production in China rose by 7.2 per cent over the same period of the previous year, which marked a modest slowdown compared to the 7.4 per cent expansion recorded in the previous quarter and represented one of the slowest growth rates since 2005, but not when compared with other economies of the world. Due to strong domestic demand, China’s manufacturing has proven resilient to external shocks. Compared to other economies, China has maintained relatively high growth rates under conditions of declining capital inflow and exports.
Latin American economies, on the other hand, were not as resilient and were negatively affected by the subdued global demand for commodities and falling oil prices. The manufacturing production in Latin America dropped by 3.2 per cent, mostly driven by a protracted recession in Brazil, where manufacturing output plunged by 6.7 per cent on a year-to-year basis. Outspread declines were recorded across almost all other larger Latin American manufacturers, namely Mexico, Argentina, Chile and Peru, which reported a decrease by 0.2 per cent, 4.2 per cent, 1.0 per cent and 8.5 per cent, respectively. The only exception among the major economies of the continent was Columbia, which showed persistent positive growth despite the extended manufacturing depression evident across Latin America.
Growth performance was much higher in Asian economies, where manufacturing output rose by 6.5 per cent in the second quarter of 2016. Viet Nam defended its position of one of the fastest growing Asian economies and maintained a two-digit growth rate in quarterly manufacturing output for the seventh time in a row. At present, though Viet Nam is experiencing the worst drought in the last three decades, its economy is benefitting from the manufacturing industry, which is primarily driven by export-oriented industries such as computers, electronics and optical products that have grown in importance over the last years. Manufacturing output in Indonesia, which recently entered the top-10 largest manufacturers worldwide, grew by 5.6 per cent in the second quarter of 2016. India’s manufacturing output, which achieved impressive growth rates in the last quarters, experienced a second slight decline in a row, this time by 0.7 per cent, but the prospects for India’s manufacturing are conclusive, since India is on the path to becoming a pivot for high-tech world manufacturing.
Estimates based on the limited available data indicate that manufacturing output in Africa has increased by 2.5 per cent. This respectable increase in growth is attributable to the region’s most industrialized economy – South Africa, whose manufacturing production was mainly driven by increasing output in refined petroleum products and chemical products. According to our estimates on growth rates, all developing African economies managed to retain a non-negative growth rate compared to the previous year.
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Uganda now banks on border markets to curb export losses
Uganda is planning to establish cross-border markets to cut trade losses resulting from instability in some of its neighbours.
Last year, the country’s export revenues fell by 4.6 per cent, from $686.6 million between March and June 2015 to $637.7 million between July and October 2015, according to figures from the Bank of Uganda.
As a result, Kampala has entered into negotiations with TradeMark East Africa and other agencies to build Elegu Market at the border with South Sudan; Lwakhakha market in Manafa district and another in Busia on the border with Kenya; and Cyanika and Katuna on the border with Rwanda.
The plan, government officials say, is partly in response to the crisis resulting from the outbreak of fighting in South Sudan, which forced Kampala to send in its military to evacuate its citizens from the country.
Other markets
There will be two other markets at Mpondwe in Kasese District and Ntoroko on the border with the Democratic Republic of Congo.
According to officials in the Ministry of Trade, Industry and Co-operatives, warehouses for small-scale manufacturers, stores for food items, slaughterhouses and silos will be built.
“We need the products near the markets so that our neighbours can buy at border points. This will help cut our losses,” said Silver Ojakol, Commissioner of External Trade.
Statistics from the Uganda Export Promotion Board show that last year, the regional market was Uganda’s top export destination, with $1 billion worth of exports shipped to the neighbouring countries.
The country’s exports
This means that 54 per cent of Uganda’s exports were consumed in the region. The country exports fish, maize, beans, sugar, bananas, sorghum and industrial products to Kenya, DR Congo, Rwanda, South Sudan and Tanzania.
The fighting that broke out in Juba in December 2013 caused a steady decrease in Uganda’s exports to the country, from $414 million in 2013 to $385 million in 2014 and $353 million in 2015.
South Sudan became Uganda’s leading export destination in 2008, following the signing of the Comprehensive Peace Agreement in 2005. In 2008, total exports peaked at $1.18 billion.
Uganda faced a similar scenario in 2008 when post-election violence erupted in Kenya. Part of the Northern Corridor was blocked, with a part of the regional railway line being destroyed.
Ugandan manufacturers reported a $43 million loss because of delays, destruction of goods and slowed production.
Similarly, conflicts in eastern DRC have disrupted the long-term economic prospects for Uganda.
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KRA steps up war on counterfeits with new mobile verification app
The Kenya Revenue Authority (KRA) has stepped up the war against counterfeits, introducing a smartphone application that can be used to verify genuine products.
Dealers in beer, wines and spirits and tobacco can now verify the authenticity of the products before buying them and ultimately selling them to the public.
Any trader who fails to verify the products and proceeds to sell them to the public risks prosecution and forfeiture of the goods.
In a public notice published in local dailies on Wednesday, the KRA informed manufacturers, importers, distributors, retailers, consumers, and the public that it had introduced the smartphone application for verifying excise stamps bearing QR (quick response) codes.
A QR code is the trademark for a type of matrix barcode or two-dimensional barcode, first designed for the automotive industry in Japan.
QR reader
A barcode is a machine-readable optical label that contains information about the item on which it is attached.
The KRA's new move targets suppliers and agencies handling products whose local market has been infiltrated by fake products.
“All persons in the supply chain handling wines, tobacco, spirits and beer are required to verify the products before receiving them into their premises or offering them for sale,” read the press notice.
The verification app can be downloaded from Google Playstore, says the notice.
The war on counterfeit products, especially wines and spirits, has been intensified especially after scores of people died or were blinded after consuming illicit alcoholic drinks, some of which bore the labels of established manufacturers.
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tralac’s Daily News Selection
The selection: Tuesday, 6 September 2016
G20 Leaders’ Communiqué: inclusive and interconnected development
We launch the G20 Initiative on Supporting Industrialization in Africa and LDCs to strengthen their inclusive growth and development potential through voluntary policy options including:
We will continue our work on addressing cross-border financial flows derived from illicit activities, including deliberate trade misinvoicing, which hampers the mobilization of domestic resources for development, and welcome the communication and coordination with the World Customs Organization for a study report in this regard following the Hangzhou Summit.
We acknowledge the important role of inclusive business in development, and welcome the establishment of the G20 Global Platform on Inclusive Business and its future actions. We welcome the G20 Inclusive Business Report for the 2016 Summit. [Full set of G20 China reports]
Industrialization in Africa and Least Developed Countries: boosting growth, creating jobs, promoting inclusiveness and sustainability (UNIDO)
The report was prepared [by UNIDO] at the request of the G20 Development Working Group. The report recommends (pdf) that the G20 group of leading economies promotes inclusive and sustainable structural transformation and industrialization in Africa and LDCs through various mechanisms, such as knowledge-sharing platforms for peer-to-peer learning; the sharing best of practices, policies, measures and guiding tools; and multi-stakeholder discussions. Other recommendations include:
Extract from Chapter 3 – Main challenges to industrialization: According to the most recent calculations available, local value added represented only about 9.5% of the total value added in intra-African trade in 2011. In other words, most of the value added in intraregional trade was imported rather than created locally. This matches the lack of exports of manufacturing intermediates in the region. Extract from Chapter 6: National policy measures and global collective actions – an agenda for action: Task international organizations to work with Africa and LDCs to assess the impact of trade facilitation reforms and trade preferences, including for non-traditional exports, and propose mechanisms that will make such preferences commercially meaningful to poor countries. Examine the impact of instruments such as duty drawbacks, tariff exemptions and VAT reimbursement schemes and see how these can be more effective. Discuss successful approaches to implement trade facilitation reforms through trade agreements between African countries. Facilitate knowledge sharing and peer learning on how best to leverage regional trade agreements for deepening regional integration and division of labour.
Africa Agriculture Status Report 2016: progress towards African agricultural transfor-mation (AGRA)
The 2016 Agriculture Status Report has as its main objective to: (i) highlight major trends in African agriculture, the drivers of those trends, and the emerging challenges that Africa’s food systems are facing in the 21st century; (ii) identify policies and programs that can support the movement of Africa’s farming systems from subsistence-oriented towards more commercialized farming systems that can raise productivity, increase incomes, generate employment and contribute to economic growth; (iii) identify areas that enable better targeting of investment resources to increase agriculture productivity; (iv) identify the necessary conditions, appropriate technologies, and institutions that can propel and catalyze African agricultural transformation; (v) examine the past and the present role of public and private sector investment in agriculture, and the success factors that can be scaled up to accelerate transformation; and (vi) explore how agricultural transformation can contribute to solving the reality of rural poverty, low productivity, food insecurity, malnutrition, unemployment, and lower income among the population in countries in sub-Saharan Africa. These objectives have been addressed in the 11 chapters of the Report.
Global Education Monitoring Report: Education for people and planet (UNESCO)
There is also an urgent need for education systems to impart higher skills aligned with the demands of growing economies, where many jobs are being automated and skill sets are changing fast. On current trends, by 2020, there will be 40 million too few workers with tertiary education relative to demand. The Report shows this change is vital: achieving universal upper secondary education by 2030 in low income countries would lift 60 million out of poverty by 2050. Inequality in education, interacting with wider disparities, heightens the risk of violence and conflict. Across 22 countries in sub-Saharan Africa, regions that have very low average education had a 50% chance of experiencing conflict within 21 years. The Report calls on governments to start taking inequalities in education seriously, tracking them by collecting information directly from families. [2016 GEM Report Background Papers]
The Global African Investment Summit: Kagame, Museveni push for more intra-Africa trade, investment
The two leaders, speaking at The Global African Investment Summit, said African countries need to break barriers and begin trading more amongst themselves if the continent must meet its development aspiration and live up to the “Africa Rising” adage. Both leaders decried slow implementation of development projects and bureaucratic tendencies which discourage foreign direct investments. “Progress in any endeavour is about valuing time very highly and using it well. We know integration is profoundly in Africa’s interest. What remains is to be doing what is necessary to make it reality,” President Kagame said. “The slow pace of implementation is caused by failing to appreciate that speed is a driver of wealth creation. It is not too much to say that the habit of tolerating endless delay is one of the major causes of poverty."
Economic competition delaying EAC integration - Kenyan MPs (Daily Nation)
Members of the National Assembly committee on regional integration said some countries in the region are at a “lower production level” than others. The committee’s vice-chairman, Christopher Nakuleu, said EAC member states need to address the issue of the economic status of the countries to speed up integration. “Before the integration was introduced, countries were operating on different production levels. For instance, the GDP of Burundi is 11 times less than [that of] Kenya. This disparity poses a major challenge,” Mr Nakuleu said. They observed that past perceptions that led to the collapse of the EAC in 1977 have also contributed to lack of commitment to the integration among some member states.
Marcelo Giugale: Can services drive Africa’s development? (Huffington Post)
All this has, of course, a not-so-rosy side. Exporting services sometimes means exporting your best and most dynamic people—those who you need to build your country. Yes, they send remittances back home. But the “brain-drain” is large and painful. By some calculations, one quarter of doctors trained in Africa eventually migrate to developed countries. Something similar probably happens to nurses, architects, and academics. But blocking their way out with legislation and bureaucracy is a self-defeating proposition - it just pushes migrants underground and leaves them unprotected abroad. So, with all its pros and cons, is trade in services the future engine of Africa’s development? Probably not the engine, but one of them, and one that can power up others—agriculture, industry, and natural-resource extraction will do better if cross-border services do better.
Rick Rowden: ‘Tanzania, Nigeria and the EU: free trade discord' (This is Africa)
The main reason cited by Tanzanian and Nigerian officials for rejecting the EPAs – that they would block industrialisation – are consistent with these historical lessons. Not only do officials worry that the EPA’s proposed tariff reductions would pose a drain on vital revenues needed for annual budgets, but both countries are concerned that dropping tariffs would destroy local industries – a view supported by research by think tanks such as the Wilson Centre. Tanzania also points to a rule in the proposed EPA that would outlaw its use of export taxes on raw materials. This would deny them a standard industrial policy that was used by all of the rich countries to keep raw materials at home and available for use by domestic manufacturers. For example, Tanzania banned exports of mineral sands from gold mining on August 1. This is permitted under WTO rules, but would not be allowed under the EPA.
Namibia: A revised outlook is not a downgrade – Schlettwein (New Era)
Said Schlettwein: “One of the major factors in this ratings opinion was the elevated level of public deficit to GDP observed in the 2015/16 financial year. This was chiefly the result of actual government revenue coming in below its target. I agree with Fitch when they identify ‘a secular decline in SACU revenues’ as one of the key challenges to Namibia’s public finances. SACU revenues have long constituted a large part of government revenue – around 30% in recent years. Many are estimating that the South African economy is bordering on a recession and it is an unavoidable reality that a weaker South Africa means weaker government revenue in Namibia.” He added that government revenue growth has been constrained by persistently low global commodity prices (particularly in the diamond and uranium industries) and spillovers from the slowing Angolan economy, which curtails consumer demand in Namibia. “In this more challenging environment, one simply cannot expect to see the strong revenue growth of the 2012-2014 period repeated in the coming few years,” Schlettwein cautioned. [Presidency responds to negative Fitch rating]
Namibia's exports need to grow 67% for country to become a net exporter (New Era)
Frans Uusiku from Simonis Storm Securities noted that it is clear that the cost of Namibian imposts is more sensitive to exchange rate fluctuation than the export revenue: 0.84 for imports and 0.79 for exports. He says this is partly because the country imports mostly soft commodities (e.g. food), while its exports are mainly dominated by hard commodities (e.g. industrial inputs). Namibia’s export profile is highly characterised by hard commodities, which are traded in US Dollars. “This makes the weaker ZAR more favourable for Namibia’s export sector and also for rebalancing the current account. Therefore, if we consider the 2015 import and export levels (N$ 97.2bn and N$58.2bn, respectively) as a benchmark, the ideal exchange rate that would warrant a positive trade balance should be at least 1.7 times the prevailing exchange rate (R14.07/USD). This would bring it to R23.91/USD,” he explained.
How Rwanda can achieve flower exports target (New Era)
The Rwamagana District based flower park project plans to export flowers by the end of the year. Emmanuel Hategeka, the permanent secretary at the Ministry of Trade and Industry, said the country is counting on this particular project to double exports to global markets including the European Union and other destinations worldwide. This, according Hategeka, will help keep the export sector competitive despite a fall in global commodity prices which has affected specifically Rwanda’s mining industry. The idea is to be able to increase flower production to at least 44,000 tonnes per annum that can generate export receipts of up to $140million by 2020
South Africa: GDP, 2nd Quarter 2016 (pdf, Stats SA)
Exports and imports of goods and services: In the second quarter net exports of R5bn were reported. Exports of goods and services increased by 18,1%. Exports of precious metals and transport equipment were largely responsible for the increase. Imports of goods and services decreased by 5,1%. Imports of machinery and electrical equipment were largely responsible for the decrease.
South Africa: Politicians should do rand crash course (Business Day)
The Rand is one of the most highly traded currencies in the world’s $4-trillion-a-day foreign exchange market. John Cairns, a currency strategist at Rand Merchant Bank, estimates that average daily onshore and offshore trade in the Rand is in the region of $50bn. Contrast that to the position of SA’s gross gold and foreign exchange reserves at the end of March 2016: in comparison they were a relatively paltry $47bn. In other words, the country’s entire pot of reserves is less than the daily trade in its currency.
A selection of G20 articles, reviews:
Olusegun Obasanjo: Africa and the G20’s moment of truth (Project Syndicate)
Robert Kappel: The G20 summit - 'a disappointment for Africa' (DW)
Developing states need greater access to global markets, Jacob Zuma tells G20 (Business Day)
President Xi Jinping: remarks at closing ceremony
Narendra Modi takes black money fight to G20 (Livemint)
Bill Gates: We are confident about the role of China in driving global development
G20 wraps with world leaders agreeing to use trade to boost global economy (CBC News)
Lagarde urges action to deliver on G20’s Hangzhou commitments (IMF)
Calling for G20 support, Ban stresses importance of financing tools for 2030 Goals (UN)
Simon Evenett, Johannes Fritz: Investment and protectionism: a pre-G20 summit briefing (Vox)
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Hangzhou Communiqué: G20 Summit concludes with historic consensus on world growth
The 11th summit of the Group of 20 (G20) major economies concluded in Hangzhou on Monday, 5 September 2016, reaching extensive consensus on pursuing innovative, invigorated, interconnected and inclusive world economic growth.
“Held at a critical time for world economic growth and the transformation of the G20, the Hangzhou summit attracted wide attention from the whole world and carried high expectations,” Chinese President Xi Jinping said at a press conference after the summit’s conclusion.
From Sunday to Monday, leaders of G20 members, guest countries and international organizations exchanged views on topics including more effective global economic and financial governance, robust international trade and investment, and inclusive and interconnected development.
They also discussed prominent issues affecting the global economy, including climate change, refugee, anti-terrorism financing and public health.
Charting a new course
World economic recovery remains weak this year. The World Bank in June cut its 2016 global growth forecast to 2.4 percent from 2.9 percent projected in January, partly due to sluggish growth in advanced economies, stubbornly low commodity prices and weak global trade.
The forecast is much lower than a year-on-year growth of 6.7 percent in the first half of 2016 in China, in line with the government’s target to keep its annual growth between 6.5 percent and 7 percent this year.
The world has been hoping for Chinese wisdom and prescription to cope with common challenges after the country took over the G20 presidency.
Xi said in a closing speech that leaders attending the summit decided to point out the way and set the course for the world economy.
“We will continue to reinforce macro-policy dialogue and coordination, work in the spirit of partnership to promote mutual help and win-win cooperation, and focus our minds and energy to pursue strong, sustainable, balanced and inclusive growth,” Xi said.
A G20 Leaders’ Communique of the Hangzhou Summit was adopted to set out the direction, targets and steps of G20 cooperation and depict the blueprint for future world economy.
A mix of effective tools, including fiscal, monetary and structural ones, must be implemented to buffer against short-term risks and unleash medium- to long-term potential, Xi said.
“This will send a strong signal of G20’s commitment to promoting global growth, and help shore up market confidence and ensure stability of global financial markets,” Xi said.
Blueprint on innovative growth
“We are determined to break a new path for growth to inject new dynamism into the world economy,” Xi said.
Past realities teach us that merely relying on fiscal and monetary policies does not work for the world economy, Xi said, adding that the world should pursue innovation-driven economy and create a new round of growth and prosperity.
The leaders unanimously adopted the G20 Blueprint on Innovative Growth, which reflects their desire to find the right path toward sustainable and healthy growth.
The G20 members will capitalize on the new opportunities brought about by innovation, new industrial revolution, digital economy and other new factors and business types, and make a series of action plans, he said.
They are also going to encourage innovation in various domains and ensure that the fruits of innovation are shared, Xi said.
“The blueprint provides us with the consensus, action plan and the overall framework to open up a new path for global growth and increase medium- to long-term potential of the world economy,” he said.
Better governance, inclusive growth
The leaders were also determined to improve global economic and financial governance to enhance the resilience of the world economy, and to revitalize international trade and investment as the key engines of growth and build an open world economy, Xi said.
They agreed to advance the quota and governance reform of international financial institutions, broaden the use of Special Drawing Rights, strengthen the global financial safety net and make the international monetary system more stable and resilient.
The leaders agreed to deepen cooperation on financial inclusion, green finance and climate funds, and formulated an action plan on energy access, renewable energy and energy efficiency, Xi said.
They will also enhance international tax cooperation, and join efforts of anti-corruption to deprive all corrupt persons of any safe haven in G20 countries and beyond, he said.
G20 members reiterated their stance to oppose trade protectionism and support multilateral trading mechanisms in pursuit of trade growth, and formulated guiding principles for investment policymaking to facilitate investment around the world.
Consensus was also made to promote inclusive and interconnected development, so that G20 cooperation will deliver benefits to the whole world, according to Xi.
For the first time, the summit put development at the center of global macro policy framework and made a groundbreaking action plan implementing the 2030 Agenda for Sustainable Development, he added.
“The development of G20 has a bearing on the immediate interests of all its members and the future of world economy. Only when the mechanism responds to changes and advances with the times can it retain its vitality,” Xi said.
G20 Leaders’ Communiqué
Hangzhou Summit, 4-5 September 2016
1. We, the Leaders of the G20, met in Hangzhou, China on 4-5 September 2016.
2. We met at a time when the global economic recovery is progressing, resilience is improved in some economies and new sources for growth are emerging. But growth is still weaker than desirable. Downside risks remain due to potential volatility in the financial markets, fluctuations of commodity prices, sluggish trade and investment, and slow productivity and employment growth in some countries. Challenges originating from geopolitical developments, increased refugee flows as well as terrorism and conflicts also complicate the global economic outlook.
3. We also met at a time of continued shifts and profound transformations in the configuration of the global economic landscape and dynamics for growth. With these transformations come challenges and uncertainties as well as opportunities. The choices we make together will determine the effectiveness of our response to the challenges of today and help to shape the world economy of the future.
4. We believe that closer partnership and joint action by G20 members will boost confidence in, foster driving forces for and intensify cooperation on global economic growth, contributing to shared prosperity and better well-being of the world.
5. We are determined to foster an innovative, invigorated, interconnected and inclusive world economy to usher in a new era of global growth and sustainable development, taking into account the 2030 Agenda for Sustainable Development, the Addis Ababa Action Agenda and the Paris Agreement.
6. In this context, we, the G20, as the premier forum for international economic cooperation, forge a comprehensive and integrated narrative for strong, sustainable, balanced and inclusive growth, and thereby adopt the attached package of policies and actions – the Hangzhou Consensus – based on the following:
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Vision. We will strengthen the G20 growth agenda to catalyze new drivers of growth, open up new horizons for development, lead the way in transforming our economies in a more innovative and sustainable manner and better reflect shared interests of both present and coming generations.
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Integration. We will pursue innovative growth concepts and policies by forging synergy among fiscal, monetary and structural policies, enhancing coherence between economic, labor, employment and social policies as well as combining demand management with supply side reforms, short-term with mid- to long-term policies, economic growth with social development and environmental protection.
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Openness. We will work harder to build an open world economy, reject protectionism, promote global trade and investment, including through further strengthening the multilateral trading system, and ensure broad-based opportunities through and public support for expanded growth in a globalized economy.
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Inclusiveness. We will work to ensure that our economic growth serves the needs of everyone and benefits all countries and all people including in particular women, youth and disadvantaged groups, generating more quality jobs, addressing inequalities and eradicating poverty so that no one is left behind.
Strengthening Policy Coordination
7. Our growth must be shored up by well-designed and coordinated policies. We are determined to use all policy tools – monetary, fiscal and structural – individually and collectively to achieve our goal of strong, sustainable, balanced and inclusive growth. Monetary policy will continue to support economic activity and ensure price stability, consistent with central banks’ mandates, but monetary policy alone cannot lead to balanced growth. Underscoring the essential role of structural reforms, we emphasize that our fiscal strategies are equally important to supporting our common growth objectives. We are using fiscal policy flexibly and making tax policy and public expenditure more growth-friendly, including by prioritizing high-quality investment, while enhancing resilience and ensuring debt as a share of GDP is on a sustainable path. Furthermore, we will continue to explore policy options, tailored to country circumstances, that the G20 countries may undertake as necessary to support growth and respond to potential risks including balance sheet vulnerability. We reiterate that excess volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability. Our relevant authorities will consult closely on exchange markets. We reaffirm our previous exchange rate commitments, including that we will refrain from competitive devaluations and we will not target our exchange rates for competitive purposes. We will carefully calibrate and clearly communicate our macroeconomic and structural policy actions to reduce policy uncertainty, minimize negative spillovers and promote transparency.
8. We are making further progress towards the implementation of our growth strategies, but much more needs to be done. Swift and full implementation of the growth strategies remains key to supporting economic growth and the collective growth ambition set by the Brisbane Summit, and we are prioritizing our implementation efforts. In the light of this, we launch the Hangzhou Action Plan and have updated our growth strategies, including new and adjusted macroeconomic and structural policy measures that can provide mutually-supportive benefits to growth. We will also strive to reduce excessive imbalances, promote greater inclusiveness and reduce inequality in our pursuit of economic growth.
Breaking a New Path for Growth
9. Our growth, to be dynamic and create more jobs, must be powered by new driving forces. While reaffirming the importance of addressing shortfalls in global demand to support short-term growth, we believe it is also imperative to address supply side constraints so as to raise productivity sustainably, expand the frontier of production and unleash mid- to long-term growth potential.
10. We recognize that in the long run, innovation is a key driver of growth for both individual countries and the global economy as a whole. We are committed to tackling one of the root causes of weak growth by taking innovation as a key element of our effort to identify new growth engines for individual countries and the world economy, which will also contribute to creating new and better jobs, building a cleaner environment, increasing productivity, addressing global challenges, improving people’s lives and building dynamic, cooperative and inclusive innovation ecosystems. We thus endorse the G20 Blueprint on Innovative Growth as a new agenda encompassing policies and measures in and across the areas of innovation, the new industrial revolution and the digital economy. In this context, we recognize the importance of structural reforms. We will act on the recommendations of the Blueprint in accordance with our national circumstances and in line with our vision for leadership, partnership, openness, inclusiveness, creativity, synergy and flexibility.
11. We commit to important cross-cutting actions related to multi-dimensional partnerships, supporting developing countries and improving skills and human capital. We will set up a G20 Task Force supported by the OECD and other relevant international organizations to take forward the G20 agenda on innovation, new industrial revolution and digital economy, subject to the priorities of the respective future G20 presidencies, ensuring continuity and consistency with the results so far, and promoting synergies with other G20 workstreams.
12. To achieve innovation-driven growth and the creation of innovative ecosystems, we support dialogue and cooperation on innovation, which covers a wide range of domains with science and technology innovation at its core. We deliver the G20 2016 Innovation Action Plan. We commit to pursue pro-innovation strategies and policies, support investment in science, technology and innovation (STI), and support skills training for STI – including support for the entry of more women into these fields – and mobility of STI human resources. We support effort to promote voluntary knowledge diffusion and technology transfer on mutually agreed terms and conditions. Consistent with this approach, we support appropriate efforts to promote open science and facilitate appropriate access to publicly funded research results on findable, accessible, interoperable and reusable (FAIR) principles. In furtherance of the above, we emphasize the importance of open trade and investment regimes to facilitate innovation through intellectual property rights (IPR) protection, and improving public communication in science and technology. We are committed to foster exchange of knowledge and experience by supporting an online G20 Community of Practice within the existing Innovation Policy Platform and the release of the 2016 G20 Innovation Report.
13. To seize the opportunity that the new industrial revolution (NIR) presents for industry, particularly manufacturing and related services, we deliver the G20 New Industrial Revolution Action Plan. We commit to strengthen communication, cooperation and relevant research on the NIR, facilitate small and medium-sized enterprises (SMEs) to leverage benefits from the NIR, address employment and workforce skill challenges, encourage more cooperation on standards, adequate and effective IPR protection in line with existing multilateral treaties to which they are parties, new industrial infrastructure, and support industrialization, as committed in the action plan. We also support industrialization in developing countries, especially those in Africa and Least Developed Countries (LDCs). We are committed to supporting our workforces throughout this transition and to ensuring that the benefits of the NIR extend to all, including women, youth and disadvantaged groups. We call for cooperation to maximize the benefits and mitigate the negative impact of the expected technological and industrial changes. In all these initiatives, the G20 will take into consideration the different opportunities and challenges for developing and developed countries.
14. To unleash the potential of digital economy, we deliver the G20 Digital Economy Development and Cooperation Initiative, which builds on our work begun in Antalya. We aim to foster favorable conditions for its development and to address digital divide, including through expanded and better and affordable broadband access, flow of information for economic growth, trust and security, while ensuring respect for privacy and personal data protection, investment in the ICT sector, entrepreneurship, digital transformation, e-commerce cooperation, enhanced digital inclusion and development of micro, small and medium-sized enterprises (MSMEs). We reaffirm paragraph 26 in the Antalya Communique, commit to offer policy support for an open and secure environment and recognize the key role of adequate and effective IPR protection and enforcement to the development of the digital economy. We welcome the efforts made by the OECD, IMF, national and other international organizations on the measurement of the digital economy, and recognize that further relevant research and exchange are needed.
15. We reiterate the essential role of structural reforms in boosting productivity and potential output, as well as promoting innovative growth in G20 countries. We deliver the Enhanced Structural Reform Agenda, noting that the choice and design of structural reforms are consistent with countries’ specific economic conditions. We endorse the nine priority areas of structural reforms and a set of guiding principles identified in the Agenda to provide high-level and useful guidance to members, while allowing them to account for their specific national circumstances. We also support the quantitative framework consisting of a set of indicators, which will be improved over time, to help monitor and assess our efforts and progress with structural reforms and challenges. We are putting in place an integrated strategy for growth with short, medium and long-term measures. We will ensure that the Enhanced Structural Reform Agenda and the relevant elements of the Blueprint on Innovative Growth are well articulated.
More Effective and Efficient Global Economic and Financial Governance
16. Our growth, to be resilient, must be underpinned by effective and efficient global economic and financial architecture. We will continue our work in this regard.
17. We endorse the G20 Agenda Towards A More Stable and Resilient International Financial Architecture. We will continue to improve the analysis and monitoring of capital flows and management of risks stemming from excessive capital flow volatility. We look forward to the IMF’s review of country experiences and emerging issues in handling capital flows by year-end. We note the ongoing work on the review of the OECD Code of Liberalization of Capital Movements. We support work to further strengthen the Global Financial Safety Net (GFSN), with a strong, quota-based and adequately resourced IMF at its center, equipped with a more effective toolkit, and with more effective cooperation between the IMF and regional financing arrangements (RFAs), respecting their mandates. In this respect, we welcome the upcoming CMIM-IMF joint test run. We support maintaining access to bilateral and multilateral borrowing agreements between members and the IMF, in line with the objective of preserving the IMF’s current lending capacity, and call for broad participation of the IMF membership, including through new agreements. We welcome the entry into effect of the 2010 IMF quota and governance reform and are working towards the completion of the 15th General Review of Quotas, including a new quota formula, by the 2017 Annual Meetings. We reaffirm that any realignment under the 15th review in quota shares is expected to result in increased shares for dynamic economies in line with their relative positions in the world economy, and hence likely in the share of emerging market and developing countries as a whole. We are committed to protecting the voice and representation of the poorest members. We support the World Bank Group to implement its shareholding review according to the agreed roadmap, timeframe and principles, with the objective of achieving equitable voting power over time. We underline the importance of promoting sound and sustainable financing practices and will continue to improve debt restructuring processes. We support the continued effort to incorporate the enhanced contractual clauses into sovereign bonds. We support the Paris Club’s discussion of a range of sovereign debt issues, and the ongoing work of the Paris Club, as the principal international forum for restructuring official bilateral debt, towards the broader inclusion of emerging creditors. We welcome the admission of the Republic of Korea and the decision of Brazil to join the Paris Club. We welcome China’s continued regular participation in Paris Club meetings and intention to play a more constructive role, including further discussions on potential membership. Following the IMF’s decision, we welcome the inclusion of the RMB into the Special Drawing Right (SDR) currency basket on October 1st. We support the ongoing examination of the broader use of the SDR, such as broader reporting in the SDR and the issuance of SDR-denominated bonds, as a way to enhance resilience. In this context, we take note of the recent issuance of SDR bonds by the World Bank in China’s interbank market. We welcome further work by the international organizations to support the development of local currency bond markets, including intensifying efforts to support low-income countries.
18. Building an open and resilient financial system is crucial to supporting sustainable growth and development. To this end, we remain committed to finalizing remaining critical elements of the regulatory framework and to the timely, full and consistent implementation of the agreed financial sector reform agenda, including Basel III and the total-loss-absorbing-capacity (TLAC) standard as well as effective cross-border resolution regimes. We reiterate our support for the work by the Basel Committee on Banking Supervision (BCBS) to finalize the Basel III framework by the end of 2016, without further significantly increasing overall capital requirements across the banking sector, while promoting a level playing field. We welcome the second annual report of the Financial Stability Board (FSB) on implementation and effects of reforms, and will continue to enhance the monitoring of implementation and effects of reforms to ensure their consistency with our overall objectives, including by addressing any material unintended consequences. We will continue to address the issue of systemic risk within the insurance sector. We welcome the work towards the development of an Insurance Capital Standard (ICS) for internationally active insurers. We are committed to full and timely implementation of the agreed over-the-counter (OTC) derivatives reform agenda, and we will remove legal and regulatory barriers to the reporting of OTC derivatives to trade repositories and to authorities’ appropriate access to data. We encourage members to close the gap in the implementation of the Principles for Financial Market Infrastructures and welcome the reports by the Committee on Payments and Market Infrastructures, International Organization of Securities Commissions and FSB on enhancing central counterparty resilience, recovery planning and resolvability. Recognizing the importance of effective macroprudential policies in limiting systemic risks, we welcome the joint work by the IMF, FSB and Bank for International Settlements (BIS) to take stock of international experiences with macroprudential frameworks and tools and to help promote effective macroprudential policies. We welcome the FSB consultation on proposed policy recommendations to address structural vulnerabilities from asset management activities. We will continue to closely monitor, and if necessary, address emerging risks and vulnerabilities in the financial system, including those associated with shadow banking, asset management and other market-based finance. We will continue to address, through the FSB-coordinated action plan, the decline in correspondent banking services so as to support remittances, financial inclusion, trade and openness. We look forward to further efforts to clarify regulatory expectations, as appropriate, including through the review in October by the Financial Action Task Force (FATF) of the guidance on correspondent banking. We call on G20 members, the IMF and WBG to intensify their support for domestic capacity building to help countries improve their compliance with global anti-money laundering and countering the financing of terrorism (AML/CFT) and prudential standards. We endorse the G20 High-level Principles for Digital Financial Inclusion, the updated version of the G20 Financial Inclusion Indicators and the Implementation Framework of the G20 Action Plan on SME Financing. We encourage countries to consider these principles in devising their broader financial inclusion plans, particularly in the area of digital financial inclusion, and to take concrete actions to accelerate progress on all people’s access to finance.
19. We will continue our support for international tax cooperation to achieve a globally fair and modern international tax system and to foster growth, including advancing on-going cooperation on base erosion and profits shifting (BEPS), exchange of tax information, tax capacity-building of developing countries and tax policies to promote growth and tax certainty. We welcome the establishment of the G20/OECD Inclusive Framework on BEPS, and its first meeting in Kyoto. We support a timely, consistent and widespread implementation of the BEPS package and call upon all relevant and interested countries and jurisdictions that have not yet committed to the BEPS package to do so and join the framework on an equal footing. We also welcome the progress made on effective and widespread implementation of the internationally agreed standards on tax transparency and reiterate our call on all relevant countries including all financial centers and jurisdictions, which have not yet done so to commit without delay to implementing the standard of automatic exchange of information by 2018 at the latest and to sign and ratify the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. We endorse the proposals made by the OECD working with G20 members on the objective criteria to identify non-cooperative jurisdictions with respect to tax transparency. We ask the OECD to report back to the finance ministers and central bank governors by June 2017 on the progress made by jurisdictions on tax transparency, and on how the Global Forum will manage the country review process in response to supplementary review requests of countries, with a view for the OECD to prepare a list by the July 2017 G20 Leaders’ Summit of those jurisdictions that have not yet sufficiently progressed toward a satisfactory level of implementation of the agreed international standards on tax transparency. Defensive measures will be considered against listed jurisdictions. We encourage countries and international organizations to assist developing economies in building their tax capacity and acknowledge the establishment of the new Platform for Collaboration on Taxation by the IMF, OECD, UN and WBG. We support the principles of the Addis Tax Initiative. We recognize the significant negative impact of illicit financial flows on our economies and we will advance the work of the G20 on this theme. We emphasize the effectiveness of tax policy tools in supply-side structural reform for promoting innovation-driven, inclusive growth, as well as the benefits of tax certainty to promote investment and trade and ask the OECD and IMF to continue working on the issues of pro-growth tax policies and tax certainty. In this connection, China would make its own contribution by establishing an international tax policy research center for international tax policy design and research.
20. Financial transparency and effective implementation of the standards on transparency by all, in particular with regard to the beneficial ownership of legal persons and legal arrangements, is vital to protecting the integrity of the international financial system, and to preventing misuse of these entities and arrangements for corruption, tax evasion, terrorist financing and money laundering. We call on the FATF and the Global Forum to make initial proposals by the Finance Ministers and Central Bank Governors Meeting in October on ways to improve the implementation of the international standards on transparency, including on the availability of beneficial ownership information of legal persons and legal arrangements, and its international exchange.
21. We recognize that, in order to support environmentally sustainable growth globally, it is necessary to scale up green financing. The development of green finance faces a number of challenges, including, among others, difficulties in internalizing environmental externalities, maturity mismatch, lack of clarity in green definitions, information asymmetry and inadequate analytical capacity, but many of these challenges can be addressed by options developed in collaboration with the private sector. We welcome the G20 Green Finance Synthesis Report submitted by the Green Finance Study Group (GFSG) and the voluntary options developed by the GFSG to enhance the ability of the financial system to mobilize private capital for green investment. We believe efforts could be made to provide clear strategic policy signals and frameworks, promote voluntary principles for green finance, expand learning networks for capacity building, support the development of local green bond markets, promote international collaboration to facilitate cross-border investment in green bonds, encourage and facilitate knowledge sharing on environmental and financial risks, and improve the measurement of green finance activities and their impacts.
22. Recognizing the detrimental effects of corruption and illicit finance flows on equitable allocation of public resources, sustainable economic growth, the integrity of the global financial system and the rule of law, we will reinforce the G20’s efforts to enhance international cooperation against corruption, while fully respecting international law, human rights and the rule of law as well as the sovereignty of each country. We endorse the G20 High Level Principles on Cooperation on Persons Sought for Corruption and Asset Recovery and welcome Chinese initiative to establish in China a Research Center on International Cooperation Regarding Persons Sought for Corruption and Asset Recovery in G20 Member States, which will be operated in line with international norms. We commit to continue the G20 Denial of Entry Experts Network. Consistent with our national legal systems, we will work on cross-border cooperation and information sharing between law enforcement and anti-corruption agencies and judicial authorities. We call for ratification by all the G20 members of the United Nations Convention Against Corruption and welcome the launch of the second cycle of its review mechanism. We will endeavor to apply effectively the extradition, mutual legal assistance and asset recovery provisions of the above Convention and other applicable international conventions. We endorse the 2017-2018 G20 Anti-Corruption Action Plan to improve public and private sector transparency and integrity, implementing our stance of zero tolerance against corruption, zero loopholes in our institutions and zero barriers in our actions. We ask the Anti-Corruption Working Group to develop an implementation plan before the end of 2016 as a flexible framework to carry this work forward with renewed high-level attention and urgency. We also welcome outcomes of the London Anti-Corruption Summit in May 2016 and the OECD Ministerial Meeting in March 2016.
23. In line with the G20 Principles on Energy Collaboration, we reaffirm our commitment to building well-functioning, open, competitive, efficient, stable and transparent energy markets, fostering more effective and inclusive global energy architecture to better reflect the changing realities of the world’s energy landscape, and shaping an affordable, reliable, sustainable and low greenhouse gas (GHG) emissions energy future while utilizing energy sources and technologies. We stress that continued investment in energy projects and better regional interconnection, particularly in sustainable energy projects, remains critically important to ensuring future energy security and preventing economically destabilizing price spikes. We endeavor to work with Sub-Saharan and Asia-Pacific countries to improve universal access to affordable, reliable, clean, sustainable and modern energy services, particularly by addressing barriers to electricity access. We encourage members to significantly improve energy efficiency based on the specific needs and national circumstances of each member and promote energy conservation through appropriate lifestyle changes. We will explore innovative collaborative arrangements for international cooperation on energy efficiency. We endorse the G20 Voluntary Collaboration Action Plan on Energy Access, the G20 Voluntary Action Plan on Renewable Energy and the G20 Energy Efficiency Leading Programme issued by the G20 energy ministers and ask them to meet regularly to follow up on the implementation of these plans.
24. We reaffirm the importance of energy collaboration towards a cleaner energy future and sustainable energy security with a view to fostering economic growth. We welcome the progress on the voluntary international collaboration on energy efficiency in six key areas, taking into consideration the policies outlined in the Energy Efficiency Leading Programme and in line with national circumstances, including in heavy duty vehicles, and improving the efficiency of these vehicles. We also reaffirm our commitment to rationalize and phase-out inefficient fossil fuel subsidies that encourage wasteful consumption over the medium term, recognizing the need to support the poor. We welcome G20 countries’ progress on their commitments and look forward to further progress in the future. Further, we encourage G20 countries to consider participating in the voluntary peer review process. Given that natural gas is a less emission-intensive fossil fuel, we will enhance collaboration on solutions that promote natural gas extraction, transportation, and processing in a manner that minimizes environmental impacts. We stress the importance of diversification of energy sources and routes.
Robust International Trade and Investment
25. Our growth, to be strong, must be reinforced by inclusive, robust and sustainable trade and investment growth. We note with concern the slow growth in trade and investment globally and commit to enhance an open world economy by working towards trade and investment facilitation and liberalization. We recognize the importance of economic diversification and industrial upgrading in developing countries to benefit from more open global markets. We endorse the outcome of the G20 Trade Ministers Meeting held in Shanghai on 9-10 July, and welcome the establishment of the G20 Trade and Investment Working Group (TIWG). We commit to further strengthen G20 trade and investment cooperation.
26. We reaffirm our determination to ensure a rules-based, transparent, non-discriminatory, open and inclusive multilateral trading system with the World Trade Organization playing the central role in today’s global trade. We reiterate our commitment to shape the post-Nairobi work with development at its center and commit to advancing negotiations on the remaining DDA issues as a matter of priority, including all three pillars of agriculture (i.e. market access, domestic support and export competition), non-agricultural market access, services, development, Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) and rules. We also note that a range of issues may be of common interest and importance to today’s economy, and thus may be legitimate issues for discussions in the WTO, including those addressed in regional trade arrangements (RTAs) and by the B20. We will work together with all WTO members with a sense of urgency and solidarity and with a view to achieving positive outcomes of the MC11 and beyond and we will work together to further strengthen the WTO.
27. We commit to ratify the Trade Facilitation Agreement by the end of 2016 and call on other WTO members to do the same. We note the important role that bilateral and regional trade agreements can play in liberalizing trade and in the development of trade rules, while recognizing the need to ensure they are consistent with WTO rules. We commit to working to ensure our bilateral and regional trade agreements complement the multilateral trading system, and are open, transparent, inclusive and WTO-consistent. WTO-consistent plurilateral trade agreements with broad participation can play an important role in complementing global liberalization initiatives. G20 Environmental Goods Agreement (EGA) participants welcome the landing zone achieved in the WTO EGA negotiations, and reaffirm their aim to redouble efforts to bridge remaining gaps and conclude an ambitious, future-oriented EGA that seeks to eliminate tariffs on a broad range of environmental goods by the end of 2016, after finding effective ways to address the core concerns of participants.
28. We reiterate our opposition to protectionism on trade and investment in all its forms. We extend our commitments to standstill and rollback of protectionist measures till the end of 2018, reaffirm our determination to deliver on them and support the work of the WTO, UNCTAD and OECD in monitoring protectionism. We emphasize that the benefits of trade and open markets must be communicated to the wider public more effectively and accompanied by appropriate domestic policies to ensure that benefits are widely distributed.
29.We endorse the G20 Strategy for Global Trade Growth, under which the G20 will lead by example to lower trade costs, harness trade and investment policy coherence, boost trade in services, enhance trade finance, promote e-commerce development, and address trade and development. We welcome the World Trade Outlook Indicator released by the WTO as an important leading indicator of global trade. We endorse the G20 Guiding Principles for Global Investment Policymaking, which will help foster an open, transparent and conductive global policy environment for investment.
30. We also support policies that encourage firms of all sizes, in particular women and youth entrepreneurs, women-led firms and SMEs, to take full advantage of global value chains (GVCs), and that encourage greater participation, value addition and upward mobility in GVCs by developing countries, particularly low-income countries (LICs).We welcome the B20’s interest to strengthen digital trade and other work and take note of it’s initiative on an Electronic World Trade Platform (eWTP).
31. We recognize that the structural problems, including excess capacity in some industries, exacerbated by a weak global economic recovery and depressed market demand, have caused a negative impact on trade and workers. We recognize that excess capacity in steel and other industries is a global issue which requires collective responses. We also recognize that subsidies and other types of support from government or government-sponsored institutions can cause market distortions and contribute to global excess capacity and therefore require attention. We commit to enhance communication and cooperation, and take effective steps to address the challenges so as to enhance market function and encourage adjustment. To this end, we call for increased information sharing and cooperation through the formation of a Global Forum on steel excess capacity, to be facilitated by the OECD with the active participation of G20 members and interested OECD members. We look forward to a progress report on the efforts of the Global Forum to the relevant G20 ministers in 2017.
Inclusive and Interconnected Development
32. Our growth, to be strong, sustainable and balanced, must also be inclusive. We are committed to ensuring the benefits of our growth reach all people and maximize the growth potential of developing and low-income countries. In this context, we place sustainable development high on the G20 agenda.
33. We pledge to enhance policy coherence on sustainable development and reaffirm our commitment to further align our work with the universal implementation of the 2030 Agenda for Sustainable Development and the Addis Ababa Action Agenda on financing for development, based on the comparative advantage and the added value of the G20 and in accordance with our national circumstances, while acknowledging that the global follow-up and review of the 2030 Agenda is a UN-led process. We commit to contributing to the implementation of the 2030 Agenda by setting an example through bold, transformative collective and intended national actions in a wide range of areas. By endorsing the G20 Action Plan on the 2030 Agenda for Sustainable Development which also includes high-level principles, we reaffirm our commitment to achieve the ambition of the 2030 Agenda. We note the Addis Tax Initiative, welcome the establishment of the Technology Facilitation Mechanism and stress the importance of enhanced cooperation on technologies to achieving sustainable development.
34. We welcome the Hangzhou Comprehensive Accountability Report on G20 Development Commitments, which reflects our progress already made over the period of 2014-2016.
35. We launch the G20 Initiative on Supporting Industrialization in Africa and LDCs to strengthen their inclusive growth and development potential through voluntary policy options including: promoting inclusive and sustainable structural transformation; supporting sustainable agriculture, agri-business and agro-industry development; deepening, broadening and updating the local knowledge and production base; promoting investment in sustainable and secure energy, including renewables and energy efficiency; exploring ways to develop cooperation on industrial production and vocational training and sustainable and resilient infrastructure and industries; supporting industrialization through trade in accordance with WTO rules; and leveraging domestic and external finance and supporting equitable access to finance – with a focus on women and youth; and promoting science, technology and innovation as critical means for industrialization.
36. We will continue our work on addressing cross-border financial flows derived from illicit activities, including deliberate trade misinvoicing, which hampers the mobilization of domestic resources for development, and welcome the communication and coordination with the World Customs Organization for a study report in this regard following the Hangzhou Summit.
37. We acknowledge the important role of inclusive business in development, and welcome the establishment of the G20 Global Platform on Inclusive Business and its future actions. We welcome the G20 Inclusive Business Report for the 2016 Summit.
38. We will fulfill our collective commitment to achieve a successful 18th replenishment of the International Development Association, as well as 14th replenishment of the African Development Fund.
39. We reaffirm our commitment to promote investment with focus on infrastructure in terms of both quantity and quality. We welcome the Joint Declaration of Aspirations on Actions to Support Infrastructure Investment by 11 multilateral development banks (MDBs), including their announcements of quantitative ambitions for high-quality infrastructure projects within their respective institutional mandates as well as their efforts to maximize the quality of infrastructure projects, strengthen project pipelines, collaborate further among existing and new MDBs, strengthen the enabling environment for infrastructure investment in developing countries, as well as catalyze private resources. We stress the importance of quality infrastructure investment, which aims to ensure economic efficiency in view of life-cycle cost, safety, resilience against natural disaster, job creation, capacity building, and transfer of expertise and know-how on mutually agreed terms and conditions, while addressing social and environmental impacts and aligning with economic and development strategies. We welcome the MDB Response to the G20 MDB Balance Sheet Optimization Action Plan and call for further implementation of the Action Plan. We note that infrastructure connectivity is key to achieving sustainable development and shared prosperity. We endorse the Global Infrastructure Connectivity Alliance launched this year to enhance the synergy and cooperation among various infrastructure connectivity programs in a holistic way. We ask the WBG to serve as the Secretariat of the Alliance, working closely with the Global Infrastructure Hub (GIH), OECD, other MDBs, and interested G20 members to support its activities. We endorse the G20/OECD Guidance Note on Diversification of Financial Instruments for Infrastructure and SMEs and we welcome the Annotated Public-Private Partnership (PPP) Risk Allocation Matrices completed by the GIH to help developing countries better assess infrastructure risks. We support the effective implementation of the G20/OECD Principles of Corporate Governance and G20/OECD High-level Principles on SME Financing and look forward to the revision of the assessment methodology of the G20/OECD Principles of the Corporate Governance, which will be informed by an FSB peer review on corporate governance.
40. Generating quality employment is indispensable for sustainable development and is at the center of the G20’s domestic and global agenda. We will work to ensure the benefits from economic growth, globalization and technological innovation are widely shared, creating more and better jobs, reducing inequalities and promoting inclusive labor force participation. We endorse the strategies, action plans and initiatives developed by G20 labor and employment ministers to enhance the growth and development agenda by taking effective actions to address changes in skill needs, support entrepreneurship and employability, foster decent work, ensure safer workplaces including within global supply chains and strengthen social protection systems. We endorse Sustainable Wage Policy Principles. We recognize entrepreneurship is an important driver for job creation and economic growth, reinforce our commitments in the G20 Entrepreneurship Action Plan, and welcome China’s contribution in the establishment of an Entrepreneurship Research Center on G20 Economies. We also endorse the G20 Initiative to Promote Quality Apprenticeship with policy priorities of increasing the quantity, quality and diversity of apprenticeships. We will further develop the G20 employment plans in 2017 to address these commitments and monitor progress in a systemic and transparent manner in achieving the G20 goals especially on youth employment and female labor participation. We recognize strengthened labor market institutions and policies can support productivity and promote decent work, and therefore higher, sustainable wage growth, in particular for the low-income workers. We recognize the importance of addressing opportunities and challenges brought into the labor market through labor migration as well-managed migration can bring potential benefits to economies and societies.
41. The G20 will continue to prioritize its work on food security, nutrition, sustainable agricultural growth and rural development as a significant contribution to implementing the 2030 Agenda for Sustainable Development. We endorse the outcome of the G20 Agriculture Ministers Meeting and encourage our agriculture ministers to meet regularly to jointly facilitate sustainable agricultural development and food value chains, including through technological, institutional and social innovation, trade and responsible investment, as a means of food security, rural development and poverty alleviation. We support increasing efforts in this regard by the agricultural scientific and private sectors and welcome the opening of the First G20 Agricultural Entrepreneurs Forum. We recognize the role of family farmers and smallholder agriculture in development, and welcome the Good Practices on Family Farming and Smallholder Agriculture that identifies a set of policies, programs and tools that can prove useful to G20 members and beyond. We welcome the contribution by programs and initiatives that promote sustainable agricultural development, including the Global Agriculture and Food Security Program.
Further Significant Global Challenges Affecting the World Economy
42. The outcome of the referendum on the UK’s membership of the EU adds to the uncertainty in the global economy. Members of the G20 are well positioned to proactively address the potential economic and financial consequences stemming from the referendum. In the future, we hope to see the UK as a close partner of the EU.
43. We reiterate our commitment to sustainable development and strong and effective support and actions to address climate change. We commit to complete our respective domestic procedures in order to join the Paris Agreement as soon as our national procedures allow. We welcome those G20 members who joined the Agreement and efforts to enable the Paris Agreement to enter into force by the end of 2016 and look forward to its timely implementation with all its aspects. We affirm the importance of fulfilling the UNFCCC commitment by developed countries in providing means of implementation including financial resources to assist developing countries with respect to both mitigation and adaptation actions in line with Paris outcomes. We reaffirm the importance of the support provided by the Green Climate Fund. We welcome the G20 Climate Finance Study Group report on “Promoting Efficient and Transparent Provision and Mobilization of Climate Finance to Enhance Ambition of Mitigation and Adaptation Actions”. We look forward to successful outcomes in related multilateral fora, including the Montreal Protocol and the International Civil Aviation Organization.
44. Worldwide massive forced displacement of people, unprecedented since the Second World War, especially those generated from violent conflicts, is a global concern. We reiterate our call in Antalya for global concerted efforts in addressing the effects, protection need and root causes of refugee crisis to share in the burden associated with it. We call for strengthening humanitarian assistance for refugees and refugee resettlement, and we invite all states, according to their individual capacity, to scale up assistance to relevant international organizations in order to enhance their capabilities to assist affected countries, intensifying efforts to find durable solutions, in particular for protracted refugee situations, and in this regard, strengthening the contribution of development assistance to host communities. We support the international efforts to respond to the ongoing crisis and note the upcoming high-level meetings which will take place during the UN General Assembly. We note the World Bank’s effort to work with other international organizations and its shareholders to develop a global crisis response platform to provide support to refugees and host communities in both low and middle income countries. The G20 will continue to address forced displacement in 2017 with a view to developing concrete actions. The G20 will also examine migration issues in 2017.
45. We strongly condemn terrorism in all forms and manifestations, which poses serious challenges to international peace and security and endangers our ongoing efforts to strengthen the global economy and ensure sustainable growth and development. We reaffirm our solidarity and resolve in the fight against terrorism in all its forms and wherever it occurs. We will tackle all sources, techniques and channels of terrorist financing, including extortion, taxation, smuggling of natural resources, bank looting, looting of cultural property, external donation, and kidnapping for ransom. In confronting terrorism, we remain committed to effectively exchanging information, freezing terrorist assets, and criminalizing terrorist financing. We call for the swift, effective and universal implementation of the FATF standards and of the provisions of the UN Security Council resolution 2253 worldwide. We welcome the progress achieved by the FATF in the implementation of its new Consolidated Strategy on Combating Terrorist Financing and call for effective implementation of its operational plan. We call on the FATF to reflect by March 2017 on ways to progress in strengthening its traction capacity and enhanced effectiveness of the network of FATF and FATF-style regional bodies.
46. Antimicrobial resistance (AMR) poses a serious threat to public health, growth and global economic stability. We affirm the need to explore in an inclusive manner to fight antimicrobial resistance by developing evidence-based ways to prevent and mitigate resistance, and unlock research and development into new and existing antimicrobials from a G20 value-added perspective, and call on the WHO, FAO, OIE and OECD to collectively report back in 2017 on options to address this including the economic aspects. In this context, we will promote prudent use of antibiotics and take into consideration huge challenges of affordability and access of antimicrobials and their impact on public health. We strongly support the work of the WHO, FAO and the OIE and look forward to a successful high-level meeting on AMR during the UN General Assembly. We look forward to the discussion under the upcoming presidency for dealing with these issues.
47. We reaffirm that the G20’s founding spirit is to bring together the major economies on an equal footing to catalyze action. Once we agree, we will deliver.
48. We thank China for hosting a successful Hangzhou Summit and its contribution to the G20 process, and look forward to meeting again in Germany in 2017 and in Argentina in 2018.
Annex
Acknowledgment and the way forward
We thank international organizations, including the UN, IMF, World Bank Group, WTO, ILO, OECD, FSB, FATF and BIS, for their valuable inputs and support to the G20 process.
We welcome policy recommendations by the G20 engagement groups, namely Business 20, Labor 20, Women 20, Youth 20, Think 20, and Civil Society 20, and appreciate their important contributions this year.
We ask the OECD and World Bank to build a new online G20 Community of Practice within the existing Innovation Policy Platform, and ask the OECD to develop the 2016 G20 Innovation Report, to exchange knowledge and experiences.
We request the OECD, together with UNCTAD and UNIDO, to release a G20 New Industrial Revolution (NIR) Report, which provides an overview of opportunities and challenges brought about by NIR.
We welcome and encourage efforts made by the United Nations, UNCTAD, UNIDO, ILO, IMF, ITU, OECD, World Bank Group and other international organizations to develop better metrics for important policy issues like trust in the digital economy, e-commerce, cross-border data flows and the Internet of Things, as practical, relevant and appropriate.
We look forward to international organizations including the OECD and interested members, intensifying efforts to measure the digital economy in macroeconomic statistics through conducting a voluntary “good practices” survey of national statistical organizations, and organizing and hosting a workshop for statisticians and digital companies on source data to measure the digital economy.
We ask the Framework Working Group to conduct assessment of G20 structural reform progress in line with the Enhanced Structural Reform Agenda, and ask the OECD to help assess G20 progress and challenges within the structural reform priority areas by producing a technical report, with input from other international organizations, using the common set of indicators.
We invite the OECD and the IMF to continue the work on the composition of budget expenditures and revenues to support productivity, inclusiveness and growth.
In the context of sluggish trade and investment growth, we recognize the need to understand and better explain how trade and investment can contribute more to stimulate inclusive growth and jobs, and the links between structural measures, trade, investment and GDP. We ask the WTO, OECD, World Bank Group and other international organizations to advance their analytical work and debates on these matters, to contribute to improve people’s perceptions on the benefits of trade and investment on well-being. In this context, we also welcome further joint work by the WTO, UNCTAD, OECD, ITC, World Bank Group and IMF, in collaboration with other relevant international organizations, within their existing mandates and resources, to identify ways and means to promote inclusive, robust and sustainable trade and investment growth, including but not limited to the work of measuring trade costs, reporting on restrictive measures, improving economic trade modeling, communicating the benefits of trade and investment, investment promotion and facilitation, enhancing coherence and complementarity between trade and investment regimes, and promoting inclusive and coordinated global value chains.
We ask the finance ministers and central bank governors to report back on their further work on the international financial architecture by our next meeting.
We call on the FATF to reflect by March 2017 on ways to progress in strengthening its traction capacity and enhanced effectiveness of the network of FATF and FATF-style regional bodies.
We look forward to a report from the FSB on authorities’ work to address misconduct in the financial sector.
We look forward to the BCBS comprehensive quantitative impact study that will inform the final design and calibration of the Basel III framework. We look forward to considering the phase II report and recommendations of the FSB’s industry-led Taskforce on Climate-related Financial Disclosures in early 2017, which will present its recommendations for better climate related disclosures.
We welcome the IMF-FSB First Progress Report on the second phase of the Data Gaps Initiative and support the Report’s action plans.
We welcome the reports on the voluntary peer reviews of inefficient fossil fuel subsidies that have examined the policies of China and the United States, prepared by expert teams chaired by the OECD.
We ask the MDBs to move forward the directions and commitments outlined in the Joint Declaration of Aspirations on Actions to Support Infrastructure Investment. We ask the MDBs to further implement the G20 MDB Balance Sheet Optimization Action Plan.
We ask the World Bank to serve as the secretariat of the Global Infrastructure Connectivity Alliance, working closely with the Global Infrastructure Hub, OECD, other MDBs, and interested G20 Members to support its activities.
We thank the UNDP and the OECD for their support in the design of the G20 Action Plan on the 2030 Agenda for Sustainable Development and of the G20 Development Working Group (DWG) Comprehensive Accountability Report. We ask them to continue supporting the DWG for the monitoring of the implementation of the Action Plan and of the relevant accountability process.
We thank UNIDO and other international organizations for their support in the design of the G20 Initiative on Supporting Industrialization in Africa and LDCs.
We look forward to address voluntary policy options to promote sustainable growth in Africa and the LDCs, including voluntary policy options to promote industrialization.
We acknowledge the establishment of the new Platform for Collaboration on Taxation by the IMF, OECD, UN, and World Bank Group, and their recommendations on mechanisms for effective technical assistance in support of tax reforms. We look forward to receiving a progress update by mid-2017.
We invite the ILO, OECD, World Bank Group and IMF to provide technical support in the implementation of the G20 Entrepreneurship Action Plan, to participate in the work of the Entrepreneurship Research Centre on G20 Economies and facilitate exchange of good practices and lessons learnt amongst G20 members. The ILO, OECD and other international organizations, social partners and experts are welcome to participate in the activities of the Centre and share their entrepreneurship experiences and research findings.
We invite the OECD and other international organizations to continue the development of the G20 initiated analytical framework for improving agricultural productivity including that of small-scale producers in an innovative and sustainable manner.