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Blue economy, intra-African trade top agenda of Afreximbank gatherings in Seychelles
Prospects for economic development in Africa, the blue economy concept and intra-African trade are among the main topics of discussions as political and business leaders from the continent and international economic experts meet in Seychelles this week.
The African Export-Import Bank (Afreximbank) is holding its 23rd annual general meeting in the island nation since Monday.
The President and Chairman of the bank’s board of directors Dr Okey Oramah says issues being discussed include the financial performance of the bank and economic development in Africa.
Oramah adds that the AGM will also be exploring the prospects for more economic development as well as the types of intervention Afreximbank will be making to support member countries.
He spoke to journalists at State House on Tuesday after meeting the Seychelles President James Michel, during which the financing of past and future projects were highlighted.
Afreximbank has already supported the extension of the island nation’s airport, the reclamation of the Eden Island development project and an ongoing tourism development project on Felicite island.
“There are discussions to put in place today finances for SMEs and we are also putting in place programmes to support the blue economy agenda of the government of Seychelles,” says Oramah, referring to small to medium enterprises.
The blue economy concept is in fact one of two major issues which Afreximbank delegates will be tackling during a series of seminars organised on the sidelines of their annual general meeting in the 115-island archipelago in the western Indian Ocean.
“The blue economy and how it represents a new frontier for Africa and for economies such as Seychelles that have very good links with the sea. Also intra-African trade which we believe would be the main driver for industrializing Africa. These would be the two main things the seminars would be talking about.”
A half-day investment forum run in parallel to a three-day exhibition spearheaded by the Seychelles Investment Board starting on Thursday is also expected to see the participation of some 50 companies in Seychelles who will be showcasing their products and services to over 500 delegates coming from various countries.
The Afreximbank headquartered in Cairo, Egypt, to which Seychelles is a member, has been in operation since 1994. Its main focus is on financing and promoting intra- and extra-African trade.
Seychelles’ Finance, Trade and the Blue Economy Minister Jean Paul Adam will on Saturday take over as chairman of the annual general meeting of the bank’s shareholders for the next year.
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tralac’s Daily News Selection
The selection: Tuesday, 19 July 2016
Starting tomorrow, at the WTO: China’s Trade Policy Review
Evidence on post-Brexit issues, by Michael Johnson (former UK Government trade negotiator) to the All-Party Parliamentary Group: UK trade negotiations and agreements post-Brexit, UK development policy post-Brexit [All written submissions]
Increasing number of labour provisions in trade agreements don’t hamper business (ILO)
Trade-related labour provisions, such as ones that address labour relations or minimum working conditions for employees, do not harm business or make trade provisions less popular, according to a study released by the ILO. The research found that a trade agreement which included labour provisions raised the value of trade by 28% on average, as compared with 26% for a similar agreement without the labour provision.
The G20 and SME development: what is the business community recommending? (World Bank)
After months of analysis, debates and deliberations, the 2016 China B20 SME Development Taskforce identified a set of challenges which constitute major impediments to SME development in both developed and developing countries. These challenges require the attention of G20 Governments: (i) Inefficiencies in cross-border trade that impede SMEs’ access to overseas markets. These inefficiencies include those due to the cost and complexity of operations, including weak use of, and access to, cross-border electronic trade. (ii) SMEs’ relative isolation from Global Value Chains due to difficulties in accessing relevant information about markets and supply-chain stakeholders, and the difficulties in meeting and obtaining certification for required international labor, environmental, social, product and quality standards.
Best practices on WTO post-accession: a note by the Secretariat (WTO)
Based on the experience and lessons learned from 36 accessions since 1995, this Note provides an overview of the emerging best practices on post-accession, which could guide new Article XII Members in the preparation for their WTO membership. These best practices on post-accession, at the same time, complement other support which is provided by the WTO Secretariat in response to specific requests for post-accession implementation, especially for newly acceded LDCs.
Development Co-operation Report 2016: the Sustainable Development Goals as business opportunities (OECD)
The Development Co-operation Report 2016 explores the potential and challenges of investing in developing countries, in particular through social impact investment, blended finance and foreign direct investment. The report provides guidance on responsible business conduct and outlines the challenges in mobilising and measuring private finance to achieve the SDGs. Throughout the report, practical examples illustrate how business is already promoting sustainable development and inclusive growth in developing countries. Part II of the report showcases the profiles and performance of development co-operation providers, and presents DAC statistics on official and private resource flows. [Supporting commentaries by: Jay Collins, Amina J. Mohammed, Gavin E.R. Wilson]
IFC InfraVentures: update (IFC)
“Here’s the secret of infrastructure financing: It’s about putting together the right partnerships around the table,” said David Donaldson, IFC InfraVentures’ lead for Africa. “We are working to create bankable projects that will attract private investors. This takes time. We get involved at an early stage and make the projects happen.” This early-stage work can be slow going but the rewards are huge: InfraVentures’ first project to begin commercial operations, the Tobene power plant in Senegal, is now providing electricity to 1.5 million people. Nachtigal, a Cameroon hydropower plant co-developed by InfraVentures, is set to increase that country’s power generation capacity by a third when it enters commercial operations in five years’ time.
SADC macroeconomic peer review mechanism: communiqué (pdf, SADC)
SADC Ministers responsible for Finance and Investment and the Central Bank Governors constituting the Macroeconomic Peer Review Panel, met on 7 July in Gaborone to review Angola, Swaziland and Tanzania - the second group of State Parties (to the Protocol on Finance and Investment) to be reviewed since the SADC Macroeconomic Peer Review Mechanism was launched in May 2013 in Maputo, Mozambique. This statement summarises the main findings and recommendations of the Panel as well as the Authorities views.
UNCTAD panel debate: Establishing high-value local content in extractive industries (UNECA)
Stephen Karingi, of the UNECA's Regional Integration and Trade Division, emphasised that it is important for local content policies to be transparent and predictable, adding this would reduce the burden on business by allowing businesses to plan how to respond to these requirements. He expressed support for regional cooperation on local content policies, including other policies that can support intra-regional trade such as development of regional infrastructure and payments systems interconnectivity. The other panellists urged for local content requirements to be non-binding, to be time-limited and discussed the potential role of donors in supporting feasibility studies on local content requirements.
Zambia: Mining investment and governance review (World Bank)
This is why the World Bank chose Zambia as the first country to pilot The Mining Investment and Governance Review (MInGov), which collects and shares information on mining sector governance, its attractiveness to investors, and how it contributes to national development. The review, based on data from in-country interviews and desktop research, assesses sector performance from the perspective of three stakeholder groups - government, investors in the mining value chain, and civil society - and identifies gaps between declared and actual government policy and practice. Throughout the survey, key stakeholders noted the need for the mining industry to more effectively use local products and services. Currently there is no national supplier development policy for the industry. Consequently, 95% of goods and services used by the mining industry are imported.
Namibia’s diamond discoveries seen extending mining by 50 years (Bloomberg)
Discoveries of diamonds on land bordering the southern Atlantic coastal areas of Namibia, the world’s largest producer of marine gems, may extend ground-based mining operations by another 50 years, Finance Minister Calle Schlettwein said. The government signed a 10-year deal with De Beers in May to get $430 million of rough diamonds annually for sale through the country’s Diamond Trading Co. The agreement would still be improved to Namibia’s advantage, Schlettwein said. “I don’t think it is the end of it, it is one step closer to our target of having better value-sharing," he said.
South Africa: Barriers to entry project papers (CCRED)
For this reason, CCRED is conducting a programme of research focused on barriers to entry and inclusive growth. The project involves researching and analysing the barriers to entry across a range of sectors in South Africa and in the region with the intention of formulating policy recommendations that will help to facilitate greater levels of entry and competition and thus drive higher growth. The study is divided into three parts: [Various downloads]
SADC hurt by Mauritius’ withdrawal from tourism bloc (Southern Times)
At their meeting in Gaborone last week, the tourism ministers agreed that while they would accept Mauritius’ decision to withdraw from RETOSA, they would continue to engage the Indian Ocean archipelago country “to establish the reasons for its withdrawal with the view to address any such reasons to encourage Mauritius to re-join the organisation”. According to the communique issued after the ministerial meeting, Namibia and Angola have offered to assist Botswana Minister of Environment, Wildlife and Tourism, Tshekedi Khama – who is also the Chairperson of the SADC Committee of Ministers Responsible for Tourism, in “engaging Mauritius”. [IATA signs MoU with African Union Commission (New Era)]
SA tourism to Zimbabwe down sharply (NewsDay)
Tourism minister Walter Mzembi told News24 in an interview on the sidelines of the African Union summit in Kigali, Rwanda, over the weekend that Zimbabwe used to have about 2,1 million tourists arrivals in the country, of which almost 1,5 million were South African. “It went down by almost 50%, and that is not assisting (the struggling economy),” he said of the economic situation in the country. The bullish United States dollar has made Zimbabwe as a destination uncompetitive for South Africans and anyone not using US dollars,” he said.
Ilmari Soininen: Making trade facilitation work in Africa - lessons from the service delivery agenda (ICTSD)
At a time when countries across the African continent are deploying important efforts to facilitate trade, what can we learn from these services for strengthening trade facilitation reform and ensuring impact?
Rwanda: Cross-border money transfer service fosters use of e-money among traders (New Times)
Teta Mpyisi, MTN Rwanda's senior manager for brand and sponsorship, said an average of about 2,650 transactions are conducted on the MTN Mobile Money platform between Rwanda, Kenya and Uganda per month, adding that the firm has about 3.7 million mobile money users. Sunny Ntayombya, the Tigo corporate communication and government relations manager, said that through the Tigo Cash platform, more than 1.1 million Rwandans are now able to transact with merchants, and send and receive money from Tanzania and the DR Congo.
Sudan-Ethiopia OSBP: validation workshop (IGAD)
IGAD organised the workshop to validate studies just completed towards the establishment of a OSBP on the Sudan and Ethiopia border. The studies are funded through a grant from the Government of Sweden. This project will serve as the pilot project towards establishment of OSBPs in the IGAD region. Once established, the OSBPs will play a pivotal role in enhancing regional trade and integration and hence providing immense socio-economic development in the region.
Mauritius-EAC trade and investment linkages: update (Daily News)
Apart from visiting the Indian Ocean Commission, Amb Mfumukeko also seized the opportunity to market EAC to the Mauritius Private Sector stakeholders, including meeting with the Mauritius Chamber of Agriculture, Mauritius Chamber of Commerce and Industry, Enterprise Mauritius, Mauritius Investment Authority, Business Mauritius and Mauritius Export Association. the Mauritius Private Sector has expressed the need to sign a Memorandum of Understanding (MoU) with the EAC. The Africa Centre of Excellence for Business has pledged to develop an EAC Handbook on Opportunities that will serve as a marketing tool to underpin the collaboration. Plans include:
Development and globalization: facts and figures (UNCTAD)
Launching this year's ‘Development and globalization: facts and figures’, UNCTAD Secretary-General Mukhisa Kituyi said that if rich countries had consistently met the 0.7% target since 2002, then developing countries would have been $2 trillion better off. "The Sustainable Development Goals represent the outcome of long, serious discussions on how we want our world to look in 2030, but this vision needs serious finance," UNCTAD Secretary-General Mukhisa Kituyi said.
High-Level Political Forum on Sustainable Development: ministerial segment (UN)
The Economic and Social Council heard from experts during three panel discussions on: 'Reaching the most vulnerable', 'Challenges of countries in special situations' and 'Unlocking means of implementation for the Sustainable Development Goals and creating an enabling environment'. Speaking during the general debate were high-level officials and representatives of Thailand (for the Group of 77 developing countries and China), Bangladesh (for the Group of Least Developed Countries), Zambia (for the Group of Landlocked Developing Countries) and Tunisia (for the African Group). Debate summary:
Namibia moves to protect intellectual property (Southern Times)
Tanzanian horticultural exporters are worried over 'Brexit' (Coastweek)
Why cautionary approach to EPA’s deal is important (Daily News)
African leaders commit to eliminate malaria by 2030 (New Times)
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Development and Globalization: Facts and Figures
If rich countries had consistently met the 0.7 per cent target since 2002, then developing countries would have been $2 trillion better off.
Developing countries would be better able to finance the Sustainable Development Goals if rich countries were meeting their 2002 target to put 0.7 per cent of gross national income into overseas aid, the United Nations said on Monday, announcing a first major effort to measure progress in achieving the new Goals.
Launching this year’s Development and Globalization: Facts and Figures, UNCTAD Secretary-General Mukhisa Kituyi said that if rich countries had consistently met the 0.7 per cent target since 2002, then developing countries would have been $2 trillion better off.
“The Sustainable Development Goals represent the outcome of long, serious discussions on how we want our world to look in 2030, but this vision needs serious finance,” UNCTAD Secretary-General Mukhisa Kituyi said.
“The 0.7 per cent target will be a hard sell for many rich Governments, but these are a daring, ambitious set of Goals, and they require an equally ambitious response,” he said.
In 2015, the international community tasked UNCTAD and four other organizations to identify the means to finance the Sustainable Development Goals, through its Addis Ababa Action Agenda. The other organizations are the International Monetary Fund, the United Nations Development Programme, the World Bank and the World Trade Organization.
By focusing on the Sustainable Development Goals, this year’s report reflects the international focus on the new Goals, putting numerical values on roughly a third of the Goals’ 230 indicators. It also generated the $2 trillion figure and highlighted some of the challenges in measuring progress on achieving the Goals.
The Goals have four times the number of indicators as their predecessors, the Millennium Development Goals, UNCTAD Head of Statistics Steve MacFeely said. But even for the Millennium Development Goals, the global community was able to measure only 70 per cent of the indicators.
“The global community has major gaps in its data and must find ways to use the existing data much better,” Mr. MacFeely said, adding that this year’s report would help to move measurement forward. “This report is online and interactive and has already thrown out some interesting results,” he said.
Only six countries have ever reached this target, which was first proposed by UNCTAD in 1968, then agreed to by the global community in 1970 and later reconfirmed at the International Conference on Financing for Development that was held in Monterrey, Mexico, in March 2002.
Introduction
The 2016 edition of the UNCTAD Development and Globalization: Facts and Figures is dedicated to the Sustainable Development Goals that were adopted by the United Nations in September 2015 (2030 Agenda Declaration). At the time of writing (June 2016), the indicators for measuring progress towards these Goals that have been proposed by the Inter-agency Expert Group on Sustainable Development Goal Indicators (IAEG-SDG) and accepted by the United Nations Statistical Commission have not yet been endorsed by the General Assembly. Nevertheless, we think it is useful to give an early or preliminary assessment of progress for a selection of the 17 Sustainable Development Goals and 169 targets.
The 2030 Agenda Declaration stresses the importance of quality, accessible, timely and reliable disaggregated data to measure progress and to ensure that no one is left behind. The Declaration also states that data and information from existing reporting mechanisms should be used where possible. This report is in keeping with that philosophy; it has been compiled using a wide variety of data sources, both official and unofficial, to present a broad overview. The purpose of this report is not to present an in-depth review or analysis, but rather to provide a situation summary and highlight some key facts and messages, and give a fair synopsis of how things stand today, at the beginning of this 15-year agenda.
The selection of the targets presented in this report reflects UNCTAD’s mandate. UNCTAD is responsible for dealing with economic and sustainable development issues with a focus on trade, finance, investment and technology. Through these actions, UNCTAD contributes to progress on 52 specific Sustainable Development Goal targets, grouped under 10 of the 17 Sustainable Development Goals. Nevertheless, the report presents some general statistical analysis for all 17 Goals, as it is considered desirable to highlight the interdependencies of all the Goals, just as it is to underline the interconnectedness of all aspects of development. Readers will note that two themes, prosperity and partnership, are given priority in this report, as these are the areas where UNCTAD’s expertise contributes most.
The report is organized in five broad themes or sections:
- People: Goals 1–5
- Planet: Goals 6 and 12–15
- Prosperity: Goals 7–11
- Peace: Goal 16
- Partnership: Goal 17
Along with the Goals, selected targets are discussed. The full list of the Goals and targets presented in this report is given below. A special note is also included in the report on global and regional population projections and demographic changes. This has been included as, over the lifetime of the 2030 Agenda for Sustainable Development and in the years following, the global population will increase significantly. These changes provide an important context for the implementation of the Agenda.
There are many important messages highlighted in this report. We would like to emphasize just two: one regarding data and one regarding the not-unrelated issue of resources. The 2030 Agenda has placed much greater emphasis than the Millennium Development Goal agenda on the need for improved data and statistics. In the lead up to adopting the 2030 Agenda, the High-Level Panel of Eminent Persons called for a data revolution. The United Nations Secretary-General Ban Ki-moon subsequently established an Independent Expert Advisory Group on a Data Revolution for Sustainable Development.
In its 2014 report A world that counts – Mobilizing the data revolution for sustainable development, the question was raised of whether unequal access to data should in fact be a recognized form of inequality. A dilemma exists concerning the fact that data availability is usually weakest for the poorest countries of the world, while these are the countries for which they are needed the most in the context of monitoring sustainable development.
This leads to the second message. The cost of implementing the 2030 Agenda will be significant. Estimates of how many additional resources will be required vary. Ambassador Macharia Kamau of Kenya, one of the co-facilitators of the intergovernmental consultative process, anticipates that the implementation of the 2030 Agenda could cost between US$3.5 trillion and US$5 trillion per year. Ibrahim Thiaw, United Nations Assistant Secretary-General and Deputy Executive Director of the United Nations Environment Programme, estimates it will cost at least an additional US$1.5 trillion annually over the Millennium Development Goals.
One thing is clear – these sums are far in excess of existing funding. We would ask readers to think about data as infrastructure; infrastructure every bit as important as broadband or electricity networks. These issues are touched on in Goals 9 and 17. In order to provide policymakers around the world with the coherent information they need to inform their decisions, a lot of investment is required behind the scenes. This investment in data infrastructure will require additional resources but will yield a return consisting of a broader knowledge base, and ultimately more efficient policy formation and a better-informed public.
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ILO: Labour provisions in trade agreements do not harm business
New ILO report looks at how the increasing number of labour provisions in trade agreements are impacting the world of work.
Labour provisions* in trade agreements do not lead to a reduction or diversion of trade flows, and ease labour market access, a new study of the International Labour Organization (ILO) finds.
The research shows that a trade agreement which includes labour provisions actually increases the value of trade by 28 per cent on average, similar to 26 per cent for an agreement without labour provisions.
The study also finds that labour provisions support labour market access, particularly for working-age women. Labour provisions impact positively on labour force participation rates, bringing larger proportions of both, male and female working age populations into the labour force.
These are the main findings of the new ILO Growth with Equity report entitled “Assessment of labour provisions in trade and investment arrangements” which analyses the design, implementation and outcomes of labour provisions in trade agreements.
The study produced by the ILO Research Department highlights a significant increase in the number of trade agreements worldwide, showing that in 2014 almost 55 per cent of exports took place within the framework of bi- and plurilateral trade agreements – compared to just 42 per cent in 1995.
“It is increasingly common for new trade agreements to include labour provisions,” said Marva Corley, ILO Senior Economist and lead author of the report.
“As of December 2015, there were 76 trade agreements in place (covering 135 economies) that include labour provisions, nearly half of which were concluded after 2008. Over 80 per cent of agreements that came into force since 2013 contain such provisions,” she added.
Currently a quarter of the value of trade taking place within trade agreements falls under the scope of such provisions which were almost non-existent until the mid-1990s.
Bridging the gap between economic and social outcomes
The report warns that the impact of trade on labour markets shows a mixed picture, especially when it comes to job quality and wage increases. It insists on the fact that income inequality has tended to widen since the 1980’s, which is partly due to trade and investment liberalization.
“The winners from trade are not adequately compensating those who lose in terms of jobs and incomes,” the study observes.
Looking at the nature of labour provisions, the authors say that in the great majority of cases, trade agreements that include labour provisions are based on the commitment not to lower labour standards or stray from labour laws to boost competitiveness. They also aim at ensuring national labour laws are effectively enforced and consistent with already existing labour standards. 72 per cent of trade-related labour provisions make reference to ILO instruments.
The authors also say that trade agreements that contain labour provisions can boost capacity-building, and, in some cases, improvements in working conditions at the sectoral level.
Involving social partners and the role of the ILO
Looking at how labour provisions can be more effective, the ILO research suggests that trade negotiations become less opaque by involving stakeholders, especially the social partners – and not just governments – in the making and implementation of labour provisions in trade agreements.
With respect to labour market outcomes, the report highlights the strong interconnection between legal reforms, capacity-building and monitoring mechanisms – while social dialogue between government and the social partners plays a key role in this process.
Finally, the authors explain that ILO expertise, if properly mobilised, can help in making labour provisions more effective, for example by enhancing coherence between labour provisions and the international system of labour standards.
“The trends identified in this report and the continued widening of income inequalities highlight the need for more research on specific provisions in trade agreements and their effect on labour standards, as well as the role the ILO can play in this respect,” Deborah Greenfield, ILO Deputy Director-General for Policy concluded.
* Trade-related labour provisions take into consideration any standard which addresses labour relations or minimum working terms or conditions, mechanisms for monitoring or promoting compliance, and/or a framework for cooperation. This definition groups together a broad range of labour provisions.
» Download: Assessment of labour provisions in trade and investment arrangements (PDF, 5.75 MB)
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Declaration of Civil Society to UNCTAD XIV
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We, over 400 organizations that participated in the Civil Society Forum of the fourteenth session of the United Nations Conference on Trade and Development (UNCTAD XIV), held in Nairobi from 15 to 17 July 2016, and its preparatory process, deliberated on the role of UNCTAD in the coming four years in the context of the panorama of international economic institutions, and adopted the following declaration.
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With its focus on the interdependence of trade, finance, investment, macroeconomics and technology as they affect the growth and development prospects of developing countries, UNCTAD is uniquely positioned to contribute to the global achievement of the ambitious commitments made by all countries in in 2015 in the Agenda 2030 for Sustainable Development, as well as the financing for development process (which the Third International Conference on Financing for Development in Addis Ababa continued in 2015), the Paris Agreement under the United Nations Framework Convention on Climate Change and the Tenth Ministerial Meeting of the World Trade Organization. However, to live up to its name and promises, its role must remain development-centred, oriented by South priorities and not subordinated to the liberalization goals of other institutions.
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We considered the challenging times we witness in the global political economy. The ramifications of the 2008 global financial and economic crisis, the worst in the postwar period, still haunt the world. Economic performance remains sluggish in all regions, further reducing opportunities for addressing the material needs of the vast and growing majorities of the poor and vulnerable. The phenomenal levels of inequality among and within nations, linked to the very types of economic activity that led to the crisis, have grown even sharper in its aftermath and through the inequitable measures adopted by many Governments in response to the crisis.
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Added to these are the escalating climate-related and humanitarian crises, and natural disasters arising from global systems of production and patterns of consumption, which threaten the very survival of humanity. Here too, it is impoverished and vulnerable peoples and countries – least responsible for climate change, least able to cope, who are owed a huge historical and ecological debt – that are suffering the worst impacts of climate change.
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These global challenges evidence the dynamics at the very core of the international economic system, and of the global order and policy regimes built thereupon. They also highlight the fundamental constraints to equitable and sustainable economic development across the world. In Africa, they have exposed the limited nature and shaky foundations of recent economic growth – based largely on rising prices in global demand for primary commodity exports – and the related Africa-rising optimism.
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In far too many developing countries, neoliberal policies have served to reinforce the structures that their economies inherited from colonialism: dependence on the export of (a narrow basket of hardly processed) primary commodities; little or no domestic manufacturing industrial capacity; stagnation of the rural economy; wanton extraction of natural resources; and reliance on fossil fuel and other harmful energy systems. They remain vulnerable to external shocks while, internally, unremitting rural collapse continues to drive levels of urbanization unrelated to the expansion of economic opportunity and/or investment in social and economic infrastructure.
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For the majority of people, especially for women and marginalized groups and communities, this has meant joblessness, precarious and degraded livelihoods, diminished opportunities for self-fulfilment, lack of access to essential services such as health and education, unsafe environments and damaged local ecosystems. At the same time, fabulous wealth continues to concentrate in the hands of narrow circles of national elites and global corporate forces that together dominate political processes and exercise control over economic resources. These extremes of inequality reflect and exacerbate pre-existing inequities and inequalities, including along the lines of class, gender, race, age, ethnic formations and other statuses; play havoc with bonds of social solidarity within and across national boundaries; and have driven conflict-laden tensions to the fore of societal interactions.
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The specific developmental challenges that UNCTAD sought to address are still with us, and in some cases (such as the African region) have become more acute. These are the challenges posed by the structural imbalances of the global order characterized at one pole by a concentration of highly industrialized economies, and at the other pole by a mass of primary commodity export-dependent economies feeding the needs of the industrial economies. This system produces immense prosperity for some, while generating poverty, constraining the well-being of vast majorities in the developing world and intensifying environmental and climate crises.
The crucial role of UNCTAD
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UNCTAD provides a critical institutional framework and a unique forum for taking up the challenges of equitable development, thanks to its make-up and orientation, its rich history of policy interventions on behalf of developing countries and the abiding relevance of the issues for which it was founded. The organization’s foundational vision is as critical today as it was 50 years ago, when it was established as a platform for thought and action on broad issues of trade and development explicitly formulated around the challenges and perspectives of the vulnerable and marginalized majority of nations within the international system, and the people in them. Its foundational principles continue to drive the work of UNCTAD. Its values, understandings, perspectives and accumulated outcomes of 50 years form the critical point of departure upon which to build the work of UNCTAD for the coming period – to enable the organization to support developing countries in meeting the challenges of today.
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Yet the high-quality contributions that UNCTAD has made have gone beyond the developing world. Arguably, all countries can benefit from expanded support to the organization that was able to spot the last global financial crisis – which took its toll on the poor and vulnerable everywhere – before it happened, and that pushed issues such as inequality and sovereign debt restructuring onto the international development agenda. Indeed, who would not benefit from developing countries being on a better footing to face their development challenges and make their contribution to the global pledge of achieving the Sustainable Development Goals by 2030? Policy analysis, consensus-building and technical cooperation activities of UNCTAD are crucial to fulfilling this task. Moreover, UNCTAD has a unique role to play in analysing the compatibility of a range of investment, trade, debt, macroeconomic and financial policies that, without proper checking, risk undermining efforts to achieve the Sustainable Development Goals.
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Paradoxically, however, the advanced industrial countries seek the exact opposite agenda for the future of UNCTAD. As is clear from the positions they have taken in the negotiations towards UNCTAD XIV, these countries continue with their project to curtail the ability of UNCTAD to provide independent and critical policy perspectives. If they succeed, UNCTAD will be undermined in its role of providing the much-needed corrective and balance to the chorus of positions that usually emanate from dominant players such as the International Monetary Fund, Organization for Economic Cooperation and Development, World Bank, World Trade Organization, and the like.
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Instead, UNCTAD might end up as a pale reflection of these dominant frameworks and policies, with its task reduced essentially to supporting poorer countries in Africa and other parts of the world to implement and live within this dominant paradigm as best as they can. The foundational mission and role of UNCTAD could be silenced at the very time when it is most needed in global affairs.
General recommendations
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It is absolutely critical to continue and strengthen the integrated approach of UNCTAD to the evolution and management of globalization and to the interdependence of trade, finance, investment and technology as they affect the growth and development prospects of developing countries. The same applies to the linkages between international trade and financial and macroeconomic issues, with particular emphasis on issues related to crisis management. Quite pertinent to this focus will be to strengthen its research on the financialization of commodity markets, and the consequences of financialization for commodity prices, commodity export revenues, taxes on commodity extraction and processing, and the use of such revenues and taxes for economic diversification for developing country members of UNCTAD. The United Nations would be failing its responsibility to the many countries that need this service if it does not take a more robust role in this regard.
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Common but differentiated responsibilities and special and differential treatment are long-standing multilaterally-negotiated principles that recognize that developed and developing countries cannot be treated in the same manner because of their differing development and economic circumstances. Thus they have different levels of responsibility with respect to environmental degradation, climate change and sustainable development. Failing to take this into account would undermine the aspiration to promote universal advances in development and trade.
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The UNCTAD XIV outcome document must give full support to the UNCTAD mandate on curbing tax evasion and avoidance, including in commodities markets and through investment policies. More broadly, the issue of changing international tax rules and closing loopholes that facilitate and enable international tax evasion and avoidance cannot just be dealt with by the Organization for Economic Cooperation and Development, which excludes the vast majority of developing countries. It must be at the centre of a multilateral intergovernmental process under the auspices of the United Nations. As part of its contribution to curbing tax dodging internationally, UNCTAD must play a vital role in the development of a normative definition of illicit financial flows, in developing guidelines and building global consensus towards public country-by-country reporting and in providing policy support and capacity-building to enhance the involvement and cooperation of developing countries in addressing base erosion and profit shifting to safeguard their taxing rights. This would go a long way towards countries being able to sustain their own development needs, as would the establishment of an intergovernmental group of experts on global tax issues.
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The mandate of UNCTAD to work on debt workout mechanisms and responsible lending and borrowing has been uniquely useful and its members should strengthen it, including by supporting further work on these issues at the level of the General Assembly of the United Nations. UNCTAD should follow up on and further enrich its conceptual work and support the implementation of responsible lending and borrowing practices in member States and monitor progress. UNCTAD should develop an alternative and development-oriented methodology on debt sustainability analysis and support national vulture funds legislation in line with the Addis Ababa Action Agenda. Moreover, it should take the lead in advancing recognition and understanding of the issue of illegitimate debts and decisive policies and actions to address it. It is important to restate the shared responsibility of creditors and debtors in achieving debt sustainability and addressing illegitimate debt. UNCTAD should support calls for government and independent citizen debt audits in both lender and borrower countries as important mechanisms for addressing debt sustainability and illegitimacy. The UNCTAD Road Map and Guide to Sovereign Debt Workouts should be made known to member States, in particular those in debt distress, and UNCTAD technical assistance should enable member States to conduct debt workout in line with the application of the principles and steps explained in the Road Map.
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While a multilateral system of trade rules is preferable to a fragmented system, the rules must be fair and balanced, taking into account the various levels of development across the United Nations membership, rather than focused on trade liberalization or simply increasing trade flows. As an institution with a long history of helping developing countries to use trade for their development, UNCTAD must play an active role in assisting developing countries to advocate for a fair multilateral trading system, and special and differential treatment for all developing countries, addressing the imbalances in the current trade regime, particularly in agriculture and cotton. It is not new approaches that are needed but the fulfilment of the development mandate of the Doha Development Agenda. Yet we are concerned that UNCTAD may be transformed into solely an implementation mechanism for trade agreements concluded elsewhere. The further UNCTAD moves towards seeing developing countries mainly as engines to increase trade – thus deviating from its mission to support the use of trade for development – the more it risks redundancy and irrelevance.
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Trade and investment agreements do not support development without the right policy environment, which necessitates policy space, an effective and developmental state able to sustain its own resource base responsible for safeguarding people’s human rights, gender equality and a more coherent, inclusive and representative global architecture for sustainable development. Also required is more responsive, inclusive, participatory and representative international decision-making through effective, accountable and inclusive international institutions, with broader and stronger participation by developing countries.
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Likewise, UNCTAD must receive a strengthened mandate to ensure that the trading system enhances the integration of developing countries, especially the least developed countries, first on a regional level; the structural transformation of African economies and gender equality and women’s rights in relation to the structural and global issues in trade and finance; the promotion of sustainable development, centred on the promotion of a higher self-sufficiency in basic food staples; and the assurance of decent work, and peasant, indigenous and workers’ rights. These goals necessitate that UNCTAD undertake a review of proposed and existing trade agreements with a view to promoting sustainable industrialization and equitable transitions to a low-carbon economy, reversing the reductions of labour’s share of income, supporting the implementation of agreements regarding the least developed countries and strengthening the negotiating capacity of developing countries in trade negotiations.
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In addition to work on the multilateral trading system, the trade-related work of UNCTAD must continue and strengthen its mandate to support developing countries in their processes towards forms of regional integration that primarily work for the people most affected by development challenges, as well as help them assess the increasingly complex (positive or negative) implications of plurilateral and megaregional trade agreements for their own development, as well as advancing their interests within such negotiations.
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Given the long history of UNCTAD in encouraging developing countries to sign international investment agreements, and the negative impacts that developing countries have experienced, particularly due to investor–State dispute settlement mechanisms, the mandate of UNCTAD should be intensely invested in helping developing countries craft investment policies that will contribute to development, rather than just “balance the interests” of investors and development; as well as to unwind and reform these agreements with a view to ensuring a positive impact on national or regional development strategies. UNCTAD members should strengthen its mandate to support not the attraction of investment as a goal in itself but rather its contribution to development. The establishment of an intergovernmental group of experts on trade and investment rules and policy reform would be helpful in this regard. This group of experts should develop a mechanism to engage civil society organizations to develop a framework for international investment agreements that would establish investors’ legal responsibility and adequate procedures for accountability, including mandatory due diligence assessments across supply chains, as well as developing policy options to increase tax transparency in the operations of multinational enterprises.
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The above work necessitates research and policy analysis, including positive and negative impacts of trade rules on national or regional development strategies, and on the achievement of the Sustainable Development Goals, independently of the World Trade Organization, which does not share the developmental mission of UNCTAD. The Trade and Development Report is one of the outlets that UNCTAD should use for such analyses.
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UNCTAD should be involved in monitoring the role of the private sector, particularly foreign investors and their impacts (both positive and negative) on mobilization of domestic resources, fiscal and debt sustainability, development, human rights, the Sustainable Development Goals and climate goals. In particular, we strongly caution about support and promotion of public-private partnerships or addressing them as ends in themselves – despite the unfortunate adoption of an indicator under Goal 17 that merely refers to the number of them. There is a lack of proof that public-private partnerships are actually delivering positive economic, social and environmental outcomes. Traditional public procurement that meets administrative efficiency and public accountability criteria and supports local private sectors should remain the preferred route for involving the private sector in infrastructure financing. Where unavoidable, public-private partnership projects should be subjected to rigorous standards and criteria on transparency, feasibility, auditing, social and environmental safeguards, the affordability, accessibility and quality of the services and sustainable infrastructure that they are expected to deliver, the prevention of unsustainable debt burdens and the consent and participation of people and communities that will be impacted by public–private partnership projects.
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The current economic model of trade and investment has created a permissive environment for business to make use of governance gaps, for instance the weak rule of law in many countries, in order to exploit cheap labour opportunities. Global and regional supply chains are infested with precarious work, triangular employment relations, child labour and slavery – problems which affect women disproportionally. Supply chains have contributed to the erosion of labour market institutions, including trade unions and collective bargaining, and to increasing inequalities.
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Recent policy initiatives in the Group of Seven, the Group of 20 and the Organization for Economic Cooperation and Development have created momentum for legal and rights-based solutions to the deficits of decent work through living wages and living incomes in global supply chains. It is timely to examine ways to utilize the United Nations Guiding Principles on Business and Human Rights with a view to establishing accountability and liability of business enterprises. UNCTAD should work to create consensus in multilateral institutions to address the lack of extraterritorial liability for business activities, including with mandatory human rights due diligence.
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Technology transfer is essential to the enabling of sustainable development in developing countries, and UNCTAD should continue to take a lead role in supporting these efforts by developing countries rather than in enforcing intellectual property rules that benefit protectionist patent- and copyright-holders in developed countries.
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The contribution of UNCTAD to the challenges faced by small and medium-sized enterprises, including capacity-building, should be continued and add support to activities to empower small and medium-sized enterprises with the right information on policies and benefits at the grassroots level. Access to finance continues to be a challenge, and UNCTAD should support policies and instruments to improve it both directly and indirectly – for example, overcoming barriers such as discriminatory land titling policies or abusive delayed payments practices by large companies to small and medium-sized enterprises they subcontract. There is also a need to promote the role of academia and interactive learning policies to make curriculums relevant and current to the training of the entrepreneurs of tomorrow, and training for women in information and communications technology.
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There is an essential role of better and disaggregated data in efforts to meet the Sustainable Development Goals and to ensure that no one is left behind. Accordingly, the mandate of UNCTAD should recognize the importance of data for monitoring and the strengthening of national statistical capacity, including:
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Support for open data standards and platforms for making development data more accessible and understandable to promote focused and effective intervention
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More institutionalized involvement of data communities to enhance data use at subnational levels
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Increased funding for the development of micro/subnational-level data systems
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The important role of UNCTAD in financing for development should be affirmed and expanded, including through the creation of an intergovernmental group of experts on financing development, as well as monitoring the implementation of commitments on official development assistance. Official development assistance is a long-standing but essentially unfulfilled commitment by the developed countries; it is central to North-South cooperation, and it must be differentiated from, and not substituted by, South-South cooperation and other sources of international public finance.
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UNCTAD should ensure that in all of the above areas, the analyses, policy formulations and implementation processes include the sharp reflection and articulation of gender dimensions and impacts on women and future generations and ways to address these, and the empowerment and effective participation of women.
UNCTAD and structural transformation in Africa
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In response to growing concerns among their peoples, African Governments have, with a greater sense of urgency, spearheaded collective initiatives aimed at the structural economic transformation of their countries and their continent:
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Towards increased value-addition;
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Improved investment in agriculture and the rural economy;
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More domestic processing of export commodities;
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Rebuilding domestic manufacture;
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Developing their industrial and services sectors;
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Enhancing overall domestic productive capabilities.
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These engines of structural economic transformation are required to create decent jobs; increase incomes and other means of livelihood; improve living conditions; recognize, reduce and redistribute the burden of unpaid care work disproportionately shouldered by women; and overcome poverty in Africa.
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African Governments have set long-term visions to reinforce the imperatives of structural transformation: Agenda 2063 of the African Union, and sectoral and cross-cutting continent-wide frameworks; the Comprehensive Africa Agricultural Development Programme; the Africa Mining Vision; the decision to fast-track the establishment of the Continental Free Trade Area; and the Report of the High-level Panel on Illicit Financial Flows from Africa (adopted by African Heads of State).
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These initiatives and policy frameworks can be strengthened, their internal coherence and alignment with each other improved. Above all, the external conditions for their realization can be greatly enhanced by ensuring that commitments undertaken by African Governments in international agreements are coherent with the imperatives of these measures and by ensuring that African Governments retain the policy space necessary for their realization, particularly by fully implementing their decisions within the African Union with regard to regional integration.
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Especially valid for Africa is the agenda that has formed UNCTAD work: to promote industrialization for countries emerging from colonialism, and thus to address the primary commodity export-dependent economic structures; to counterbalance the so-called free play of economic forces and their effects on developing economies; and to ensure different treatment and obligations for structurally different types of economies.
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African countries, whose peoples and economies have suffered the worst results of this dominant dogma and its policy prescriptions, cannot remain indifferent to such a possible outcome of the contestation over the work programme and position of UNCTAD in global economic governance.
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At UNCTAD XIV – taking place on African soil – African and other developing countries must ensure, and developed countries must support, the adoption of a work mandate that: (a) Provides UNCTAD with the necessary space and means to articulate the policy requirements of Africa’s structural economic transformation and work in support of their realization; (b) Reflects the elements of the changing global trade and development agenda as it affects the positions and fortunes of African countries in meeting the challenges of this landscape; (c) Addresses the specific constraints that African countries face in meeting their development challenges.
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UNCTAD must support African countries to: (a) Address the negative effects of the imbalances of the international trade regime, including World Trade Organization agreements, economic partnership agreements and bilateral and international investment agreements, and protecting the space for policy initiatives and South-South economic cooperation against further encroachment; (b) Push and adopt financial, fiscal and other relevant policies that stop the transfer of capital, illicit financial flows and other leakages of economic resources from Africa and enable African countries to retain the investible resources generated in their economies for domestic investment and economic development; (c) Decisively address continuing debt burdens and the looming debt crisis and adopt policies that will prevent the re-accumulation of unsustainable and illegitimate debts; (d) Adopt policies to access technology (through adoption, diffusion and technology transfer) to support the development of productive capacities and domestic enterprise and to meet the needs of sustainable development; (e) Adopt gender-sensitive and responsive trade and development policies that promote equitable and rights-based development. The ongoing work of UNCTAD in this regard must continue and be enhanced.
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Above all, it is important that African countries reimagine UNCTAD beyond the expectations of technical assistance and capacity-building, and reclaim the role of UNCTAD to shape global policy frameworks that uphold developmental imperatives in line with their vision as expressed in Agenda 2063 of the African Union.
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Many of these recommendations are highly relevant to the needed structural transformation in other regions of the world.
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Civil Society commits to mobilizing its expertise in order to make tangible proposals that can contribute to make effective this support required of UNCTAD.
Conclusion
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To further allow implementation of the calls made in this declaration, there is a need to scale up the international financial and human resource support of member Governments towards UNCTAD and its overall mandate. As the organization becomes more dependent on project-based funding from developed countries, priorities shift in the direction of donor States rather than the agreed-upon mandate, a tendency that robust, renewed general support funding from member States could curb.
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As civil society organizations, we remain deeply committed to human rights, gender equality and social justice, the achievement of the Sustainable Development Goals and sustainable development for all. We urge you to adopt the above positions and ensure that UNCTAD continues and strengthens its role in trade, finance, investment, macroeconomics and technology as they affect the growth and development prospects of all developing countries.
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We reaffirm our intent to continue working with all countries, groups of countries, and institutions, and subnational authorities, towards aligning the mission of UNCTAD with the model of development we support, rather than the needs of a non-accountable transnational corporate sector. For this purpose, we will work on strengthening the Civil Society Organization community involved in UNCTAD, at the global, regional and country levels.
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$22 trillion e-commerce opportunity for developing countries
Developing countries must grasp the opportunity of e-commerce – worth around $22.1 trillion in 2015 – or risk falling behind.
Developing countries should grasp the rapidly growing opportunity of electronic commerce – e-commerce – worth around $22.1 trillion in 2015, up 38 per cent from 2013, or risk falling quickly behind, UNCTAD said on Monday at the launch of a new e-commerce initiative.
The new initiative, called “eTrade for All”, brings international organizations, donors and businesses under one umbrella, easing developing country access to cutting-edge technical assistance and giving donors more options for funding.
By providing new opportunities and new markets, online commerce can help generate economic opportunities, including jobs. But while more than 70 per cent of people are shopping online in Denmark, Luxembourg and the United Kingdom, the story is different in most developing countries. In Bangladesh, Ghana and Indonesia, for example, just 2 per cent or less of the population buy online.
“A huge divide is opening between countries that are exploiting those opportunities and those that are not,” UNCTAD Secretary-General Mukhisa Kituyi said, ahead of the initiative’s launch at UNCTAD 14.
E-commerce includes both business-to-business (B2B) and business-to-consumer (B2C), respectively valued at around $19.9 trillion and $2.2 trillion each, according to the new UNCTAD data. This trade is mostly domestic, but is becoming more and more international.
The new UNCTAD data show that e-commerce is growing rapidly, with emerging economies accounting for most of this growth. China is now the world’s largest B2C e-commerce market, both in terms of sales and in number of online shoppers. Brazil, India, the Republic of Korea and the Russian Federation have also all moved into the top 10 e-commerce markets.
Top 10 B2C E-commerce Markets, 2015, ranked by number of online buyers
“I am delighted by this collaboration with our partners, which finally gives the global community an effective platform for helping developing countries access and benefit from e-commerce,” Dr. Kituyi added.
With strong involvement by the private sector – through a new Private Sector Advisory Council – and with financial contributions from the Governments of the United Kingdom of Great Britain and Northern Ireland, Sweden, Finland and the Republic of Korea, the eTrade for All initiative will support developing countries which express an interest in boosting their online commerce.
The initiative will help developing countries in seven policy areas, including e-commerce assessments, information and communications technology infrastructure, payments, trade logistics, legal and regulatory frameworks, skills development and financing for e-commerce.
In this way, the initiative will also support the December 2015 call by the United Nations General Assembly to better use information and communication technology to facilitate achievement of the Sustainable Development Goals.
» Download: Aid for eTrade: Unlocking the potential of e-commerce in developing countries – Draft call for action (PDF, 504 KB)
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Development Co-operation Report 2016: the Sustainable Development Goals as business opportunities
The face of development has changed, with diverse stakeholders involved – and implicated – in what are more and more seen as global and interlinked concerns. At the same time, there is an urgent need to mobilise unprecedented resources to achieve the ambitious Sustainable Development Goals (SDGs). The private sector can be a powerful promotor of sustainable development. Companies provide jobs, infrastructure, innovation and social services, among others.
Increasingly, investments in developing countries – even in the least developed countries – are seen as business opportunities, despite the risks involved. The public sector can leverage the private sector contribution, helping to manage risk and providing insights into effective policy and practice. Yet in order to set the right incentives, a better understanding is needed of the enabling factors, as well as the constraints, for businesses and investors interested in addressing sustainable development challenges.
The Development Co-operation Report 2016 explores the potential and challenges of investing in developing countries, in particular through social impact investment, blended finance and foreign direct investment. The report provides guidance on responsible business conduct and outlines the challenges in mobilising and measuring private finance to achieve the SDGs.
Throughout the report, practical examples illustrate how business is already promoting sustainable development and inclusive growth in developing countries. Part II of the report showcases the profiles and performance of development co-operation providers, and presents DAC statistics on official and private resource flows.
Executive summary
The year 2015 was a decisive year for sustainable development. With the adoption of the 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals (SDGs), the world now has the most ambitious, diverse and universal development roadmap in history. The Addis Ababa Action Agenda stressed the importance of using public investment instruments and vehicles to leverage the unprecedented levels of private finance required to fund this agenda. And the United Nations Climate Change Conference (COP21) in Paris confirmed the challenges of managing climate change – and an unprecedented global commitment to do so.
These milestones have changed the face of development forever. To meet the challenges they represent, the global community needs to move well beyond the approximately USD 132 billion provided as official development assistance (ODA) in 2015. Investment needs for the SDGs in developing countries are estimated to be in the order of USD 3.3 to 4.5 trillion per year. Limiting the global temperature increase to 1.5°C above pre-industrial levels will require concerted action by all. Developed countries have committed to mobilising USD 100 billion per year by 2020 to support developing country efforts.
At the same time, the new goals make it clear that the challenges of sustainable development are no longer merely a question of what is happening in poor countries – they are challenges for us all. To tackle these global and interlinked concerns, a diverse array of stakeholders will need to join forces – with the private sector taking a pivotal position. In fact, achieving each and every one of the 17 SDGs hinges on private sector involvement.
Investment in sustainable development is smart investment
The business case for the SDGs is strong. This Development Co-operation Report 2016 makes it clear that investing in sustainable development is smart investment. Companies that introduce sustainability into their business models are profitable and successful, with positive returns on capital in terms of reduced risk, diversification of markets and portfolios, increased revenue, reduced costs, and improved value of products. Increasingly, investments in developing countries – and even in the least developed countries – are seen as business opportunities, despite the risks involved. On the other hand, companies provide jobs, infrastructure, innovation and social services, among others.
This report explores five pathways for realising the enormous potential of the private sector as a partner for delivering on the SDGs, providing the quantity and quality of investment needed to support sustainable development.
Five pathways to the Sustainable Development Goals
1. Foreign direct investment is by far the greatest source of international capital flows to developing countries and is considered one of the most development-friendly sources of private investment. It can create jobs, boost productive capacity, enable local firms to access new international markets and bring with it transfers of technology that can have positive long-term effects. Many are expecting these flows to play a major role in filling the SDG financing gap. According to the United Nations Conference onTrade and Development (UNCTAD), a concerted effort by the international community could help to quadruple foreign direct investment by 2030, especially in structurally weak countries. There is, however, some cause for concern: global capital flows have started to decelerate, while economic vulnerabilities are growing. Chapter 2 warns that a slowdown, or even reversal, in foreign direct investment could have serious negative ramifications for both developing and international investment markets. Framing development strategies around the complementary and mutually reinforcing qualities of private investment and development co-operation can help to offset the cyclic, changing nature of foreign direct investment trends. Tools such as the OECD Policy Framework for Investment can help countries to improve business climates, creating conditions that increase investment while maximising its economic and social returns.
2. New investment models can help mobilise financial resources to meet the challenges of implementing the SDGs. Blended finance – using public funds strategically to provide, for instance, de-risking instruments for private investors – can dramatically improve the scale of investment in development. Blended finance offers huge, largely untapped potential for public, philanthropic and private actors to work together to dramatically improve the scale of investment in developing countries. Its potential lies in its ability to remove bottlenecks that prevent private investors from targeting sectors and countries that urgently need additional investment. To accelerate social and economic progress towards the SDGs, blended finance needs to be scaled up, but in a systematic way that avoids certain risks. Chapter 3 takes a close look at the use of development and philanthropic finance to unlock resources through blending mechanisms that have the potential to transform economies, societies and lives. It notes that while the concept of blending public and private finance in the context of development co-operation is nothing new, it has played a marginal role so far.
3. Today’s development financing packages can be complex, with multiple actors involved. Chapter 4 of this report describes work underway to monitor and measure the mobilisation effect of public sector interventions on private investment. This is expected to be an important element of the new “total official support for sustainable development” (TOSSD) framework, which will provide important information about financing strategies and best practices, helping to attract development finance to support the SDGs. A recent OECD survey has confirmed the feasibility of collecting and measuring data on the direct mobilisation effect of guarantees, syndicated loans and shares in collective investment vehicles; work is underway to develop similar methodologies for other financial instruments. Much work still remains to be done, however, in particular to find ways of measuring the indirect – or “catalytic” – effect of public interventions on the achievement of the global goals and in tackling climate change. The OECD is co-ordinating its efforts with work underway in other fora to ensure coherence.
4. If development is to be truly sustainable and inclusive it must benefit all citizens – in particular the poorest, most marginalised and vulnerable. This means looking at business through a new lens, focusing on leaving no one behind and on empowering people to lead fuller, more productive lives. Social impact investment has evolved over the past decade as an innovative approach to increasing the benefits of business for the world’s poorest and most marginalised populations as described in Chapter 5. Enterprises that generate measurable social as well as financial returns can bring effectiveness, innovation, accountability and scale to development efforts. Public funds can be used to strengthen and promote this type of investment by sharing risks, and also by supporting a sound business environment, particularly in the least developed countries and in countries emerging from conflict. These new business models can complement existing ones, especially in areas not traditionally popular with business – but essential to the poor – such as education, health and social services.
5. For business to do good while doing no harm, the private sector must be held to the same international transparency and accountability standards as all other actors. Chapter 6 looks at the principles and standards of responsible business conduct and how following them can give responsible businesses an advantage that benefits their bottom lines, while at the same time producing positive results for people and the planet. Business and government have complementary roles to play in implementing, promoting and enabling responsible business conduct. The OECD Guidelines for Multinational Enterprises help to optimise their contributions, supporting the development of responsible and accountable business practice to ensure that investment quantity is matched by business quality to produce social, economic and environmental benefits. These guidelines can enable business to make an important contribution to the SDGs in countries worldwide, helping to raise the standard of living through the creation of fair and equal jobs, the development of skills and technology, and more equitable distribution of wealth.
By following these pathways and working together, investors, governments, philanthropy, institutions and civil society can make the most of converging interests and potential to unlock the resources needed. This approach can provide accountability and transparency, at the same time meeting business needs and expectations. And it can do so while ensuring that no one is left behind and that the planet’s resources are conserved and even renewed. This report provides examples of how the OECD is stimulating dialogue and creating opportunities for co-operation among the many stakeholders involved in sustainable development. It also presents practical cases that illustrate how businesses are already working to promote sustainable development and inclusive growth in developing countries.
Many development agencies and bilateral and multilateral development finance institutions are already engaging in new ways of sharing risks and reducing costs so as to leverage private finance for sustainable development. Providers of development co-operation generally agree that mobilising private resources for sustainable development needs to be “at the core of a modernised, reinvented role for ODA”. In much the same way, in this era hallmarked by globalisation, rapid technological advancement and competition for precious resources, it is important to remember that business thrives when the world thrives. Doing good by doing well needs to be the new mantra of business for sustainable development.
» Download: Development Co-operation Report 2016 (PDF, 13.87 MB)
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How can Zambia benefit more from mining?
A recent review of Zambia’s mining sector governance and investment attractiveness shows the country remains an appealing place for investment. Integrating the mineral sector into national development planning is a crucial driver for sustainable development in Zambia.
Zambia has a long history of mining and a large known resource base of copper, emeralds, and other deposits. It also has very good potential for further discoveries. Mining accounts for 12% of Zambia’s GDP and 70% of total export value. The sector is also a significant source of government revenue and formal employment, both directly and indirectly. Continuing to attract investment in the sector is crucial to the country's growth since it constitutes 62% of foreign direct investment.
Given this rich endowment of natural resources, an array of stakeholders in Zambia, including investors, government agencies, and civil society organizations, have long questioned why minerals are not bringing as much benefit as they should.
“Zambia is rich in minerals but we haven’t fully managed to convert that wealth for the benefit of the people,” said Ina Ruthenberg, the World Bank’s Country Manager for Zambia. “We need to know where to improve and what changes to make so we can harness this wealth to benefit not only current, but also future generations of Zambians.”
This is why the World Bank chose Zambia as the first country to pilot The Mining Investment and Governance Review (MInGov), which collects and shares information on mining sector governance, its attractiveness to investors, and how it contributes to national development. The review, based on data from in-country interviews and desktop research, assesses sector performance from the perspective of three stakeholder groups – government, investors in the mining value chain, and civil society – and identifies gaps between declared and actual government policy and practice.
MInGov findings in Zambia highlight that the country is an attractive place for investment due to favorable geology, its long history of mining, its political stability, and a relatively favorable economic environment. Zambia is also safe and secure – since the country’s independence in 1964 there has never been a war.
But these positive aspects are overshadowed by a lack of transparency and accountability regarding revenue management, a lack of consistency surrounding fiscal policy, and lack of support for diversifying the economy and leveraging of infrastructure for the general population.
“We need to stick to the rules of the game in the long-term to foster a stable investment environment, while simultaneously diversifying our economy so we are not overly dependent on mining,” said Paul Chanda, Zambia’s Permanent Secretary for the Ministry of Mines.
Throughout the survey, key stakeholders noted the need for the mining industry to more effectively use local products and services. Currently there is no national supplier development policy for the industry. Consequently, 95% of goods and services used by the mining industry are imported.
“MInGov has pointed out that local supplier development policy is an area where stakeholder agreement is a priority and ripe for policy action,” said Martin Lokanc, Senior Mining Specialist at the World Bank Group. “We’re pleased the Zambian government is in the process of preparing regulations in this important area.”
Increased openness and transparency is another priority issue that government, civil society, and industry agree on. More specifically, stakeholders agreed on a perceived lack of independence of the licensing authorities. On this front, the Zambian government is making progress through an updated Mines and Minerals Act (2015) and implementation of the Extractive Industries Transparency Initiative (EITI), which they began implementing in 2009 and advanced to compliant status in 2012.
A key challenge for the Zambian government will be to fully integrate the mineral sector into national development plans.
“Zambia has a national development plan, but no mining sector development plan,” said Ruthenberg. “With so many different expectations for mining – as shown through the different priorities areas identified in MInGov – a sector development strategy should be a high priority.”
There are also concerns about social and environmental issues surrounding the mining sector. Zambia’s regulations in this area are a good starting point, but regulatory and monitoring agencies must be strengthened to conduct more meaningful consultation among stakeholders on issues affecting the sector.
The MInGov study in Zambia was made possible by support from the Extractive Industries – Technical Advisory Facility (EI-TAF) and the German Development Cooperation. Moving forward, MInGov studies will be developed in Botswana, the Democratic Republic of Congo (DRC), Mozambique, Peru, Ghana, and Kenya. Results will be published later this year.
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Accession to the World Trade Organizaton: Best practices on WTO post-accession
Introduction
WTO membership and Director-General Roberto Azevêdo attach great importance to post-accession implementation and support. Building on the conceptual framework developed in the Director-General's 2014 Annual Report on WTO Accessions, the Secretariat has continued to deepen its understanding on post-accession needs of future Article XII Members and its efforts to operationalise the post-accession framework, with the support of Members and acceding governments. In this regard, the first dialogue on post-accession at the Third China Round Table held in Dushanbe in May 2015 provided rich insights based on direct experiences, which helped the Secretariat to structure its post-accession support to new Article XII Members. Moreover, the recently concluded accessions of Afghanistan and Liberia with their post-accession needs already built into the accession packages provide an operational mechanism for post-accession implementation and coordination in response to the specific needs of the least-developed countries (LDCs).
The framework for WTO post-accession implementation and support is structured into four pillars, as follows:
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Best Practices on WTO Post-Accession;
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Country-Specific WTO Post-Accession Implementation Strategy for LDCs;
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Specialised Training on WTO Post-Accession for LDCs; and,
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Internal Secretariat Note on Post-Accession Implementation and Monitoring. The four pillars are complementary to each other.
The first pillar, 'Best Practices on WTO Post-Accession', whose details are contained in this Note, is aimed at assisting Acceding Governments and new Members in the transition from the accession negotiations to the membership. WTO accession is a tool for domestic reforms and integration into the rules-based global economy. Yet, WTO membership does not automatically lead to trade-related development, as the realisation of its benefits is inter-dependent with sustained domestic reforms and implementation of WTO obligations, including accession-specific commitments. The completion of an accession process does not mark an end but signals the beginning of sustained economic reforms to maximize the benefits of WTO membership and ensure global economic integration. Best practices on post-accession are drawn from the lessons learned and direct experiences of thirty-six accessions concluded to date since the establishment of the WTO since 1995.
The second pillar is the 'Country-Specific WTO Post-Accession Implementation Strategy' for LDCs. In the recently concluded accessions of Liberia and Afghanistan to the WTO, Post-Accession Implementation Strategies were prepared as integral parts of their respective Accession Packages. The WTO Secretariat developed the Strategies in consultation with the Acceding Governments, following the final Working Party meetings for Liberia in October 2015 and for Afghanistan in November 2015. The main focus of the Strategies is on the implementation of accession commitments, including notification obligations, and the identification and sequencing of specific post-accession needs for trade-related technical assistance and capacity building and infrastructural support for implementation. The Strategy contains three parts:
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Annex I: Actions and work to be undertaken to implement accession-specific commitments contained in the Accession Protocol within defined timeframes;
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Annex II: Notification requirements, contained in the WTO Agreements and the Accession Protocol, with technical assistance and capacity building needs; and,
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Annex III: Complementary actions and support, including soft and hard infrastructural support, to realize the benefits of WTO membership and integration into the global economy.
Liberia and Afghanistan presented their respective Post-Accession Implementation Strategies to bilateral and multilateral development partners, at the Post-Accession Round Tables which took place immediately following the approval of the accession packages by WTO Members at the Tenth Ministerial Conference in December 2015 in Nairobi, Kenya.
The third pillar is 'Specialised Training on Post-accession' for LDCs. The purpose of such training, which is usually held before the membership date, is to: (i) provide post-accession support for an LDC, including on the preparation of notifications and the internal coordination to implement accession commitments from Day 1 of WTO membership; (ii) develop a medium term action plan to operationalise the Post-Accession Implementation Strategy; and, (iii) facilitate the exchange of post-accession experiences and best practices among Acceding Governments and recently acceded Members. The first of such specialised post-accession training activities is delivered by the WTO Secretariat for Afghanistan and Liberia in June 2016, before their WTO membership dates. The provision of WTO Secretariat post-accession support for Pillar 2 and Pillar 3 is normally restricted to LDCs only and is in response to specific requests from acceding LDCs.
The fourth pillar is the 'Secretariat's Note on Post-Accession Implementation and Monitoring'. The Note, developed under the guidance of Deputy Director-General David P. Shark is internal to the WTO Secretariat. It aims at improving internal Secretariat coordination for monitoring and support for new Article XII Members on the implementation of their specific accession commitments/obligations. A template of the Note was first developed in early 2014, and country-specific Notes have been issued for Yemen, Seychelles and Kazakhstan, generally on the membership date.
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Making trade facilitation work in Africa: Lessons from the service delivery agenda
At a time when countries across the African continent are deploying important efforts to facilitate trade, what can we learn from public service delivery in other areas for strengthening trade facilitation reform?
June 23 marked the UN Public Service Day, the official international day of recognition for the value and virtue of public service to the community and its role in the development process. From Lagos to Lusaka, leaders across the African continent marked the 22nd annual Africa Public Service Day in tandem. Saara Kuugongelwa-Amadhila, Prime Minister of Namibia, called for her government to “do all we can to support our country in building up and revitalising public service capacities. […] Policy making for inclusive growth must align voice, design, delivery and accountability for joint outcomes.”
In many respects there is much to celebrate. Public service delivery has improved markedly across the continent over the last several decades. In Southern Africa, governments, once slow to recognise the severity of the HIV/AIDS epidemic, have mobilised to distribute antiretroviral drugs to those who need them most, helping to significantly reduce the rate of new infections. Similarly, in Eastern Africa, the rate of primary and secondary school enrolment has increased markedly, with innovative information campaigns to ensure money reaches the schools. Indeed, in a 2013 Afrobarometer survey across 34 countries, these two areas – healthcare and education – had the most positive reviews, with infrastructure and sanitation garnering much less positive perceptions.
At a time when countries across the African continent are deploying important efforts to facilitate trade, what can we learn from these services for strengthening trade facilitation reform and ensuring impact?
Trade facilitation as a service
Governments also provide critical services related to international trade, which are starting to receive more attention thanks in part to the WTO Trade Facilitation Agreement. The World Bank’s Logistics Performance Index (LPI) surveys a large sample of global logistics operators for their views of the logistics environment, including their assessment of customs clearance services by the government. Here, sub-Saharan Africa risks falling significantly behind the rest of the developing world (see graph). The recently released 2016 LPI report highlights that the bottom quintile of countries (the majority of which are African) remain far from implementing key trade facilitation measures, such as online processing and reduction of physical inspections, while the other four quintiles continue to converge towards the top performers.[1]
If African economies are to better integrate into the global economy, especially global supply chains, then improving border clearance services is critical.
Lessons from the service delivery reforms for successful TFA implementation?
The workhorse for much of the analytical work on public service provision over the last decade has been the “service delivery triangle” developed in the 2004 World Development Report.[2] The framework lays out the three key accountability relationships in public service delivery: between users and providers, between citizens and policymakers, and between policymakers and providers (see Figure 2).
Figure 1: LPI – Efficiency of customs clearance subindex (by region, 1 to 5 scale)
Figure 2: The service delivery triangle
Looking first at the “short route”, the monitoring function of clients is a critical starting point. Importers and exporters – whether the firms themselves or designated clearing agents – interact daily with the various border agencies and are often in a much better position to understand what happens at the border than officials in the capital. Education reforms provide useful examples. Increasing the client power of parents, for example, through school management committees and public information campaigns has helped improve schooling. Parents are in a much better position to monitor what is happening in their local schools than officials in the capital.
In Kenya, the establishment of Joint Border Committees (JBCs) at the level of individual border crossings provides an interesting application of this insight. Set up with the support of the East Africa Trade Hub in 2009 and now overseen by the Kenyan Revenue Authority, the JBCs brought together the various border agencies with private sector groups to address operational challenges at specific border posts. The dialogue supported by the monthly meetings helped to shift the mindset from enforcement and control to trade facilitation and service delivery. The JBC is credited by both government and the private sector in helping significantly speed up the border crossing times from days to hours at the Malaba border post, the main artery for goods entering Uganda.[3]
The long route of accountability: Strengthening citizen and client voice
Turning to the first leg of the “long route” of service delivery, voice – the relationship between citizens (or firms) and politicians – is typically the most complex accountability link in the service delivery chain. How can citizens influence politicians and policymakers to improve service delivery? Here, it is useful to note the contextual differences between the provision of services for customs clearance compared to health or education. Most obviously, a much smaller subset of the population interacts with customs and border agencies compared to the millions of citizens who deal with the public health or education systems each day. This concentration of interests among traders can help reduce collective action problems faced by the general public. Moreover, multinationals or large companies can have an important voice in influencing government decision-making as these firms are often major investors, employers, and tax payers and, perhaps more importantly, ever more mobile. But conversely, smaller domestic firms may not have the needed bargaining power with respect to politicians and lack the capacity to effectively organise and lobby for improved outcomes. However, from the analysis of firm-level data across developing countries, it is clear that firms both large and small stand to benefit from trade facilitation reform, especially as opportunities open up for smaller firms to supply lead firms.[4]
Strengthening the voice of domestic consumers is another tool for strengthening this accountability link. Trade costs are ultimately passed onto consumers in the form of higher prices, but consumers are often not well organised and face the collective action issues highlighted previously. In a 2012 analysis, the World Bank found that the annual welfare losses (primarily to consumers) from inefficiencies at the Port of Dar es Salaam – due to a mix of inefficient border clearance and poor infrastructure – totalled US$1.8 billion for Tanzania and over US$800 million for neighbouring land-locked countries dependent on the Port.[5]
From voice to compact
The second leg of the “long route”, the compact, sets out the relationship of accountability between politicians and service providers. The 2004 World Development Report points out that “all public services providers face multiple principals, undertake multiple tasks, and produce outcomes that are hard to observe and hard to attribute to their actions.” Here, one lesson from other sectors is that better data and transparency can help create incentives for higher performance. In many parts of Africa, education reforms have included systematic tracking of learning outcomes to create school scorecards and measuring teacher absence rates. In some cases, mobile phone technology has been tried to reduce absenteeism.
For trade facilitation, measuring performance and results can be achieved through increased automation and adoption of information and communications technology, as well as measures to instil transparency. Technologies such as modern electronic single windows allow for an evolution from one-off or ad-hoc time release studies to real-time monitoring of clearance times, providing senior government officials with better tools to establish effective incentives for better performance both at the individual border officer and overall agency levels. Similarly, governments could explore the idea of publicising clearance times by border post and creating scorecards which could help to create friendly competition and further strengthen the “client power” dynamic, especially when combined with effective JBCs. The Rwanda Revenue Authority’s “Service Charter” provides an excellent example of a public service compact outlining measurable commitments to delivering transparent, predictable, and professional trade facilitation services.
Another interesting finding from the 2016 LPI Report is that customs is not necessarily the main bottleneck, but the combination of other border agencies – health, agriculture, quarantine, police, immigration, and standards – that have the worst service delivery ratings (see figure 3).[6] In healthcare and education, this type of coordination problem among numerous providers is much less of an issue, so there are fewer lessons there. Whereas reform efforts (and development partner programming) have often focused on customs reform, the other critical agencies have largely not been on the radar of the reform agenda. Many of the key tools for customs reform – risk-based management and automation – would be relevant for these agencies, too. Moreover, including them in the national-level trade facilitation committees and streamlining trade facilitation into the agencies’ mandates is equally important.
Figure 3: Respondents rating agency quality competence as “high” or “very high” (by LPI quintile)
Making the service delivery framework work for trade facilitation
The service delivery framework can provide useful insights into why public service delivery can fail, and how it can work when the relationships of accountability are strong. When looking at trade facilitation service delivery, we cannot, however, forget that border agencies play a critical role in securing national borders from a variety of potential threats, as well as collecting customs duties which are often the most important domestic source of revenue for governments. Yet, it is a false paradigm to think that the ability to deliver on this mandate must be compromised by improved service delivery.
In fact, the two go hand in hand. Automation, transparency and meaningful public-private dialogue can help to deliver better outcomes on both mandates. Much as increasing the client power of parents can affect the outcomes at the school level, strengthening the influence of the private sector, both at the border and national level, can help to deliver reform. Similarly, looking at innovative ways to bring the voice of consumers into the policy debate can also help to yield positive results.
Policy-makers and politicians can take inspiration from the broader reform efforts across the continent. The Mandela government first introduced the Batho Pele (“People First”) principles for public service delivery nearly two decades ago to radically transform the public service delivery culture in South Africa, although this has been a slow and uneven process. These core principles – from consultation and transparency, to service standards and meaningful redress – offer a “made in Africa” framework for driving the service delivery revolution needed to meet the challenges of the 21st century global economy.
Ilmari Soininen is a Consultant and former coordinator for the DFID-funded African Union Trade Facilitation Support Programme.
This article is published under Bridges Africa, Volume 5 - Number 6, by the ICTSD.
[1] Jean-Francois Arvis et al. Connecting to Compete: Trade Logistics in the Global Economy. Washington DC: World Bank, 2016.
[2] World Bank. World Development Report: Making Services Work For Poor People. Washington DC: World Bank, 2004.
[3] East Africa Trade Hub. “Joint Border Committees: A Look at Malaba Border.” 2013.
[4] Hoekman, Bernard, and Ben Shepherd. “Who Profits From Trade Facilitation Initiatives? Implications For African Countries.” Journal Of African Trade 2 (2015): 51-70. doi:10.1016/j.joat.2015.08.001.
[5] Morisset, Jacques. Tanzania economic update: opening the gates: how the port of Dar es Salaam can transform Tanzania. Washington DC: World Bank, 2013.
[6] Jean-Francois Arvis et al. Ibid.
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tralac’s Daily News Selection
The selection: Monday, 18 July 2016
Featured infographics: South Africa’s economy closes in on Nigeria (Bloomberg), Implementation of WTO Agreement on Trade Facilitation in SADC (tralac)
EAC-EU trade deal signing called off (New Times)
In a sudden twist, comprehensive Economic Partnership Agreement between the EAC and the EU will not be signed today as earlier planned. Officials who spoke to The New Times over the weekend were non-committal on divulging details pertaining to the sudden change of heart that comes after Tanzania recently decided to halt signing, citing the “turmoil” that the EU is experiencing following Britain’s exit. Emmanuel Hategeka, the permanent secretary at the Ministry of Trade and Industry said: “Signing on July 18 on the margins of UNCTAD 14, has been called off by agreement between both parties. In my view, this will allow more time for consultations.” EABC chief executive Lilian Awinja said: “The signing has been called off so whatever issues are contentious should be brought to the table for renegotiation.” [International Trade MEPs back trade deal with six African countries]
Brexit threatens East African cohesion as Kenya mulls go-it-alone trade deal (Bloomberg)
Kenya may abandon 10 years of negotiating a trade deal with the EU as part of the five-nation East African Community and go it alone, to avoid having duties of as much as 30% slapped on its exports from October. "We would like to sign it together; the desire is that we sign it together," Kenyan foreign secretary Amina Mohammed said in an interview in the capital, Nairobi, last week. "If we get to a stage where we can’t do that then we also have the right to make our own sovereign decisions."
Tanzania’s exit from trade pact tests regional integration (Daily Monitor)
Speaking in an interview last week, the permanent secretary at the Ministry of Trade Mr Julius Onen, said Uganda is not about to act as an accomplice to the regional disintegration. “We are not prepared to disintegrate. So we would rather sign it (EPA) altogether as EAC even if it means postponing it.” He added: “Our position has always been to sign it together. On our side (Uganda) we will do anything to keep away from disintegrating.” Now the heat is with the Republic of Kenya, a key regional partner state.
EAC: Reprieve as ban on second-hand clothes put on hold for three years (The East African)
Ronah Serwadda, the acting director at Uganda’s Ministry of East African Affairs said that the presidents agreed that a three-year grace period is necessary to conduct a study to find out whether the region has the capacity to produce its own garments once the ban on second-hand clothes and shoes becomes operational. Rogers Mukwaya, an economic affairs officer at UNECA, said that imposing the ban without improving the production capacity for industries would hand the garments market, currently dominated by North America and Europe for used items, to China and other South East Asia nations whose textiles are cheaper than those produced locally.
Zimbabwe, SA in key trade talks (Sunday Mail)
Government will this week engage South Africa to discuss issues of mutual economic concern, joint ventures, credit lines, markets and Harare’s policy to restrict certain imports as part of efforts to boost local industry. South African businesses are ratcheting up pressure on Tshwane to push for an end to the import controls. South Africa is Zimbabwe’s largest trading partner. Since the promulgation of Statutory Instrument 64 of 2016, the Musina business community on the Zimbabwe-South Africa border has lost more than $10m in potential business. This has seen South Africa’s trade and industry ministry ask for a five-day meeting from 18-22 July. Zimbabwe’s Secretary for Industry and Commerce, Mrs Abigail Shonhiwa, said the meeting between Deputy Minister Chiratidzo Mabuwa and her South African counterpart Mr Mzwandile Masina was meant to find a market for local products and also scout for lines of credit. [Related: Ian Scoones - The rise of the informal trader and a new political economy, Marange diamond audit begins, Small scale gold producers shun Rand]
South Africa: Minister Davies launches one-stop shop to support intra-Africa trade (dti)
The one-stop shop, which is called Trade Invest Africa will provide support to South African businesses doing business in the rest of Africa as outlined in the Industrial Policy Action Plan. According to Minister Davies, Trade Invest Africa will bring together all support programmes including incentives in order to build strong partnerships with business. Davies said South Africa was following the Development Integration approach in order to strengthen regional integration and create a larger market. [Related: Guidelines for Good Business Practice by SA companies operating in the rest of Africa (pdf), Dianna Games: 'Better late than never as SA plays catch-up in Africa’s markets']
Namibia Economy Watch: the SADC EPA, impact of Brexit (IPPR)
However, the UK remains an important market for Namibian meat and grapes. Some 23% of Namibia’s total meat exports and almost 100% of meat exports to the EU were destined for the UK in 2015, while 21% of fruit exports (grapes) ended up on the UK market accounting for 27% of fruit exports to the EU market. Meat contributed 31% and fruits 12% to Namibia’s total exports to the UK in 2015. The UK is also a major market for Namibia’s charcoal absorbing 22% of Namibia’s total charcoal exports and 50% of charcoal exports to the EU market. Charcoal exports made up 10% of total exports to the UK in 2015 [download (pdf)]
AU sets $1.2 billion self-financing target (New Times)
African Heads of State and Government asked former African Development Bank president, Dr Donald Kaberuka, to work out a self-financing formula practical to member countries. The formula was presented and adopted at a retreat of Heads of State and Government and finance ministers on Saturday. According to Finance and Economic Planning minister Claver Gatete, under the new formula, countries’ contributions will be increased through 0.2% levy on eligible imports which is expected to raise about $1.2bn every year. Beginning 2017, the levy will be collected by tax collection authorities of African countries and channelled through central banks of member countries. By channelling the money through the central bank as opposed to collecting it from the treasury, Gatete said it would prevent defaulting by member countries or delayed payments that have been rampant in the past. The retreat also agreed that each of the four regions should contribute $65m for peacekeeping activities to raise a total of $320m. [AU to cost SA an extra R2.2bn]
Valentine Rugwabiza: 'Britain may have given up on the EU dream, but Africa still wants integration' (The Guardian)
The EU model appeals to African leaders because we’ve seen how centralised decision-making speeds up the pace of development (the AU Commission is currently very decentralised) and that weaker economies don’t hold back stronger states, but if provided with some flexibility, advance at a quicker pace. Having said that, this year’s 27th African Union Summit took place in Rwanda only three weeks after the Brexit vote. Should pro-African leaders be worried that the UK’s EU vote will influence the integration of the African continent? I don’t think so. [The author is Rwanda's Minister of the East African Community]
Related: AU delays Chairperson vote as no clear winner emerges (M&G Africa), Geoffrey Onyeama, Nigeria’s foreign minister: 'AU passport needs legal framework to work' (Naija247), Calestous Juma, Francis Mangeni: 'Africa’s economies are set to get a boost from tighter integration with or without Brexit' (Quartz), AUC/ECA/AfDB Joint Secretariat Support Office: update (UNECA)
Trade misinvoicing in primary commodities in developing countries: the cases of Chile, Côte d'Ivoire, Nigeria, South Africa, Zambia (UNCTAD)
The results from the analysis show substantial levels of trade misinvoicing in all five countries covered by the study, but the patterns vary substantially across countries, products and trading partners. Some interesting patterns and contrasts emerge. At the product level, while trade in copper exhibits pervasive and large amounts of over-invoicing in Chile, the results for Zambia show substantial under-invoicing, as well as considerable over-invoicing in trade with Switzerland and the United Kingdom. Iron ore and gold exports from South Africa exhibit systematic under-invoicing. Relatively little gold appears in South Africa’s export data, although the country's trading partners record substantial amounts of gold imports from South Africa. Exports of oil from Nigeria and silver and platinum from South Africa show mixed results − both under-invoicing and over-invoicing.
Servicification, trade facilitation: a policy agenda for Africa (pdf, UNCTAD)
African trade policymaking should be framed in terms of trade in tasks where goods and services are considered in a single package. Efforts at boosting trade in industrial and agricultural goods should be revisit to properly integrate the dismantling of binding trade in services. Trade in services reforms should prioritize development of rules for that account for a servicified reality. Further research is needed to fully understand servicification and its implications for all trade stakeholders. The implementation of the TFA should be part of a broader trade facilitation agenda that properly account for infrastructural services and other business environments. Furthermore, there is a need to develop a research and advocacy program which ensure all the political economy constraints are properly understood and the necessary actions are taken to build and sustain a coalition for reform. [The anlysts: Dominique Njinkeu, Sekou Doumbouya]
Related: #UNCTAD14 documents are available here, Uhuru roots for intra-African trade, draws comparison with West (The Star), Letter from 331 Groups of Global Civil Society: UNCTAD’s role and mandate towards UNCTAD14
Sub-Saharan Africa’s economic downturn and its impact on financial development (ODI)
Key messages: (i) Sub-Saharan Africa is experiencing a deterioration in financial markets including a ‘credit crunch’ in the banking sector, reduced availability and increased expense of international finance – which has been made worse by the ‘Brexit’ shock – and increased financial fragility. On-going governance problems are making these issues worse; (ii) Importantly for the region’s long-term growth prospects, scarce banking finance is being used in sectors with little or no transformational effect such as extractives or middle class consumer finance; (iii) This is starving sectors that would transform the economy – such as manufacturing, trade and agri-processing – of the financing they need to grow, reducing the prospects for structural changes that would diversify the economy and create employment; (iv) Policy suggestions include tailored macro prudential policy for sub-Saharan Africa, more robustly directing credit into priority sectors and international cooperation to tackle corruption.
Christine Lagarde: 'Doubling down on development' (IMF)
Consider this: the 48 countries in sub-Saharan Africa together generate only the same amount of electricity as just one advanced economy - Spain. Clearly, if the continent is to realize its potential, better infrastructure is needed. The price tag, however, is significant. UNCTAD estimates that total infrastructure investment needs in developing countries range from $3.3 trillion to $4.5 trillion a year. Striking the right balance between scaling-up spending and maintaining sustainable debt is therefore critical, and our revised debt policies toward low-income countries reflect this trade-off.
UK to finance Egypt trade deals worth up to GBP 500 mln (Ahram)
UK Export Finance, the UK's export credit agency, is committed to funding trade deals with Egypt worth up to GBP 500 million, and has GBP 2.5 billion of financing available for projects in Egypt, according to a British embassy press release on Sunday. The volume of trade between Egypt and the UK is over GBP 1.5 billion, UK ambassador to Egypt John Casson said. British investments represent 40% of Egypt's foreign direct investment inflows. [Towards devaluation?]
Two funding tools to reset Nigeria’s export financing policy (Premium Times)
The CBN’s partnership with NEXIM Bank will unclog what has been a bottleneck for a long time, namely, access to low interest (single digit) rate credit to the non-oil sector and enable companies in this sector connect to international markets for trade and investment. The share of credit to non-oil export-oriented companies shrunk to less than one percent last year. The CBN said inadequate financing was responsible for the drop in non-oil export revenues from $10.53bn in 2014 to $4.39bn in 2015.
Remodeling India’s investment treaty regime (The Wire)
The Netherlands is not the only country that has received a treaty termination notice. India has recently served similar termination notices to as many as 57 countries (including the UK, France, Germany, Spain and Sweden) with whom the initial duration of the treaty has either expired or will expire soon. For the remaining 25 countries (such as China, Finland, Bangladesh and Mexico) with whom the initial duration of the treaty will expire from July 2017 onward, India has requested them to sign joint interpretative statements to clarify ambiguities in treaty texts so as to avoid expansive interpretations by arbitral tribunals. Does the termination of the India-Netherlands BIT mean the end of the protections? The answer is no.
Egypt's Supreme Investment Council: what’s new?
Starting over on tariffs: post-Brexit trade agreement partners for the United Kingdom (PIIE)
Reconstructing Britain’s trade policy after Brexit: launch of UK Trade Policy Observatory (Chatham House)
Global trade plateaus: the 19th Report of the Global Trade Alert (VoxEU)
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EAC-EU trade deal signing called off
In a sudden twist, comprehensive Economic Partnership Agreement (EPA) between the East African Community (EAC) and the European Union (EU) will not be signed today as earlier planned.
Officials who spoke to The New Times over the weekend were non-committal on divulging details pertaining to the sudden change of heart that comes after Tanzania recently decided to halt signing, citing the “turmoil” that the EU is experiencing following Britain’s exit.
The agreement was due to be signed at a meeting in Nairobi, Kenya today.
The East African Business Council (EABC) has been advising partner states to sign the deal earlier than previously agreed as further delay, it argued, would hamper EAC exports to the EU.
“The signing has been called off so whatever issues are contentious should be brought to the table for renegotiation,” EABC chief executive Lilian Awinja said.
Emmanuel Hategeka, the permanent secretary at the Ministry of Trade and Industry, confirmed that both parties agreed to call off the signing.
The five partner states previously proposed that the signing ceremony be held in the first week of August.
Last month, however, the EABC recommended July 18 (today), as the date of signing to coincide with the visit of the EU Commissioner for Trade, who is expected in Nairobi for the United Nations Conference on Trade and Development (UNCTAD).
Hategeka said: “Signing on July 18 on the margins of UNCTAD 14, has been called off by agreement between both parties. In my view, this will allow more time for consultations.”
The EABC expectations were that all EAC partner states’ ministers for trade would attend the conference and, therefore, sign the agreement on the same date to project the region as a functional Customs Union.
It was thought that the recommended July 18 signing would give partner states ample time to ratify the agreement before October 1, the deadline earlier set by the EU.
Failure to meet the EU deadline on ratification, it was noted, could see EAC exports to EU attract import duty, especially for Kenya, the region’s largest economy.
Whereas Burundi, Rwanda, Uganda and Tanzania have an option to rely on the Everything But Arms (EBA) trade arrangement where they have duty-free market access to the EU, Kenya faces a tough choice as the clock ticks toward the deadline for the ratification.
The case is that Kenya heavily relies on the EU – which represents 30 per cent of its export market – for selling its cut flowers, tea, vegetables and fish, among others.
Source: Bloomberg
Tanzania’s foreign affairs permanent secretary Aziz Mlima last week said: “Our experts have established that the way it has been crafted, the EPA will not benefit lead industries in East Africa, but instead lead to their destruction as developed countries are likely to dominate the market.”
Abubakar Zein Abubakar, a Kenyan representative in the East African Legislative Assembly (EALA), also told The New Times that it is imperative for the Community to listen carefully to the issues Tanzania is raising, and jointly look at “the implications of Brexit” as the region “cannot afford not to act together.”
Was EAC under pressure?
When regional civil society organisations gathered in Uganda last month, they assessed the details of the proposed agreement and noted that the bloc concluded the EPA negotiations after 12 years with the EU “not because it was contented with the provisions of the agreement” but, rather, in order to meet the deadline so that Kenya would not be removed from the list of beneficiaries of the Duty Free Quota Free Market Access to the EU.
The civil society groups stressed that the overall objectives of the EPAs – which include ensuring sustainable development of regional countries and eradicating poverty – were not adequately addressed.
Before the signing was called off, on Friday, John Bosco Kanyangoga, a consultant to the Rwandan government EPA team, said right from the beginning of the process to the finalisation of the negotiations, some civil society organisations were against it.
“So, because of their defined stand, they tend to over blow the challenges and to put some issues out of context,” Kanyangoga said.
After the deadline as per the regulation, he noted, Kenya would face duty-free and quota restrictions on the EU market and the only solution would be to have a signed and ratified EPA in place for Kenya to continue enjoying Duty-Free Quota-Free Access to the EU market.
He also agrees there could be some kind of pressure for EAC countries to sign.
Kanyangoga added: “Some kind of diplomatic pressure, yes. However, around the period of finalising the negotiations, most of the concerns were dealt with in the agreement and that is actually why we have the rendezvous clause stating that some issues will be negotiated at a later stage.”
If the five partner states do not sign “together as EAC,” he said, it would be “an unfortunate signal that questions the strength of our Customs Union.”
“It could weaken and undermine the Customs Union because we would not have a Common External Tariff as far as our trade as EAC with EU is concerned,” Kanyangoga said.
“It would bring confusion and, I think, we would need to discuss how best we would handle it. For example, how would Tanzania deal with EU goods that come to Kenya duty-free and eventually cross the border to Tanzania?”
On January 1, 2017, Kenya is expected to be removed from the EU’s generalised scheme of preferences trade regime for live plants and floriculture products, thus attracting even more duties under the ‘most-favoured nation’ rates.
Kenyan exporters would be subjected to import duties of between 5 per cent and 8.5 per cent, says EABC.
According to Awinja, UK’s exit from EU should not be a reason for Tanzania to back out as signing with the remaining 27 EU countries presents EAC with immense opportunities for export development.
The EABC chief executive earlier said that, by October 1, if Tanzania will not have finalised ratification of EPA, it will, among others, lose Duty-Free Quota-Free Access to EU market, leaving it with the ‘everything but arms’ option. which is not better as it has more stringent rules of origin requirements.
Related News
Some countries losing up to 67% of commodity exports to misinvoicing
Some commodity dependent developing countries are losing as much as 67% of their exports worth billions of dollars to trade misinvoicing, according to a fresh study by UNCTAD, which for the first time analyses this issue for specific commodities and countries.
Trade misinvoicing is thought to be one of the largest drivers of illicit financial flows from developing countries, so that the countries lose precious foreign exchange earnings, tax, and income that might otherwise be spent on development.
Released during UNCTAD’s Global Commodities Forum, the study uses data from up to two decades covering exports of commodities such as cocoa, copper, gold, and oil from Chile, Cote d’Ivoire, Nigeria, South Africa, and Zambia.
“This research provides new detail on the magnitude of this issue, made even worse by the fact that some developing countries depend on just a handful of commodities for their health and education budgets,” UNCTAD’s Secretary-General, Mukhisa Kituyi, said.
Commodity exports may account for up to 90 percent of a developing country’s total export earnings, he said, adding that the study generated fresh lines of enquiry to understand the problem of illicit trade flows.
“Importing countries and companies, which want to protect their reputations, should get ahead of the transparency game and partner with us to further research these issues,” Dr. Kituyi said.
The analysis shows patterns of trade misinvoicing on exports to China, Germany, Hong Kong (China), India, Italy, Japan, the Netherlands, Spain, Switzerland, the UK, US, and more.
Findings of the report include:
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Between 2000 and 2014, underinvoicing of gold exports from South Africa amounted to $78.2 billion, or 67% of total gold exports. Trade with the leading partners exhibited the highest amounts: India ($40 billion), Germany ($18.4 billion), Italy ($15.5 billion), and the UK ($13.7 billion).
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Between 1996 and 2014, underinvoicing of oil exports from Nigeria to the United States was worth $69.8 billion, or 24.9% of all oil exports to the US.
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Between 1995 and 2014, Zambia recorded $28.9 billion of copper exports to Switzerland, more than half of all its copper exports, but these exports did not show up in Switzerland’s books.
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Between 1990 and 2014, Chile recorded $16.0 billion of copper exports to the Netherlands, but these exports did not show up in the Netherlands’ books.
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Between 1995 and 2014, Cote d’Ivoire recorded $17.2 billion of cocoa exports to the Netherlands, of which $5.0 billion (31.3%) did not show up in the Netherlands’ books.
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Between 2000 and 2014, underinvoicing of iron ore exports from South Africa to China was worth $3 billion.
Introduction
The problem of trade misinvoicing has generated increasing attention in the research and policy communities. It is an issue that has gained particular traction through the current debates on illicit financial flows, since trade misinvoicing continues to be used as a key mechanism of capital flight and illicit financial flows from developing countries. This study aims to contribute to research and policy debates by providing empirical evidence on the magnitude of trade misinvoicing in the particular case of primary commodity exports from five natural-resource-rich developing countries: Chile, Cote d’Ivoire, Nigeria, South Africa, and Zambia. This sample comprises four resource-dependent developing countries and a more diversified resource-rich middle-income country (South Africa). It covers a representative sample of products in the three main categories of primary commodities: oil and gas; minerals, ores and metals (copper, gold, iron ore, silver and platinum); and agricultural commodities (cocoa). The inclusion of two copper exporters in the sample makes it possible to compare and contrast patterns of copper misinvoicing between two countries and over time.
Estimates of trade misinvoicing have been based, traditionally and primarily, on bilateral trade data published in the Direction of Trade Statistics (DOTS) of the International Monetary Fund (IMF), which provides aggregate values of imports and exports between a country and its trading partners. More recently, there has been growing interest in investigating trade misinvoicing at more disaggregated levels, at sector and product levels, and by trading partner. This interest is motivated by two major factors. First is the presumption that some products may be more frequently smuggled and mispriced than others based on their idiosyncratic characteristics. Second, there may be variations among trading partners with regard to transparency and enforcement of trade recording rules that may generate differences in trade misinvoicing across partners. The analysis at the product and partner levels is made possible by the existence of disaggregated data published in the United Nations Commodity Trade Statistics (UN Comtrade) Database, which provides time series on imports and exports broken down by product, country and trading partner. Such an analysis produces valuable insights about the sources, directions and patterns of trade misinvoicing.
The study describes in detail how to use UN Comtrade data to identify major products and leading partners in order to guide the analysis of trade misinvoicing. It describes the statistical model for estimation of export misinvoicing at the product and partner levels. In the case of Nigeria, which exports oil and gas while also relying on imported oil products, the study also investigates the extent of oil import misinvoicing for this country.
The data show heavy concentration of exports both by product and by partner. With the exception of South Africa, the export baskets of the other countries in this sample – Chile Cote d’Ivoire, Nigeria, and Zambia – exhibit a heavy dependence on two or three primary commodities; South Africa has a more diversified export basket, though it is also rich in natural resources. These stylized facts illustrate the relevance and appropriateness of the sample selected for this study on trade misinvoicing in primary commodities. The results from the analysis show substantial levels of trade misinvoicing in all five countries covered by the study, but the patterns vary substantially across countries, products and trading partners. Some interesting patterns and contrasts emerge. At the product level, while trade in copper exhibits pervasive and large amounts of overinvoicing in Chile, the results for Zambia show substantial underinvoicing, as well as considerable overinvoicing in trade with Switzerland and the United Kingdom. Iron ore and gold exports from South Africa exhibit systematic underinvoicing. Relatively little gold appears in South Africa’s export data, although the country’s trading partners record substantial amounts of gold imports from South Africa. Exports of oil from Nigeria and silver and platinum from South Africa show mixed results both underinvoicing and overinvoicing. At the partner level, the Netherlands presents the most peculiar case, with systematic export overinvoicing in trade with all the countries in the sample and for all the products. In other words, exports registered as going to the Netherlands cannot be traced in the Netherlands’ bilateral trade data. In contrast Germany’s trade with all the countries and products in the sample exhibits underinvoicing. The results generally show a close correlation between export concentration by destination and the extent of trade misinvoicing.
7th Global Commodities Forum: Breaking the chains of commodity dependence
Closing Statement by UNCTAD Deputy Secretary-General Joakim Reiter
The crash in commodity prices since 2014 has brought macroeconomic difficulties in many commodity-dependent developing countries, especially oil exporters.
But, as the discussions of this forum have highlighted: high, low or volatile prices are not the only problem.
There is a more pervasive problem.
Most exporting countries were unable to convert windfalls from the 2004-11 commodity price boom into structural transformation and reduction in poverty levels.
This is actually an old story of developing countries not benefiting enough, and not using the benefits well enough, from the production and trade of commodities.
This cannot continue.
We should never miss the opportunity of a crisis. Times are tough but there are remedies and, low commodity prices, taking firm action is all the more urgent.
Indeed, there are actions that can and will now have to be taken to harness the revenues of commodities to sustainable development.
Let me focus my closing remarks on three important ideas of future action that you have discussed during this forum.
First, we need to get a handle on trade misinvoicing and other illicit flows related to the trade of commodities.
Professor Ndikumana shared with us yesterday his estimates of the magnitude of trade mispricing on commodity exports and imports in five developing countries.
The figures in his finding are striking.
There are literally tens of billions of dollars of export earnings and government revenues lost to trade misinvoicing. This represents a drain on government revenues, and certainly a lost opportunity for all commodity exporters and their citizens. It reduces the ability of countries to drive growth, diversification and poverty reduction, and achieve the SDGs.
Therefore, it is clear that we need to address trade misinvoicing. But it is also clear that this requires more transparency and more effective cooperation, from exporting and importing countries, and traders. UNCTAD stands ready to support all of you in these efforts.
My second message is on policies to promote greater value addition.
Improved local content is a way to improve the value and revenue countries can get from their exports of natural resources. However, for this to happen, countries have to adopt a long-term approach based on developing human capital.
In this context, we need to update the policy options we suggest to developing countries, to help them “break the chains of commodity dependence”.
Early local content policies disappointed, boosting only low-value activities in the host country.
Drawing from these past shortcomings, panellists in this forum highlighted on the need to abandon a short-term approach to local content framework, characterised by governments imposing, in isolation, penalty-based conditions on extractive projects.
Of interest was the assertion by private sector representatives on the importance of training programmes including skills and enterprise development.
UNCTAD is active in this area, with programmes such as Empretec – as are our partners at the Commonwealth Secretariat and other international organisations – but our role in skill and enterprise development need to be expanded.
My third message of today is on the importance of regional value chains.
Developing countries, especially in Africa, must develop regional value chains to expand their export markets and broaden their export baskets.
Of course, export diversification has been prescribed for many years, without many examples of successful implementation.
The rise of global value chains (GVCs) has had a mixed effect on this picture for commodity producers.
On one hand, developing countries now see a more disaggregated chain, with more activities for which they can compete.
On the other hand, developing countries now face more questions to answer: “what activities should we pursue? And how do we prepare ourselves?”
In this regard, international organizations could help countries in identifying the best opportunities for developing new products and export markets, given their comparative advantages.
Another piece of the puzzle is the assistance for developing countries to streamline their trade procedures and lower trade costs, thus improving their competitiveness when entering new markets.
There is a clear message for developing countries, especially in Africa emanating from this forum: to pursue regional value chains, to grow the markets for exports, without incurring the high transportation costs that can render their exports uncompetitive.
Finally, allow me to briefly refer to the ministerial session. At this session you debated whether to “go green or go coal”. This highlights the tough question we have to answer: on the one hand, energy for all and, on the other hand, the necessity of reducing carbon emissions.
The UN and UNCTAD’s position is clear on this: coal is a dead end. We must convert power generation to renewables to reduce the carbon footprint of our global economy. Otherwise, we cannot achieve the sustainability enshrined in Agenda 2030.
Also, in the discussions about agricultural development, several ministers highlighted the importance of putting women at the centre of this agenda: women provide the majority of agricultural labour on small farms in Africa, but earn less. This is an issue of great importance for UNCTAD, and in fact, later in the UNCTAD 14 programme we have a special session on this topic.
Let me conclude by congratulating everyone for a successful Forum. You have indeed highlighted a number of critical areas where more action is needed. We, at UNCTAD, stand ready to shoulder our responsibility and look forward to carrying these outcomes and messages forward through UNCTAD 14 and beyond.
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Civil society call on world leaders to uphold commitments to development
Civil Society Forum officially opens at the 14th UNCTAD Conference
The international civil society is calling upon governments to uphold commitments made during the 2012 UNCTAD Conference in Doha. This came as the Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), Dr. Mukhisa Kituyi, opened the Civil Society Forum on 15 July 2016 at the Kenyatta International Conference Centre.
In the recent past, Western member states of UNCTAD have come under intense criticism for their sluggishness in supporting the Agency’s initiatives and expanding its roles to cover other areas crucial for the advancement of developing countries.
Negotiations in the lead up to UNCTAD XIV have continually exhibited a desire to curtail UNCTAD’s independence and the much needed-balance between the wants of the global North and South.
Over 7,000 delegates are expected to attend the Nairobi Conference of which the Civil Society Forum comprises. This year’s theme is ‘From Decisions to Actions’ and comes on the back of the ratification of the United Nations 2030 Sustainable Development Goals in December 2015. Member states have since made important commitments during the Financing for Development (FfD) process and the 10th Ministerial meeting of the World Trade Organization (WTO).
While opening the Civil Society Forum, Dr. Mukhisa Kituyi, the Secretary-General of UNCTAD, challenged CSOs to maintain the momentum in making their demands as delegates engage in negotiations in the coming week. “There must be greater efforts made towards inclusion of all stakeholders, especially women and youth, if at all we are to achieve the SDGs. There can be no Sustainable Development Goals without the Least Developed Countries,” said Dr. Kituyi.
However concerns have been raised concerning the role that UNCTAD will play in influencing global trade and development in the future as it is gradually relegated to an implementation mechanism for trade agreements.
In a letter signed off by 331 global civil society organizations including trade unions, farmers’ organisations and public interest groups, CSOs reiterated that “UNCTAD can play a unique role in the panorama of international economic institutions thanks to its focus on the interdependence of trade, finance, investment, macroeconomics, and technology as they affect the growth and development prospects of developing countries. However, to live up to its name and promises, its role must be development-centred, and not tied to the liberalization goals of other institutions.”
The organisation has also been touted as an invaluable apparatus in providing support to developing countries in using trade for their own development purposes.
“As negotiations begin, we are calling for a mandate that addresses specific constraints of developing countries, adoption of gender-sensitive policies on trade and development, institution of measures that curb the illicit transfer of economic resources from developing countries,” said Alvin Mosioma, Tax Justice Network-Africa’s Executive Director.
“UNCTAD policies are geared towards ensuring unified trade language to curb disparities. It is important that in the coming days, we remind the delegates of the UNCTAD conference of the role of UNCTAD; not only to preserve it but strengthen it as well,” said Eric Le Compte, Executive Director of Jubilee USA Network.
Civil society organisations have over the course of the year attended two hearings at the UNCTAD headquarters in Geneva to which they have made their contributions into the Negotiating Text of the Conference. Final submissions into this document will influence actions post-UNCTAD14.
On Sunday 17 July 2016, CSOs will release the final statement on their standpoint going into the main negotiations as the conference progresses from 17-22 July.
331 Global Civil Society Organizations demand that Members affirm development mandate
Members of 331 civil society organizations (CSOs) including trade unions, farmers, development advocates, and public interest groups from over 150 countries wrote an urgent letter to members of UNCTAD to express concern regarding the current negotiations towards the quadrennial mandate of the agency during the UNCTAD 14 Conference which starts July 17th in Nairobi, Kenya.
The letter was coordinated by the International Steering Group of CSOs towards the UNCTAD 14, which includes: ActionAid International, Asian Peoples’ Movement on Debt and Development (APMDD), Center of Concern, European Network on Debt and Development (EURODAD), FEMNET, Financial Transparency Coalition, Global Alliance for Tax Justice, Jubilee USA, Latin American Network on Debt, Development and Rights (LATINDADD), Our World Is Not For Sale network (OWINFS), Public Services International (PSI), Regions Refocus, Society for International Development, Southern and Eastern Africa Trade Information and Negotiations Initiative-Uganda, Tax Justice Network Africa (TJN-A), and the Third World Network – Africa.
The CSOs highlighted that “UNCTAD can play a unique role in the panorama of international economic institutions thanks to its focus on the interdependence of trade, finance, investment, macroeconomics, and technology as they affect the growth and development prospects of developing countries. However, to live up to its name and promises, its role must be development-centered, and not tied to the liberalization goals of other institutions.”
The letter makes specific policy recommendations, noting that “[t]rade and investment agreements do not support development without the right policy environment (Paras 12 and 48), which necessitates policy space (Para 14 bis), an effective and developmental state able to sustain its own resource base responsible for safeguarding people’s human rights (Para 71), and a more coherent, inclusive and representative global architecture for sustainable development.”
The letter addresses the full range of developmental issues which have been affirmed by member states as crucial to UNCTAD’s mandate, but which developed countries are attempting through the drafting process, to diminish, including on key issues of tax and debt. It highlights that the mandate of UNCTAD “The document must continue and strengthen UNCTAD’s mandate on curbing tax evasion and aggressive tax avoidance including in commodities markets (Para 27) and through investment policies (Para 55 (bis)).” It further notes that “UNCTAD’ s work on debt workout mechanisms and responsible lending and borrowing (Paras 15, 20, 32, 33, 40 (e), 40 (e) bis, 40 (f), 53, and 107 (e)) has been uniquely useful and should be strengthened, including by supporting further work on these issues at the UN General Assembly level.”
CSOs also make recommendations regarding UNCTAD’s mandate on the “integrated approach of UNCTAD to the evolution and management of globalization and on the interdependence of trade, finance, investment and technology as they affect the growth and development prospects of developing countries;” as well as on issues of Least Developed Countries (LDCs); regional integration; monitoring the role of the private sector rather than promoting Public Private Partnerships (PPPs); technology transfer; and the Financing for Development (FfD) process.
UNCTAD’s role on investment is also addressed: “Given UNCTAD’s long history encouraging developing countries to sign International Investment Agreements (IIAs) and the negative impacts developing countries have experienced, particularly due to the Investor to State Dispute Settlement (ISDS) mechanisms, UNCTAD’s mandate should be intensely invested in helping developing countries craft investment policies that will contribute to development (Paras 60 (p) and 60 (w)), rather than just ‘balance the interests’ of investors and development (Para 21); as well as to unwind and reform these agreements (Paras 26 and 60 (ii)).”
The letter concludes: “We believe that the further UNCTAD moves toward seeing developing countries mainly as engines to increase trade — and thus deviating from its mission to support the use of trade for development, the more it risks redundancy and irrelevancy. As civil society organizations deeply committed to human rights and social justice, the achievement of the SDGs and sustainable development for all, we urge you to adopt the above positions and ensure that UNCTAD continues and strengthens its role in trade, finance, investment, macroeconomics, and technology as they affect the growth and development prospects of all developing countries.”
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Global trade plateaus
For the past 18 months, officials have worried about a global trade slowdown. This column summarises the latest Global Trade Alert report, which shows that, in fact, global trade is not growing slower – it is not growing at all. The plateau in global trade coincided with a spike in protectionism.
Falling rates of global trade growth have attracted much comment by analysts and officials, giving rise to a literature on the ‘global trade slowdown’[1]. The term ‘slowdown’ gives the impression of world trade losing momentum, but growing nonetheless. The sense of the global pie getting larger has the soothing implication that one nation’s export gains don’t come at the expense of another’s. But are we right to be so sanguine?
World trade volume plateaued around January 2015
Using what is widely regarded as the best available data on global trade dynamics, namely, the World Trade Monitor prepared by the Netherlands Bureau of Economic Policy Analysis, the 19th Report of the Global Trade Alert, published on 13 July 2016, evaluates global trade dynamics[2]. Our first finding that the rosy impression painted by some should be set aside. We demonstrate that:
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World export volumes reached a plateau at the start of January 2015. The same finding holds if import volume or total volume data are used instead.
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Both industrialised countries’ and emerging markets’ trade volumes have plateaued.
Figure 1: World trade plateaued around the start of 2015
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Except during global recessions, a plateau lasting 15 months is practically unheard of since the Berlin Wall fell.
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In 2015 the best available data on world export volumes diverges markedly from that reported by the WTO, IMF, and World Bank, and probably explains why analysts at these organisations have missed this profound change in global trade dynamics.
Table 1: Marked differences in reported global trade volume growth in 2015
Our argument is not that world trade has stopped. Rather, that according to a benchmark measure of trade volume, world trade isn’t slowing down – it is not growing at all.
More products accounts for the lion’s share of trade’s fall in 2015
So much for trade volumes, but what of the total value of world trade? Our last report showed that three oil-related products accounted for just over half of the fall in the value of world trade from October 2014 to June 2015.[3] Coupled with the rising value of the US dollar, some felt that these factors – rather than a change in global trade dynamics – accounted for the falling value of world trade in 2015. Does this story fit the facts?
To examine the variation in trade flows across products during the global trade plateau, a detailed product-level dataset of the value of trade was assembled from the monthly UN trade data releases through to December 2015. Analysis of this dataset revealed that:
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Falling commodity prices could not have accounted for the majority of the fall in the value of global trade in 2015. In fact, raw materials trade recovered partially in the fourth quarter of 2015.
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The total value of capital goods trade fell in the first half of 2015 and then plateaued; same for consumer goods.
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Meanwhile, parts and components trade fell in value throughout 2015.
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The pain is spreading – in our last report we showed that 28 product groups each accounted for 0.5% or more of the fall in the value of world trade. That number has now risen to 38.
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The product groups that contributed more to the fall in the value of world trade in 2015 faced policies skewed towards trade restrictions and away from subsidies and export incentives.
Figure 2: Products where trade fell the most in 2015 faced proportionally more trade restrictions
In sum, the variation across products in how much trade fell in value in 2015 suggests that an across-the-board currency valuation effect (caused by the rising value of the US dollar) or a ‘commodities only’ story are not enough. That there could be a link between the policy mix facing a product on global markets and changing trade values begs the question as to whether trade policy dynamics changed during the global trade plateau as well. We turn to this matter.
Was 2015 unusual for trade policy dynamics too?
In a nutshell, yes. Using the latest update of the Global Trade Alert, which saw 1,016 new reports of government policy measures added to the database from mid-October 2014 to 1 May 2015, we found that:
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Resort to protectionism in 2015 is 50% up on that seen in 2014.
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Policy initiatives harming foreign commercial interests in 2015 outnumbered trade liberalisation three-to-one.
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Since 2010 between 50 and 100 protectionist measures were implemented in the first four months of each year; in 2016 the total had exceeded 150.
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G20 members were responsible for 81% of protectionist measures implemented in 2015.
Before world trade plateaued, duties for dumping, subsidisation, and import surges were used most; during the plateau, trade-distorting bailouts and financial assistance were number one. Since global trade plateaued, another trade restriction – export taxes – were used less and requirements on investors to source locally imposed more often. In short, the policy mix used by governments appears to have shifted once trade plateaued, suggesting trade policy dynamics have evolved as well.
Figure 3: Top 10 most used harmful measures since the crisis began
The new GTA report also includes a chapter on the high-profile trade policy tensions in the steel sector. Last year and this, steel sector interventions have been under the spotlight. However, our report shows that protectionism in this sector has been ratcheting up since 2010 and, while so much attention is focused on tariffs targeting dumped steel, in fact, state incentives to promote steel exports are a far larger systemic problem.
In contrast to high-profile steel, our report also includes a chapter on the quiet spread of old and newer forms of local content requirements. This development is remarkable in light of the widely held view that these measures were banned over 20 years ago in a WTO accord. Nevertheless, they have made a comeback and we draw out the key lessons from the growing body of analysis of the adverse trade, foreign direct investment, and welfare impact of rules that force firms to source locally.
Multinational firms are adjusting to the new reality of ever-more fragmented markets. As the CEO of General Electric recently put it: “A localization strategy can’t be shut down by protectionist politics”.[4] Many more firms have announced plans to ‘localise production’. Since political leaders won’t rein in protectionism, pragmatic business people are adjusting – often by substituting foreign direct investment for trade.
Risk of a negative feedback loop
Either finding – of global trade growth coming to a halt or a sharp increase in beggar-thy-neighbour activity – ought to worry policymakers. That both coincide prompts questions of linkage. In our report we don’t claim to have shown definitely what is causing what – after all, multiple factors likely trade and policy decisions and the data available to check won’t be published for years.
Analysts have the luxury of waiting for data to mount up before taking a stand; decision-makers in the public and private sectors do not. As a result, going forward an even more important concern is that a negative feedback loop develops where zero trade growth fuels resort to even more zero-sum trade policies which, in turn, discourages cross-border supply of national markets.
In a world where global commerce isn’t growing any more, governments may conclude that larger market shares for their exporters can only be grabbed from trading partners. Parallel contests for talent, foreign direct investment, research and development hubs, and intellectual property would intensify. This could, in turn, precipitate a 21st century variant of mercantilism that, unlike its predecessors in earlier centuries, affects more types of global commerce.
References
[1] Constantinescu, C., A. Mattoo and M. Ruta. (2016). “Does the Global Trade Slowdown Matter?”, Journal of Policy Modeling, forthcoming; Hoekman, B. M. (2015) (ed.) The Global Trade Slowdown: A New Normal? CEPR Press.
[2] Evenett, S. J., and J. Fritz. (2016). Global Trade Plateaus. The 19th Report of the Global Trade Alert. CEPR Press.
[3] Evenett, S. J., and J. Fritz. (2015). The Tide Turns? Trade, Protectionism, and Slowing Global Growth. 18th Report of the Global Trade Alert. CEPR Press. November.
[4] Bhatia, K., S. J. Evenett, G. C. Hufbauer (2016), “Why General Electric is localising production”, VoxEU.org, 21 June.
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Minister Davies launches one-stop shop to support intra-Africa trade
A one-stop shop to support intra-Africa trade and intra-Africa investments has been launched by the Minister of Trade and Industry, Dr Rob Davies in Pretoria on Friday. The one-stop shop, which is called Trade Invest Africa (TIA) will provide support to South African businesses doing business in the rest of Africa as outlined in the Industrial Policy Action Plan (IPAP).
According to Minister Davies, Trade Invest Africa will bring together all support programmes including incentives in order to build strong partnerships with business. He said the name Trade Invest Africa emanated from the approach of having trade which is driven by investment.
Minister Davies said the rest of Africa presents great opportunities for South African companies. He encouraged South African companies to invest in the other African countries.
“We need to build on our investment capacity and promote trade through investment. We already have a number of South African companies who are some of the largest investors in other parts of the South African continent, and therefore we want to drive an investment led African trade initiative even though we will still be maintaining the normal trade promotion activities. Investing in the rest of Africa in manufacturing and infrastructure will support the industrialization objectives that many African countries have set for themselves, and we would like to make a meaningful contribution to our partners’ objectives,” he added.
Davies said South Africa was following the Development Integration approach in order to strengthen regional integration and create a larger market. He said South Africa was already a trade partner a lot of African counties and therefore intra-Africa trade was important to ensure integration and economic growth among African countries.
Trade Invest Africa as well at the Guidelines for good business practice for companies operating in the rest of Africa were launched and signed by representatives of government and business at the Roundtable Discussions organized by the Department of Trade and Industry (the dti).
Speaking on the guidelines, Minister Davies said when South African companies operate in other African countries, their conduct reflected and carried the brand of South Africa in addition to their individual companies. He emphasised the need for South African companies to be good citizens when doing business in other countries. Davies also added that this was the reason for developing the Guidelines for good business practice for companies doing business in other parts of the African continent.
“Although these are signed on a voluntary basis, we want to encourage South African businesses to sign the Code of Conduct and align themselves to it. Signing this code means we can also tell our counterparts in other countries that these companies are aligned with our code,” he said.
Speaking at the same event, the Board Director of New Partnership for Africa’s Development Business Foundation (NBF) Mr Gregory Nott congratulated the dti for launching Trade Invest Africa. He said the initiative demonstrated foresight and created an enabling business environment which is conducive for closer collaborative efforts between the public and private sector.
“With NBF operating in over 21 African countries, I can attest to the difficulties of successfully implementing an African growth strategy. Much of the success or failure of operating in Africa is hinged on the softer issues that include government support, governance issues, as well as the attitudes and behavior of businesses as they expand into other territories,” said Nott.
He highlighted the importance of support from the country of origin and said that he hoped that the guidelines would not only support South African businesses expansion into Africa, but also understand and assimilate better into partnering and doing business in the African environment.
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Zim, SA in key trade talks
Government will this week engage South Africa to discuss issues of mutual economic concern, joint ventures, credit lines, markets and Harare’s policy to restrict certain imports as part of efforts to boost local industry.
South African businesses are ratcheting up pressure on Tshwane to push for an end to the import controls. South Africa is Zimbabwe’s largest trading partner.
Since the promulgation of Statutory Instrument 64 of 2016, the Musina business community on the Zimbabwe-South Africa border has lost more than US$10 million in potential business.
This has seen South Africa’s trade and industry ministry ask for a five-day meeting from July 18 to July 22.
Zimbabwe’s Secretary for Industry and Commerce, Mrs Abigail Shonhiwa, told The Sunday Mail Business that the meeting between Deputy Minister Chiratidzo Mabuwa and her South African counterpart Mr Mzwandile Masina was meant to find a market for local products and also scout for lines of credit.
“The main purpose of the meeting is to find an everlasting solution of trade between South African goods and our goods. We would want a situation whereby Zimbabwean goods uptake tally with the South African uptake. Though we are not going back with the SI 64, we seek to iron out all sticking points for the trade of the two countries to flourish.
“South Africa remains committed to the Zimbabwean cause, hence, she (the need) to promote foreign direct investment in Zimbabwe by South African companies... The mission will give local companies the opportunity to look for joint venture partnerships with South African investors as well as look for markets of their products in South Africa,” she said.
In June, Zimbabwe restricted the import of goods on products such as cosmetics, cereals, cheese,
canned goods and furniture for commercial purposes.
Confederation of Zimbabwe Industries vice-president Mr Sifelani Jabangwe said the SI boded well for the future of local industry.
“As CZI, we would like to go there and share our own experiences with those of our South African counterparts and find way forward for our goods as well as finding partnerships. Finally, our policymakers are giving us a big platform like this to participate and make contributions for the good of our industry,” he said.
Besides the bilateral engagements, it is understood that Tshwane has approached Sadc structures claiming that SI 64 is against regional trade protocols.
Though South Africa is fretting about the new policy, Zimbabwe similarly has concerns on some non-tariffs barriers imposed by its neighbour on exports to that country.
During President Mugabe’s State visit to South Africa in April 2015, Finance Minister Patrick Chinamasa complained about that country’s insistence that pharmaceutical goods from Zimbabwe be transported by air.
This ultimately makes local drugs more expensive relative to those produced by South African pharmaceutical companies.
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Member States welcome NEPAD interventions, call for re-orientation of strategies to grow Africa’s economy
Senior political leaders meeting on Saturday at the NEPAD Heads of State and Government Orientation Committee meeting in Kigali, Rwanda on 16 July 2016, called on the continental agency to leverage efforts in the improvement of industrialisation through existing trading blocs.
The Committee’s Chairperson Senegal President Macky Sall noted in his opening remarks the importance of re-orienting current policies to effectively grow African economies.
The 35th session of Committee focused its attention on industrialisation of the continent highlighting the need to actively engage the private sector in a number of investment plans.
Representing Rwanda’s President, Foreign Minister Ms. Louise Mushikiwabo urged delegates to consider and implement practical partnerships for sustainable development.
“Our goal of sustainable development cannot be reached without industrializing Africa. Our discussions are therefore of strategic importance and I look forward to a fruitful exchange leading to practical outcomes,” Ms. Mushikiwabo added.
Integrated into African Union structures and processes in 2010, the NEPAD Agency has coordinated a number of developmental projects including the Presidential Infrastructure Champion Initiative which under the leadership of Rwanda’s President Paul Kagame saw the roll out of fiber optic EAC five countries cable in 2013.
According to the Chairperson of the Africa Union Commission, now is the time for NEPAD Agency to bring to the fore, industrialization and other development aspects that can lead to the realization of the AU Agenda 2063.
“The commission and the agency have been engaged in discussion of allocation of responsibilities, in the context of a restructuring project, this includes strengthening the agency’s capacity to drive the implementation of our agriculture and agro-processing, infrastructure, science and technology in the industrialization programs on top of other priorities. We hope in the future to see NEPAD taking on the implementations of these,” she said.
In his presentation to delegates attending the meeting, NEPAD Agency CEO Dr. Ibrahim Assane Mayaki called on African leaders to own and lead regional programmes.
“These priorities are all linked to regional integration, because we all know that the optimal solutions to our national problems are not at the national level, but at the regional level, whether it is about trade, education, energy or transport.
“Thus one thing that we are requesting to the Heads of State is to be champions of these regional projects that will accelerate the connectivity of this continent, and since we are in Rwanda, the East African community has really embraced strongly that attitude, approach and strategy others should follow suit,” he said.
A key element of his address at the Summit included a presentation on the recently developed ‘dashboard’, which he said would provide the Agency and Member States an opportunity to track implementation targets of projects at the regional and continental level. He added that the tool would further enhance accountability.
In his closing remarks President Sall expressed his gratitude to the NEPAD Agency for its ongoing commitment to the development of the continent.
Press Briefing of H.E. Macky Sall, President of Senegal and H.E. Dr. Ibrahim Mayaki, CEO of NEPAD
African countries need to be strategic and work collaboratively in promoting industrialization in the continent as this will help in creating employment opportunities and become competitive in a global trading world.
Dr. Ibrahim Mayaki the Chief Executive Officer of New Partnership for African’s Development (NEPAD) told journalists’ attending the 27th African Union Summit in Kigali that the biggest challenges impeding the continent was a “Trade” whereby countries are not trading with each, lack of enough infrastructure and poverty.
Speaking at a press conference immediately after the NEPAD Heads of State and Government Orientation Committee (HSGOC) meeting held on 16 July 2016 at the margin of the AU Summit, Dr. Mayaki observed that the continent has the youngest population in the world that will need employment adding that clear strategies would be needed to facilitate the continent’s new generation.
Trade continues to play a major role in Africa’s economic growth performance and it has the potential to promote trade-induced industrialization of the continent provided it is deliberately directed at industrialization. For this purpose, trade policy must be consciously designed, effectively implemented and managed with regular monitoring and evaluation.
No doubt, Africa’s industrialization should take advantage of it's abundant and diverse resources including agricultural and mineral resources, however, the continent should exploit its comparative advantage in commodity-based industrialization and add-value to these resources using its abundant human capital.
“Our young generation needs jobs, they need food, clean water, and we must utilize the current size and potential opportunities we have in the continent to promote our industrialization in Africa,” Dr. Mayaki said while addressing the international and local media.
The huge challenges facing the continent are to maintain strong economic growth and to transform it to productivity-induced sustainable, inclusive, employment-generating, poverty-reducing, and environmentally-friendly growth.
The greatest deficiency of the current growth episode is its inability to promote the structural transformation of the economies of the region. Rudimentary agricultural practices and provision of services dominate the structure of African economies.
This overt dependence on traditional agriculture and services sectors can only support limited growth. Industrialization with its capability to generate direct and indirect employment, strong forward and backward linkages with other sectors of the economy including external sector not only promises to transform African economies but also to ensure that growth translates into sustainable development.
“We must provide assistance to the small-scale farmers and women if the continent is to develop economically. Investment in cross-border infrastructures like railway lines would be another factor to move our continent at the attractive level,” Dr. Mayaki added.
He mentioned that in Africa, informal small scale entrepreneurs invest $100billion annually adding that if these informal investors were facilitated to the formal level it would yield immense opportunities for the continent.
On the issue promoting agriculture as a cornerstone to the poverty eradication and enhancing investment in the sector, the NEPAD CEO further observed that Africa needs to embark on the implementation of Maputo declaration as this will create more investment opportunities to the continent.
At the Second Ordinary Assembly of the African Union in July 2003 in Maputo, African Heads of State and Government endorsed the “Maputo Declaration on Agriculture and Food Security in Africa”. The Declaration contained several important decisions regarding agriculture, but prominent among them was the commitment to the allocation of at least 10 percent of national budgetary resources to agriculture and rural development policy implementation within five years.
“However despite the declaration, some countries have gone ahead to implement it while others are yet to do so however officials are calling for its full implementation for the betterment of the continent,” concluded Dr. Mayaki.
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Sub-Saharan Africa’s economic downturn and its impact on financial development
Global GDP growth rate was 3.1% in 2015 and – before the Brexit shock – was forecast at 3.4% in 2016 and 3.6% in 2017. This is being driven by a weak and uneven growth in advanced economies and the continued rebalancing of the Chinese economy. Lower commodity prices and strained global financial markets are expected to continue.
These global shocks have affected sub-Saharan Africa where GDP growth fell in 2015 to a 15-year low of 3.5%. It is expected to fall further, to 3%, in 2016. This sharp decline in growth was due to the shocks from collapsed commodity prices, tighter financial conditions and severe drought in parts of southern and eastern Africa.
The current economic climate is causing a slowdown in financial development in sub-Saharan Africa. Credit is contracting, savings have declined, cross-border capital is less available and more costly, while indicators of financial soundness have deteriorated.
There have also been failures in governance of private and public institutions, including corruption and fraud that have deepened these problems. These have also undermined the public trust that is essential for long-term formal financial development.
By early 2016, these economic problems were beginning to manifest in slowing financial development as well as rising financial fragility. Indicators of this include the following (Figure 1):
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A ‘credit crunch’ in the banking sector resulting from the economic slowdown reducing the pace of growth in lending in some countries and stalling it in others;
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Reduced availability and increased expense of nonbank sources of finance including cross-border capital;
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Increased financial fragility with declines in banks asset quality, capital ratios and profitability.
These trends were strongest in oil-exporting countries and more moderate in oil-importing countries, highlighting the vulnerability of sub-Saharan Africa’s economies and financial systems to commodity price cycles.
While it seems unlikely that these conditions will develop into a financial crisis unless there are further significant economic shocks, they are negative for economic growth – and especially given the on-going ‘credit crunch’ – in an economic environment that is already difficult. In this context, policy needs to counterbalance the short-term negative effects. However, it also needs to address the long-term needs to maintain and balance financial sector development and stability.
In the short-term, as well as increasing the risks of financial instability, these trends are reinforcing the current recessionary forces in the region by reducing the availability of private finance for development – colloquially termed a ‘credit crunch’.
However, more important is the question of whether the current conditions will cause a deterioration in long-term private finance. This includes in relation to both its scale and cost and in relation to whether it is flowing into the ‘right’ sectors for structural economic transformation.
To date, although there has been strong growth in private finance prior to 2015, much of that finance has flowed into the ‘wrong’ sectors – that is those with relatively low impact on structural economic transformation. This includes sectors such as extractive industries, consumer finance and short-term working capital.
Other sectors such as manufacturing and agriculture, with much greater potential impact on structural economic transformation, have received little or no financing.
Policy needs to address these new and less favourable conditions for private financing for development. Whilst conventional policy approaches, particularly ‘getting the basics right’ and anti-cyclical development financing, remain relevant, new thinking is also needed. This includes:
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Developing macro prudential policy that is tailored to the sub-Saharan African context;
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Policy that more robustly directs credit into priority sectors; and
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International cooperation to tackle corruption more effectively
Sub-Saharan Africa has made remarkable and unprecedented progress in terms of economic growth and poverty alleviation in the last decade. Tackling these issues in the financial system is needed if this progress is to be kept on track.
Key messages
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Sub-Saharan Africa is experiencing a deterioration in financial markets including a ‘credit crunch’ in the banking sector, reduced availability and increased expense of international finance – which has been made worse by the ‘Brexit’ shock – and increased financial fragility. On-going governance problems are making these issues worse.
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Importantly for the region’s long-term growth prospects, scarce banking finance is being used in sectors with little or no transformational effect such as extractives or middle class consumer finance.
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This is starving sectors that would transform the economy – such as manufacturing, trade and agri-processing – of the financing they need to grow, reducing the prospects for structural changes that would diversify the economy and create employment.
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Policy suggestions include tailored macro prudential policy for sub-Saharan Africa, more robustly directing credit into priority sectors and international cooperation to tackle corruption.
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International Trade MEPs back trade deal with six African countries
The EP Trade committee gave its green light to an Economic Partnership Agreement (EPA) with six member states of the Southern African Development Community (SADC) on Thursday.
The deal offers duty free access for products from Namibia, Mozambique, Botswana, Swaziland, Lesotho and improved EU market access for South Africa. To maximize the impact of the deal, a robust monitoring scheme should be put into place, MEPs argue.
“This development-oriented regional trade agreement has the potential to contribute to sustainable economic growth and deepened intra-regional trade and integration. The SADC States should, however, conduct trade and development-friendly domestic policies, pursue structural reforms and consider using the potential of the EPA by going beyond trade in goods and address services in the future. The EU needs to provide assistance for capacity building, while the EP has to monitor implementation,” said rapporteur Alexander Graf Lambsdorff (ALDE, Germany) before the vote.
Trade MEPs recommended that the House gives its consent to the deal by 22 votes in favour, 9 against with 1 abstentions.
The agreement establishes a “positive discrimination” for the SADC EPA partners, ensuring immediate duty- and quota-free access to the EU market. It also creates new regional opportunities through a more flexible use of rules of origin. The African countries will liberalise 86% of trade with the EU (Mozambique 74%) over ten years with the exception of agricultural and fishery products. It replaces the previous interim agreements based on unilateral trade preferences which the the EU has granted so far to the six states, and establishes a contractual arrangement that complies with World Trade Organisation (WTO) rules.
MEPs note that while the agreement covers only merchandise trade and development-cooperation, it leaves the door open for services, investment, intellectual property and public procurement. The deal is expected to boost regional and economic cooperation and good governance.
To mitigate potential negative impacts several safeguards were added to the deal. A key demand of the African partner countries was met with the use of agricultural export subsidies no longer allowed upon entry into force of the EPA, International Trade MEPs say.
As for development cooperation, a detailed chapter identifies trade-related areas that could benefit from EU support, although no financial commitment has been made at this stage.
MEPs would also like to strengthen the monitoring of the agreement to make sure that its “benefits for the people” are maximised. The Committee adopted an oral question to the Commission on Parliamentary oversight and civil society monitoring of the agreement for the September plenary.
Background
With the Cotonou Partnership Agreement of 2000, African, Caribbean and Pacific Group of States (ACP Countries) and the EU agreed to negotiate reciprocal, though asymmetric trade agreements known as Economic Partnership Agreements mainly to comply with WTO rules. EPAs are also aimed at supporting ACP countries’ sustainable development and gradual integration into the world economy.
Negotiations were expected to be concluded by the end of 2007, but the process eventually took much longer and in July 2014, the EU finished negotiations with six states of the SADC Group. Angola finally decided not to enter into the agreement, but can join in the future. The other eight SADC Member States (Democratic Republic of Congo, Madagascar, Malawi, Mauritius, Seychelles, Tanzania, Zambia and Zimbabwe) are part of other regional EPA configurations.