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Politics hurts Kenyan growth prospects, says Kepsa survey
Politics is directly hurting Kenyan businesses and their contribution to the economy, a survey reveals.
The study notes that when economic activities are affected by what politicians say and do, there is a direct impact on tax collection as well as job creation in the country.
The survey calls for the need to sensitise those who take part in demonstrations to respect private property as their actions do not hurt the government directly, but affects the ability to create wealth and employment.
“Eighty (80) per cent of the 509 businesses involved in this study showed political demonstrations hit hard their incomes and threatened livelihoods but no politician seems to give a hoot to our cry. We have a role to reawaken politicians from slumber and force them to respect businesses first before doing anything else to pursue their own interests,” said Kenya Private Sector Alliance chief executive Carole Kariuki.
The survey was conducted by Research firm Trends and Insights For Africa (Tifa), which was sanctioned by the alliance.
It says it is self-defeating for politicians to carry out activities that disrupt business as this hits revenues meant for development at both county and national levels.
The survey called for rigorous sensitisation workshops to awaken politicians’ consciousness on the role of business in any community, saying it went beyond the scramble for power and that existence of firms was a matter of life and death for any society.
Kepsa said Kenyan businesses were apprehensive of the political situation as General Elections neared and called for closer consultations to avert revenue and job losses.
“Kenyan demonstrators must know that hurting businesses hardly hurts the government but Kenyans’ general wellbeing in terms of investments and development,” said Ms Kariuki.
The TIFA report castigates politicians’ behaviour saying as role models, they must lead by example or risk hurting economies of counties as potential investors will stay away if unsure of the safety of their ventures.
“For Nairobi, which is fast shedding the terrorism tag and attracting global events, we need to protect its name as Africa’s preferred first stop and hub for multinationals or else risk losing billions of shillings in terms of investments,” said the report.
Shun the CBD
It observed that local investors would shun the Central Business District (CBD) in favour of the capital city’s suburbs since no one wants their properties to be destroyed every time there is a demonstration.
Tifa chief executive Margaret Ireri said Kenyans must divorce business and political issues so as to enhance Kenya’s competitiveness as a mature democracy that allows free thoughts to prevail as well as holding of peaceful demonstration as enshrined in the Constitution.
Nairobi City Protests: Businesses Count the Costs
Preamble: Global Perspective
Demonstrations* are considered as a means of bringing about social change but in reality they take a toll on the society especially when they turn violent. Cities around the world continue to face the challenge of protests with the worst ones reported in India, USA, UK and Argentina. The post-election demonstrations in Nairobi in December 2007 makes it the only African city in the top ten list of worst ever protests in the world. Protests can have serious long-term consequences as investors and businesses steer clear of areas where the safety of their capital, their employees and their customers is at risk.
* Demonstrations are usually peaceful and they do not destroy the properties. Protests can be defined as a civil action where people behave violently and are out of order.
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World Bank Board approves new Environmental and Social Framework
Package expands protections for people, environment in Bank-financed projects
The World Bank’s Board of Executive Directors on 4 August 2016 approved a new Environmental and Social Framework (ESF) that expands protections for people and the environment in Bank-financed investment projects. The safeguards review included the most extensive consultation ever conducted by the World Bank. It concludes nearly four years of analysis and engagement around the world with governments, development experts, and civil society groups, reaching nearly 8,000 stakeholders in 63 countries. The framework is part of a far-reaching effort by the World Bank Group to improve development outcomes and streamline its work.
“The World Bank Group’s mission is to end extreme poverty and reduce inequality in the world, and this new framework will be a critical factor in helping us reach those goals,” said World Bank Group President Jim Yong Kim. “These new safeguards will build into our projects updated and improved protections for the most vulnerable people in the world and our environment. We also will substantially increase our financing of the safeguards to make sure this works as intended – with enough funding for both implementation and building capacity in countries so that they can play a more active role in protecting people and the environment.”
The framework brings the World Bank’s environmental and social protections into closer harmony with those of other development institutions, and makes important advances in areas such as transparency, non-discrimination, social inclusion, public participation, and accountability – including expanded roles for grievance redress mechanisms.
“The new framework embodies the World Bank’s commitment to environmental and social protections and responds to new and varied development demands and challenges that have arisen over time,” said Alex Foxley, World Bank Executive Director for Argentina, Bolivia, Chile, Paraguay, Peru, and Uruguay, and Chair of the Committee on Development Effectiveness, a committee of the World Bank Board that oversees policy matters. “The experience and capacity of many borrowers has improved and our requirements have been updated to reflect the realities of today. The framework is designed to boost development outcomes in Bank projects by placing strong emphasis on sustainability, responsible use of resources, and monitoring and evaluation.”
The approved Environmental and Social Framework introduces comprehensive labor and working condition protection; an over-arching non-discrimination principle; community health and safety measures that address road safety, emergency response and disaster mitigation; and a responsibility to include stakeholder engagement throughout the project cycle.
The New Environmental and Social Framework
Protecting the Poor and the Environment in World Bank Investment Projects
Economic development depends in part upon providing infrastructure and facilities that improve people’s lives and expand economic opportunities. This development can be from a road that allows a farmer to get goods to market, access to electricity so hospitals can refrigerate medicines and children can do their homework at night, providing clean water to reduce the incidence of easily preventable water-borne diseases that kill an estimated 1,400 children every day, or access to local facilities such as schools, clinics or community centers.
Governments in developing countries often turn to the World Bank to help finance infrastructure and service facilities. We fund these projects because we know they can help to reduce poverty and improve living conditions, which is central to achieving the World Bank’s goals of ending extreme poverty and promoting shared prosperity.
A cornerstone of our work on investment projects is helping to ensure strong protections for people and for the environment. We help do this through policies – often called “safeguards” – that serve to identify, avoid, and minimize harms to people and the environment. These policies require borrowing governments to address certain environmental and social risks in order to receive Bank support for investment projects.
Examples of these requirements include conducting an environmental and social impact assessment, consulting with affected communities about potential project impacts, and restoring the livelihoods of displaced people. World Bank safeguards are widely regarded as an effective way to ensure that environmental and social concerns and community voices are represented in the design and implementation of our projects.
New Rules Reflect a Changing World
The world has changed since the first of our existing safeguards was developed more than 20 years ago. On August 4, 2016, the World Bank’s Board of Executive Directors approved a new Environmental and Social Framework (ESF) to help protect people and the environment in the investment projects it finances. This effort is one of several key initiatives, including procurement reform, and the climate and gender strategies, recently undertaken by the Bank to improve development outcomes.
The ESF responds to new and varied development demands and challenges that have arisen over time. The experience and capacity of many borrowers has improved and our requirements have been updated to reflect the realities of today.
This framework will boost protections for people and the environment and drive sustainable development through capacity- and institution-building and country ownership. It will also enhance efficiency for both the Borrower and the Bank.
The framework brings the World Bank’s environmental and social protections into closer harmony with those of other development institutions, and makes important advances in areas such as transparency, non-discrimination, social inclusion, public participation, and accountability – including expanded roles for grievance redress mechanisms. The framework helps to ensure social inclusion, and explicitly references human rights in the overarching vision statement.
In order to support the new framework – and meet additional oversight demands – the World Bank is on a trajectory to substantially increase in funding for the safeguards.
Strengthening national systems in borrowing countries is recognized as a central development goal by the World Bank and most of its shareholders. In line with this goal, the framework places greater emphasis on the use of borrower frameworks and capacity building, with the aim of constructing sustainable borrower institutions and increasing efficiency.
The expanded protections in the framework, which is precedent-setting for the World Bank, include comprehensive labor and working condition protections and community health and safety measures that address road safety, emergency response and disaster mitigation. It also includes a responsibility to include stakeholder engagement throughout the project cycle, and a non-discrimination principle augmented by a new mandatory World Bank Directive that lists examples of vulnerable and disadvantaged groups and explicitly requires staff to assist borrower to consider, mitigate, and manage related issues.
This framework will promote better – and lasting – development outcomes. It provides broader coverage and access, and will benefit more people, especially vulnerable and disadvantaged groups. The framework promotes sustainable development by considering a greater range of environmental and social risks and potential impacts, and by encouraging the sustainable management of living natural resources. Livelihoods will be better secured by providing protections for workers and improving living conditions of people displaced by projects. The framework will foster resilience by requiring emergency preparedness measures to guard against unexpected shocks and by considering climate change impacts and requiring measures to address them.
The new Environmental and Social Framework is the result of the most extensive consultation the World Bank has ever had. For nearly four years, we intensively engaged with World Bank stakeholders, including our member countries, civil society organizations from developed and developing countries, academia, development experts, and beyond. Bank staff went to 63 countries, including 50 borrower countries, and the consultation meetings had almost 8,000 participants overall across the three phases.
The feedback obtained from these consultations, along with the written submissions received, elevated the debate on this important development issue and informed the development of the World Bank’s new Environmental and Social Framework.
This has been a dynamic process. As a global cooperative of 189 countries, everyone worked very hard to develop sustainable policies that can work for all of our members and that stand to improve development outcomes.
We are confident that our Board of Executive Directors, who have the final say on all World Bank policy, have come to a decision that reflects our mission of protecting the world’s poorest and most vulnerable people, and the environment.
Next Steps
The World Bank now begins an intensive preparation and training period (12-18 months) to prepare for the transition to the new framework, which is scheduled to go into effect in early 2018. Implementation will focus on: supporting and strengthening the capacity of borrowers; training Bank staff and Borrowers to implement the framework; strengthening the Bank’s environmental and social risk management system; and strengthening strategic partnerships with development partners.
The World Bank’s current safeguards are expected to run in parallel to the new ESF for about seven years to govern projects approved before the effectiveness date of the new ESF.
Background
Assessing and managing environmental and social impacts in World Bank financed projects has been a core concern of the institution for more than 40 years. The Bank’s current policies, issued nearly 20 years ago, were for years viewed as setting the standards for Multilateral Development Banks (MDBs) in protections for people and the environment.
The current safeguards review began in July 2012. Responding in part to a 2010 report from the World Bank’s Independent Evaluation Group (IEG), the Board instructed management to revise the existing safeguards policies to increase coverage, social inclusion, and harmonization across the Bank Group; enhance client capacity, responsibility and ownership; strengthen safeguards supervision, monitoring, evaluation to ensure rigorous implementation of our policies; and improve accountability and grievance redress systems and instruments for communities and individuals who want to express their concerns about World Bank-financed investment projects.
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South Africa’s trade ties with BRICS vital – Davies
South African Trade and Trade and Industry Rob Davies told The BRICS Post in an exclusive interview on Thursday that South Africa’s trade ties with the BRICS members were vital, especially given the uncertainty about trade ties with the United Kingdom after the Brexit vote and an ongoing trade dispute with neighbour Zimbabwe, which unilaterally imposed restrictions on South African exports to Zimbabwe.
“Our trade ties with our BRICS partners are vital to our economy’s health as they are our largest trading partners. That is why I look forward to engaging with the other BRICS trade ministers later this year in India, as well as at the G20 Summit in China,” Davies said.
Responding to a question about Brexit, the South African Trade Minister said Pretoria expects to replicate its successful EU trade deal with the UK following its shock vote to leave the European Union.
“I have corresponded with the British ambassador and met with the British trade minister recently at the G20 meeting in Shanghai. We aim to have as good a trade agreement as we have currently with the European Union and maybe some easing of phytosanitary restrictions on our agricultural exports,” he added.
In 2015, South Africa sent 23% of its manufactured exports and 36% of its agricultural exports to the European Union including the UK.
The UK was the eighth largest trading partner of South Africa. On 10 June, the EU signed an Economic Partnership Agreement (EPA) with South Africa that includes better trading terms mainly in agriculture and fisheries, such as for wine, sugar, fisheries products, flowers and canned fruits.
Meanwhile, Davies also responded to anxiety about the growing impact of China’s economic slowdown on South Africa’s economy.
China is South Africa’s largest trading partner.
Davies expressed concern about the Chinese slowdown, but said that that the South African government had strong ties with Beijing.
In particular, he pointed out that the South African Minister for International Relations Maite Nkoana-Mashabane has just returned from a visit to China, where she co-chaired the Co-ordinators’ Meeting of the Forum on China-Africa Cooperation (FOCAC). The meeting assessed progress of common commitments made at the Johannesburg Summit of the FOCAC held in December.
Davies also spoke about the government’s plans to increase the country’s productive capacity and its drive to help many South Africans who were excluded from the mainstream economy under years of apartheid rule.
“We have a vigorous industrialisation policy in place that aims to promote black industrialists. We have allocated half a billion rand to six projects and they include a state-of-art syringe factory at the Coega Industrial Development Zone, while I recently opened a new tomato paste factory in Limpopo, so it not just talk, but action on the ground that is providing jobs and a boost to exports,” Davies said.
The rand has gained recently from strong export growth as the record R18.4 billion foreign trade surplus in May was succeeded by a R12.5 billion surplus in June.
On the subject of Special Economic Zones (SEZ), Davies highlighted the experience of China as valuable lessons for South Africa.
“The SEZ legislation has been passed in South Africa and the SEZ at Saldanha has been proclaimed. Dube Trade Port and Harrismith are on track and we are looking at two SEZs in the platinum belt so that we can turn the platinum into jewellery, autocatalysts and fuel cells. Chinese investment such as the FAW truck plant at Coega and the manganese sinter plant in the Northern Cape shows how cooperation between BRICS countries are mutually beneficial,” he said.
Davies said he would raise the issue of industrialising Africa at the BRICS and G20 summits later this year. The 54 member-nations of the African Union can further industrialise and move up the value chain with the help from the BRICS and G20 partners, he asserted.
“If you take the simple example of coffee, Africa earns $6 billion a year from the coffee beans it grows, yet it is the roasters and blenders outside the continent who capture $94 billion of the value addition to those beans. That is unsustainable and if we want to promote sustainable inclusive growth, then more value addition has to place in Africa. That applies not only to coffee beans, but a whole variety of raw materials. The BRICS countries can help Africa to industrialise and lift millions out of poverty,” Davies said.
“We can no longer rely on the commodity super cycle to lift prices and so support export values. African countries need to add value to the raw materials before they are exported and to do this we need to industrialise further and integrate so that we create a single market of one billion people,” he concluded.
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tralac’s Daily News Selection
The selection: Friday, 5 August 2016
Featured new publication: Africa’s unexplored potential of trade in services (World Bank)
Very little is known about trade in services in Africa and its prospective impact. The continent’s potential to engage in trade in services, especially in dynamic knowledge-intensive activities remains neglected. Africa’s export potential in traditional services, such as tourism, is clearly recognized, but the incipient dynamism in exports of non-traditional services, such as business services is often overlooked. This book broadens our understanding of services trade for Africa by opening up some unexplored opportunities to invigorate and deepen the discussion on the role of traditional and modern services in economic transformation, trade diversification and upgrading. The book provides estimates on the magnitude of such flows and discusses the regulatory hurdles that prevent the emergence of a services-led transformation as observed in some other regions of the world.
An important challenge to exploring Africa’s potential in trade in services is the paucity of data. Poor availability of data and huge discrepancies between official statistics and firm-level data make analyses of services trade misleading. Informal trade in services flourishes across the continent, yet data on such flows remain totally absent. Comprehensive comparisons across sectors and regions are ambiguous or not possible. Furthermore, despite growing opportunities for African services firms to export to neighbouring countries, limited data on trade in services by partner country and sparse information on regulatory policies and their application hamper the monitoring of progress in services liberalization and regional integration. To draw attention to the available assessment tools and policy instruments for possible refinement and broader application across sectors, this book proposes novel data collection methods, such as crowd-sourcing and mystery shopping, pioneering knowledge transfer practices, and experiences with innovative policy reforms. [From foreward by Punam Chuhan-Pole, Acting Chief Economist, Africa Region]
Business cooperation between Chinese and African entrepreneurs: remarks by AU Commissioner of Trade and Industry (AU)
Tomorrow we will be meeting to follow up on progress in a number of areas, which open up such business partnership opportunities. Those include: (i) investments in health, which will build capacity on the continent for early detection, prevention and response to infectious diseases; (ii) investments in education generally and technical and vocational education and training. This is an area of comparative advantage for China, and an opportunity to African-Chinese joint ventures. It also benefits both Africa and China more generally as those centres create the skills required for businesses to perform properly.; (iii) investments in agriculture, agri-business, climate change / environment; and the blue-ocean economy. Under the FOCAC Framework we are expected to prepare Invest in Africa and other Platforms to make this exchange possible. I invite us to start the preparations for this Platform to take place as soon as possible. We also need to discuss concrete mechanisms to support African exporters to China, and Chinese investors and trade partners with Africa. [Sino-Africa textile symposium in Mombasa]
Brexit could mean UK gets more fruit and vegetables from Africa (The Guardian)
Consumers in the UK could see a rise in fruit, vegetables and other produce coming from Africa following the UK’s vote to leave the EU, according to a survey of retailers. The EU is currently the main source of food imports to the UK, with EU member states making up nine out of 10 of the biggest importers. But about one-third of UK retailers now say they are considering sourcing from a different country and 38% expect to see more produce sourced from Africa. [Barclays: supply chain survey]
Pradeep S. Mehta: 'UNCTAD: investing in development' (Asian Age)
Having participated and spoken at several UNCTAD conferences in past, I can vouch that this was one of the best organised. While high-level representation from developing countries (DCs) and least developed countries was noticeable, their counterparts from rich countries were conspicuous by absence. This best highlights the difference in value attached to the multilateral organisation by these two factions.
IGAD: towards a capacity development strategy
Mr Farah Abdulsamed, regional capacity building coordinator at IGAD, gave a useful background of the proposed strategy as well its objectives, scope and its importance to improve skills, knowledge and experiences for IGAD staff and instruments to implement and perform better. Amb. Crispin Gray Johnson, a UNECA consultant, highlighted that existing IGAD plans and all other documents on capacity building and development will be reviewed, updated and modified to a knowledge instrument that should be relevant to the future users as well. Amb. Johnson went on to say that focus will also be put on existing gaps and performance challenges that may have affected implementation at IGAD.
ACBF: Survey of the capacity needs of Africaʼs Regional Economic Communities - second edition (forthcoming): This second survey builds on the first one by reappraising the capacity needs of the African Union’s eight recognized RECs in line with their strategic thrusts and development imperatives.
South Africa: Rob Davies puts Harare on notice over exports impasse (Business Day)
Trade and Industry Minister Rob Davies has given Zimbabwe a three-week grace period in which SA’s neighbour has to reopen its doors to South African exporters. This development follows a long anticipated meeting between Davies and his Zimbabwean counterpart, Mike Bimha. The parties have to resolve the impasse before a Southern African Development Community (SADC) meeting of trade ministers in Botswana later in August. "On August 24, there should be an agreement reached where there are a series of surcharges and additional tariff increases that were applicable to the export interests of SA," said Davies. [#MugabeMustFall protesters plot Beitbridge shutdown, Vince Musewe: Bounds of possibility - re-industrialising Zim]
Angola: Luau cross-border logistics platform to link Angola to DRC, Zambia (MacauHub)
A cross-border logistics platform will be built in Luau municipality, Moxico province, to link Angola to the DRC and Zambia via the Benguela railway, Angolan Transport Minister Augusto da Silva Tomás announced. The Luau cross-border logistics platform will altogether comprise an integrated and varied multipole front in economic relations with Angola’s neighbouring countries, said Tomás, who spoke on Saturday during the opening session of a conference on “The National Logistics Platform”.
Rwanda: Senior lawyers discuss investment arbitration (New Times)
Top lawyers from both private and public institutions in the country have convened at Rwanda Development Board for a two-day workshop to discuss emerging trends in investment and commercial arbitration. The meeting was organised in partnership with Rwanda International Arbitration Centre, and facilitators include individuals like Emmanuel Gaillard, an attorney with Shearman & Sterling LLP, a UK-based law firm that is considered an authority in international commercial arbitration.
LNG in East Africa: the global race intensifies (IPPMedia)
China, Japan, India and the Middle East are particularly hungry for liquefied natural gas and so the intensifying global competition among LNG exporters means East Africa’s window of opportunity is shrinking, or facing stiff competition at the very least. Tanzania and Mozambique – home to East Africa’s largest natural gas reserves and with a combined capacity of nearly 250 trillion cubic feet – must quicken their pace as the race for supply contracts accelerates. East Africa benefits from convenient geography, with the coastline acting as a springboard to market to rising demand in the Middle East, India, China, Southeast Asia and Northern Europe. The vast potential of East Africa’s LNG reserves faces little debate. But, Tanzania and Mozambique must quickly court investors to leverage their assets and secure clients in Africa and along the New Silk Road before other LNG exporters cross the finish line. [The author, John Roper, is Head of Middle East at Uniper Global Commodities]
SA consultancy eyes big power deals with Nairobi office (Business Daily)
A South Africa-based energy and infrastructure projects adviser has opened its East Africa headquarters in Nairobi seeking a share of growing opportunities in the regional renewable energy sector. Fieldstone Africa, which last year advised on the financing of Sh252 billion ($2.5 billion) worth of infrastructure projects in Africa, seeks to ride on its physical presence in Nairobi to bag big-ticket private and government projects in the region.
East Africa: Shippers Council strategy targets transportation cost (The Standard)
The Shippers Council of East Africa has embarked on a four year strategy (2016–2020) seeking to mobilise revenue for the body’s advocacy work and for sustainability. The strategy is to enhance stakeholder value through advocating for improved efficiency in the logistics chain and reduction in the cost of transportation. Siginon Group Managing Director Meshack Kipturgo said the strategy is meant to increase the competitiveness of shippers and re-engineer the council’s business processes enabling it to meet stakeholder’s expectations while developing sufficient human capital to fulfill its mandate.
New alliance to shore up food security launched in Africa (The Wire)
As over 20 million sub-Saharan Africans face a shortage of food because of drought and development issues, representatives of the UN FAO and the Pan African Parliament met in Johannesburg to forge a new parliamentary alliance focusing on food and nutritional security. Monday’s meeting came after years of planning that began on the sidelines of the Second International Conference on Nutrition organised by the FAO in late 2014. FAO Rome special co-ordinator for parliamentary alliances, Caroline Rodrigues Birkett, said her role was to ensure that parliamentarians take up food security as a central theme. [Pan African Parliament Food and Nutrition Security Agenda: IPS interview]
Robusta coffee makes comeback in Africa (IPPMedia)
Robusta coffee is making a comeback in Africa, years after its production plummeted in the 1990s and early 2000s due to a fall in its price on the global market as civil war, pests and diseases affected some producing countries on the continent. Production of Robusta coffee variety currently accounts for about 40% of Africa’s total annual production, an increase of about 10% from three years ago. Prices have been on the rise in countries like Uganda – the highest Robusta coffee producer in Africa — since May 2016 when a kilogramme went for US$75.60, according to Business Week.
Inequality of opportunity in Sub-Saharan Africa (World Bank)
This paper evaluates inequality of opportunity and the different sources of unequal opportunities in 11 Sub-Saharan Africa countries. The results indicate that the portion of total inequality that can be attributed to exogenous circumstances -- that is, circumstances outside the control of individuals control -- is between 30 percent and 40 percent in the countries considered. The results also indicate a positive association between total consumption inequality and inequality of opportunity. Finally, this paper addresses a number of methodological issues that typically arise when measuring inequality of opportunity with imperfect data, which is the typical case in developing countries.
Kasumbalesa to get trade centre (ZNBC)
Marsabit cashes in on Kenya-Ethiopia Lapsset road as traders flock to region (Business Daily)
Mozambique: Government launches tenders for road concessions (Club of Mozambique)
Dar to become regional hub for commodity market (Daily News)
Kenya: CBK kicks off foreign investment survey (Footprint to Africa)
Brazil, Argentina close trade facilitation agreements
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Africa’s unexplored potential of trade in services
From informal to knowledge-intensive, services offer promising opportunities for Africa’s trade diversification, growth, job creation and poverty reduction
A burgeoning services sector is fueling economic expansion in many African nations. Services contribute substantially to GDP, absorb a large proportion of youth employment, improve gender parity, and offer promising opportunities for export diversification.
Services are also key inputs in the production of important exports and food staples. Inefficient services can be partially responsible for high prices. For instance, in Ethiopia, services embody about 80 percent of the final price of roses, one of the country’s key export products. Similarly, between 60 and 75 percent of the price of teff, Ethiopia’s staple food grain, comes from services inputs.
Access to more efficient services along the whole value chain – possibly through importing them – has the potential to boost the country’s cut flower exports and help ensuring food security by lowering the price of staple foods. Importing services can also improve productivity through increased competition, better technologies, and access to foreign capital. But there are many obstacles to trading in services among African countries that make it difficult to take advantage of these opportunities.
A new World Bank Group report From Hair Stylists and Teachers to Accountants and Doctors: The Unexplored Potential of Trade in Services in Africa sheds light on uncharted opportunities for services trade in Africa and invigorates the discussion about the role of services in trade diversification and economic upgrading on the continent.
Services Trade in a Wide Range of Sectors
Africa’s export potential in traditional services, such as tourism, is clearly recognized, but the emerging success of exports of nontraditional services, such as business services, is often overlooked. For example, according to the firm-level surveys on professional services presented in the book, more than 16 percent of the interviewed accounting, architectural, engineering and legal firms in the Common Market for Eastern and Southern Africa (COMESA) countries are already engaged in exports, mainly to neighboring countries. This contradicts official statistics, which assert that professional services exports for several countries are negligible or nonexistent. Likewise, many hospitals in Sub-Saharan African countries are treating foreign patients and are using tele-medicine; yet official statistics often do not record such trade flows in medical services.
At the other end of the spectrum, Africa witnesses widespread transactions in informal services ranging from hairdressing, construction, and housekeeping to education, health and finance. Such services trade flows seem to flourish on the African continent – despite the many barriers to the movement of services providers. Tanzanian Maasai hair braiders are in high demand in Zambia, while Congolese, Kenyan, and Ugandan hairdressers are sought after by Tanzanian women from all walks of life, from the girl next door to the wife of the minister. All these hairdressers are crossing borders –usually helped by facilitators and fixers to provide their services in a foreign country. And the earnings they receive by working in foreign countries (export earnings) often remain their main source of income, contributing to significant improvements in their livelihoods.
“This is the only way I earn an income. I have been able to take care of my family,” explains Helene, a 38 year-old Congolese hairdresser living in Zambia.
Opportunities and Challenges
While trade in services presents African countries with opportunities for growth, there are still challenges to the sector. Domestic regulatory hurdles and trade barriers continue to fragment the services markets on the continent; and the cost of trading in services is high. For instance, education and health services in East Africa are hindered by restrictions on using telemedicine or e-learning. Medical tourism remains restricted by the non-portability of insurance policies. Restrictions on the legal forms of entry to hospitals in countries such as Tanzania and Uganda or limits on the repatriation of earnings in Kenya and Uganda constrain the establishment of foreign hospitals in the region. Finally, the high cost of visa and work permits in many countries impose stringent restrictions on the movement of health and education professionals to provide services abroad.
What happens when such regulatory barriers restrict trade in services? “Trade does not stop but rather, it takes an informal route,” said Arti Grover, Senior Consultant Economist with the World Bank Group. “Nonetheless, the extent and volume of such trade is diminished. Without such burdensome regulations, the government, the suppliers and the consumers could all be better off.”
What can governments do to address these challenges? Concrete, sector-specific guidance to improving regulatory frameworks and minimizing restrictions to trade are needed to deepen regional cooperation on trade in services in Africa. The book emphasizes a few potential solutions:
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Strengthen data generation efforts on services trade flows, transaction costs and outcome indicators
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Monitor services integration, focusing on the impact of reforms on lowering trade costs
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Put informal and knowledge intensive services on the agenda of policy makers.
Some countries and economic communities are already doing this. The Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and the South Africa Development Community (SADC) have taken steps to reduce trade barriers and countries are beginning to discuss practical solutions to trade impediments. Knowledge platforms on professional and tourism services are good examples of tools for translating policy recommendations into action. For example, the East Africa Tourism Platform has recently shown leadership in championing a coordinated approach to enhance the region’s travel and tourism competitiveness. Such platforms were designed for practitioners, policy makers, and regulators to engage in meaningful dialogue about the critical issues that are currently transforming these services in Sub-Saharan Africa.
“Cooperation initiatives are necessary to increase the regulatory capacity that African governments need to build over time to engage in meaningful liberalization efforts,” says Alemayehu Geda (Ph.D), Associate Professor of Economics at Addis Ababa University. “Through analytical support and technical assistance, the World Bank Group can assist African countries to improve regulation, facilitate services flows, and ultimately make services in Africa more competitive.”
» Download: The unexplored potential of trade in services in Africa: from hair stylists and teachers to accountants and doctors (PDF, 11.15 MB)
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The changing global trade architecture: Implications for sub-Saharan Africa’s development
The narrative of a ‘rising’ Africa is now widely recognised. It has replaced the discourse of ‘the hopeless continent’, which adorned the front cover of The Economist just over a decade ago. Africa’s economic fortunes have become more hopeful as the global trade architecture has changed dramatically in the new millennium.
What are the main changes in the global trading architecture over the past 15 years? How have these changes impacted on Africa’s economic development and the nature of trading relations between Africa and its traditional developed country partners, the European Union, the UK and the USA, and its main developing country partner, China? What are the implications of ‘Brexit’ – the UK’s departure from the European Union – for Africa’s trade? And how has the changing narrative of trade and trade integration impacted on Africa’s own strategy to integrate its market? This issue of Commonwealth Trade Hot Topics explores these questions and offers some policy recommendations for African policy-makers and trade negotiators.
The changing architecture of world trade
China’s accession to the World Trade Organization (WTO) at the launch of the Doha Development Round in November 2001 helped to catapult China into the pinnacle of global trade within a decade, and transform the existing patterns of North-South trade that emerged after the Second World War. China’s high growth rates – of over 10 per cent per annum – created the demand for Africa’s commodities, leading to improved growth prospects for many Sub-Saharan African countries following at least two lost decades of development. In the first decade of the new millennium African economies grew at an unprecedented average rate of over 5 per cent per annum, although this growth was not always inclusive and sustainable, or lead to Africa’s structural economic transformation. China’s ‘rise’, and that of other emerging developing countries that became known as the BRICS (Brazil, Russia, India, China, and South Africa), has changed the nature and direction of world trade through greater South-South trade and investment in the first decade of the new millennium.
These changes in the world trading system in just over a decade have been dramatic. The following selected trade statistics illustrate these changes. China overtook Japan as the leading Asian exporter in 2004. China was to then overtake the USA in 2007 and Germany in 2009 to become the world’s largest exporter. According to the WTO, the share of developing country exports in world trade grew, from 26 per cent in 1995 to 44 per cent in 2014, while the share of developed economies’ exports in world trade declined, from 70 per cent to 52 per cent, during the same period. The United Nations Economic Commission for Africa (UNECA) furthermore notes that Africa’s share of world exports had also grown, albeit very modestly, from 3 per cent in 1990 to 3.3 per cent in 2010 but fell back to 3 per cent in 2014. While Africa’s economies have been growing at unprecedented rates, this has been from a concentrated export structure and significant de-industrialisation for some countries, while poverty, inequality and unemployment, especially for the youth, are still key challenges today. While the African growth story is still positive and hopeful, it should be treated with some caution and considerable degree of nuance.
Developing countries, led by China, have made significant progress in world trade during the past 15 years of the new millennium. These changes were to impact significantly on the WTO Doha Round of trade negotiations. These changes are now discussed below together with the role of African countries in the multilateral trading system.
Africa’s Economic Partnership Agreements (EPAs)
The dramatic changes in the European Union, since the fall of the Berlin Wall and the end of the Cold War, increased the membership of the EU, from EU-15 to EU-28. Most of the EU-13 countries do not share the burden of responsibility for the colonial relations between Europe and Africa, and thus have not had the same enthusiasm for the EU-Africa or EU-ACP relationship that was defined by trade preferences and development assistance since the Lomé Convention in 1975. The Lomé Convention was transformed into the Cotonou Agreement in 2000. These changes in the composition of the EU began a debate for the radical transformation of the traditional trade and aid relationship between the EU and Africa from one of unilateral preferences towards one of reciprocity. The fact that the Cotonou Agreement required a waiver in the WTO to extend the Cotonou preferential trade arrangement with the ACP was arguably of much less importance than that of the change in the composition and attitude of the new members to the ACP. The EU thus began a process of ‘negotiating’ African countries out of the Cotonou Agreement towards reciprocal Economic Partnership Agreements (EPAs) on 27 November 2002.
African countries thus have a challenging task to evaluate the implications of the EPAs for their regional integration processes. African countries will need to ensure that they do not open their markets to EU member states before they open their markets to their neighbours in Africa. The EPAs do not correspond to the same regional configurations that African countries have been moving towards. A range of challenges thus arise for African economies, including: the different pace of goods liberalisation, both in terms of products and phase down periods; the different rules of origin that may complicate regional integration; and the different rules that may create differences on policy issues, such as export taxes. Africa will have to evaluate how to unravel the complications that have been created by these EPAs and how to ensure that they do not allow these agreements to become stumbling blocks, but instead use the EPAs as building blocks to advance Africa’s regional integration agenda.
The prospect of Brexit will also have implications for the EPAs and the UK’s future trading arrangements with Africa. The Brexit shock will impact on Africa through various channels: trade, FDI, official development assistance (ODA), remittances and tourism. For example, Sub-Saharan African countries have almost doubled their merchandise exports to the UK over the past fifteen years, from US$8 billion in 2000 to about US$16 billion in 2014. In 2014, the UK’s ODA to developing countries amounted to about £12 billion, much of which went to Africa. It is important that Brexit does not disrupt current trade or aid to the world's poorest continent.
African Growth and Opportunity Act (AGOA)
The USA had been following the EU negotiations with the ACP countries with a great deal of interest as it began its own process of reviewing its trade arrangements with Africa, specifically the African Growth and Opportunity Act (AGOA-III) that was set to expire in September 2015. Originally enacted in 2000, AGOA grants qualifying Sub-Saharan African countries unilateral trade preferences for over 6,400 tariff lines. This programme has now been renewed three times with the latest renewal (AGOA-IV) signed by President Obama in June 2015.
Learning from the EU, the USA introduced a slew of provisions in the new AGOA Extension and Enhancement Act of 2015 that demand reciprocity from AGOA beneficiaries, including on specific trade and investment related policy issues required by its lobbies. In addition, the US administration is required to actively encourage African countries to engage in a dialogue with the US Trade Representative with a view to transforming the existing one-way preferential trade system enjoyed by AGOA beneficiaries into a two-way reciprocal free trade agreement.
It is also most likely that the template for the reciprocal free trade agreements will come from the recently concluded TPP negotiations where the USA has already agreed on a slew of trade issues including tariffs, trade rules and regulations, which go well beyond that covered or contemplated in the WTO Doha Round. In addition, the current debate in the US Congress over the TPP and TTIP, if successful, will lead to more than two-thirds of world trade being captured in these new trading blocs and the consequent erosion of preferential access into the US market for current major beneficiaries of AGOA, such as South Africa, and other Sub-Saharan African countries.
The implications of the new AGOA Extension and Enhancement Act of 2015, and the impact of the US led mega-regional (TPP) and mega-bilateral (TTIP) is that the 10-year extension of AGOA benefits may not be assured over this period, unless African countries acting together persuade the US Congress to maintain AGOA-IV until its current expiry date of 2025. Thus current export beneficiaries of AGOA should be cautious about making long-term investment plans. African countries will need to intensify their lobbying in the US Congress to make AGOA more development friendly and supportive of African regional integration.
Competing approaches on African economic integration
While Africa has made considerable progress in building an ambitious programme of action to integrate the continent in the past few years, there remain competing paradigms for African economic integration, which have diverted Africa’s attention from its development integration path. It is for this reason that it is important to revisit the debate and set out clearly the path that Africa will need to travel to succeed in its objective of development integration. Two main approaches to regional integration are discussed: linear integration and open-regionalism supported by the World Bank, and ‘development integration’ advocated by UNCTAD, the UNECA and other writers.
A recent World Bank (2015) study uses the global value chain (GVC) narrative as its analytical framework and argues that while Africa has made significant progress in increasing growth, the main strategy to advance poverty reduction should be to: increase its role in GVCs by focusing on the production of intermediate goods; liberalise its tariff regime, not only to its African neighbours but also to all other third countries; and focus on developing a Services Hub in Southern Africa. The report argues that African countries should not only be opening their markets to their neighbours in Africa, but also opening their markets to all other countries as well in a so-called ‘openregionalism’ approach.
This approach to development policy is similar to the structural adjustment policies (SAPs) advocated by the World Bank in the 1980s and the 1990s. The SAPs required countries to liberalise trade, deregulate their financial markets, privatise SOEs, and reduce social expenditure. More recently, the World Bank has admitted that the SAPs had gone too far, resulting in deindustrialisation in a number of African countries. This approach to regional integration has long been critiqued by several studies. As an alternative these writers have called for a ‘development integration’ approach that stressed the need for ‘macro and micro co-ordination in a multi-sectoral programme embracing production, infrastructure and trade’. In addition, Davies argued that, to ensure a more equitable balance of the benefits of regional integration, trade integration would need to be complemented by regional industrial development to compensate the least developed countries in a regional integration project. This approach to regional integration has gained increasing support. UNCTAD, in its 2013 report, argued that African countries should adopt an approach to regional integration referred to as ‘developmental regionalism’. More recently, the UNECA argued that ‘trade policy which exposes infant industries to competition can lead to de-industrialisation’. The UNECA report emphasises the need for trade to serve as an instrument of accelerated industrialisation and structural transformation in Africa, rather than an end in itself.
African countries have made considerable progress in increasing intra-regional trade, rising from a mere 10 per cent in 1995 to 18 per cent in 2014. This increase is still low compared to other regions. Intra-regional trade accounts for 70 per cent of the EU’s total trade. For North America, intra-regional trade accounted for 50 per cent of its exports, and in Asia 52 per cent of its exports was within Asia in 2014. African countries have been trying to integrate since the 1980 Lagos Plan of Action. While some regions in Africa have been making significant progress in developing their regional integration processes within the so-called Regional Economic Communities – namely, SADC, EAC, COMESA, ECCAS, ECOWAS, IGAD, UMA, and CEN-SAD – they have tended to follow political impulses rather than economic imperatives and created a complex set of overlapping regional configurations – resulting in a so-called spaghetti bowl of integration.
It is for this reason that African leaders decided to intervene to bring some consistency, integrity and seriousness of purpose to the African integration agenda. On 12 June 2011, the Heads of State and Government of SADC, COMESA and the EAC convened at a Tripartite Summit in Sandton, Johannesburg, to discuss the need for a ‘grand free trade area’ between the regional communities (Davies, 2011). An Action Plan on Boosting IntraAfrican Trade (BIAT) was adopted by the African Union Summit in January 2012. The plan is aimed at increasing intra-African trade and addressing a number of tariff and non-tariff issues, including: trade facilitation, trade policy, productive capacity, trade related infrastructure, trade finance, trade information and factor market integration.
The Tripartite Free Trade Area (T-FTA) was launched on 10 June 2015. The T-FTA will form the basis for an Africa-wide FTA initiative that has three pillars: market access, cross-border infrastructure and regional industrial development. In parallel with the process of the T-FTA negotiations, the African Union Assembly launched the Continental Free Trade Area (C-FTA) negotiations during the 25th Ordinary Summit of Heads of States and Governments on 15 June 2015 in Johannesburg. The benefits of the C-FTA include access to a larger market of more than one billion people and a combined GDP of over US$2 trillion.
In order to achieve the African Union’s vision of ‘an integrated, prosperous and peaceful Africa, driven by its own citizens and representing a dynamic force in the global arena’, the AU Summit in January 2015 adopted Agenda 2063. Agenda 2063 sets out the priority areas for Africa’s development over the next 50 years and calls specifically for a 50 per cent increase in intra-African trade by 2022. The post-2015 development agenda adopted by the United Nations aims at achieving, by 2030, a set of Sustainable Development Goals (SDGs) encompassing social, economic and environmental dimensions. Regional integration of the African continent is essential for both the implementation of the AU’s own goals captured in Agenda 2063 and the UN SDGs. African negotiators will need to ensure that their approach to regional integration draws on the development integration approach discussed above and is applied pragmatically to advance the economic development of the African continent. The EU model has informed African integration. It is important to draw lessons from Brexit, especially ensuring inclusive regional integration and balancing the costs and benefits of integration.
Building the capacity of African trade negotiators to advance the multiplicity of regional, bilateral and multilateral negotiations at the same time is essential. African countries will also need to anticipate the effects of TPP and TTIP.
Faizel Ismail is Adjunct Professor in the School of Economics, University of Cape Town. He previously served as South Africa’s Ambassador to the WTO (2010-2014). The views expressed in this article are those of the author and do not necessarily represent those of the Commonwealth Secretariat.
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New alliance to shore up food security launched in Africa
Representatives of the United Nations Food and Agriculture Organisation and the Pan African Parliament met in Johannesburg to forge a new parliamentary alliance focusing on food and nutritional security.
As over 20 million sub-Saharan Africans face a shortage of food because of drought and development issues, representatives of the UN Food and Agriculture Organisation (FAO) and the Pan African Parliament (PAP) met in Johannesburg to forge a new parliamentary alliance focusing on food and nutritional security.
Monday’s meeting here came after years of planning that began on the sidelines of the Second International Conference on Nutrition organised by the FAO in late 2014.
Speaking at the end of the day-long workshop held at the offices of the PAP, its fourth vice president was upbeat about the programme and what she called the “positive energy” shown by attendees.
“We have about 53 countries here in the PAP and the alliance is going to be big,” she said. “At a continental level, once we have launched the alliance formally, we’ll encourage regional parliaments so the whole of Africa will really come together.”
“This will be a very big voice,” she said on the sidelines of the workshop.
FAO Rome special co-ordinator for parliamentary alliances, Caroline Rodrigues Birkett, said her role was to ensure that parliamentarians take up food security as a central theme.
“The reason why we’re doing this is because based on the evidence that we have in the FAO, is that once you have the laws and policies on food and nutrition security in place there is a positive correlation with the improvement of the indicators of both food and security of nutrition,” she told IPS.
“Last year we facilitated the attendance of seven African parliamentarians to a Latin American and Caribbean meeting in Lima, and these seven requested us to have an interaction with parliamentarians of Africa,” she said.
A small team of officials representing Latin America and the Caribbean had travelled to Johannesburg to provide some details of their own experience working alongside the FAO in an alliance which had focused on providing food security to the hungry in South America and the island nations of the Caribbean.
These included Maria Augusta Calle of Ecuador, who told the 20-odd PAP representatives that in her experience working alongside officials from the FAO had helped eradicate hunger in much of the region.
Caribbean representative Caesar Saboto of Saint Vincent and the Grenadines was also forthright about the opportunities that existed in the developing world to deal with hunger alleviation.
“It’s the first time that I’m travelling to Africa,” he said, “and it’s not for a vacation. It’s for a very important reason. I do not want to go back to the Caribbean and I’m certain that Maria Augusta Calle does not want to go back only to say that we came to give a speech.”
Saboto delivered a short presentation where he outlined how a similar programme to the foundation envisaged by those attending the workshop had drastically reduced hunger in his country.
“In 1995, 20% of my country of 110,000 people were undernourished,” he said. “Over 22,000 were food vulnerable. But do you know what? Working with communities and within governments we managed to drive down that number to 5,000 in 2012 or 4.9% of the population. And I’m pleased to announce here for the first time, that in 2016 we are looking at a number of 3,500 or 3.2%.”, he said.
PAP members present included representatives of sectors such as agriculture, gender, transport, justice as well as health. Questions from the floor included how well a small island nation’s processes could be used in addressing the needs of vastly larger regions in Africa.
“Any number can be divided,” said Saboto. “First you have to start off with the political will, both government and opposition must buy into the idea. If you have 20 million people you could divide them into workable groups and assign structures for management accountability and transparency,” he said.
African delegates queried the processes which the Latin American nations have used to set up structures in particular. Dr. Lahai wanted the Latin American delegates to assist the African parliament in planning the foundation.
“Food security is not only a political issue but a developmental issue,” she told IPS in an interview.
“The first port of call when there are food security issues is normally the parliament. We should be at the forefront of moving towards what is known as zero hunger,” she said.
But major challenges remain. After a meeting in October last year, the FAO had contracted the PAP with a view to targeting hunger in a new alliance. The PAP is a loose grouping of African nations and the members pointed out that they were unable to get nation states to support an initiative without a high-level buy in of their political leadership.
Need of a proper framework
Dr. Lahai was adamant that the workshop should begin addressing issues of structure. She stressed that co-ordination between the PAP, various countries and other groupings such as the Economic Community of West African States and Southern African Development Community should be considered.
“We need a proper framework,” she said. “It’s important to engage our leaderships in this process. With that in mind, I would suggest that we learn a great deal from our visitors who’ve had a positive experience in tackling nutrition issues in Latin America.”
In an earlier presentation, FAO representative for South Africa Lewis Hove had warned that a lack of access to food and nutrition had created a situation where children whose growth had been stunted by this reality actually were in the most danger of becoming obese later in life. The seeming contradiction was borne out by statistics presented to the group showing low and middle income countries could see their benefit cost ratio climb to 16-1.
Africa’s Nutritional Scorecard published by NEPAD in late 2015 shows that around 58 million children in sub-Saharan regions under the age of five are too short for their age. A further 163 million women and children are anaemic because of a lack of nutrition.
The day ended with an appeal for further training and facilitation to be enabled by the FAO and PAP leadership. With that in mind, the upcoming meeting of Latin American and Caribbean states in Mexico was set as an initial deadline to begin the process of creating a new secretariat. It was hoped that this would prompt those involved in the PAP to push the process forward and it was agreed that a new secretariat would be instituted to be headquartered at the PAP in South Africa.
Dr Lahai said delegates would now prepare a technical report which would then be signed off at the next round of the PAP set for Egypt later this year.
This article originally appeared in the Inter Press Service.
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Civil society views on the EAC-EU Economic Partnership Agreement (EPA)
We, the members of Civil Society Organizations working on Trade, fiscal and trade related issues in the EAC, would like to present our observations and recommen-dations in respect to stalled EAC-EU EPA signing.
In a letter (ref.no. CDC.12/129/01F/149 dated 5th July 2016) addressed to the Secretary General of the EAC Secretariat, Tanzania indicated that it was halting her signing of the EPA because of “turmoil” that the EU is experiencing following Britain’s exit. Following that, the signing of the EAC-EU EPA which was scheduled for 18th July 2016 during Nairobi did not happen.
We note that His Excellency Yoweri Kaguta Museveni, the president of the Republic of Uganda has also made it clear that the EAC will not sign the EPA until the EAC presidents are fully briefed on it and have discussed it during the forthcoming EAC Summit in August. As Civil Society Organizations working on Trade, fiscal and trade related issues, we welcome the President’s stand on ensuring that the implications of the EPA on EAC economies and regional integration process is first assessed before a decision on its signing is made.
We wish to reiterate the following concerns which we have been raising since the inception of the EPA negotiations:
1. General implications as a result of extensive liberalization
Under the EPA, the EAC is to liberalize 82.6% of its trade with the EU over the period of between 2015 and 2032. This has the following negative implications:
a) Loss of revenue: According to UNECA (2005), the EPA will result into revenue shortfalls estimated at US $ 32,490,659 for Tanzania; $ 9,458,170 for Uganda; $ 5,622,946 for Rwanda; $ 107,281,328 for Kenya and $ 7,664,911 for Burundi. This revenue shortfall has serious implications on the EAC partner states’ ability to mobilize resources for their development. Therefore, this will lead to EAC’s continued reliance on aid and increased indebtedness estimated by the IMF (as a proportion of GDP) to be 55.4% for Kenya, 42.4% for Tanzania, 41.5% for Rwanda and 37.9% for Uganda as of May 2016.
b) EAC Industrialization at risk: According to research using trade data, majority of EAC partner states currently produce and export on 983 tariff lines. According to former Tanzania’s President, Benjamin Mkapa, when the EPA is implemented, 335 of the 983 products that majority of EAC partner states currently produce would be protected in the EPA’s ‘sensitive list’, but 648 tariff lines would be made duty-free; i.e. the existing industries on these 648 tariff lines would have to compete with EU’s imports without the protection of tariffs. Such a high level of liberalisation visà- vis a very competitive partner is likely to put EAC’s existing local industries in jeopardy and discourage the development of new and infant industries.
c) EAC Agricultural production at risk: Para 2 of Article 68 of the EAC-EU EPA indicates that the position of the EU not granting export subsidies for all agricultural products to EAC Partner States shall be reviewed by the EPA Council after 48 months. We are concerned that EAC economies will be more exposed to EU’s dumping of subsidised agricultural products under the EPA because of the much deeper liberalization in the EPA. According to SEATINI (2016), the 82.6% liberalization that the EAC has committed to under the EPA will affect Uganda’s agricultural product including key starch products, including maize, potato, monioc (cassava) will be liberalised from the current Most Favoured Nation rate of 10% to 0%. This will make it difficult for domestic starch manufactures to compete with high quality goods from Europe.
d) Undermining South-South Cooperation: Article 15 of the EAC-EU EPA obliges the EAC to extend to the EU any more favorable treatment resulting from a preferential trade agreement with a major trading economy/country. This will not only circumscribe the EAC’s external trade relations but will also undermine the prospects of South- South trade which the EAC is aspiring to promote. In addition, the clause is contrary to the spirit of the World Trade Organization’s (WTO’s) Enabling Clause that promotes Special and Differential Treatment for developing countries and South- South cooperation.
e) Threatening of regional integration in Africa: There are parallel ongoing regional integration processes in Africa under the different Regional Economic Communities (RECs), the EAC-SADCCOMESA Tripartite Free Trade Area (TFTA) and the Continental Free Trade Area (CFTA). Under Article 40 of the report on the 4th EU-Africa Summit, the EU pledged an EPA that will foster intra-African trade, Africa’s regional integration efforts and the planned CFTA. However, as former AU Chairperson, Dr. H.E. Dr. Nkosazana Dlamini-Zuma indicated, there are still misgivings on the implications of the EPA on Africa’s development, and as to whether the EPA will be a tool for structural transformation and sustainable development in Africa. This is based on grounds that African countries may end up granting more favourable treatment to a number of EU-originating imports, than to similar African products originating outside their own RECs, hence threatening regional integration agenda.
2. Concerns regarding the specific articles within the EPA
The following are our concerns regarding specific articles within the EAC-EU EPA.
a) Rendez-vous Clause (Article 3): Under this clause, the EAC and EU undertake to conclude the negotiations in areas of services, investment, government procurement, trade and sustainable development, intellectual property rights and competition policy and conclude within five years upon entry into force of the EPA. This commitment is neither required by the Cotonou Agreement nor for WTO-compatibility, and the issues therein will further shrink EAC partner states’ policy space needed for sustainable development in the following ways:
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Government Procurement: Under this, the EAC will be required to liberalise government procurement. Uganda has not signed or developed a formal position on signing the GPA yet it will soon be engaged in discussions and negotiations about it should the EPA be signed. This will curtail the scope and space for the government to use procurement as an instrument for development, especially in giving preferences to local companies for the supply of goods and services and for the granting of or concessions for implementing projects.
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Investment: Under this, the Uganda will be required to liberalize investment and accord EU investors the same treatment with respect to acquisition of property, expansion, management, conduct, operation, and sale or other disposition of investments in the EAC territory, like that accorded to the Ugandan Investors. This will be constrain Uganda’s ability to promote local investors or local industries, which doubtlessly need assistance to grow in order to be able to compete with foreign companies which are already more established.
b) Export duties and Taxes (Article 14): To a larger extent, this Article prohibits either parties to introduce any new duties or increase existing ones in connection with the exportation of goods to either Party. The logic of export taxes is to encourage producers to enter into value-added processing, hence encouraging diversification and the upgradation of production capacities. While the Article allows EAC Partner States to impose, after notifying the EU, a temporary duty or tax in connection with the exportation of goods, the time granted for such an imposition (48 months) is so limited to enable EAC partner states effectively nurture their industries and enhance her competitiveness. Moreover, at the Word Trade Organisation (WTO), export taxes are completely legal. Also, there is ample evidence that all today’s rich countries got rich through using nationalistic policies (e.g. tariffs and restrictions on foreign trade) in order to nurture their infant industries, and only liberalized after they had attained a level of competitiveness.
c) More Favourable Treatment (MFN) resulting from a Free Trade Agreement (Article 15). Under this article, the EAC is obliged to extend to the EU any more favorable treatment resulting from a preferential trade agreement with a major trading economy/country. This circumscribes EAC’s external trade relations and will undermine the prospects of South- South trade which the EAC is aspiring to promote. In addition, the clause is contrary to the spirit of the WTO’s Enabling Clause that promotes Special and Differential Treatment for developing countries and South- South cooperation.
d) Domestic policy measures (Article 68): Falling under the Agriculture chapter, this article states that the EU shall not grant export subsidies for all agricultural products to EAC Partner States, as from the entry into force of the EPA. However, this prohibition shall be reviewed by the EPA Council after 48 months. This means that after 48 months, EAC economies will be more exposed to EU’s dumping of subsidised agricultural products to the detriment of agricultural producers in the EAC.
3. Kenya’s case
The European Commission (EC) has amended Annex 1 to the Council Regulation No 1528/2007 to state that the European Commission will take appropriate action to remove Kenya from Annex I if it has not ratified its agreement by 1st October 2016. According to the Kenya Flower Council, the removal of Kenya from Annex A will mean imposition of a tariff of 12% (MFN) or 8.5% (GSP) leading to an estimated revenue loss to Kenya of about US$193.8 Million per year. While this is a huge loss to the Kenya economy, it is vital that, for the future development of the region, the implications of the EPAs on the entire EAC economy are considered. We also propose that:
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The EAC region be treated by the EU as an LDC region which should benefit from Duty Free Quota Free Market Access given the fact that the region consists of four (4) LDCs and only one developing country. This is in line with the African Union proposal for a common and Enhanced Trade Preference System for LDCs and Low Income Countries.
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Kenya be granted an enhanced Generalized System of Preferences (GSP+) where her top 27 exports to the EU including the much cited flower and horticulture exports will access the EU market duty free and quota free. This will necessitate Kenya’s ratification of the Genocide and International Labor Organization Conventions 87 which are already reflected in her legal practice.
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The EAC recalls section C Para 20 of the ACP guidelines for negotiating the EPA which states that “irrespective of the outcome of the EPA negotiations, with respect to trade relations with the EU, no ACP State should be worse off in the post-2007 period than under the current ACP-EU trade arrangements”. Under such circumstances, failure to sign the EPA should note leave either Kenya or any other EAC Partner State in a worse situation than it was before. The EAC should therefore call upon the EU to be true to its promises.
Therefore, taking note of the need for regional integration in the EAC which the EPA, among its objectives is meant to promote, we call upon Uganda to among other issues:
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Reconsider signing the EPA especially given its implications on EAC’s in general and Uganda in particular, and given the changes in the EU with the exit of Britain
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Engage other EAC partner states to explore the alternatives for Kenya’s access of the EU market so as to ensure that Kenya does not lose out from not signing the EPA;
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Explore an alternative mutually beneficial trade relationship with the EU.
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New Panama Papers series exposes secret deals in Africa
New revelations published on 25 July by the International Consortium of Investigative Journalists (ICIJ), in collaboration with more than a dozen news organizations in Africa, expose fresh details about the misuse of corporate secrecy and hidden wealth in Africa, the world’s poorest continent.
Released nearly four months after ICIJ and more than 100 media partners first published what is now known as the Panama Papers, 11.5 million files from the Panama-based law firm, Mossack Fonseca, fresh investigations include new details about the middleman at the center of a probe into hundreds of millions of dollars in suspected bribes paid for oil and gas contracts awarded in Algeria.
The files also reveal the offshore assets, including a luxury yacht and jet, of a Nigerian aviation and oil magnate who is reportedly close to a former oil minister and has recently had some of his assets seized as part of a $1.8 billion probe into oil sales.
The revelations published by ICIJ and media partners include investigations from countries that are being examined for the first time, including Tanzania, Burkina Faso, Ghana, Mozambique and Togo.
Businesses in 52 of Africa’s 54 countries used offshore companies created by Mossack Fonseca, a law firm that specializes in creating companies often sold and used for anonymity or lower taxes. In 44 countries, offshore companies were used to assist oil, gas and mining deals and exports, concerning advocates and governments in a continent where many nations rely on revenue from natural resources. In total, the Panama Papers include more than 1,400 companies whose names alone indicate activity in the extractive industries. Although many of these companies do legitimate business, ICIJ identified 37 companies within the Panama Papers that have been named in court actions or government investigations involving natural resources in Africa.
In the oil-rich North African country of Algeria, for example, investigations continue into nearly $275 million in alleged bribes paid through a cluster of offshore companies to secure energy contracts. Twelve of the 17 offshore companies listed by Italian prosecutors as belonging to the alleged middleman, Farid Bedjaoui, were set up by Mossack Fonseca. Italian investigators described one of those companies, Minkle Consultants S.A., as a “crossroads of illicit financial flows” that channeled millions of dollars from subcontractors to an array of recipients whose identities are still being untangled.
In a written response to ICIJ, Mossack Fonseca said it follows “both the letter and spirit of the law. Because we do, we have not once in nearly 40 years of operation been charged with criminal wrongdoing. We’re proud of the work we do, notwithstanding recent and willful attempts by some to mischaracterize it.”
The release of the new investigations is a major collaboration of media organizations in Africa that range from traditional newspapers in Namibia, to popular radio stations in Ghana and to innovative start-up websites in Morocco. The reporting partners include journalists who have previously published stories as part of Panama Papers as well as journalists from Ghana, Tanzania, Niger, Mozambique, Mauritius Burkina Faso and Togo who are publishing stories for the first time. Many of the journalists worked in collaboration, exchanging contact information and court documents and with the editorial assistance of the African Network of Centers for Investigative Reporting, an ICIJ partner.
ICIJ, in partnership with the Pulitzer Center on Crisis Reporting, has also published an interactive quiz game in conjunction with the new series of investigations. Continent of Secrets highlights the widespread use of offshore companies by a variety of businesses across Africa, and challenges players to use their knowledge of the continent to discover more about the impact of offshore financial secrecy.
Africa’s offshore secrets revealed as investigations continue
In just over 48 hours since ICIJ and more than one dozen media partners across Africa launched a wave of new reporting on Panama Papers with a focus on the world’s poorest continent, new investigations have generated strong public interest and attracted interest from governments.
The investigations exposed how offshore companies have been used to siphon money out of Africa, particularly in the oil, gas and mining industries. ICIJ found extractives industry businesses in 44 out of Africa’s 54 countries using offshore financial structures detailed in the Panama Papers, including 37 companies linked to court actions or official investigations.
Advocacy groups said the latest round of Panama Papers stories highlighted the serious impact offshore secrecy has on Africa.
“This gives a window on to the murky underworld of secret deals and sham companies that is robbing people in the world’s poorest continent of their futures,” commented the British nongovernmental organization Global Witness.
“Rather than being used to build hospitals and schools, these huge sums are siphoned off through offshore companies, helped by lawyers and other professionals, and then spent on luxury goods and property in the US and UK.”
Oxfam America praised ICIJ’s and its partners’ work, and repeated their call for a bipartisan bill in the U.S. Congress that would bring more transparency to offshore schemes exposed by the Panama Papers investigation.
“The widening Panama Papers scandal shows how urgently we need Congress to pass these common sense reforms,” said Tatu Ilunga, Oxfam America’s Senior Policy advisor on tax and extractive industries.
“The extractives industry has been shown to be a hugely corrupting influence at the heart of many of these scandals. … As a result, some of Africa’s most resource rich countries are also its poorest and most unequal.”
In addition to ICIJ’s own stories, journalists who collaborated with ICIJ have published at least one dozen new investigations with more to come:
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In Egypt, the government said it was unaware of the offshore activities of a company with which it signed a lucrative oil deal in the Gulf of Suez;
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In Togo, cement executives used offshore companies to manage part of their vast West Africa business empire;
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Kenya’s Ministry of State for Defence signed a contract with an offshore firm that, in the secret files, explicitly stated its purpose was “tax avoidance;”
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A cousin of the King of Morocco was linked to as many as 30 offshore companies, reportedly used for stock market betting designed for foreign investors, not Moroccans;
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A mysterious company with no online presence or physical offices in Botswana has been accused of unsustainable fracking in Botswana’s Kalahari Desert;
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Two Namibian businessmen with ties to an infamous arms deal were identified as clients of Mossack Fonseca;
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In South Africa, a major bank found itself in a muddle by denying any ties to Mossack Fonseca yet recording nearly 25,000 results in the Panama Papers database;
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In Mali, a French mobile phone company would not explain why it paid hundreds of thousands of dollars to a shell company for Mali’s first mobile phone network, or disclose who the money was for;
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In Burkina Faso, a discreet American pilot of the country’s former president, who quit office in 2014 following mass protests, used an offshore company for a property deal in the United Kingdom;
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New details emerged in a controversial land deal in Mozambique that may displace thousands of people but about which very little, including the true identity of executives behind the companies, is known;
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In Algeria, a powerful executive was an early customer of Mossack Fonseca, reportedly in breach of Algerian laws that prohibited offshore holdings;
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In Niger, the man behind a major transport company who is reportedly close to the country’s ruling political party, used an offshore company to receive revenue from his buses across the Sahara Desert.
More stories will be published in the coming days in Tanzania, Mauritius, Ghana, Zimbabwe and Senegal. Together, this series represents ICIJ’s biggest journalistic collaboration of African media outlets to date. Many of ICIJ’s partners worked in editorial collaboration with the African Network of Centers for Investigative Reporting (ANCIR).
Some of ICIJ’s partners in Africa have already reported that government agencies have been in contact to express surprise at the level of detail about offshore activity contained within the Panama Papers. Other reporters said there are indications that authorities may open inquiries into some of the named companies and individuals.
In Niger, the central African landlocked country, newspapers carrying the exclusive investigation by Moussa Askar, director of L’Evenement, sold out completely.
The leaderboard on ICIJ’s Continent of Secrets game (supported by the Pulitzer Center on Crisis Reporting) has also filled quickly, as more than 2600 players from about 170 countries have completed the game. The top score so far is 6640, set by a player who calls themselves L’Ouest from the United States. The top 10 players so far are from the U.S., New Zealand, Belgium, Austria, Norway and South Africa.
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Supply chain considerations front of mind for retailers following Brexit
The origin of the products on British shelves could change as retailers adjust their supply chainsfollowing the UK’s vote to leave the EU, finds new research published by Barclays.
A survey of retailers carried out after the EU referendum, shows that many are already reviewing how their supply chains operate, as a result of the vote to leave the EU.
Retailers are looking to build more efficient supply chains (76%), and are considering changing suppliers (30%) and sourcing from different countries (28%).
In a potentially positive sign for the British economy, a third of retailers (32%) predict that they will source more from the United Kingdom, with only 12% expecting a reduction. Asia could also be a winner; 52% expect to increase supply chain activity in India and 43% in China. Consumers can expect to buy more products with an African supply source (38%), but Europe fares less well, with 43% of respondents anticipating a reduction in what they source from the region.
Commenting on the findings, Ian Gilmartin, Head of Retail & Wholesale at Barclays, said: “Getting your supply chain strategy right can be the key to success for retailers. It’s a mixed picture, but there are some encouraging findings in our post-Brexit survey. Retailers are not overly pessimistic about the impact of the vote on their supply chains, and yet they are still thinking carefully about what they need to do now, in particular with regards to which regions they source from and their foreign exchange strategy.
“It’s also reassuring to note that most retailers don’t intend to pass on costs to their customers and will instead look for other ways to tackle supply chain issues. The really significant news is that a third of retailers surveyed intend to increase domestic supply chain activity. At a time when we’ve all got to pull together to encourage growth in the UK this is a very positive sign, and at Barclays, we’re committed to doing all we can to support our clients with their supply chain strategy and to help businesses thrive.”
There are mixed feelings amongst retailers when considering the effect of the referendum vote on their supply chains. Although half (52%) think that their business is unprepared for Brexit, a small majority (56%) actually think that Brexit will have no real impact (41%) or a positive impact (15%) on their supply chain.
Cost management was already high on the agenda of finance directors before the EU vote. However, there are some reassuring findings on the cost implications of the referendum result, as most retailers (59%) expect supply chain costs to remain the same or just increase slightly. Consumers will also be relieved to discover that only a third of retailers (31%) expect cost changes to result in price increases for customers.
As might be expected following the recent moves in the currency markets, foreign exchange concerns are high on the list of supply chain considerations. Four in five retailers (81%) expect the effect of Brexit on foreign exchange rates to have a negative impact on their supply chain and 70% will be reviewing their currency hedging strategy in light of the referendum result.
A separate survey of retailers and consumers carried out before the Brexit vote found that close to two thirds of retailers (63%) believe that their supply chains are not cost-effective.
The continued rise of online shopping and the associated challenges of meeting consumer expectations for faster delivery times and multiple delivery options is a key supply chain issue (78%). In response, the average number of delivery options from large retailers is expected to increase from seven today to ten by 2019, with greatest customer demand being for faster delivery (59%), Sunday delivery (43%) and specific timeslots (37%).
Likewise the unpredictable nature of consumer demand is a significant consideration for retailers’ supply chains (72%). Consumers have their own concerns, 63% stating that retailers increasingly seem to stock products which are unsuitable to the weather.
Gilmartin added: “The boom in online retail puts huge pressure on supply chains. Unpredictable consumer demand, coupled with rising expectations around delivery options and speed of fulfilment mean that cost pressures are going to remain an issue. It’s important that retailers work with their suppliers to make sure consumers receive the level of service they want, and indeed now expect as standard, in the most cost-efficient way possible for the retailer.”
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Business cooperation between Chinese and African entrepreneurs: Remarks by the AU Commissioner for Trade and Industry
Below are the remarks by African Union Commissioner of Trade and Industry, H.E. Fatima Haram Acyl, at the Seminar on Business Cooperation between Chinese and African Entrepreneurs in Beijing, China, 28 July, 2016
It is a pleasure to be here, representing the African Union Commission on this important occasion under the umbrella of the Forum for China-Africa Cooperation (FOCAC).
China has grown to be a strategic business and economic partner of Africa. Foreign direct investment from China to Africa has exponentially risen from $7 billion in 2008 to $26 billion in 2013. China has been Africa’s largest trading partner for years, with trade in 2014 reaching $222 billion, estimated to reach US$385 billion in 2016.
Like any other economy of the world, Africa needs investments from business people and entrepreneurs like you to grow. We are grateful for your attraction to our dear Continent, Africa. We are aware of the challenges you face in working thousands of miles away from the environment that you are most familiar with, and on terrority where you have no jurisdiction. But we are also aware of how clever Chinese business people and entrepreneurs are by analysing and understanding the equation of risks and returns, and this is what differentiates you from others.
African entrepreneurs stand to learn from your business model as they strive to engage more widely and effectively in the global market.
Today we know that at least 2,500 large and medium Chinese companies have registered to operate in Africa. This indicates that our business relationship is maturing and transitioning from a simple exchange of consumer goods against primary resources or raw materials, to a business partnership. As Africa develops its own productive capacities, it will seek partnership with Chinese entrepreneurs and businesses to provide material inputs, technology, production know-how, investment capital, and training. That is the benefit of foreign direct investment, which governments or the public sector alone cannot provide.
Our partnership with your government, the Government of China, has been grounded in the need to alleviate poverty, improve people’s lives on both sides, protect the environment, uphold social peace and prosperity and mutual learning. In December, Chinese president Xi Jinping has taken this partnership to a new level by pledging $60 billion loan and aid package to Africa over a two-year period, in ten major projects. There is no other better opportunity to boost China-Africa business cooperation than implementing the pledge made by your President. Tomorrow we will be meeting to follow up on progress in a number of areas, which open up such business partnership opportunities. Those include:
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Investments in health, which will build capacity on the continent for early detection, prevention and response to infectious diseases;
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Investments in education generally and technical and vocational education and training (TVET) in specific. This is an area of comparative advantage for China, and an opportunity to African-Chinese joint ventures. It also benefits both Africa and China more generally as those centres create the skills required for businesses to perform properly.
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Investments in agriculture, agri-business, climate change/environment; and the blue-ocean economy.
Under the FOCAC Framework we are expected to prepare Invest in Africa and other Platforms to make this exchange possible. I invite us to start the preparations for this Platform to take place as soon as possible. We also need to discuss concrete mechanisms to support African exporters to China, and Chinese investors and trade partners with Africa. African countries and their African Union Commission pledge to take our trade and investment relations to another level. Our Continent has many success cases in the area of facilitating investment, including in areas of agriculture and infrastructure, and we aim to replicate them in order to attract more investments and trade partners from countries all over the world, like China.
We look forward to welcoming you in Africa and believe that together we can make the world a better place for present and future generations, both Chinese and African.
I thank you.
tralac’s Daily News Selection
The selection: Thursday, 4 August 2016
Featured tweet, @ECA_Lopes: Tariff protection within Africa averages about 8.7%, but only 2.5% to the rest of the world.
Malawi: Government contests COMESA court ruling (The Times)
The Malawi Government will appeal against a ruling in which the First Instance Division of the COMESA Court of Justice found that the regional court has jurisdiction to hear a case in which Malawi Mobile Limited sued the government and the Malawi Communications Regulatory Authority for an illegal termination of a contract. COMESA Head of Corporate Communications, Mwangi Gakunga, has confirmed that the Appellate Division of the COMESA Court will sit in October this year to determine the case. The court earlier dismissed the preliminary application by the Government of Malawi which contended that COMESA Court lacked jurisdiction to hear the case.
AGOA exporters push for less travel restrictions to US (New Times)
Rwandan beneficiaries of the African Growth Opportunity Act, a trade preference programme between the US and select African counties, have called for easier access to US visas saying the rigorous process has kept them out of the market. The call was made when officials from the Trade and Industry ministry and US Ambassador to Rwanda Erica Barks-Ruggles launched the renewed AGOA action plan, a year after the US government decided to renew the free trade framework for sub-Saharan African countries by 10 more years beginning 2015. Although the number of Rwandan exporters to the US remains relatively low compared to other countries such as Nigeria, Angola, Kenya and South Africa, the traders say there is need for more technical support from the Rwandan side and mitigation of the lengthy bureaucracy in acquisition of visas on the US side.
President Obama expands membership of the President’s Advisory Council on Doing Business in Africa (White House)
In light of the numerous US Government initiatives and activities to promote expansion of the commercial relationship, the breadth of US private sector engagement in Sub-Saharan Africa, and the range of issues on which future advice may be requested, broader representation of the diversity of private sector viewpoints, experiences, and knowledge on the Council is warranted. Thus I am increasing the membership of the Council. Sec. 2. Amendment to Executive Order 13675. Executive Order 13675 of August 5, 2014, is amended in section 3(a) by striking “shall consist of not more than 15 private sector corporate members” and inserting in lieu thereof “shall consist of not more than 26 private sector corporate members”.
Burundi’s breach of EAC free trade regime will hurt own economy, says Rwanda’s trade minister (New Times)
The government has condemned Burundi’s recent decision to ban exports destined to Rwanda saying it was a serious breach of EAC trade agreement but said it will have no impact in the Rwandan economy. Addressing a news conference yesterday on regional and international trade, the Minister for Trade and Industry, Francois Kanimba, stated that the decision would not in any way affect Rwanda’s economy. [Regional traders decry hurdles on Central Corridor (IPPMedia)]
Harmonise EAC tax regime, states told (The Citizen)
Tax harmonisation across the EAC member states is the way to go if the countries are to attain economic union, businesses opine. In trying to rectify these disparities, experts from the member states have resumed discussions on how harmonisation of domestic taxes will be handled. The East African Business Council executive director, Ms Lillian Awinja, told a technical working group meeting in Arusha on Tuesday: “Tax harmonisation is an element that runs through all stages of EAC integration, including the EAC customs union, common market, monetary union and political federation.” However, Ms Awinja said partner states have retained the mandate to freely decide on the domestic taxes. [Business council cautions on domestic tax harmonisation (Daily Monitor)]
Ghana’s Parliament ratifies EPA with EU (Citi)
Ghana’s parliament has ratified the Economic Partnership Agreement between government and the European Union. Government earlier signed onto the agreement (interim) but was awaiting ratification from Parliament as stipulated in the country’s laws in relation to international agreements. Trade and Industry Minister, Dr. Ekow Spio- Garbrah has however rejected claims that signing an interim Economic Partnership Agreement with the European Union will collapse indigenous businesses in the manufacturing sector. Speaking to Citi Business News, Dr. Spio-Garbrah rather challenged locally based manufacturers to improve the standards of their products to enable them export to the EU.
Promoting cross-border trade in the EAC: the role of Sauti
Sauti, meaning voice in Swahili, is a mobile-based trade information and social accountability platform for SMEs engaged in cross-border trade in the East African Community. Our mission is to empower cross-border traders to exercise their rights as citizens of the EAC – able to trade legally, safely and profitably across borders. [The web startups looking to cash in on 1 billion African consumers (The Guardian)]
Namibia takes knocks from Angola’s economic meltdown (Shanghai Daily)
The Angolan economic bubble burst caused by the fall of crude oil prices in 2014 is affecting Namibia’s real estate, schools and medical centers. About 11 sectors - health care, education, banking, retail, accommodation, tourism, construction, education, and banking - are feeling the cold from the economic meltdown in Angola. Accommodation facilities - hotels and lodges - have so far recorded about 90% revenue decline since the Angolan economy started to slow down. More than 20 Namibian companies involved in the trucking business have also collapsed, while business in the transport sector slowed down by 70%.
How will SA respond to Zimbabwe’s import restrictions?: tralac’s JB Cronjé comments on the latest trade restrictive measures implemented by Zimbabwe and the South African government’s response
Côte d’Ivoire launches new platform to improve business regulation (World Bank)
Billion-dollar map may prove key to unlock Africa’s future (The National)
Now Malawi is hoping mineral discoveries will see new mining ventures opening up, too. One such hopeful is Mkango, a Canadian company focusing on rare earths. These are a special breed of minerals that are increasingly important in hi-tech applications. The company was also assisted by a wealth of free data made available by the World Bank’s geo-mapping project. To date more than $31m has been spent on the project, says Mr Banda. The information has helped Mkango in its search for rare earths, but also revealed other minerals, Mr Dawes says. Meanwhile, other countries should now also benefit from geo-mapping. Soon the aerial photographing of Zambia will begin, and others will follow thereafter. A big advantage of this being a World Bank initiative is that all the data is publicly available
Kenya seeks UN help to secure oil, gas riches beneath its sea bed (Business Daily)
The government is seeking the United Nations’ authority and expertise to map out Kenya’s territorial waters to enable the country exploit huge oil, natural gas and mineral reserves believed to be underneath the Indian Ocean sea bed. Attorney-General Githu Muigai on Monday told the New York-based United Nation’s Commission on the Limits of Continental Shelf (UNCLCS) — the body mandated to determine countries’ maritime boundaries — to fast track the demarcation of the sea borders to pave the way for Kenya’s search for riches in her territorial waters. Against the back drop of the push, Kenya is separately battling a court case before the UN’s top court over a maritime border dispute between it and Somalia. The AG said Kenya would be arguing its case against Somalia’s claim next month in The Hague. The area with potential reserves of oil and gas stretches more than 100,000 square kilometres.
Katanga: Tensions in DRC’s mineral heartland (ICG)
To address distrust between the centre and provinces, financial flows need to be more regular, transparent and in line with statutes. National auditors and civil society must be better empowered to monitor these flows and their use. Resolving the DRC’s national and provincial problems ultimately requires trust and dialogue, as well as electoral progress. The stalled dialogue initiative, mediated by Edem Kodjo of the African Union, should be pursued and other channels of communication kept open to allow elite-level talks on national and provincial interests. Congo’s international partners should support dialogue, as the AU is doing, and ensure that the critical question of centre-province relations is kept on the table.
China warns on $60bn package (The Times): Director of African Affairs in the Ministry of Foreign Affairs, Lin Songtian, told the media on Sunday after the three, day Coordinators Conference and a tour of Suzhou Industrial Park that his government is concerned that while some countries are making much progress others are moving slowly. “If some people will not catch the train the train will not wait for them,” said Lin who revealed that some countries are only showing more interest on grants, concessional loans and loan cancellation requests. “About $30bn of (the $50bn) agreements are commercial loans and foreign direct investments by Chinese financial institutions and investors. We’re paying more attention to industrialisation and agricultural modernisation so this requires private sector participation,” said Lin.
China stresses implementation (FPA): Chinese State Councilor Yang Jiechi said: “We Chinese often say that planning contributes 10 percent to the success of an undertaking while 90 percent of the success lies in implementation. In this first year after the Johannesburg Summit, it is our shared expectation to see the early implementation of its outcomes so as to deliver more benefits to the Chinese and African people.” Yang was quick to point out that more than 30 African countries have established internal coordination mechanisms and designated ministerial-level coordinators to implement the outcomes, adding, “Presidents and prime ministers of several countries have even taken on the responsibility themselves.”
Related: Text of President Xi Jinping’s congratulatory message, State Councilor Yang Jiechi’s keynote speech, Joint Statement of Coordinators’ Meeting, China signs production capacity co-op framework agreement with Zimbabwe (The Herald)
Brazil seeks closer ties with East Africa (EAC)
Brazil has expressed willingness in promoting stronger ties with the East African Community especially in the areas of trade, investments and diplomacy. Brazil’s Ambassador to Tanzania and the East African Community, Carlos Alfonso Iglesias Puente, said the Brazilian business community already has a significant presence in Tanzania and Kenya especially in construction, energy and solid waste management sectors.
Brain drain of African doctors costs region over Sh200bn (Business Daily)
Kenya’s Education Cabinet Secretary, Dr Fred Matiangi, has called upon African governments to curb the number of doctors moving to work abroad that has cost sub-Saharan Africa up to $2bn (Sh203bn) invested in training the clinicians. He said Ethiopia, Kenya, Malawi, Nigeria, South Africa, Tanzania, Uganda, Zambia and Zimbabwe have suffered the worst economic loses due to the clinical brain drain while Australia, Canada, Britain and the United States have benefited the most from recruiting doctors trained in Africa. Matiangi was speaking during the 6th Annual Medical Education Partnership Symposium in Nairobi. [@meharitaddele: In AU experts’ meeting to initiate process of drafting the Protocol on Free Movement of People in Africa]
The role of road networks in addressing fragility and building resilience (pdf, AfDB)
International development partners need to systematically examine transport master plans and operations through a fragility lens. This means using a broader set of criteria to judge the value of projects, making the reduction of fragility as important as the economic issues that currently dominate policy. This would necessitate providing new financial leverage mechanisms for projects that may have an important role to play in state-building, but would receive insufficient attention if only short-term economic returns were considered.
Gender equality in agriculture: what are really the benefits for sub-Saharan Africa? (pdf, AfDB)
While the extent of gender productivity gaps in SSA is well documented, a crucial ingredient is often missing from studies analyzing gender bias in agriculture: the assessment of potential benefits that would be expected if we were to decrease or outrightly eliminate gender inequality in agricultural productivity. For policy purposes, this is an important shortcoming. Indeed, it is particularly challenging to get policy makers committed to closing gender yield gaps if they are not convinced of the real benefits from allocating national resources to the fight against agricultural gender bias. [The cost of hunger in Africa: the social and economic impact of child under-nutrition on Ghana’s long-term development (pdf, UN)]
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G20 Hangzhou Summit 2016: Proposals for trade, investment, and sustainable development outcomes
Leaders from the Group of Twenty (G20) major economies will gather in Hangzhou, China in September 2016 to address a range of shared governance priorities.
This year’s Chinese presidency has identified trade and investment as a key priority for the 2016 summit, interconnected to and supportive of three other focus areas including growth, economic and financial governance, and inclusive and interconnected development. The International Centre for Trade and Sustainable Development (ICTSD) has provided inputs into the G20’s consultative process around trade and investment in order to generate ideas for its work in the mid and long term.
Successive G20 leaders’ communiqués have recognised the importance of trade and investment in driving economic growth, job creation, and sustainable development. The G20 has also affirmed the need to work to ensure that trade agreements whether bilateral, regional, and plurilateral contribute to a stronger multilateral trading system.
This volume brings together a series of short papers by leading experts and practitioners that evaluate future contributions the G20 could make to global governance in trade and investment. The pieces variously focus on how the G20 might continue to work towards strengthening and ensuring coherence between the WTO and the wider international trading system, boost global growth, refine investment rules, respond to different views on the speed and nature of economic integration, and foster inclusive global value chains that offer viable development paths, all underpinned by a commitment to sustainable development as a guiding compass for global economic governance and the trading system.
China’s G20 Presidency: Proposals for the Global Trade and Investment Regime in the 21st Century
by Ricardo Meléndez-Ortiz, Chief Executive, ICTSD
“What’s past is prologue,” so goes the saying in Shakespeare’s The Tempest. After eight years’ development, the summit of the Group of Twenty (G20) major economies has gradually become the premium forum for global economic cooperation, now viewed as a critical fixture on the international agenda. Presently, the G20’s achievements, criticisms it faces, and recent global market rout serve as an important backdrop for this year’s Hangzhou Summit.
China has highlighted “robust trade and investment” as a key theme in a document announcing the priorities for this year’s G20 summit, interacting with and complementary to three other focus areas, including “breaking a new path for growth,” “more effective and efficient global economic and financial governance,” and “inclusive and interconnected development.”
This article provides selected ICTSD and E15Initiative policy recommendations to the G20 Hangzhou Summit and beyond, member governments, and relevant stakeholders with respect to the Chinese Presidency’s trade and investment theme.
Enable the WTO to Better Serve and Lead the Global Trade and Investment Regime
The World Trade Organization (WTO) concluded its Tenth Ministerial Conference (MC10) in Nairobi, Kenya, last December with a pivotal outcome: an agreement to disagree on how, or indeed whether, to continue its Doha Round of multilateral trade negotiations. In practical terms, this has left the international community without a multilateral trade agenda, and raises both challenges and opportunities for the 2016 G20 summit.
Many of the challenges and divisions between members spotlighted in Nairobi are not new, however, but instead stretch back over a decade that has seen the WTO outcompeted in relevance by other fora. On the one hand, major liberalisation has occurred in world trade since 2001, with the World Bank estimating a 30 percent average reduction of tariffs affecting all regions and larger cuts in several major emerging economies. Such liberalisation has two main sources, unilateral policies seeking competitive advantages in a world economy in which imports matter as much as exports, as well as bilateral and regional agreements of deeper integration. On the other hand, the WTO has been faced with tectonic changes in world markets, the rapidly-expanding use of digital technologies, and more efficient transportation. Some of these shifts have been of a major scale, responding to China’s rapid insertion into the international rules-based liberal economic order. And some have led to the emergence of international production networks – so called global value chains (GVCs) – with the ensuing significant evolutions of trade and investment relations, and a corresponding need for regulatory cooperation frameworks.
Against this backdrop – characterised by extraordinary changes in the real and political economy of trade and investment and competition from non-WTO fora, including emerging mega-regionals setting new benchmarks for standards and policy coverage – the WTO negotiation function stalled, resulted in the Nairobi outcomes, and is in evident need of reorientation.
If properly deliberated, this challenging environment could provide opportunities for G20 leaders and the trade policy community to rethink and re-craft the future of the multilateral trade system. The G20 should continue to support the WTO, including through helping the institution regain its centrality by repositioning itself in the broader and complex global trade and investment system of the 21st century.
The wider system encompasses both intergovernmental institutional arrangements in the trade and investment areas as well as various voluntary arrangements and rules initiated by private and non-governmental institutions. Broadly speaking, intergovernmental trade and investment arrangements include the multilateral trade system that has the WTO as its backbone, binding regional, plurilateral, and bilateral trade and investment agreements, and other non-binding trade and investment efforts – such as the One Belt, One Road (OBOR) initiative to boost connectivity and economic development in Eurasia – as well as interventions into the trade and investment space from other economic, development, or environment-focused institutions. Non-governmental, voluntary arrangements include a range of social and environmental principles, standards or codes of conduct, such as the Equator Principles for determining and managing social and environmental risks in project financing, or the Group of Seven (G7) decision on responsible supply chains to ensure effective custody of labour and environmental practices of the highest standard.
The G20 can help to shed some light on this shifting and complex trade and investment landscape. Building on decisions in the last two WTO ministerial conferences to ensure the complementarity of regional trade agreements (RTAs) with the multilateral system – rather than regarding these new variables as an intrinsic threat or rival – it can seek to take the next step to position the WTO as a foundation for the wider ecosystem with the capacity to evolve into a leadership role over the regime complex.
With this in mind, priority should be given to strengthening the legitimacy of the WTO by enhancing its inclusiveness, synergy, and effectiveness. Given the current complex political economy that is driving trade talks, WTO members may in the short term explore opportunities to develop various ”trade clubs” within its folds to the greatest extent possible; in the mid and longer term they should work towards multilateralising elements of regional and plurilateral arrangements into the non-discriminatory multilateral system. Members of the WTO have an opportunity to align the institution with the 2030 Agenda for Sustainable Development and its accompanying Sustainable Development Goals (SDGs) to help bolster synergies between the multilateral trade system and other governance objectives. Considering the 2030 Agenda’s integrated policy approach, the WTO offers ready platforms to investigate and deliberate on mitigation of the intricate effects that might stem from trade initiatives implemented without appropriate flanking policies. G20 members may also seek ways for the WTO to contribute to the implementation of the new Paris Agreement on climate change. To bolster its effectiveness, the WTO should seek innovative intergovernmental negotiating approaches on the one hand, and, on the other, add new tools to its legal instruments that go beyond negotiated rule-making per se and instead focus on better regulatory cooperation.
To achieve these aims, the following concrete options may be pursued.
First, G20 members can agree to enhance the monitoring and facilitation functions of the WTO, in particular in the areas of data collection and analysis, transparency, and dialogue. For example:
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Enhance the function of the WTO committees by developing these into active platforms for deep analysis and more effective informal dialogue;
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Participate in or lead informal initiatives, such as a proposed public-private Global Value Chain Partnership (see suggestions below) and the OBOR initiative, which can play a similar role in promoting robust trade and investment as formal trade agreements;
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Participate or lead initiatives for regulatory coherence, such as a proposed global investment policy cooperation compact and the RTA Exchange (see suggestions below).
Secondly, G20 members could act at the WTO to pursue more innovative approaches in negotiations and rule-making processes, by promoting certain model elements for regional or plurilateral agreements with a view to integrating these into the multilateral trade system in 10 to 20 years. For example:
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Encourage members to negotiate and agree on principles for plurilateral negotiations that provide assurances to third parties about their openness;
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Support an independent body, such as an “RTA Exchange,” to set out criteria for assessments of economic impact of RTAs and undertake the analysis.
Thirdly, the G20 could encourage the formation of a working group to address fossil fuel subsidies concretely at the WTO, through an expansion of existing WTO disciplines that are uniquely placed for international rules-based cooperation on subsidies. The G20 has committed to phasing out fossil fuel subsidies. Under the existing WTO Agreement on Subsidies and Countervailing Measures (SCM), fossil fuel subsidies cannot be challenged based on the environmental externalities generated, in other words greenhouse gas (GHG) emissions. The G20 could consider:
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Including better notification and peer review of such subsidies;
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Working towards an immediate stand-alone phase-out of production subsidies, leading to an eventual ban on all fossil fuel subsidies, while taking the impact of consumption subsidies on the poor into account in the reform process;
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Expanding the category of subsidies that could be subject to an absolute prohibition or a presumption of a prohibition, such as found in the now defunct SCM Article 6.1.
Boost Global Trade Growth
International trade and investment contribute to productivity increases in the world economy by facilitating the optimal allocation and use of capital, labour, as well as technology. However, due to both cyclical and structural reasons, global trade growth now sits both below pre-crisis levels and annual Gross Domestic Product (GDP) growth. Sluggish trade expansion has negative impacts on the outlook for economic development and jobs. Building upon the basis of previous summits, the G20 process can move forward two particular initiatives, in order to re-harness trade and investment for global growth.
First, G20 members could support negotiating a plurilateral Digital Trade Agreement, with a view to capitalising on opportunities offered by the rapid expansion of the Internet and other information communication technologies, maximising the contributions of Internet-based trade to economic development and employment, as well as boosting the integration of small- and medium-sized enterprises (SMEs) into global markets. Many developing countries, including least developed countries and island states, have voiced their support for this type of initiative in post-Nairobi debates. Key aspects might include:
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A focus on the core concepts governing cross-border data flows given that data regulation can be a disguised restriction on trade. Inspiration can be taken from rules and principles emerging in some regional and bilateral trade agreements;
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Negotiating the deal in an “open plurilateral mode,” whereby talks take place in the WTO with an open invitation for non-G20 members to sign up, would allow the benefits to be extended on a most favoured nation (MFN) basis once a predefined “critical mass” participation threshold is surpassed;
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Activating and expanding the function of the existing WTO E-commerce Working Group so as to provide more analytical and administrative support for a feasibility study and possible negotiations in future.
Second, the G20 can promote and develop a comprehensive framework for services trade facilitation so as to thoroughly explore the potential contributions of services to trade growth and creation of quality jobs. Services can enable developing countries to leapfrog the traditional manufacturing route. However, services exports continue to make up less than 25 percent of total world exports, despite strong annual trade growth now outstripping that of goods. The discrepancy between the size of such exports and services importance to economic growth points to a major untapped potential in services trade. The following proposals are suggested:
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Deepen regional regulatory cooperation in financial services, including through the creation of regional credit bureaus and rating agencies, facilitation of free data flows and offshoring, and standardisation of documents and documentation requirements;
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Simplify visa and work permits for service providers and set up “innovation zones” that allow researchers and other professionals to enter freely for up to ten years.
Promote Inclusive, Interconnected, and Sustainable Global Value Chains
With intermediate goods making up roughly 60 percent of world total imports, GVCs have emerged as significant international networks of production, information, innovation, and services. As previous G20 summits have correctly pointed out, the better integration of SMEs into GVCs – both regional and international – will bolster local development, global trade, and economic growth. Participating in GVCs relies not only on economic “hardware” – such as transportation, communication facilities, and so on – but also on “software” – including institutional management, quality and safety standards, and custom procedures. As GVCs continue to expand, the inclusiveness, sustainability, and rules governing these are important questions for the G20 agenda. This year’s G20 can propose relevant actions as follows.
First, set up a “Global Value Chain Partnership” as a public-private platform to enable the efficient functioning of supply chains and sustainable participation. The partnership could perform the following functions, including:
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Serve as a strategic and pragmatic platform for governments who intend to further integrate their economies into GVCs to meet and cooperate with foreign enterprises looking for new partners;
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Act as a value-oriented platform for improving the inclusiveness and sustainability of GVCs by involving professionals, civil society groups, and other relevant stakeholders in dialogue;
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Provide research and information facilities, for example, by mapping sectoral GVCs, identifying particular national barriers with regards to linking to GVCs, and providing advice for governments and international agencies.
Second, provide clarity on and bolster the rules-based system in which GVCs must operate in order to simplify business operations, create new opportunities, and enable better participation. This can include the following actions:
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Simplify over 400 RTAs and work towards convergence on salient elements. The G20 could support an independent “RTA Exchange” as a public information platform to enhance the transparency of RTAs, better understand similarities and differences between these, support mutual learning, encourage the use of best practices, and identify rules that could eventually be multilateralised to bolster the international trading system;
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Simplify over 3,200 international investment agreements (IIAs). The G20 could use the Investment Policy Framework for Sustainable Development, recently issued by the United Nations Conference on Trade and Development (UNCTAD) as a basis to develop and promote a new international model agreement – this template would be formulated as a best practice available for voluntary adoption, with the idea to spur modernisation and harmonisation of bilateral investment rules from the bottom up;
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Launch a work programme aimed at fusing the disparate elements of various international trade and investment rules into a more coherent and integrated system; existing policy silos dealing with goods and services, trade and investment, competition policy, intellectual policy rights, and multiple aspects of regulation should be brought together and rendered mutually consistent and supportive;
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In order to facilitate the integration of the least developed countries (LDCs) into GVCs, all developed countries should offer duty-free quota-free (DFQF) treatment to all exports from this group; developing countries should follow the example of China, India, and Brazil by offering DFQF treatment for 97 percent of tariff lines in the next five to ten years;
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G20 countries should also follow Canada’s example by offering all LDCs an extended cumulation approach to rules of origin requirements for trade preferences; this would significantly stimulate exports from LDCs, judging from the evidence of similar rule of origin changes in the past, and make global supply chains work better for development purposes;
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With respect to capacity building, the G20 can both support supply-side capability in developing countries – for instance to help producers and service providers meet international and voluntary standards – and help to reduce trade costs by investing in economic and legal infrastructure and in public services.
Enhance Global Investment Policy Cooperation and Coordination
Like international trade, cross-border investment is an important engine for economic growth and development. While multinational enterprises have accumulated between US$1.5-5 trillion in cash, this investment potential has not been unlocked due to recent instability in financial markets, tumbling commodity prices, slow growth in emerging economies complemented by continued stagnation in major markets such as the EU, investment policy uncertainties, and trade protectionism, among other issues. This is not good news for developing countries, in particular low income economies, as they face a US$2.5 trillion annual investment gap in key SDG sectors.
Against this backdrop the G20 has rightly paid increasing attention to investment issues. Trade ministers this year have endorsed Guiding Principles for Global Investment Policymaking, among other things. Further work could build on these achievements in order to boost investment for sustainable development and improve confidence in the IIA universe.
First, the G20 members could propose a more comprehensive global investment policy cooperation compact. This would:
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Encourage G20 members and the international community to base investment deals on an agreed model investment agreement, which would enable IIAs to better serve the sustainable development goals and elaborate fundamental investors’ rights and obligations;
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Enhance capacity building in the area of investment policy, for example by expanding and upgrading the existing Aid for Trade (AfT) programme into an “Aid for Trade and Investment” initiative, which could be focused on improving much-needed capital flows to infrastructure, climate mitigation and adaptation, and upskilling the labour force;
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Launch a feasibility study for negotiating a plurilateral investment promotion agreement among some G20 members, in one or several strategic sectors, for example environmental services, energy, transportation, or professional services, among others.
Second, improve international investment dispute prevention and settlement to rebuild trust in the system and strengthen its legitimacy. The following actions could be taken:
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Encourage G20 members to set up investor-state conflict management schemes to prevent, manage, and solve disputes, for example, setting up national investment ombudspersons and interministerial committees. The World Bank has started to help some countries set up such schemes that can be used as a reference for G20 members;
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Start a feasibility study for the establishment of an international appeal system or a world investment court; if there are disputes over the arbitration, they could resort to the ad hoc appeal scheme, composed of judicial experts accredited by the international framework;
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Set up an Advisory Centre for International Investment Law, using the Advisory Centre on WTO Law (ACWL) as a reference, to provide legal services for developing country governments that lack legal capabilities, such as helping to negotiate big investment contracts, defend in legal disputes, among other things.
Conclusion
The G20 is shifting its approach from issue-centred to outcome-oriented as reflected in China’s announcement of the Hangzhou Summit’s themes and key focus points. Particularly in the area of promoting robust international trade and investment, the G20 could make several breakthroughs, in addition to maintaining an important cooperation mechanism through the Trade and Investment Working Group.
Supporting the multilateral trade system should remain a priority for the G20 agenda. However, due to a widening trade governance gap, the G20 should no longer support the global trade body as an isolated institution. The G20 could instead develop the WTO’s leadership role in the newly-emerging broader ecosystem of the global trade and investment regime, fusing it more coherently to the broad collection of binding and non-binding intergovernmental trade and investment arrangements, as well as a burgeoning array of voluntary standards and rules developed by the private sector and nongovernmental agencies.
With the purpose of restoring the inclusiveness and effectiveness of the multilateral trade system as well as its legitimacy, G20 members could take active measures to enhance the WTO’s monitoring, facilitation, and cooperation functions, in particular activating the regular work of committees, as well as leading or participating in informal, interdisciplinary initiatives. G20 members could also encourage new innovative approaches in formal rule-making negotiations, and provide alternative avenues for promoting regulatory coherence. Harnessing WTO rules to better address subsidies that have the potential to harm global welfare, such as fossil fuel subsidies, would be a useful contribution to global efforts to tackle climate change.
With respect to boosting global trade growth, the G20 members should explore practical ways to utilise the potential of the digital economy for global trade growth and jobs, including through the launch of a feasibility study towards Digital Trade Agreement negotiations. G20 members could also develop a comprehensive framework for services trade facilitation to maximise the contribution of growing service sectors to global trade growth.
GVCs have been among the key issues at G20 gatherings since 2012. The G20 could initiate a road map towards a clearer rules-based trade and investment system for those operating across GVCs to achieve greater inclusiveness, interconnectivity, and sustainability. Efforts envisaged as part of the road map would provide transparency on, as well as encourage convergence and harmonisation of, disparate trade and investment rules found across the wider ecosystem in key areas.
There is a pressing need to enhance investment policy cooperation. Future G20 work could consider further building on the new G20 Principles for Global Investment Policymaking, which can be nonbinding, include the use of the updated IIA template, enhance the “Aid for Trade and Investment” initiative, and initiate a feasibility study of a G20 plurilateral investment promotion agreement. The G20 can also suggest better ways to manage and settle international investment disputes.
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AGOA exporters push for less travel restrictions to US
Rwandan beneficiaries of the African Growth Opportunity Act (AGOA), a trade preference programme between the US and select African counties, have called for easier access to US visas saying the rigorous process has kept them out of the market.
The call was made when officials from the Trade and Industry ministry and US Ambassador to Rwanda Erica Barks-Ruggles launched the renewed AGOA action plan, a year after the US government decided to renew the free trade framework for sub-Saharan African countries by 10 more years beginning 2015.
Although the number of Rwandan exporters to the US remains relatively low compared to other countries such as Nigeria, Angola, Kenya and South Africa, the traders say there is need for more technical support from the Rwandan side and mitigation of the lengthy bureaucracy in acquisition of visas on the US side.
According to Gilbert Kubwimana, the country director of Songa Designs, a company that makes Rwandan-made jewelry for sale in the US, the cost of transactions and shipping has been a hurdle beside unreliable clearance freight agencies.
“Although our target market is in North America and we try our best to improve both the volumes and quality of our products, the cost of transactions can double the price of a single item once in the US,” he said, urging the US to treat all traders fairly since those from bigger trading blocs are normally given faster access.
“The process of acquiring visas remains lengthy even if we qualify through that trade window. This doesn’t look good for companies seeking to make use of that market,” said Joselyne Bazubagira, the head of products at Kaliza Fashion and Design, another Rwandan company specialising in clothing lines.
Established in 2000, AGOA is the flagship of US trade engagement with Africa whose mandate was renewed by the US executive despite calls by Congress to terminate it in the interest of the US economy.
However, according to Francois Kanimba, the Minister for Trade and Industry, the relaunched AGOA Rwanda chapter will help traders unlock the potential of the US market although the priority has always been to first supply the local and regional markets.
“How do we link potential exporters from Rwanda to potential buyers in the US? Once we have such a linkage, a lot of things can happen. A buyer will come to your factory and tell you the product you have doesn’t suit the standards and requirements of his clients.
“Thus, we have a plan that provides for technical guidelines and assistance to design products that can respond to the needs of the American market,” he said.
While at least 98 per cent of all imports from eligible African countries enter the US market duty-free, just recently President Barack Obama decided to expand the list by 27 other products that can be traded in the US.
Under the Generalised System of Preferences (GSP) programme, approximately 5,000 products from 122 developing countries and territories, including 43 least-developed countries, are eligible for duty-free treatment when exported to the US. Nearly 1,500 of these are reserved for duty-free treatment for only least-developed beneficiary developing countries.
Kanimba further added that facilitation and intervention from both governments and the traders are already ongoing, especially on SMEs seeking to access trade-shows.
“We recently got major US buyers who came to Rwanda to talk to the apparel industry players and negotiated how they can sell their products in the US markets, and as I am speaking now, one of these buyers has concluded a deal. Now the player is in process to see how he can feed that market,” he added.
According to ambassador Barks-Ruggles, much as there is need to harmonise a number of systems to allow smooth trade between the two countries, transportation of goods remains another challenge and needs collective effort to address.
“Transport is a global industry; it’s not a US industry or African industry or any one country’s industry. It is a real challenge to get the transport cost down when you are in a landlocked country.
“The cheapest form of transport is shipping containers and if you don’t have an ocean on your border it makes it more expensive. Thus figuring out ways to bring down the price of transport is very important,” she said.
The envoy further stated that the US government had been pushing for the EAC to create free trade areas and focusing on bringing down non-tariff barriers, and the time spent at the borders to get harmonised customs papers.
Barks-Ruggles also said the US was also trying to ease visa acquisition for AGOA traders as effectively as possible.
In 2013, the AGOA exports share was calculated at 5.8 per cent of the total exports translating to Rwf18bn (about $25 million).
By late 2015, the exports had risen to $46.8 million (Rwf37 billion) mainly through commodities like tea, coffee, spices and vegetables.
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FOCAC on economic opportunities – China stresses implementation
All African governments and institutions have to do now is to put in place mechanisms that will bring to reality the 10 action plans advanced by China under the Forum on China-Africa Cooperation (FOCAC).
FOCAC is creating the platform for more opportunities that lead Africa to industrialization and modernization with increasing Chinese investment.
Under the action plans, announced by Chinese President Xi Jinping at the FOCAC Johannesburg Summit December last year, with a US$60 billion fund support, about 243 cooperation agreements have been signed between Chinese government, institutions and African countries.
Chinese State Councilor Yang Jiechi made the disclosure at the the Coordinators’ Meeting on the Implementation of the Follow-up Actions of the FOCAC Johannesburg Summit held July 29, 2016, in Beijing, China.
Yang said the agreements worth US$50.725 billion, including US$46 billion of Chinese direct investment in and commercial loans to Africa, accounting for 91% of the total value of the agreements.
While efforts are being made to implement the Johannesburg Summit outcomes, Yang said the Beijing event was aimed at taking stock of the delivery of the outcomes, to align their thinking, build consensus, overcome challenges and difficulties, share experience and promotion cooperation, among other.
The Chinese State Councilor stated that both sides are committed to win-win cooperation and common development.
However, he stressed the need for collective efforts in the implementation if the Chinese and African people must show to the world their strong determination to promote solidarity through cooperation.
“We Chinese often say that planning contributes 10 percent to the success of an undertaking while 90 percent of the success lies in implementation. In this first year after the Johannesburg Summit, it is our shared expectation to see the early implementation of its outcomes so as to deliver more benefits to the Chinese and African people,” Yang said.
Yang was quick to point out that more than 30 African countries have established internal coordination mechanisms and designated ministerial-level coordinators to implement the outcomes, adding, “Presidents and prime ministers of several countries have even taken on the responsibility themselves.”
He also highlighted five pillars of FOCAC to strengthen in working with Africa, including sharing weal and woe; remaining good partners for common development; increasing inter-civilization exchanges; promoting peace and stability; and broadening cooperation in international affairs.
At the same time, Yang read President Xi’s message at the meeting.
The Chinese President, according to the message, the Coordinators’ Meeting was not only an important action by China and Africa to implement the consensus of Chinese and African leaders and the outcomes of the FOCAC Summit, but also a major measure to assist the development of China-Africa cooperation.
“Paying high attention to its relations with Africa, China will continue to adhere to the principles towards Africa featuring sincerity, real results, affinity and good faith as well as the correct viewpoint of righteousness and benefit,” the message maintained.
He indicated that China will take solid steps to implement the outcomes of the summit, and constantly enrich and develop China-Africa comprehensive strategic cooperative partnership.
Also speaking at the meeting was Chinese Minister of Commerce Gao Hucheng, who explained how progress have been under various plans including industrialization, agricultural modernization, infrastructure, public health, financial, green development, trade and investment facilitation. He further named poverty reduction, cultural and people-to-people, peace and security as plans being implemented.
Gao said China is stepping up economic transformation and restructuring while pursuing the “Belt and Road” Initiative and international cooperation on capacity and equipment manufacturing. “China is the largest developing country and the fastest growing major economy, while Africa is the fastest developing continent with most developing countries,” he added.
The Chinese Commerce Minister admitted that the global economic crisis has been affecting Chinese and African economies; thus stressing the need for China and Africa to strengthen their confidence.
Speaking on behalf of the Chair of the Authority of Heads of State and Government of the Economic Community of West African States (ECOWAS) and Liberian President Ellen Johnson Sirleaf, at the meeting, Liberia’s Minister of State Without Portfolio, Sylvester M. Grigsby, praised organizers and said the gathering reaffirms the longstanding strong bond of friendship and cooperation between Africa and China based on equality and mutual respect. Grigsby noted that the huge turnout was a testimony to the strength and intensity of the Africa-China relationship.
He explained that since the FOCAC Project was launched in 2000, Chinese funded footprint projects have sprouted across the landscape of the African Continent.
“Many of these projects including railways, highways and industrial plants have been conspicuously located in regions to bring light and better livelihood to millions who otherwise would never have benefited from such amenities in their lifetimes if investment were to be determined strictly by the traditional profit motive,” the Liberia’s State Minister said.
Grigsby recounted China’s assistance, saying that the country has increasingly become the engine of growth for the global economy, so has China’s development assistance graduated from being perceived as a source of alternative development.
Today, he said, China is a major donor partner, being an architect of the China/Africa Development Fund, the Asia Infrastructure and Investment Bank (AIIB) and the BRICS Bank.
After a decade and a half of Chinese assistance under FOCAC, Minister Grigsby intimated that it would be interesting to conduct an objective assessment of the program and its impact. There should be a large body of data for such an exercise.
He then used the occasion to commend the Government and people of the People’s Republic of China for the enormous support given in combating the outbreak of the deadly Ebola Virus Disease (EVD) in West Africa.
“We are delighted that the Johannesburg Action Plan (2016-2018) incorporates post-Ebola recovery efforts that will bring an end to the Ebola plague. We want to encourage Chinese investment in medical and healthcare services as well as to improve healthcare infrastructure through construction, renovation and equipping of health facilities,” he maintained.
About 300 people, including over 100 ministerial officials of 53 FOCAC members, representatives from more than 30 member units of the Chinese Follow-up Committee of the FOCAC and African diplomatic envoys to China, attended the meeting.
Liberian delegation to the meeting included: Minister of State Without Portfolio, Mr. Sylvester M. Grigsby, Liberian Ambassador to China, Mr. Dudley McKinley Thomas, and Deputy Foreign Affairs Minister for International Cooperation & Economic Integration, Mr. Dehpue Zuo.
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Billion-dollar map may prove key to unlock Africa’s future
It is being called the “billion dollar map”, a catchy name that, if anything, underplays just how valuable a guide it will be to Africa’s hidden mineral treasures.
Many overseas companies, including from the UAE, are involved in resource exploration on the continent. They include Dana Gas, primarily focused on Egypt, and RAK Gas, which has an ongoing project in Malawi.
While those are hydrocarbon ventures, it has long been established that the continent holds beneath its soil vast quantities of desirable minerals, too. Finding them in economically viable deposits, however, is not always easy. Geological surveys are painfully slow and it can cost as much as US$1 million per metre to drill core samples.
To speed things along and ease the path for mineral explorers, the World Bank has started a geomapping programme that will eventually cover much of the continent.
“The geodata gathering process involved aerial surveys by low-flying airplanes across the country at a consistent line spacing to gather the electromagnetic data,” says Zeria Banda, a World Bank spokesman in Malawi, where a precursor to the Africa-wide mapping project has commenced.
“The survey has already identified interesting geological features that were previously unknown.”
Malawi has been something of a Cinderella state in southern Africa, where mining underpins the economies of the states in that region. Zambia is one of the world’s largest producers of copper, an element vital to electronics, electricity transmission and wind turbine construction.
Neighbouring Zimbabwe is the world’s second-largest producer of platinum after South Africa, used in catalytic converters and jewellery. Botswana and Namibia have diamonds and South Africa has pretty much everything – gold, diamonds, iron ore and more.
Malawi, though, seemed to have been overlooked in the geological lottery. The former British colony was ignored for decades by mineral hunters, largely because it is a peculiar colonial construct that is wedged between different countries with no access to the sea. Without a port, getting minerals to world markets is difficult in the extreme.
Its one significant mine, a uranium producer operated by the Australia-listed Paladin Energy, had been trucking uranium almost 2,000 kilometres by road to Namibia and the diesel bill eventually swamped the operation, causing it to be closed down.
The uranium mine was, at its peak, generating around 10 per cent of Malawi’s GDP, and its closure was sorely felt.
Hydrocarbons are also a source of interest for RAK Gas there.
The company has conducted tests and surveys in the country that are a precursor to exploration drilling.
Now Malawi is hoping mineral discoveries will see new mining ventures opening up, too.
One such hopeful is Mkango, a Canadian company focusing on rare earths. These are a special breed of minerals that are increasingly important in hi-tech applications.
“The demand is from clean-tech and many consumer devices,” says the Mkango chief executive William Dawes. “They are needed for the optimum functioning of wind turbines, smartphones and fuel cracking among others. Any application that requires miniaturisation of components is likely to have them.”
An example of the firm’s Web-based airborne magnetic survey mapping, done last month, is available at http://www.mkango.ca.
Virtually all rare earths are currently supplied by China, which has guarded its monopoly jealously. In 2006 Beijing began to restrict exports to better control the price of the minerals. As prices rose, so others eyed the market and by 2012 the only rare earth operation in the United States, Molycorp, began processing ore.
China then dropped export restrictions and by last year Molycorp had filed for bankruptcy protection.
Many other rare earth start-ups that were touting their projects to investors in Toronto, London and Australia – the centres of mining finance – also went to the wall.
Mkango, however, has soldiered on, promoting its Malawi plan. It recently listed in London – a mere two weeks before Brexit – raising $1m on the Alternative Investment Index (AIM). Considering the company is little more than a handful of geological data and a website, this was a successful listing at a time when few start-up mining ventures are attracting any capital at all.
Mr Dawes says the funds raised will allow further geological investigation in preparation for actually getting shovels in the ground. The company is now the only rare earth miner listed on the AIM, which is part of the London stock exchange.
Much of the success of Mkango’s listing comes down to the time Mr Dawes, a Briton, has spent alternatively dressed in khakis in the rolling hills of Malawi gathering data and suited up for boardrooms talking to investors.
The company was also assisted by a wealth of free data made available by the World Bank’s geomapping project. To date more than $31m has been spent on the project, says Mr Banda.
The information has helped Mkango in its search for rare earths, but also revealed other minerals, Mr Dawes says.
“We are very excited with the results of the airborne survey, which further confirms significant potential for uranium, niobium, tantalum and other minerals,” he says.
As for the issue of lack of infrastructure and port access – that, too, has changed. Malawi is now connected to Mozambique via a 500km railway line that runs to the Indian Ocean. It runs within 100km of where Mkango hopes to build its mine.
Meanwhile, other countries should now also benefit from geomapping. Soon the aerial photographing of Zambia will begin, and others will follow thereafter.
A big advantage of this being a World Bank initiative is that all the data is publicly available.
Often private surveys carried out by mining companies are kept confidential, lest rival treasure hunters try to quickly move in.
Now, all this data will be readily available and it will be the first Web-based open-access regional geodatabase for Africa.
The World Bank believes resource extraction will form the basis of many African economies as they develop.
South Africa is an illustration of how mining can transform a country. Resource extraction has powered it to become the only industrialised country in sub Saharan Africa.
“Uses of geoscientific data for the public good justify government support for their collection, collation and delivery,” Mr Banda adds.
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Africa and China meet to assess progress in the implementation of FOCAC Action Plan and plan for the future
A coordinators’ meeting on the implementation of the follow up actions of the Johannesburg summit of the Forum on China-Africa cooperation (FOCAC) was held in Beijing from 28 to 29 July. South Africa co-chaired the meeting with China on behalf of FOCAC.
The African Union Commission was represented by H.E Fatima Haram Acyl, Commissioner of Trade and Industry, while Mr Moussa Faki Mahamat, Foreign Minister of Chad represented the African Union. Chad is the current chair of the AU. Over 300 delegates at ministerial and senior levels attended.
The purpose of the meeting was to take stock of the implementation of the 2016-2018 Action Plan that was agreed in Johannesburg in December 2015, and to give further impetus to the implementation of the FOCAC Action Plan’s five pillars and the identified areas of cooperation within the 10 major economic and trade domains. Apart from the plenary session of all the partners on 29 July, the meeting also saw the holding of a business cooperation ceremony, the signing of various bilateral and business agreements, dialogue between African and Chinese financial institutions, as well as a visit by delegates, to Suzhou on a tour of the Suzhou Industrial Park (SIP) in Jiangsu province.
China puts $46 billion into Africa’s economy
The meeting appreciated the prompt action taken by both China and Africa in the implementation of the Johannesburg summit outcomes, with South African Minister of Foreign Affairs Honourable Maite Nkoana Mashabane declaring that “In a matter of months (since Johannesburg), we are busy with implementation, unlike past partnerships whose implementation would take a long time. By 2018 we shall have completed the first phase of action and ordinary Africans will be feeling the difference made by the partnership”.
Minister Mahamat expressed Africa’s hope to see greater synergy between the outcomes of Johannesburg and Africa’s agenda 2063 and its ten year implementation plan. He called for the empowerment of women and better services among other things, and highlighted the need for support to combat terrorism and manage migration. The Chinese President Mr Xi Jin Ping meanwhile declared, in a statement read by State Counsellor Mr Yang Jiechi that “China’s support for Africa’s peace and development will never change”.
The head of the African Union Commission delegation, Commissioner Acyl had earlier told a business meeting that “as Africa develops its own productive capacities, it will seek partnership with Chinese entrepreneurs and businesses to provide material inputs, technology, production know-how, investment capital, and training”. She also reminded delegates to start preparations for the ‘Invest in Africa Platform’ and pledged the commitment of African countries and the African Union Commission to take trade and investment relations with China to another level.
The meeting took stock of milestones already attained under the five pillars as follows; high level mutual visits; advancing mutually beneficial cooperation across the board; maintaining robust people to people and cultural exchanges; security cooperation; and cooperation in the international arena.
A joint communique issued at the end of the meeting stated that both sides had reaffirmed their readiness to make joint efforts to promote industrialisation and agricultural modernisation in Africa through alignment of industry, transfer of technology and human resources capacity development cooperation; and to continue to push forward the implementation of the agreed action plan. Delegates agreed to adhere to five cooperative concepts for the implementation of the Johannesburg outcomes of the FOCAC i.e. common, intensive, green, safe and open development. They called on the international community to pay greater attention to, and increase investment for peace, security and development for Africa and urged developed countries to honour their commitment to provide aid, transfer technologies and support capacity building of African countries and support African countries to tackle challenges in peace, security and development affairs.
FOCAC was launched in 2000 in Beijing as a tri annual collective dialogue platform for cooperation between Africa and China. The 2nd Africa-China Cooperation Forum Summit, which was held in Johannesburg, South Africa on the 4th and 5th of December 2015, under the theme “China-Africa Progressing Together: Win-Win Cooperation for Common Development”, endorsed the Johannesburg Declaration and Plan of Action.
To drive the implementation of the action plan and the 10 major economic and trade domains, President Xi Jinping pledged 60 billion United States dollars in financial support to Africa distributed as follows: five billion dollars of free aid and interest free loan and interest free loans, 35 billion dollars of preferential loans and export credit on more favourable terms, five billion dollars of additional capital for the China Africa development fund, 5 billion dollars of initial capital of special loans for the development of African small to medium enterprises each, and 10 billion dollars for a China-Africa production capacity cooperation fund.
Joint Statement of Coordinators’ Meeting of The Implementation of the Follow-up Actions of The Johannesburg Summit of The Forum on China-Africa Cooperation (FOCAC)
Beijing, 29 July 2016
In order to jointly push forward the implementation of the follow-up actions of the Johannesburg Summit of the FOCAC, and provide new driving force for the implementation of the Forum on China-Africa Cooperation Johannesburg Action Plan (2016-2018), Coordinators from the People’s Republic of China, 51 African countries and the African Union Commission held a meeting of Coordinators in Beijing on 29 July 2016.
Both sides recalled the Johannesburg Summit of the FOCAC convened in South Africa from 4 to 5 December 2015, as well as post-Summit progress made in bilateral and multilateral cooperation to implement the Summit outcomes under the framework of the FOCAC. Both sides went through intense and comprehensive discussions on topics of strengthening coordination, intensifying efforts on further implementation of follow-up actions of the Johannesburg Summit, and promoting China-Africa win-win cooperation for common development, and reached the following consensus:
1. Both sides highly acclaimed the great success of the Johannesburg Summit of FOCAC, fully appreciated its fruitful results and great significance, and spoke highly of the new concepts and new thinking of China’s policy to Africa and new measures for China-Africa cooperation articulated by President Xi Jinping, with the support of African Heads of State and Government, during the Johannesburg Summit. Both sides reiterated their commitments to working closely together to fully implement the outcomes of the Johannesburg Summit and develop the comprehensive strategic and cooperative partnership featuring political equality and mutual trust, win-win economic cooperation, mutually enriching inter-civilization exchanges, mutual assistance in security, and solidarity and coordination in international affairs.
2. Both sides highly acclaimed the rapid progress achieved on the follow-up actions of the Johannesburg Summit of the FOCAC, as well as the success of the Coordinators’ Meeting initialized by the co-chairs of the FOCAC, China and South Africa. The African side appreciated the fact that China has kept its promises and suited the action to the word. China fully appreciated the constant efforts the African side has made in the implementation work of the Johannesburg Summit. Both sides were pleased to notice that, China and Africa have reached a great deal of cooperation agreements and made remarkable achievements after the Johannesburg Summit of FOCAC. Both sides reaffirmed their readiness to make joint efforts to promote industrialization and agricultural modernization in Africa through industry alignment, transfer of technology and human resources capacity development cooperation, focus on industry alignment and production capacity cooperation between China and Africa, and continue to push forward the implementation of the follow-up actions of the Ten Cooperation Plans and the Forum on China-Africa Cooperation Johannesburg Action Plan (2016-2018) in a safe, orderly and efficient way.
3. Both sides enhanced the exchange of views on cooperation and agreed to adhere to the principles of sincerity, practical results, affinity and good faith and uphold the values of friendship, justice and shared interests, as well as the following FIVE cooperative concepts and make joint efforts for the implementation of the outcomes of the Johannesburg Summit of the FOCAC and promote China-Africa cooperation on development:
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Adhering to the concept of common development. Both sides will combine the peaceful development of China with the self-sustainable development of Africa, jointly translate the advantages of Africa’s natural and human resources into development outcomes that will benefit the people, to support Africa to accelerate the development of industrialization and diversification of economy, so as to realize win-win cooperation for common development between China and Africa.
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Adhering to the concept of intensive development. Both sides agree to combine the construction of infrastructure projects with the development of industrial parks and special economic zones, so as to achieve sound interaction and mutual benefit between infrastructure projects and industrial development. Both sides will not only seek economic and social benefits of the projects themselves, but also focus on the self-sustainable development of Africa, and try our best to avoid risks of debt and financial burden for Africa. The African side highly appreciated the initiative made by China to kick off pioneering work in the demonstration countries and accumulate successful experience to guide comprehensive cooperation between China and Africa.
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Adhering to the concept of green development. Both sides will focus on the protection of eco-environment and strengthen cooperation on eco-civilization. Both sides will simultaneously promote economic cooperation and protection of local environment and wild lives according to laws, so as to ensure that China-Africa cooperation will never be pursued at the expense of local eco-system and long-term interests.
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Adhering to the concept of safe development. Both sides will enhance cooperation on peace and security and take comprehensive measures to tackle both the symptoms and root causes of the security problems, and improve the capability of maintaining peace and stability, counter-terrorism and law enforcement, thus creating and safeguarding lasting peaceful and secure environments for China-Africa cooperation on development and ensure the protection of personal safety and legal interests of investors.
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Adhering to the concept of open development. Supporting Africa to achieve peace, stability and development is in conformity with common interests of the world people and is the shared responsibility of the international community. Both sides will uphold the concepts of openness, inclusiveness and win-win cooperation and welcome the international community to make more contributions to the realization of lasting peace and sustainable development in Africa.
4. Both sides called on the international community to pay greater attention to and increase the investment for peace, security and development in Africa, and urged developed countries to honor their commitments to provide aid, transfer technologies and support capacity building of African countries and earnestly support African countries to tackle the current difficulties and challenges in peace,security and development affairs.
5. The African side acclaimed China’s commitment to developing the China-Africa comprehensive strategic and cooperative partnership, and expressed its gratitude for the efforts of relevant Chinese departments to successfully arrange this pragmatic and fruitful Coordinators’ Meeting.
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Developing countries show world way forward on green finance
Developing countries such as Kenya, Bangladesh and Jordan are leading the world on green finance, which is essential to meet the world's sustainable development aspirations, according to a new report from the Inquiry into the Design of a Sustainable Financial System.
Released to coincide with the High-Level Political Forum on Sustainable Development in New York, the report, Green Finance and Non-G20 Developing Countries, captures progress being made by 13 countries across Africa, Asia and Central America.
“Today, there are numerous examples of developing countries showing strong leadership on green finance,” said Erik Solheim, Executive Director of UN Environment. “This is extremely positive, as private capital will be a major contributor to delivering on the Sustainable Development Goals and climate commitments.”
In order to reach the US$5-7 trillion a year needed to implement the Sustainable Development Goals, the financial system must mobilize finance for specific sustainable development priorities and ensure sustainable development factors are included in financial decision-making.
The report shows how developing countries are leading the world in taking these steps, highlighting the lessons that can be drawn from their leadership in aligning financial market development with national priorities and sustainable development.
The countries surveyed, as part of their innovative approaches, are implementing new models inspired by developments in fintech (the use of technology to make financial services more efficient).
“Green finance is burgeoning; it has reached the point of spontaneous combustion,” Nuru Mugambi, Director of Communications for the Kenya Bankers Association. “But it needs to be aligned. It needs to go beyond the leadership of a few champions and be coordinated across regional trading blocks.”
Green Finance in Action
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In Kenya, the rapid growth of mobile banking has become a platform to enable renewable energy. Several companies offer pay-as-you-go solar home systems that use mobile payments to unlock the use of the solar panel and battery system each day. This in turn enables customers to build up a credit history, which can be used to access additional loans.
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In Bangladesh, the central bank has led a sustained initiative to ingrain inclusive and environmentally sustainable financing in the country’s financial sector, establishing mandatory environmental risk management and also offering a low-cost refinance window for green lending.
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The Central Bank of Jordan has launched a national strategy on financial inclusion including SME finance, women’s access to financing and the protection of consumers of financial services.
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Morocco’s Central Bank has committed to sustainable development as part of its formal strategy and is taking first steps in the field of green finance. It has held meetings with banks to explore regulatory and voluntary options towards developing a roadmap for finance reform for a green economy.
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The Philippines is developing a public-private disaster insurance pool, and will make disaster insurance compulsory for homeowners and SMEs. This will provide families and small businesses with more rapid and reliable support for reconstruction and will support fiscal and financial stability in a country where natural events can result in losses of several points of GDP.
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In Central America, the regional business school INCAE has developed an ECOBANKING programme to improve the Latin American financial sector’s competitiveness through better environmental management and by designing innovative financial products.
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The State Bank of Vietnam and the Vietnam Bankers Association have been working to develop Environmental and social risk management guidelines for the banking sector. They have drawn on international best practices on environmental and social risk management, including through South-South knowledge with the China Banking Regulatory Commission and Industrial Bank.
Green Finance for Developing Countries: Needs, Concerns and Innovations
This briefing outlines key concerns and needs of developing countries in relation to green finance, particularly focusing on developing countries that are not members of the G20. It also highlights emerging innovations, drawing in particular from engagement with practitioners and regulators from Bangladesh, Colombia, Egypt, Honduras, Jordan, Kenya, Mauritius, Mongolia, Morocco, Nigeria, the Philippines, Thailand and Viet Nam, and the findings from the UNEP Inquiry’s country studies.
Green finance is a strategy for financial sector and broader sustainable development that is relevant around the world. But the context differs considerably for different countries. Developing countries, notably those with underdeveloped financial systems, face particular challenges in financing national development priorities.
Financial development shapes the context for green finance. Different sources of capital and financial institutions are particularly relevant in different countries. Financial systems in developing countries tend to be characterized by a dominant banking sector, and have large areas of the economy that remain unserved by the formal financial sector. Public finance and foreign direct investment can be particularly important as sources of long-term investment.
Broadly, concern and action to align financing to sustainable development is concentrated in three areas:
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Preventing the financing of illicit practices or profiting from weak enforcement. Weak enforcement of environmental, economic and social policies and regulations can lead to social conflicts and market impacts resulting in losses to lenders and investors, and even macroeconomic stability risks.
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Unlocking opportunities for green investment. In many countries, opportunities for green finance such as renewable energy, energy efficiency, agricultural development and Small and Medium-sized Enterprises (SMEs) productivity, as well as insurance markets, are potentially commercially viable, but inadequate owing to barriers in demand or supply.
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Exploring solutions to dilemmas and trade-offs. Many developing countries face a tension between the need to expand the electricity supply and reduce fossil fuel intensity. Similarly, SME finance is an area where regulators must be careful that lending requirements do not result in reduced overall lending or higher rates of non-performing loans and financial instability.
Key findings
Key concerns of developing countries:
1. Integrated approach – It is strongly emphasized that environmental considerations in financing be addressed in conjunction with economic and social issues and priorities, in particular access to finance for SMEs.
2. Dilemmas, gaps and trade offs – International measures to promote appropriate green financing of the transition to a green economy should not come at the cost of developing countries’ competitiveness, equity, development and financial inclusion.
3. Impacts of international developments – Developments in the international financial system, including those in major national financial centres, impact on developing countries positively and negatively. This makes G20 country deliberations and actions a key matter for all developing countries seeking to achieve sustainable development.
Action by developing countries:
4. National collaboration – National strategies and road maps for aligning financial system development with the needs of sustainable development are being elaborated in a number of countries involving public and private actors, and combining market-driven approaches with policies, regulations and standards. These processes are critical to reduce reliance on pioneering individuals or institutions.
5. Disruptive potential – New business models across the financial system, such as those enabled by mobile money and blockchain ledgers, offer the potential for ‘leapfrogging’ that can drive more inclusive, green financial market developments. These could be promoted while recognizing the need to ensure the integrity and robustness of financial markets.
Specific needs of developing countries:
6. Inward direct investment – A key challenge is how to support long-term green finance effectively in advance of mature local bond markets developing. This may include blended finance approaches, drawing on public institutional investment vehicles and integrating green finance considerations into foreign direct investment, as well as pioneer issuance of green bonds.
7. Financial system developments – Developing countries need to be able to contribute to international debate and practice, through the G20 and other relevant for a.
8. International knowledge sharing – Enhanced cooperation is needed to share experience between countries by leveraging, extending and connecting existing platforms and initiatives.
The Inquiry into the Design of a Sustainable Financial System was established in January 2014 with a mandate to advance policy options that would improve the effectiveness of the financial system in supporting sustainable development. The Inquiry has worked with central banks, environment ministries, international financial institutions as well as major banks, stock exchanges, pension funds and insurance companies. Its first global report, The Financial System We Need, was released in October 2015.
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Malawi Government contests Comesa court ruling
The Malawi Government will appeal against a ruling in which the First Instance Division of the Comesa Court of Justice found that the regional court has jurisdiction to hear a case in which Malawi Mobile Limited (MML) sued the government and the Malawi Communications Regulatory Authority for an illegal termination of a contract.
Comesa Head of Corporate Communications, Mwangi Gakunga, has confirmed that the Appellate Division of the Comesa Court will sit in October this year to determine the case.
The court earlier dismissed the preliminary application by the Government of Malawi which contended that Comesa Court lacked jurisdiction to hear the case.
The decision was delivered in November 2015 and David Kanyenda of Makiyi and Kanyenda, who is representing Malawi Mobile in the case, said his client’s position is that the decision of the First Instance Division (FID) of the Comesa Court is correct and sound at law, therefore, it ought to be upheld by the Appellate Division.
Kanyenda said MML is contesting the appeal on two principal grounds that it’s incurably defective for non-compliance with the mandatory procedures and further that it lacks merit.
“Needless to say the Comesa Court is an indispensable organ towards deepening of regional integration. Government’s resistance to submit to the jurisdiction of the Comesa Court is, therefore, baffling given the importance of the regional court to attain common market objectives and given that Malawi is a signatory to the Comesa Treaty that established the Comesa Court of Justice,” Kanyenda said when we contacted him.
But the Attorney General, Kalekeni Kaphale, who is representing government in the case, said questioning a court’s jurisdiction is normal litigation and does not mean that government is disrespecting the mandate of the Comesa Court.
“Our application does not mean that we are disrespecting the regional court because had it been otherwise, we would be facing contempt of court but no motion has been pushed that we are in contempt of court,” Kaphale said.
Kaphale could, however, not be drawn to comment on the grounds on which government is basing its appeal.
This is the first case from the Malawi Supreme Court to be referred to the Comesa Court and according to Kanyenda, the landmark nature of the decision of the FID lies in the fact that it flies in the face of conventional legal thinking to the effect that decisions of the Supreme Court are final and unassailable.
“Apex courts in the common market can no longer be regarded as final arbiters of legal disputes,” Kanyenda said.
The Malawi Mobile Limited dragged government to the Comesa Court after the Malawi Supreme Court of appeal reversed a High Court ruling that awarded MML $66 million (at the exchange rate then). MML was seeking to establish a mobile phone company in the country.
The Comesa Court of Justice is the judicial organ of Comesa through which member states and other stakeholders can seek redress for any damages or disputes which may arise as a result of the Comesa integration process.
Chapter five, Articles 19-44, of the Comesa Treaty provides for the establishment and other matters relating to the Comesa Court of Justice. It has jurisdiction to hear all matters arising under the Comesa Treaty in the Comesa region.
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Namibia takes knocks from Angola’s economic meltdown
The Angolan economic bubble burst caused by the fall of crude oil prices in 2014 is affecting Namibia’s real estate, schools and medical centers.
About 11 sectors – health care, education, banking, retail, accommodation, tourism, construction, education, and banking – are feeling the cold from the economic meltdown in Angola.
A number of Angolans studied English and various other short courses in Namibian capital Windhoek staying for up to six months, while others came to shop.
Now with the economy that heavily relied on oil exports depressed, most of the students have gone back, while others have become street vendors because they cannot go back home amid the economic woes.
Even the International Monetary Fund (IMF) noted that Angola’s economic growth slowed down to three percent in 2015 because of the low oil prices.
At the same time, the IMF said, inflation rose sharply to 29.2 percent year-on-year in May this year thereby taking down the kwanza that depreciated by 40 percent to the U.S dollar.
This gloomy outlook has also affected Namibia especially Windhoek where most Angolans used to find it very affordable to study and shop using the U.S dollar.
Most shops, especially at Oshikango (700 kilometers north of Windhoek), a town at the northern border of Namibia and Angola experienced losses of about 4 billion Namibian dollars (about 280 million U.S dollars) between 2014 and Dec. 2015.
Shops in other towns such as Rundu, also about 700 kilometers from Windhoek, Oshakati and Ondangwa in the north have so far recorded a fall of 25 percent.
Accommodation facilities – hotels and lodges have so far recorded about 90 percent revenue decline since the Angolan economy started to slow down.
More than 20 Namibian companies involved in the trucking business have also collapsed, while business in the transport sector slowed down by 70 percent.
Between Feb. 2015 and Feb. 2016, more than 700 Namibians lost jobs at Oshikango when shops closed down because of low cross border trade.
But the effects of Angola’s economic slowdown are most visible in Windhoek where blocks of flats and houses where Angolans used to stay are standing empty.
Xinhua reporters managed to see empty flats around Windhoek that were once occupied by Angolans. This is a huge difference from a year ago when finding accommodation was difficult because of high demand.
A number of landlords who made rolling business renting out houses and rooms to Angolan students told Xinhua that since the economic problems hit Namibia’s northern neighbor, their businesses have been suffering.
One of the landlords who owns blocks of flats in Windhoek and is currently building more, said he was thinking of turning the buildings into offices.
Although it is not clear how many Angolan have dropped out of other universities since their economy started to decline, the University of Namibia that had 151 students in 2014, currently has about 89.
The housing market is not the only one affected. Schools run mostly by Zimbabweans offering English lessons to Angolans have been hit hard.
Nicholas Samaita, who came to Windhoek from Harare in 2008, never had less than 70 Angolan students studying English at his small college. Today, he will be lucky to have 10 students at one time.
Samaita told Xinhua that if the situation in Angola does not improve, he would be forced to close down or find something different to do.
“Angolans pay in advance when they come. If they are taking a six-month course, they pay in cash,” he told Xinhua.