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Minister Rob Davies: Trade and Industry Dept budget vote NCOP 2016/17
DTI Budget Vote Address delivered by Dr Rob Davies, Minister of Trade and Industry, in the National Assembly, 20 April 2016
It is common cause that we meet at a time when our economy is facing enormous challenges. We are all aware of the impact of the global commodity price weakness, the domestic challenges related to electricity and the ongoing drought.
We are also aware that South Africa is not alone in facing these challenges. China, the world’s largest economy based on purchasing power parity, has not met its recent growth target and has experienced substantial stock market turmoil. Moreover, Brazil, Russia and Canada are in recession while Australia experienced growth of 0.6% in Q4 of 2015 – exactly the same as South Africa.
The Prime Minister of the United Kingdom has had to cut short his holiday to attempt to find a solution to the UK’s steel crisis. The UK’s steel sector is battling to remain afloat amid a global steel glut and, a few weeks ago, Prime-Minister David Cameron called on UK industry to support British Steel through buying local! I want to assure Honourable Members that the South African government has been taking no holiday on this issue and remains seized with working to ensure that we retain increasingly competitive primary steelmaking capacity in this country.
Madam Speaker, the circumstances we find ourselves in require that we re-double our efforts to radically transform our country’s economy. We can no longer afford to be a country that relies on the production and export of primary commodities. We need to continue working to bring about structural changes at two inter-related levels: first, we need to place our productive sectors firmly at the heart of a new growth path that will move us up the value chain – and second, we must significantly broaden the base of economic participation. These are commitments of the NDP and provide the only plausible basis on which to secure higher rates of inclusive growth.
The 9 point plan spells out the interventions planned by government in this regard and several of these speak directly to the work of the dti. Today I will address just some of these, starting with “the implementation of a higher impact IPAP”.
Madam Speaker, in a few weeks’ time we will release the 8th iteration of our Industrial Policy Action Plan (IPAP) covering the period 2016/7-2018/9.
Just one of the important transversal policy levers identified in IPAP is local procurement. Thus far we have designated more than 16 sectors or products where public entities are required to procure from products produced in this country. These include rail rolling stock, work wear and uniforms, and furniture.
The three latest designations came into force on 21 October 2015. These are conveyance pipes, transformers and steel sub-structures.
I am happy to report that we are now beginning to see real impact of these commitments to local procurement in a number of industries:
For example, in Clothing, Textiles, Leather and Footwear – after having set a 100% local content requirement – we have seen the re-introduction of products where local production had been discontinued. These include technical fabrics, protective footwear, protective fabrics and chambray fabrics. The value of public procurement of locally produced clothing and textile products recorded by National Treasury increased from R264m in 2013/14 to R479m in 2015/16 – an increase of 82%. This intervention, supported also by our Clothing and Textile Competitiveness Improvement Programme has contributed to turning this sector around, and we are now applying the lessons learnt in Clothing and Textiles to the Leather and Footwear sector, where the initial results are very encouraging with 4 new factories have opening in the last six months: Ariana Footwear, Prizm Footwear, Safety Boys, and Mystic Eyes are fully operational.
A second example of successes from designation is bus bodies. This has led to the local manufacture and assembly of more than 700 bus bodies. Busmark 2000 received an order to assemble 700 buses for the City of Cape Town. Mercedes-Benz SA was successful in a tender to provide 134 buses for phase 1B of Johannesburg’s Rea Vaya BRT system. Volvo SA won a tender to provide 40 new vehicles to the City of Cape Town for its extended MyCiti bus routes. And MAN is supplying 80 new commuter buses to Great North Transport, Limpopo’s largest public transport operator. Alongside the rejuvenation of our bus industry for the various Bus Rapid Transit (BRT) systems, we have been able to leverage a substantial increase in medium- and heavy commercial vehicle exports. In 2012, South Africa exported just R1.3bn of these vehicles. By 2014, this had almost tripled to R3.7bn and we expect the performance in 2015 to have improved further. Not too long ago we were advised, even in this House that productive activities such as the manufacture of bus bodies were ‘not worth saving’. We are glad we ignored that advice.
A third example is the steady progress being made in the production of locomotives locally. The R50bn Transnet contract for the building of 1,064 locomotives is a case in point. Locomotives are being built at Transnet Engineering’s plants in Koedoespoort, Pretoria and Durban. We have seen the IEC Holden assemble the first SA-made AC Traction motors, demonstrating rapidly improving local capabilities. Furthermore, China North Rail is working with MTU (a local company) to assemble advanced diesel engines locally. On the 4th of March 2016, the Gibela Rail Consortium took the first steps in building a factory at a cost of R1bn in Ekurhuleni. The factory when fully operational will employ 1,500 people directly and we are positive that these investments will create a viable platform for South African firms to export into Africa.
Needless to say, this factory would not exist without the implementation of local procurement policy.
A fourth example is the designation of ship and boat building under the Oceans economy Operation Phakisa. As a result, SA Ship Yards (SAS) won a tender of R1.4bn to build seven Tugboats for Transnet National Ports Authority (TNPA). The contract has to date created approximately 200 new jobs and more than 60 apprentice artisans and mine engineers are being trained. More than R700 million has been earmarked for the Supplier Development agreement entered into by SAS and Transnet’s local suppliers, employees and graduates. In addition Vee Craft was awarded a tender worth R23m to build workboat ferries for the Navy and Smit Amandla Marine partnered with Damen Shipyards Cape Town to build two new vessels in an overall investment package worth R150 million.
Madam Speaker, I have visited many of these factories in the past year and can report that these Government contracts have created a mood of optimism on the shopfloors and factories. Industries that appeared to have no future and where assets were being run-down prior to being sold for scrap have been revitalised and long-term investments – including in machinery, people and skills – are being made which augur well for these industries’ future.
How much investment? Well, across the dti’s main incentive schemes (the AIS, 12i, CIP, Film, MCEP & ADEP) R57.1 billion rand in private-sector investment is being leveraged as a result of the dti having provided incentive support during the last financial year of approximately R10bn (on-budget R4bn + R6bn in 12i tax allowances). This support is provided to a wide range of local and domestic companies, one thousand seven hundred and seventy in the last financial year to be exact. Put differently, the dti approved support to about 7 new or established firms every single working day in 2015.
Significant though these achievements are, the industrial sector in South Africa remains characterised by far too few black entrepreneurs. It is impossible to build an inclusive and stable society when some sectors and industries remain largely untransformed, and where established sectors are perceived as monopolising access to government resources. This is why our Black Industrialist Programme is such an important initiative of Government. We are harnessing the resources – both on the supply and the demand-side – across Government and its Agencies to support black industrialists who have the potential to grow, invest and create jobs. In the coming year, we will focus on supporting qualifying Black Industrialists through access to funding, incentives, soft loans, market access, procurement opportunities, training and capacity building, matchmaking and information sharing, research and innovation, assistance to meet quality standards, productivity enhancement support, and economic infrastructure. This support will be provided through collaboration with DFIs, SOCs, the CSIR and SABS, and other private and public institutions.
About 50 applications have already been received and are being considered by the department, covering sectors such as Agro-processing, Chemicals, Cosmetics, Pharmaceuticals, Mineral beneficiating sectors, Oil & gas, Automotive, Rail, Clothing & Textiles, Green Energy, Capital Equipment, and ICT. We are grateful for the many messages of support we are receiving from the private-sector and – increasingly – firm offers to collaborate and partner with Government to make the Black Industrialist Programme a success.
Honourable Members, another component of the 9 point plan that speaks directly to the work of the dti is encouraging private sector investment. There are numerous initiatives being undertaken in this regard. The relative difficulty or cost of doing business can be an important constraint on investment and business confidence. One of the costs of doing business which Business has raised quite sharply with the dti was the time and number of processes to be completed to register a company at the Companies and Intellectual Property Commission (CIPC). I am pleased to be able to report to this House that we have fundamentally re-engineered the way the CIPC operates over the last few years. Whereas it was a common complaint that registering a company could take more than a month, for a straight-forward company registration where the name of the company is not already in use, the process can be completed in just a few hours.
Furthermore, the CIPC has partnered with all the major banks and just last week I launched the partnership with Nedbank to provide business registration facilities within their branches. I want to emphasise that it is no longer necessary to travel to the CIPC offices to register a company. Company registration can now be done at branches and online through banks as well as at CIPC’s self-service Terminals so far installed in four Provinces or on-line through the CIPC website. Already in the past year, 300 000 businesses were formally registered at the CIPC. 88% of these applications were received through online channels.
Madam Speaker, working with the private-sector, we have identified a range of regulatory processes which – while in many cases necessary to protect our natural resources and citizens – could be simplified and decision-making speeded up. This has led us to establish a new division within the dti. The One Stop Shop or ‘InvestSA’ is a specialised unit that offers a suite of services that will fast-track, unblock and reduce red-tape in government for all investors. InvestSA is supported by an Inter-Ministerial Committee chaired by the President which will, amongst others, provide clarity and certainty on South Africa’s economic policy, identify and package investment projects, promote partnership between government and the private sector, and coordinate a One Stop Shop for investors to grow our attractiveness as an investment destination.
At an operational level, the One Stop Shop will be staffed by regulatory decision-makers from relevant Government Departments and Agencies. This will integrate and co-ordinate Government decision-making across its regulatory entities with transparent processes and firm turnaround times so as to speed up decision-making, communication with investors and ultimately unlock pent-up investment.
Madam Speaker, our SEZ programme has been bolstered with the addition of a major new initiative to revitalise our Local Industrial Parks. Ten State-owned Industrial Parks located in under-developed and former ‘Homelands’ have been identified for revitalisation. We cannot simply continue to lament that South Africans are not entrepreneurial enough without investing in the infrastructure which all business but especially township business needs to be able to operate.
For this reason, we have contracted the Development Bank of Southern Africa (DBSA) to oversee the infrastructure implementation phase with the first phase involving security infrastructure upgrading, fencing, street lighting, top structures and critical electricity requirements. We will be investing R189 million covering six industrial parks in this financial year. Two of the parks – Seshego Industrial Park in Limpopo and Botshabelo Industrial Park in the Free State are near completion of the first phase of the revitalisation program and will be launched in May 2016.
This initiative is a critical element of our inclusive growth imperative and we are pleased to report that other National Departments such as the Departments of Small Business Development, Rural Development and Land Reform, Economic Development and some Provinces such as Gauteng, are working closely with the dti to make our townships and Industrial Parks hives of economic development. The more equitable provision of economic infrastructure to under-developed areas is a key tenet of our inclusive growth strategy.
Honourable members, we have continued to make advances to deepen trade and economic relations with the world. The State Visit of President Xi Jinping – the 2nd in just a few years – has ushered in a new era of Sino-Africa relations with China committing US$ 60 billion towards Africa. One part of this sizable funding commitment was the announcement to create the US$10bn China-Africa industrial capacity cooperation fund to support investments into value-adding sectors including manufacturing, hi-tech, agriculture, energy and infrastructure by Chinese firms in Africa. The fund was launched in January 2016. China also increased its capitalization of the China Africa Development Fund (CADF) from US$ 5 billion to US$ 10 billion for Africa.
Government has also concluded the negotiations on poultry, beef and pork with the United States – “the three meats” – bringing to a close several months of discussions with the United States on the terms required to secure South Africa’s position in the African Growth and Opportunity Act (AGOA) for the next 10 years. The first shipment of poultry (frozen chicken legs) arrived at the Port of Durban and was cleared by the Port Health Authorities.
The negotiations with the US to secure AGOA have been complex and arduous. We would have failed in our duty to protect South African businesses and consumers had we simply agreed to the demands as originally put rather than undertaking negotiations. I am confident that South Africa has negotiated the best possible deal – in very difficult circumstances – to secure AGOA access at the lowest possible cost to our Agricultural sector.
Turning to the region, we have played a prominent role in championing developmental integration in our Africa regional economic integration initiatives. By this I mean that we are not only focused on the mercantilist benefits of regional trade. Rather we seek to create mutually beneficial partnerships which will secure Africa’s long-term development, by developing regional industrial capacity, stimulating infrastructure development, expanding skills development, and creating the conditions for Africa to embark on a growth trajectory based on regional beneficiation of its natural resources.
The current global downturn and depressed commodity prices have painfully reminded us that Africa must deepen its industrial base and beneficiate or remain forever vulnerable to volatile global commodity prices. As Angola approaches the International Monetary Fund for bailout funds due to the collapse in oil prices, we must stress that intra-Africa trade anchored by beneficiation and local manufacturing is essential to our long-term development. Consequently, South Africa strongly supports regional and continental efforts to build more industrialised and diversified economies and reduce Member States’ over-dependence on the export of primary products.
Our regional trade integration efforts have already had an impact; the Continent is now the destination for 30% of South Africa’s total exports. More importantly, our trade with the Continent is in value-added products and has been growing while our trade with our traditional partners has stagnated. It is no exaggeration to say that our Manufacturing sector would be in dire straits had Government not consciously decided to focus on developing the African market a decade ago.
As we continue to improve our support to exporters trading with Africa, I am pleased to announce that the Africa Export Council commenced operations on the 1st of April 2016. This – our first – multi-sectoral Export Council will ensure that we provide targeted and customised support to manufacturing and service exporters trading on the Continent. Linked to this, we continue to develop our export credit offering so that South African exporters and especially those operating in the capital goods sector are able to compete on an equal footing with the many global players who are also operating in this space.
Honourable Members, I am happy to report that in June 2015 we launched the Tripartite Free Trade Area (T-FTA) signifying the conclusion of negotiations on the legal text that underpins the T-FTA. We are on track to create a market of over 600 million people with a combined GDP of over US$1trillion. The T-FTA is the building block for the establishment of the Continental FTA that will embrace the entire continent with a market of 1, 3 billion people and a combined GDP of over US$2trillion.
On infrastructure, a number of corridors and infrastructure projects have been identified to facilitate inter-connectivity and facilitate the movement of goods and services.
The benefit of the relatively weak Rand has been undermined by weak global demand, nevertheless, the dti directly facilitated R5.5 billion worth of exports in the 2015/16 financial year through undertaking 31 National Pavilion exhibitions, 26 Trade Missions and 5 high-level Investment and Trade Initiatives (ITIs). Associated with these events, 1,138 companies received financial assistance through the Export Marketing and Investment Assistance Scheme (EMIA).
With regard to implementing the National Exporter Development Programme (NEDP), important strides have been made during 2015/16 in aligning our export work with Provincial stakeholders and the larger export community through signing and implementing 6 Memoranda of Understanding (MoUs) with Provinces as well as 19 Agreements with Export Councils. The resultant greater coordination contributed to 1,558 potential exporters being trained to become exporters. In addition 1,437 clients were also assisted through the Department’s Export Help Desk with 816 trade leads being disseminated.
In this financial year, and cognisant of our fiscal constraints, the dti will undertake 25 National Pavilion exhibitions, 5 Investment and Trade Initiatives and 1 Special Project mission towards facilitating a targeted R3.5 billion of exports, with 1,000 companies financially assisted through EMIA.
The Integrated National Export Strategy was launched on the 23 March to guide our various export promotion undertakings with the aim of diversifying markets for value-added South African exports in identified IPAP sectors. Against this backdrop, in the 2016/2017 period the dti will focus on implementing the Export Promotion and Development Action Plans that have been articulated in the INES. These plans include the operationalisation of the National Export Advisory Council (NEAC) which will be tasked with enhancing coordination issues across government and the private sector in the implementation of the INES in order to improve the issue of competitiveness and removal of unnecessary barriers faced by exporters.
In addition to this a Services Export Strategy that is aimed at assisting South African firms to integrate into global supply chains of multi-national firms, by actively promoting subcontracting in power, infrastructure programmes and the built environment will be launched.
Madam Speaker, Honourable Members, turning to the dti’s regulatory programme. The National Gambling Policy was approved by Cabinet in February 2016. The National Gambling Amendment Bill will be tabled before Cabinet for approval on 18 May 2016 and later before Parliament in July 2016. Capacity will be built for enforcement of the policy, while support will be provided to people who are addicted. Illegal gambling activities will be dealt with harshly and coordination of policies and legislation at national and provincial levels will be strengthened.
With regard to the Liquor Policy, I have taken this Cabinet and its accompanying Bill will be tabled before Cabinet in May 2016; and before Parliament in July 2016. Once the process has been finalised national, provincial and municipal liquor authorities will apply policies, legislation and strategies in combatting alcohol abuse in a harmonised manner.
The Copyright Amendment Bill will be tabled in Cabinet for approval on 18 May 2016; and in Parliament on July 2016. When the legislative process is completed, the creative industries, in particular the music sector, will greatly benefit.
Madam Speaker, as I conclude, I must address the doomsayers amongst us especially those who enthusiastically contribute to the perception that investments are no longer reaching our shores. The facts are that leading global multinational companies continue to invest billions in the South African economy. In the words of the National Association of Automobile Manufacturers of SA (NAAMSA): “Capital expenditure by the seven major vehicle producers over the last five years amounted to over R24bn. Investments of this magnitude confirm the commitment of multi-national auto corporations to SA.” In October 2015 BMW announced a new investment of R6bn, just two weeks ago Ford announced a R2.5bn investment. And it is not only in the auto sector.
On the 14th of March 2016 we launched the R 2 billion Japanese Sumitomo Rubber Industries, a two-phased project which will have a huge impact in stimulating economic growth and job opportunities in the KZN province but more importantly poverty alleviation in Ladysmith (Uthukela District Municipality) through skills development programmes that will be geared for the youth. Also significant is that, phase 2 will replace the import of truck tyres which will be produced in the Ladysmith factory. This investment is expected to create a further 300 jobs bringing the employment to 1,200 which is significant for the local area.
Unilever has invested R 4 billion in state of the art plants across the country. These new investments also contribute to sustainable development, are energy-efficient, water-neutral and reduce the carbon footprint. Similarly, other companies such as Nestle, Proctor and Gamble, Samsung, Hisense, and Johnson & Johnson, all announced significant investments.
Indeed, as a matter of fact, this year we will make a number of further announcements on new investments, expansions and launches from domestic and foreign investment. In May we will launch the MPACT PET Recycling plant in Wadeville and Dursots Food’s tomato processing plant in Modjadjieskloof in Limpopo. In April and May, Ford and Toyota will launch their new vehicles destined for the local and export markets.
The Han Noi company of China is undertaking a feasibility study to invest US$3,9bn in metallurgical technology, processing, steel plant, mining construction and energy in the prospective Musina Special Economic Zone.
Honourable Members, the dti is tasked with co-ordinating 3 of the priorities in Government’s 9-Point Plan to ignite growth and create jobs. In the coming year, we will intensively implement the Higher-Impact IPAP, the Beneficiation programme and the partnership with the private-sector to unlock investment. These activities all contribute to higher – and critically important – more inclusive economic growth.
All the work I have been discussing is underpinned by the efforts of related development finance and regulatory bodies – namely, the Industrial Development Corporation, the National Empowerment Fund, the Council for Scientific and Industrial Research and the dti’s technical infrastructure institutions – as well as the cooperation of those SOCs that occupy a central place in our industrialisation effort. To the staff of all these institutions and to our own dedicated dti people – on whom all this work rests – I offer on behalf of government as a whole our sincerest appreciation.
The work of the dti is also supported by the oversight of the Parliamentary Portfolio Committee and the Select Committee of the National Assembly and the National Council of Provinces. To the Chairpersons, the Hon Joan Fubbs and the Hon Eddie Makue, as well as honourable members of the Committee, I express my sincere appreciation for your support.
All the work of the dti is also supported by the Ministers and Departments of the Economic Sectors and Employment and Industrial Development Cluster. Allow me to also express my sincere appreciation to these Ministers and their respective departments.
We re-affirm our common goal of taking the inclusive industrialisation of South Africa to a new and higher level.
I commend this budget to the House.
I thank you.
Appendix
1. FDI
The business press has reported widely on a supposed sharp decline in Foreign Direct Investment (FDI) in 2015 according to a preliminary UNCTAD report. This report was based on estimates for the last quarter of 2015 as the Reserve Bank (SARB) only released the final 2015 figures on the 8th of March this year.
According to the SARB, South Africa recorded a negative direct investment in Q1 and Q2 of 2015. This outflow of capital was due to foreign parent companies reducing their equity holdings in their South African subsidiaries. The transactions included:
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The sale of Glaxo's share in Aspen (R 10,5 billion)
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Brait sold 37,1 per cent of its stake in Pepkor to Steinhoff (R 26,4 billion)
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ENRC sold 13 per cent of its stake in Northam Platinum (R 2,5 billion)
Madam Speaker, we must make clear here that these transactions are not the same as the disinvestments we saw before the dawn of democracy in SA. Not one of these companies has indicated that they are disinvesting because of something SA has done. These transactions result from global private companies making strategic decisions - in many cases due to regulatory changes or changing circumstances in their home markets. Barclays Plc's decision to sell Barclays Africa is another such transaction and as has been reported is not due to any particular policy change in SA. Indeed as the Barclays SA CEO has stated publicly, Barclays SA's profit metrics are significantly better than Barclays Plc is able to achieve in the UK.
It is important to contextualise some of the successes we have had in building an investor-friendly environment.
Amongst others, we have finalised the Protection of Investment Act, which aims to balance the rights and obligations of investors and government while also preserving the right of government to regulate in the public interest.
Investors domestic and foreign will be treated equally on the basis of the principle of non-discrimination and substantial protection of investor rights, based on the Constitution. I am pleased to announce that South Africa is ranked no.10 globally for the protection of investors.
2. Incentives
(i) MCEP
In May 2012, we introduced the Manufacturing Competitiveness Enhancement Programme to assist South African manufacturers to enhance their productivity, international competitiveness and job retention. Today I can report that more than 900 projects have been supported through this scheme. In the period April 2015 to December 2015, 232 entities were approved for funding and a total of 52 466 jobs were sustained.
(ii) APDP
Manufacturing sector remains critical to our economy given its multiplier effect, job creation and inclusive growth capability. The review of the APDP and the policy certainty we have created has grown the auto sector significantly.
The number of units of vehicles produced grew from 388 442 in 1995 to 615 658 in 2015. The APDP has leveraged private-sector investment of over R25, 7bn over the last 5 years. As a result South Africa has become an international player in the autos sector with all the major OEMs producing locally.
The year 2015 was notable for a steady stream of new investments in the autos sector as OEMs increased their investments in the South African plants. The OEMS often explicitly acknowledged the support they received under the Automotive Production and Development Programme (APDP) as a critical lever that encouraged them to invest more in SA.
Highlights of the year included the following:
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In February 2016, German motor company Daimler announced its decision to make South Africa the regional base for its new global truck and bus strategy. This is expected to bring significant business to Mercedes Benz SA and ultimately result in new investments in its East London plant. Making SA the new Southern African regional base will set South Africa up as the service base for all Daimler brands in SA, Namibia, Botswana, Swaziland, Lesotho, Mozambique, Zimbabwe, Zambia and Malawi.
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BMW Group South Africa has announced an investment of R6 billion into its Rosslyn Plant in Pretoria, earmarked for the production of the next generation of the BMW X3, which will be sold locally and exported internationally.
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An Iveco-Larimar joint venture has started producing trucks and buses on its R600 million production plant in Rosslyn. This plant will assemble CKD kits of Iveco trucks and buses and is expected to employ 1,000 workers.
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In March 2015, Toyota Motor SA started CKD production of the Quantum minibus in its Durban facility. The project cost was R500 million, with 270 direct jobs created and a further 50 new components to be sourced locally.
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Volvo has invested R60 million in a regional parts and distribution centre in Benoni, Ekurhuleni. This facility will consolidate all their logistical operations in Sub-Saharan Africa.
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In December 2015, Beijing Automobile International Corporation announced an investment of R11 billion in a completely knocked down (CKD) vehicle manufacturing plant in South Africa. The investment will create about 2,500 direct jobs and 7,500 indirect jobs.
(iii) 12i
Section 12i Tax Allowance Incentive was launched in July 2010 to promote and support investment in new manufacturing projects that utilise new and unused manufacturing assets; as well as for the expansion and upgrading of existing industrial projects.
Between April 2015 and January 2016, 26 projects with an investment value of R9.5 billion were approved. The support was extended to companies in a wide range of sectors such as steel, agro-processing, oil and gas, boatbuilding, chemicals, cement, paper, plastics and food and beverages.
(iv) BPS incentive
With regard to BPS incentive, 10 new projects were approved in the 2015/16 financial year with a 5 year projected Export Revenue of R5,7 bn. Through government support, the industry has sustained 10,997 jobs.
SEZs & IDZ
During the financial 2015/16, we designed the Maluti-a-Phofung IDZ as an SEZ. Maluti-a-Phofung is aimed at bolstering logistics efficiency along the key trade routes such as the Gauteng-Durban port corridor and Bloemfontein-Cape Town corridor. The main industries it will serve include agriculture, agro-processing, automotive and logistics.
Related News
‘Bold and decisive’ action needed for Africa’s future, UN deputy chief tells Member States
The United Nations and African countries are working as one to support the continent’s people in realizing their hopes and aspirations for peace and development, which will require “bold and decisive” action, Deputy Secretary-General Jan Eliasson said today at a special event on the continent’s future.
Last year, when the world adopted the historic 2030 Agenda for Sustainable Development as well as the Paris Agreement on climate change, Africa adopted its own transformative Agenda 2063 and Ten-Year Implementation Plan.
“These global and regional frameworks share a focus on people and their well-being on a healthier planet. They include pledges on justice and are rooted in respect of human rights,” Mr. Eliasson told delegates attending a High-Level Forum entitled The Africa We Want in 2030, 2063 and Beyond.
According to the UN, both the 2030 Agenda and Africa’s Agenda 2063 aim at structural transformation and a more equitable sharing of income and wealth, stressing inclusive growth and sustainable development. “These high ambitions require bold and decisive action from everyone involved. The people of the world are looking to their leaders on all levels to act and to be accountable for their actions,” said the UN deputy chief.
Organized by the African Union, the Government of Sweden, and the UN Office of the Special Adviser on Africa, the meeting aims to delve into thematic areas which exhibit a strong link between the agendas. In his remarks, Mr. Eliasson underlined his wish to focus on three points in particular:
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Women’s empowerment is one of the main themes of the meeting and a vital area for the global community’s work;
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Both agendas stress the importance of ending conflict, through Sustainable Development Goal 16 and Agenda 2063’s aspiration for “a peaceful and secure Africa”;
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Sufficient resources, both in terms of capacity and, financing, will play a decisive role in tackling the UN and African agendas.
“Carrying out these agendas will require stronger policy-making capacities and effective cooperation and coordination,” the Deputy Secretary-General insisted, adding that there is work to be done on data, indicators, and monitoring mechanisms.
Outcome Document
The Africa We Want in 2030, 2063 and Beyond
1. Towards Transformative Economic Growth and Regional Integration in Africa
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The 2030 Agenda for Sustainable Development and the AU Agenda 2063 are strongly aligned. Both agendas are firmly rooted in a people-centred approach to tackle poverty and promote accelerated, inclusive economic growth with equity that is socially inclusive and environmentally sustainable and can lead to socio-economic development.
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The integrated implementation of both agendas is essential to deliver results. It is imperative to domesticate the goals and targets of both agendas in national and regional plans as well as develop a common and harmonized review and reporting framework to promote synergies and support a mutually reinforcing implementation.
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The importance of capacity development of national and regional institutions, including data and statistical systems to be able to produce timely, accurate and reliable data, track progress and identify gaps in the implementation of both agendas.
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The revitalized and enhanced global partnership for sustainable development should support Africa’s efforts towards socio-economic transformation by focusing on Africa’s development priorities, identified in Agenda 2063, including structural economic transformation, regional integration, infrastructure development, agricultural development, industrialization, human capital, services, trade, climate resilience, women empowerment, youth employment, peace and security and urbanization.
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The importance of supporting and promoting partnerships, including for advancing progress in critical areas such as resource mobilization, addressing tax avoidance and evasion and curbing illicit financial flows, promotion of trade and investment, technology development and transfer and capacity building. The role of public-private partnerships and private sector engagement in driving industrialization, value addition and job creation including through small and medium enterprises (SMEs) cannot be overemphasized.
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While underscoring the role of domestic resources as the main source of finance for the two agendas, we recognize that ODA remains an important source of financing for development, particularly for African countries, the least developed countries (LDCs), landlocked developing countries (LLDCs), Small Islands Developing States (SIDS) and countries in conflict and post-conflict situation. Innovative financing mechanisms must be explored to support the attainment of development objectives.
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The need to strengthen UN mechanisms mandated to mobilize international support, advocate for Africa’s development objectives and strengthen UN coordinated and integrated support for Africa, including the UN Inter-Agency Task Force on African Affairs chaired by the Office of the Special Adviser on Africa.
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The need for an effective framework for follow-up and review at the national, subregional, regional and global levels for the implementation of the SDGs and Agenda 2063. Recognizes the emphasis placed in the 2030 Agenda for Sustainable Development on effective linkages between the High Level Political Forum and the follow up and review arrangements of all relevant United Nations conferences and processes.
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The importance of the contribution that the United Nations Monitoring Mechanism, established by GA resolution 66/293, can provide to the High-level Political Forum in realizing the synergies in the implementation of the 2030 Agenda and Agenda 2063 through reviewing progress in the implementation of commitments made towards Africa’s development.
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Multilateral development banks (MDBs) and international financial institutions (IFIs) must increase their support to projects and cooperation frameworks that foster crossborder trade and investment and regional and sub-regional integration in line with the Addis Ababa Action Agenda as well as support building resilience in African countries against emerging threats to peace, security and development such as health crises including through instruments like the Pandemic Emergency Financing Facility developed by the World Bank.
2. Empowering African Women: Gender as the Agenda
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The designation by the AU of 2015 as the “Year of Women’s Empowerment and Development towards Africa’s Agenda 2063” and 2016 as the “African Year of human rights, with particular focus on the rights of women” reflects the commitment of the African leaders to empowering women, enhancing women’s political and economic participation, including access to means of production, land and finance as well as and promoting respect for human rights and fundamental freedoms. This emphasis on women empowerment in the implementation of development strategies must be further encouraged and supported.
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African countries have committed in the Ten-Year Implementation Plan of Agenda 2063 to achieve full gender equality and significantly empower African women by 2023. This goes in line with the global objective of SDG 5 to achieve gender equality and empower all women and girls. It is imperative to ensure that a gender perspective is mainstreamed in the implementation of both agendas.
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The need for international support for the efforts by African countries to implement existing human rights instruments, including the Maputo protocol to ensure full respect for the rights of women and ensure that women and girls are involved in the implementation of both agendas, including in the promotion of peacebuilding in Africa as well as in addressing the negative impact of climate change through involvement in the implementation of the COP21 climate deal “the Paris Agreement”.
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Women empowerment, socio economic engagement of youth and the inclusion of people living with disabilities must be vigorously pursued. This must be accompanied by peace and security, efficient governance, institutional building and rule of law among others.
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The importance of building on the results of the Global Study on the implementation of Security Council resolution 1325 (2000) on women, peace and security and the adoption of Security Council resolution 2242 (2015) to further strengthen the link between gender equality and international peace and security and ensure women participation in all stages of conflict resolution.
3. Consolidating peace and security in Africa
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The importance of further promoting peace and security in Africa as a prerequisite for creating a conducive and favourable environment for the implementation of Agenda 2063 and the 2030 Agenda.
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There is a need for closer cooperation between the UN, AU and sub-regional organizations in all areas of conflict prevention and resolution, peacekeeping, and peacebuilding as recognized in results of the major reviews undertaken in the UN of the UN Peace operations, the peacebuilding architecture and the implementation of SC Resolution 1325 (2000) on women, peace and security.
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The importance of taking concrete steps, including by Africa’s development partners, towards supporting the realization of Africa’s ambitious and bold initiative “Silencing the Guns” to end all wars in Africa by 2020. The UN General Assembly and Security Council have committed to consider defining a concrete five-year plan in support of the initiative’s goal of achieving a conflict-free Africa by 2020.
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More progress needs to be made on enhancing the coordination between the African Peace and Security Council and similar bodies at the level of the Regional Economic Communities.
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The importance of making progress on critical areas for consolidating peace and security on the continent, including the speedy operationalization of the African Standby Force, enhancing early warning mechanisms, ensuring transparency in the exploitation of natural resources, promoting women participation in peace processes and directing more investments towards post-conflict reconstruction and development.
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There is a need to ensure a central role for the AU, NEPAD Agency, Africa’s Regional Economic Communities (RECs) and the African Peer Review Mechanism (APRM) in the implementation of both agendas, given their important role in facilitating peer review, identifying common challenges and sharing of best practices.
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The need to redress the historical injustice done to Africa and to accord it permanent representation in the Security Council. While almost 65% of the Security Council work is on Africa and the majority of UN peace operations are deployed on the continent, Africa has no permanent seat in the Security Council.
Related News
Revving the engine of services trade
Trade fell dramatically during the 2008 financial crisis and has grown sluggishly since then. But this overall trend obscures an important fact: trade in services has proven remarkably resilient, and has been steadily growing since 2010. This expansion of services trade – from health and education to transport, telecommunications, and tourism – presents developing countries with significant opportunities.
Until recently data on services trade policies was sparse. But in last month’s Policy Research Talk, Research Manager Aaditya Mattoo unveiled a body of new research and data, including the Services Trade Restrictions Database, that is advancing knowledge about services trade policies, and how best to reform them.
“There are many questions around services trade we are still trying to understand better,” said Research Director Asli Demirguc-Kunt, who hosted the event. “What impedes services trade? How should we best design service trade policies? And what is the development impact? The answers to these questions matter since the services sector is getting bigger by the year in many developing countries.”
As Mattoo made clear, trade in services is vital not only for rich countries but also the developing world. Drawing on data on the 40 poorest countries in the world, Mattoo found that services account for more than half of GDP and employment.
“If these countries are to grow, and lift people out of poverty, there needs to be a dramatic improvement in the state of services,” Mattoo said. Services are important not only because of their share of GDP, but also because other industries, including manufacturing and agriculture, depend on the strength of the sector.
Trade in services includes cross-border trade in communications and transport, as well as outsourced business services; consumption abroad by foreigners of tourism, health and education; foreign direct investment (FDI) in banking, communication, and distribution; and temporary migration of doctors and teachers. Together, trade in these services through different modes could have a transformative effect on poorer countries.
In his research, Mattoo found that openness to trade in services is associated not only with more rapid growth but also increased economic stability. “Countries that are more dependent on services exports, saw less volatility in trade during the financial crisis,” he said.
Mattoo highlighted two phenomena that are together creating a surge in opportunities in services trade. The first is advancement in technology that is dramatically changing the way people access service providers and reducing the need for in-person interaction. Telemedicine, mobile banking, and digitized business services are all good examples of this phenomenon.
Shifting demographics are also an important factor. Old and young people tend to consume different types of services, with older people in particular spending more on health and personal care. And aging countries with shrinking workforces are less able to produce these services themselves. This creates opportunities for developing countries to meet growing demand in overburdened sectors in wealthier countries.
Mattoo urged policy makers not to give in to an unwarranted services trade pessimism arising from a large unskilled workforce. Citing India as an example, Mattoo explained that even though service exports tend to be more skill intensive than manufactured goods, many less skill-intensive jobs can still be generated through supporting industries such as construction and on-site restaurants.
But divergent globalization means that some developing countries have benefited from these new opportunities, while others have not.
Mattoo highlighted the work of the World Bank in assisting Zambia to reform sectors like transport and telecoms. While the country scrapped public monopolies in these sectors, appropriate regulatory structures were not put in place early on to ensure a competitive and fair marketplace. Mattoo emphasized the need to better sequence reform efforts so that service sectors would deliver equitably within a country rather than just serving the well off.
Internationally, neither the Doha Round nor the Trans-Pacific Partnership have made significant progress on tackling barriers to trade in services. Drawing on the Services Trade Restrictions Database, Mattoo highlighted the extensive barriers in the services sector, which include often opaque instruments like limits on ownership, foreign providers, foreign personnel; discriminatory taxes; and subsidies to national providers.
A new approach to trade negotiations is needed that better reflects the inherent differences between services and goods. Importing countries can inspect goods at their ports and other points of entry to ensure they meet domestic regulatory standards. Services are typically consumed as they are produced, making international transactions harder to regulate.
“What you need is a credible mechanism to protect consumers from international market failures,” said Mattoo. “The new proposal is to have regulatory commitments by exporting countries to protect foreign consumer interests in return for market access commitments by importers.” Mattoo pointed to examples where this type of exchange is already happening, such as the US promise to protect the privacy of EU citizens to ensure data flows across the Atlantic.
Anabel Gonzalez, Senior Director of the Global Practice on Trade and Competitiveness, underlined the value of generating data like the Services Trade Restrictions Database in areas where rigorous evidence is often lacking. “This data serves as a critical input in driving and providing the evidence base for reform,” she said.
Related News
tralac’s Daily News Selection
The selection: Wednesday, 20 April 2016
tralac’s contribution to the Inquiry on the UK’s Africa Free Trade Initiative
Highlighted recommendations: i) support new approaches to services negotiations focusing on regulatory matters (reform, cooperation, harmonisation), ii) support regional courts to deliver on the potential benefits implicit in any agreement, iii) support smaller member states to prepare and engage effectively in CFTA negotiations; support debate among non-state actors including the private sector, support broad-based access to information on CFTA matters
Underway, in Kampala: the 13th Northern Corridor Integration Projects summit
Running under the chairmanship of Ugandan President Yoweri Museveni, the major highlight of the conference is the impending announcement of the route the oil pipeline from Uganda will take with all indications pointing to the port of Tanga in Tanzania. Uganda, Kenya, Rwanda, South Sudan, Tanzania, Burundi, DRC and Ethiopia are attending this summit which is one of the most significant regional steps so far at propping up the region’s competitiveness through improving infrastructure. The Secretary-General of the East African Community and the executive secretary of the Northern Corridor Transit Transport Coordination Authority will attend as observers. Private sector representatives from Uganda, Kenya and Rwanda will also participate. Uganda Chamber of Mines and Petroleum (UCMP) will represent the oil and gas private sector while Private Sector Foundation and East Africa Business Council will represent the wider interest of the regional private sector. [Northern Corridor Integration Projects website, Summit briefing]
Starting today, in Addis: the Africa Climate Resilient Infrastructure Summit (ACRIS II)
African Department briefing transcript (IMF)
But to reap this strong medium-term potential, a substantial policy reset is critical in many countries of the region. And the reset is urgent, as the policy response to-date has generally been insufficient. In commodity-exporting countries, fiscal and foreign reserves are depleting rapidly, and financing is constrained. Consequently, commodity exporters should respond to the lower export earnings and budgetary revenues promptly and robustly, to prevent a disorderly adjustment. As revenue from the extractive sector is likely durably reduced, many affected countries critically need to contain fiscal deficits and build a sustainable tax base from the rest of the economy. For countries outside monetary unions, exchange rate flexibility as part of a wider macroeconomic policy package should also be part of the first line of defence. [Asia and Pacific Department briefing]
African Ministerial Conference on the Environment: outcomes (UNEP)
The Ministers agreed on the urgent need for the sustainable management of Africa's natural capital in support of implementation of the 2030 Agenda, the SDGs and Agenda 2063 and its first ten-year implementation plan. They also agreed to put in place policies and practices to reverse ecosystem degradation and promote sustainable consumption and production patterns. In addition, the forum agreed to create and strengthen private and public partnerships and establish centres for sustainable harnessing of natural capital, value addition, green industries and agro-processing centres. The meeting was held just over a month ahead of UNEA-2, where major decisions of relevance to Africa will be taken. African countries intend to table a set of resolutions, ranging from natural capital and illegal trade in wildlife, to health and the environment, with focus on lead battery recycling. [Various downloads]
The South African manufacturing exporter story (UNU-WIDER)
In this paper we use the SARS data to highlight some ‘stylized facts’ about South African exporters and to investigate the relationship between exporting and productivity in more detail. This data shows that South African exporting at the firm level is similar to the stylized facts of firm-level exporting found internationally: less than a fifth of firms export in any given year; specialist exporting is very rare but total export value is dominated by a small number of firms; and exporters are larger, pay better, and are more productive. There is also a large degree of churn—entry and exit into the export market—but this does not seem to translate into sustained exporting. Most of South Africa’s exporting growth comes from expansion on the intensive margin—existing exporters expanding their exports of existing products to existing destinations. [The authors: Marianne Matthee, Neil Rankin, Tasha Naughtin, Carli Bezuidenhout] [Economic zones pick up speed, MPs told (Business Day)]
SACU policy issues: President Zuma in Namibia (New Era)
Turning his attention specifically to SACU issues, Zuma said South Africa is in the process of visiting all the member states of the customs union. “We started in Botswana yesterday. We are here today. On Thursday we are in Swaziland, and someday thereafter we will be in Lesotho. We thought we should do so, as we are chairing SACU for now, particularly because of the importance of our organisation,” he said. Zuma said this type of regional engagement is necessary, taking into account the number of meetings that have taken place between members of SACU, as there are discussions that have not yet been brought to a conclusion.
Namibia and the CMA: Higher interest rates less likely to curb capital outflow to SA (New Era)
Namibia is a member of the CMA, hence the free flow of capital between the member countries. However, because South Africa has more developed financial markets, capital flows in the CMA are skewed to that market and any efforts – whether fiscal, monetary or otherwise – to limit the outflow of capital to South Africa remain futile and will not yield the intended results. In fact, the main objective of free capital mobility is to foster the integration of member countries’ financial markets towards each other – and the Rand (South Africa) being the anchor currency, it draws all capital towards itself.
Mozambique: review of the Doing Business indicator 'Getting electricity' (SPEED)
This 2016 SPEED-commissioned study proposes changes designed to make the new electricity connection process to firms more cost effective and responsive. The scope of this study is limited to the Maputo Distribution Network a methodology that is aligned with the World Bank doing business structure. This proposal has been reviewed and validated by EDM’s Executive Board and the National Directorate of Electric Energy, of the Ministry of Mineral Resources and Energy (MMRE). These entities have officially accepted the proposed changes and are committed to proceed with the implementation of the newly proposed business sector electrical connection process. The Council of Ministers approved the proposed reforms on April 13, 2016. [Downloads] [A review of consumption poverty estimation (UNU-WIDER)]
China-Angola/Mozambique trade statistics: Jan-Feb update (MacauHub)
In the first two months of the year, China’s exports to Portuguese-speaking countries fell overall by 49.16%, while imports increased by 0.95% year on year. China sold 50.27% less to Brazil in January and February, 77.32% less to Angola, 46.69% less to Mozambique, 43.05% less to Cabo Verde (Cape Verde), 28.61% less to Guinea-Bissau and 22.16% less to Sao Tome and Principe. Chinese imports from Portuguese-speaking countries fell in almost all cases, the exception being the value of imports from Brazil in the first two months of the year (19.28% more).
Smart Africa Initiative: 11 African countries set up One Area Network (New Times)
The decision, binding to 11 countries across Africa, was reached Monday at a high-level meeting of ICT Ministers and Regulators convened under the Smart Africa Initiative. The implementing countries include; Ivory Coast, Gabon, Kenya, Mali, Uganda, Senegal, South Sudan, Chad, Rwanda and Burkina Faso. Among other developments, the implementation of the One Africa Network will see harmonisation of tariffs on mobile voice calls, SMS and data transmission within the 11 countries. International traffic among Smart Africa member countries will also be tax exempt, consequently bringing down the calling costs.
Jaindi Kisero: 'On oil pipeline route, Uganda and Tanzania have snookered us' (Daily Nation)
The diplomatic stand-off with Uganda over the pipeline route got me reflecting about how the next phase of the standard gauge railway — the section between Nairobi to Malaba — stands in terms of Uganda’s permanent interests. What if Uganda changes its mind and decides that extending the standard gauge railway from Malaba all the way to Kasese is not in its long-term interest and, therefore, not a high priority item?
Related: Ugandan experts explain choice of Tanzania for pipeline route (IPPmedia), What role will South Sudan play in EAC? (IPPMedia), East African Business Council: trade and policy advocacy updates, Uganda warns traders over Mombasa goods amnesty (The EastAfrican)
An age of choice for development finance: evidence from country case studies (ODI)
This report and case studies examine the viewpoints of developing country governments on this new age of choice in general, and on non-traditional sources of development finance - defined as 'beyond official development assistance (ODA)' - in particular. It looks at the ‘beyond ODA flows’ (BOFs) that developing countries can select, explores their choices and the factors that shape them. The findings in this report are based on nine country case studies that were carried out in stable lower-income countries (Ethiopia, Uganda, Ghana, Senegal, Kenya, Zambia) and lower-middle-income countries (Cambodia, Viet Nam and Lao PDR) from 2012 to 2015, drawing on interviews with government officials, development partners and civil society organisations.
2016 Aid Transparency Index (Publish What You Fund)
Back in 2011, leading donors committed in Busan to make their aid transparent by the end of 2015. The 2016 Aid Transparency Index demonstrates whether that commitment has been met. The results find that ten donors of varied types and sizes, accounting for 25% of total aid, have met the commitment to aid transparency made in Busan. Over half of the organisations included in the 2016 Index publish data to the IATI Registry at least quarterly. However, most of the organisations covered fall into the lowest three categories, scoring below 60% and demonstrating that the publication of timely, comparable and disaggregated information about their development projects to the IATI Registry is far from complete. The Index also finds that over half of the organisations included do not publish budget information for the next one to three years – a key demand of partner countries.
Meeting of the foreign ministers of Russia, India, China: communiqué (Ministry of Foreign Affairs, China)
The Ministers expressed their support for improved global economic governance to ensure sound, stable and balanced growth of the world economy. They welcomed the implementation of 2010 IMF Quota and Governance Reforms and called on the IMF to continue to carry out reforms in order to increase the voice and representation of emerging markets and developing countries as soon as possible. The Ministers reaffirmed their strong support for joint efforts to further develop and strengthen an open, transparent, rules-based, non-discriminatory and inclusive multilateral trading system that contributes to growth, sustainable development and employment generation in all sectors. They recognized the central role of the WTO in setting the universal rules and principles of international trade.
West Africa Trade & Investment Hub: April newsletter
Namport plays hard to get (The Namibian)
Madagascar Economic Update (World Bank)
Swaziland signs taxation pacts with 4 countries, 7 pending (StarAfrica)
COMESA/LLPI joins international leather body (COMESA)
China suspends G20 anti-corruption task force: sources (Reuters)
Platform for Collaboration on Tax: update (IMF)
GVCs, jobs and routine content of occupations (Working Party of the Trade Committee, OECD)
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tralac contribution to the Inquiry on the UK’s Africa Free Trade Initiative (AFTi)
The Trade Law Centre (tralac) was invited to contribute to the Inquiry on the UK’s Africa Free Trade Initiative (AFTi); which took place on 19 April 2016.
Trudi Hartzenberg acknowledged, along with other contributors to the Inquiry, the importance of the trade and integration agenda for the development strategy of African countries. There was also broad agreement that a practical trade facilitation agenda, and measures to reduce or eliminate non-tariff barriers, can reduce the costs of cross-border trade in Africa and also support Africa’s integration into the global economy.
The following are a selection of issues raised by tralac:
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The beneficiaries of Africa’s trade and integration agenda are investors, producers, traders, workers and consumers. These agents require transparency, accountability and legal certainty from the trade and integration agreements that African countries conclude – in short they require rules-based governance.
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An important emerging trend is the quest for legal certainty by private sector agents; with firms bringing cases, related to trade and integration agreements, to domestic and regional courts. A recent case involved a Mauritian company, Polytol Paints, bringing a case to the COMESA Court of Justice. The matter concerned a tariff increase on a product imported from Egypt (an input used by Polytol Paints in its production process) after the tariff had been reduced in accordance with the liberalisation commitments that Mauritius had undertaken in the context of the COMESA Free Trade Area. Cases such as these demonstrate the practical importance of rules-based governance, with effective dispute resolution or remedies available to the beneficiaries of the agreements.
Recommendation: support regional courts
- To deliver on the potential benefits implicit in any agreement; it must be effectively implemented. An unimplemented agreement is equivalent to no agreement at all.
Recommendation: support member states to implement agreements
- The capacity to produce tradeable goods and services competitively, is still in short supply in most African countries. It is, therefore, not surprising that industrial development has become an important feature in the trade and integration discourse. This highlights the important linkages between trade and industrial development, and the role of disciplines on the trade and integration agenda for industrial development. These include standards (sanitary and photo-sanitary) and technical regulations. Quality assurance, as well as compliance with standards, are essential to the determination of effective access to export markets. There are success stories to learn from; Namibia, a very small country in Southern Africa, is able to export certain beef products to the European Union markets. This country has managed to develop a beef supply chain, that includes several abattoirs that are accredited, by the relevant authorities in the European Union. The establishment of the abattoirs was on the initiative of the private sector, in collaboration with the Namibian government and with the support of development partners. It is possible to replicate and expand such successful initiatives to enhance the competitiveness of Africa’s agriculture and industry.
Recommendation: support collaborative efforts to enhance quality assurance infrastructure and technical capacity (learning from success stories)
- Infrastructure development is well-acknowledged as a priority for Africa; it is important to recognise that it is the services associated with the infrastructure that are inputs to production and trade facilitation. Energy, transport and communication are essential infrastructure services that are inputs to all economic activities and feature in all trade transactions. Regulation governing these infrastructure services will determine determine quality, price and accessibility for economic agents. Basic regulations, in the case of transport, such as axle load limits, can if they differ across countries, frustrate investment, production and trade. Harmonisation of such regulations can reduce trade costs significantly.
Recommendation: support new approaches to services negotiations focusing on regulatory matters (reform, cooperation, harmonisation)
What does this mean for Africa’s Continental Free Trade Area initiative?
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The design and architecture of the CFTA are of critical importance to its success. It will be easier to make progress in some areas – such as non-tariff issues. Since there is much evidence (from the World Bank and other sources) to show that non-tariff barriers have greater restrictive impact on trade among African countries, it makes sense to prioritise negotiations in these areas, and to design the overall CFTA so that ‘agreements’ on such issues can enter into force in terms of their own provisions, while negotiations in other areas continue. The design can also accommodate variable geometry, so that willing partners may proceed, and others join later.
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The CFTA thus provides an opportunity to shape a pragmatic integration agenda, to make progress in areas that can make a positive contribution to Africa’s trade, industrial development and integration ambitions. Lessons from the Tripartite Free Trade Area (TFTA) indicate that tariff liberalisation negotiations are very sensitive, and the appetite for further tariff reductions is, among many African countries, very weak. The associated rules of origin negotiations in the TFTA have also proved to be complex and difficult. Progress in other areas such as standards, trade facilitation (including customs and border management) has been much more expeditious. Prioritising these less contentious disciplines in the CFTA negotiations, makes sense.
Recommendations: support smaller member states to prepare and engage effectively in CFTA negotiations; support debate among non-state actors including the private sector, support broad-based access to information on CFTA matters
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2016 Aid Transparency Index
2015 was an important year for international development, with governments agreeing to the new Sustainable Development Goals (SDGs) for the next fifteen years. It was also a critical year for aid transparency. Back in 2011, leading donors committed in Busan to make their aid transparent by the end of 2015.
The 2016 Aid Transparency Index demonstrates whether that commitment has been met. Five years after the first Aid Transparency Index, and five years after the Busan commitment, it shows us how transparent major donors are as we begin the first year of the implementation of the SDGs.
The results find that ten donors of varied types and sizes, accounting for 25% of total aid, have met the commitment to aid transparency made in Busan. Over half of the organisations included in the 2016 Index publish data to the IATI Registry at least quarterly. However, most of the organisations covered fall into the lowest three categories, scoring below 60% and demonstrating that the publication of timely, comparable and disaggregated information about their development projects to the IATI Registry is far from complete. The Index also finds that over half of the organisations included do not publish budget information for the next one to three years – a key demand of partner countries.
The United Nations Development Programme (UNDP) tops the Index for the second time with an excellent score of 93.3%, the only organisation to score above 90%. The Millennium Challenge Corporation (MCC) is placed second, performing well once again, and UNICEF enters the ‘very good’ category for the first time, jumping into third place. The ‘very good’ category also includes the United Kingdom’s Department for International Development (UK-DFID), the Global Fund, the World Bank-International Development Association (WB-IDA), the Inter-American Development Bank (IADB), the Asian Development Bank (AsDB), the government of Sweden and the African Development Bank (AfDB). These donors should be commended for their efforts in dramatically improving the timeliness and the comprehensiveness of their aid information since 2011.
At the other end of the scale, some important donors are performing poorly. France, Italy and Japan have agencies in a group of twelve donors in the ‘poor’ and ‘very poor’ categories. The United Arab Emirates (UAE), a new addition in 2016, and China come last in the Index ranking. The largest number of donors is grouped under the ‘fair’ category, including some of the most important ones as categorised by aid budget such as USAID and Japan-JICA. Many of these donors are well established and have the structures in place to perform better.
Based on these findings, the report recommends that all publishers should recognise the right to information enshrined in the SDGs. Publishers should improve the quality and comprehensiveness of their data to provide a full picture of all development flows. This should be implemented along with strategies to realise the full potential of their data, using the IATI Standard as an opportunity to strengthen management systems, communication or serve accountability purposes better. Governments and civil society should work together to fill the gaps and advance open data and transparency in the development sector worldwide.
Helen Clark: Keynote speech at the Publish What You Fund Aid Transparency Index launch
I am delighted to join this launch of the 2016 Publish What You Fund Aid Transparency Index. UNDP places the utmost importance on making information about its activities freely available and accessible. I am delighted that UNDP is ranked number one for the second year running in this year’s index. My thanks go to Publish What You Fund for its work to make information about aid, development, and humanitarian resources easier to access, use, and understand. I also thank the Center for Global Development for hosting today’s event.
A great deal has been accomplished since concerted efforts began on improving the availability of development data in the run up to the Third High Level Forum on Aid Effectiveness in Accra in 2008. Progress made over the last two years on growing the number of International Aid Transparency Initiative (IATI) participants in the run up to the Busan Commitment deadline in December 2015 has been positive. Publish What You Fund’s annual assessment is a powerful driver for improving reporting on transparency. As this year’s Aid Transparency Index makes clear, however, urgent improvements are still needed to improve both the quantity and the quality of available data.
Why aid transparency matters
The 2030 Agenda and the Sustainable Development Goals which were launched last year have set out a bold and universal agenda which responds to the volatile and unpredictable times in which we are living. The 2030 Agenda aims to complete the unfinished business of the Millennium Development Goals, to advance economic and social development and environmental sustainability simultaneously, and to build peaceful and inclusive societies.
Much greater transparency around development funding and operations will be beneficial for the new global agenda in the following ways:
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It will support national ownership, which is recognized in the 2030 Agenda as fundamental to achieving the SDGs. To accelerate development, governments need to be able to make informed decisions on the funding available to them and how to allocate it.
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Many countries have already set up systems which integrate IATI data on external resources with their national databases. For these systems to work well, development partners do need to adhere to the IATI standard.
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The full implementation of the IATI standard enables citizens in developing countries and in development partner countries to gain access to the information they need to hold governments accountable for the use of resources allocated for development.
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Achieving the 2030 Agenda will require the effective deployment of all sources of development finance: public and private, domestic and international, and developmental and environmental. Blending, catalysing, and leveraging finance from all these sources will maximize the use of available funds. Accessible and timely data on financing flows will help the governments of developing countries and their partners to have an accurate and comprehensive picture of aid spending. This can then be used to identify trends and gaps, and to make all contributions more effective.
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The breadth of the 2030 Agenda and the scale of the challenges our world faces require many new multi-stakeholder partnerships to be built. Partnerships flourish when they are underpinned by trust, and by common understanding and vision. Transparency and openness are key to this.
More transparency is also needed to improve the efficiency and effectiveness of humanitarian work. The United Nations Secretary-General’s report on the World Humanitarian Summit has called for humanitarian organisations to subscribe to IATI principles. The High-Level Panel on Humanitarian Financing appointed by the UN Secretary-General called in its preparatory report for “a specific time-bound commitment by the international community to provide open and transparent data, including on transaction costs, published on a single global platform – with IATI-compatible data at its core”. This is a very important endorsement of the value of IATI.
IATI now includes a feature to tag project activities which relate to a particular emergency or crisis. By using this marker, and by increasing the frequency of updates, to IATI, humanitarian actors could make this vital information available in real time. It will also be helpful when taking stock of the effectiveness of spending after an emergency has passed. I urge all humanitarian actors to use the marker, so that the application of the IATI standard can play its full part in ensuring that humanitarian aid is effective.
What does it take to improve aid transparency?
The IATI standard is clearly a valuable tool for driving aid transparency. At UNDP, we advocate its universal adoption. We also know that accepting its disciplines requires organisational transformation.
I came to UNDP in 2009, fresh from being Prime Minister of New Zealand where there had been an Official Information Act giving citizens access to government information since 1982. I could see no reason why a major multilateral organisation like UNDP should not be as open. With some $5 billion spent through UNDP each year, all our partners have every right to expect us to be open about our work. There must be confidence that contributions to UNDP are traceable and are being used efficiently and strategically.
To move in this direction:
First, a culture shift was called for. Working in the open required commitment all the way from management, project, procurement, and communications staff in our country offices to our global headquarters. With our work open to public scrutiny, our staff must take even more care to ensure that information about it is accurate, complete, and up to date. UNDP as a whole must be and must be seen to be responsible and accountable for its work.
Second, improving transparency required putting in place systems and technology which could capture and visualize data adequately. UNDP developed an online portal, open.undp.org, which allows the public to access information on the thousands of active UNDP projects, with activity-level data now published on more than 5,000 projects.
Third, harnessing the value of data transparency demanded long-term commitment from us all at UNDP. We took great pride in being ranked number one in the last Publish What You Fund Aid Transparency Index in 2014. Since then, UNDP has made further improvements. In 2015, we began to publish even more of our project and financial information to the IATI standard, using the new elements of the standard to add results data at the project level. This is reflected in our being ranked number one again this year.
This new level of transparency has already improved UNDP’s effectiveness in the following ways:
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Project and performance management: the improved quality and quantity of UNDP data has led to much more internal information sharing, which in turn has improved internal management and programme efficiency. Just one example: UNDP’s Evaluation Office used open.undp.org to gather the information it needed to support an evaluation of anti-corruption projects.
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Beginning later this year, staff will be requested to consult and use IATI data to identify other development partners working in a sector or location in order to leverage synergies and avoid duplication. These measures are part of a broader effort to enhance programme effectiveness at UNDP;
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Donor relations: rather than waiting for annual reports, UNDP donors can easily access information related to their contributions on open.undp.org;
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Accountability: UNDP has included specific language in all new project documents, which advises project managers and partners that the results of all UNDP projects will be published to IATI, and that the language being used should therefore be clear to an external audience.
As the lead and co-ordinating agency in the UN development system, UNDP is uniquely placed to share experiences with sister UN agencies on achieving high standards of transparency. A dedicated UN Development Group Task Team on Data and Transparency, of which we are a co-chair, is now working to increase the number of UN agencies publishing to IATI. Fourteen UN agencies have already published their data to IATI, and three more have committed to publishing in 2016.
To conclude
Transparency has the potential to transform the effectiveness of development spending by supporting:
- informed decision making;
- improved trust and confidence in development work;
- more monitoring and accountability; and
- improved prioritisation of spending allocations by governments and development partners.
The challenge for partners in development is to keep on improving our performance. UNDP is committed to seeing that transparency is at the heart of its work, and to encouraging all actors in development to work to improve the transparency and effectiveness of development and humanitarian funding and expenditure.
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An age of choice for development finance: evidence from country case studies
National financing strategies will play a decisive role in implementing the Sustainable Development Goals.
The Sustainable Development Goals (SDGs) have been agreed and the world is gearing up for their implementation. The SDGs are ambitious, and their achievement will require financing that is not only massive in scale, but effective in delivering impacts at the country level.
Governments pursuing the SDGs find themselves in ‘age of choice’ for development finance, with new financing instruments and providers to choose from – far beyond the traditional donors – to support their development priorities.
This age of choice could not be more timely, as the comprehensive and universal SDGs demand a multitude of financing tools and partnerships. It also means, however, that developing countries need a far better understanding of the different financing options and partners available to them. At the same time, donors that want to be chosen as partners must work harder to give developing countries what they actually need if the finance they offer is to have a real impact on national priorities.
This report examines the viewpoints of developing country governments on this new age of choice in general, and on non-traditional sources of development finance in particular. It looks at the ‘beyond ODA flows’ (BOFs) that developing countries can select, explores their choices and the factors that shape them.
The findings in this report are based on nine country case studies that were carried out in stable lower-income countries (Ethiopia, Uganda, Ghana, Senegal, Kenya, Zambia) and lower-middle-income countries (Cambodia, Viet Nam and Lao PDR) from 2012 to 2015, drawing on interviews with government officials, development partners and civil society organisations.
BOFs are not part of traditional official development assistance (ODA), but they are sources of external finance that could be available to governments to fund national development strategies. They include:
A new age of choice for developing countries
Developing countries now have more external finance available to them to fund national development than ever before. Total external development finance to all developing countries more than doubled between 2003 and 2012 to $269 billion, with BOFs accounting for $120 billion, or around 45%. In 2012, the bulk of this $120 billion came from OOFs (37%) and bilateral DAC donors (23%), followed by philanthropic assistance (22%) and emerging donors (13%), marked by a growing share from China. Other sources were international sovereign bonds (4%) and multilateral climate finance (1%).
More choice means more potential bargaining power for national governments
The emergence of new development finance providers has strengthened the negotiating power of some developing countries with traditional donors. This seemed to be the case for Cambodia, Ethiopia and Uganda, where China’s presence as a donor stood out.
The Government of Cambodia, for example, cancelled the 2012 Cambodia Development Cooperation Forum to review progress against conditionalities – a cancellation some interviewees blamed on disputes with the World Bank. In Ethiopia, some interviewees said that the emergence of new donors has allowed the government to adopt policies that do not tally with the conventional policy conditions set by the International Monetary Fund (IMF) and World Bank. Similarly, interviewees in Uganda believed that the growing influence of China has allowed the Government to pay less attention to the governance concerns of traditional donors.
A landscape dominated by ODA, China and sovereign bonds
Development finance from traditional donors still matters, and is growing
ODA remains the largest single source of external development finance at country level and its flows are growing, even in middle-income countries (MICs). Its volume increased in all case study countries except Zambia. Kenya and Viet Nam have seen five-fold and three-fold increases of ODA respectively in the last ten years. In Cambodia, Ethiopia, Lao PDR, Senegal and Uganda, the volume of ODA doubled between 2003 and 2012.
China is the largest non-traditional donor at country level
China accounted for half of all BOFs from 2010 to 2012 across the case study countries, and for more than 70% in Cambodia, Ghana, and Lao PDR. The average financial contribution from China surpasses that of any other emerging donors (like Brazil, India and South Africa).
This doesn’t mean, however, that every government can count on massive amounts of finance from China. Much seems to depend on geopolitical factors, as countries recovering from or embroiled in tense diplomatic relationships with China (such as Senegal and Viet Nam) receive less of its official finance.
International sovereign bonds are the second largest source of non-traditional flows
Every case study country except Cambodia and Uganda (both LICs) has accessed international capital markets over the past decade, particularly to fund their investment in infrastructure.
The volume of philanthropic assistance and climate finance is very small
Philanthropic assistance may be the second largest source of external BOFs at the global level, but its volume at country level is minimal; amounting to the equivalent of just 1% of ODA flows in both Ghana and Senegal between 2003 and 2012. This is because philanthropic organisations rarely deal directly with governments – instead, they channel their funds via trust funds and international organisations.
The volume of climate finance funds is also extremely small at country level, even in the countries most vulnerable to climate change. Senegal, for example, ranks high (number 137 of 180 countries) on the Notre Dame Global Adaptation Index, but total climate finance pledged to the country since 2003 amounts to only $32 million, and only 60% of this had been disbursed by 2013. This stands in stark contrast to the more than $1 billion of ODA Senegal received in 2011 alone.
What shapes the choices made on development finance?
Developing country priorities: volume, speed, ownership, alignment and diversification
The top priorities for developing countries remain largely in line with the principles of aid effectiveness, regardless of the changing finance landscape. Some countries stressed speed of disbursement, while many prioritized their ownership of development programmes that are aligned with national development strategies, consistent with the principles of the Paris Declaration. Several, including Kenya, Lao PDR and Cambodia, emphasised the sheer volume of finance, as they need to invest heavily in infrastructure projects. They have issued international sovereign bonds over the past 10 years to diversify their funding portfolio because they require amounts that other enders, especially multilateral developmet banks (MDBs) and bilateral DAC donors, have not been able to provide.
A general trend across the case study countries was the increasing issuance of sovereign bonds even though their terms and conditions are not as favourable as loans from bilateral and multilateral lenders. Governments issue bonds because it allows them to re-finance previous obligations and sends a clear signal: this country can access international financial markets. Developing countries also valued the absence of the policy conditionality and delays that often characterise the disbursement of traditional development finance.
Non-traditional donors have little interest in aid coordination mechanisms
It seems that the energy around the aid effectiveness agenda is faltering, given the lack of interest among developing country governments and emerging donors, even in countries that were very active in the processes around the Paris Declaration, the Accra Agenda for Action and the Busan High Level Forum on Aid Effectiveness. Emerging donors take no active part in aid coordination mechanisms in the case study countries, with the exception of Zambia. They are either entirely absent from such processes or only participate as observers. Most negotiations with developing country governments are bilateral and often involve discussions with contractors (especially those from China) at a very early stage in the project implementation process.
Public debt is on the rise
Public debt levels have soared over the past decade in Kenya, Lao PDR, Uganda and Viet Nam. With the exception of Lao PDR, these countries have debt-to-GDP ceilings, set by parliament or regional organisations, which they will reach very soon. This could make it difficult for them to take on more loan financing to meet national development priorities. Loan financing is essential, as the SDGs cannot be achieved through grant financing alone.
Managing a new age of choice – a way forward
The range of recommendations offered by this report can be condensed into 10 recommendations to help developing countries and donors navigate their way through a transformed development finance landscape.
Developing country governments can take five main steps to capitalise on the new age of choice:
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Know what you want. Countries with clear national development strategies, such as Ethiopia and Uganda, were more confident when dealing with potential donors. Governments should put together national development strategies that identifiy priority sectors and how funds should be spent. The clear message is: seek a range of funding that supports your development strategy, reject any funding that does not, and agree clear priorities for the ‘terms and conditions’ of the development finance flows you choose.
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Know how much finance is coming in, and keep track of where it goes. The case study countries often lack data monitoring on development finance by Ministries of Finance and Planning. Ministries should, therefore, improve their efforts to build and maintain good data sets so they can see how much finance is coming in, what kind of finance it is, where it is from, and where it is going. This would allow governments to see the links between financial flows and tangible progress. At the global level, a data revolution is needed to support achievement of the SDGs. At local level, a data revolution is needed for good strategic planning and better evaluation.
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Think outside the ODA box. Most financing strategies in the case study countries still focus on ODA but, in the new age of choice, alternative sources of finance generated $120 billion for developing countries in 2012 alone. While ODA still matters, access to it will decline as economies grow. So include public and private non-concessional financing in your national development strategies. This will help you achieve a range of development objectives in the face of rising debt levels and limits on the amount of traditional financing you can access.
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Play the field. Don’t just stick to traditional donors. China and the international sovereign bond markets are already major sources of development finance at country level, and philanthropists and other non-DAC donors at the global level. Negotiate with both new and old development finance providers and be strategic in managing your relationships with them. Recognising the distinctive characteristics of a provider will increase your chances of a successful negotiation.
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Don’t forget about macroeconomic performance. This might seem obvious, but successful sovereign bond issuances rely on good macroeconomic indicators and their forecasts. Poor macroeconomic performance means lower credit ratings and higher interest rates for future issuances, making the refinancing of international sovereign bonds unsustainable.
Donors can take five main steps to provide more effective development finance:
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Remember that ODA still matters. It is still by far the largest source of external development finance available to governments in developing countries. While debates on ‘beyond ODA’ are important, donors must ensure that ODA itself is effective in supporting national development plans and progress towards the SDGs.
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Support countries’ own strategies and policies, and do it quickly. Evidence suggests that developing countries are using the availability of new financing options to their advantage, and that this has bolstered their negotiating position with donors. Traditional donors need to give developing country governments what they want – ownership, alignment and swift disbursements – or risk losing ground to other providers and, ultimately, losing relevance.
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New donors need to respond to developing country priorities. The biggest new donor – China – on average accounts for more than 50% of ‘beyond ODA flows’ across all case study countries, and for more than 70% in three of them. All providers, including China, need to ensure that their finance contributes effectively to the achievement of the SDGs, is ‘owned’ by the country that receives it, is aligned to that country’s priorities, and promotes macroeconomic and debt sustainability.
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Find out what is going on with the very small flows of philanthropic and climate finance. It may be that philanthropic finance is subsumed into flows from NGOs and global funds, but better tracking is needed. Given the recent landmark agreements on climate change, it is alarming that so little climate finance goes to countries that are vulnerable to climate change.
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Don’t forget about debt management. Debt levels have risen rapidly in many countries, and those with debt ceilings are about to hit them. Given the vast financing needs for the SDG agenda, donors and aid-recipient governments must work together to identify funding options that do not heighten the risk of debt distress. This also requires multilateral development banks to reflect on whether limited supply and terms and conditions are pushing developing countries towards more expensive – and perhaps more risky – capital markets.
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International organizations take major step to boost global cooperation in tax matters
The International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the United Nations (UN) and the World Bank Group (WBG) announced on 19 April 2016 the details of their joint effort to intensify their cooperation on tax issues: the Platform for Collaboration on Tax.
The Platform will not only formalize regular discussions between the four international organizations on the design and implementation of standards for international tax matters, it will strengthen their capacity-building support, deliver jointly developed guidance, and share information on operational and knowledge activities.
This effort comes at a time of great momentum around international tax issues, and was welcomed by the G20 finance ministers at their February meeting in Shanghai. Amid the growing importance of taxation in the debate to achieve the UN Sustainable Development Goals (SDGs), a major aim of the Platform is to better frame technical advice to developing countries as they seek both more capacity support and greater influence in designing international rules.
Among the Platform’s first tasks will be to deliver a number of ‘toolkits’ designed to help developing countries implement the measures developed under the G20/OECD Base Erosion and Profit Shifting Project and on other international tax issues. The first of these toolkits, focusing on tax incentives, was delivered in November. There will be an important link to the new BEPS implementation framework. Platform members will hold regular meetings with representatives of developing countries, regional tax organizations, banks and donors. Consultations with business and civil society will be organized as needed.
The Platform for Collaboration on Tax: Concept Note
Context and Background
A core agenda...
Strengthening tax systems – policy and administration – has emerged as a key development priority, being a core part of the Sustainable Development Goals (SDG) framework and the Addis Ababa Action Agenda. The international organizations (IOs)* already provide extensive support to countries’ tax efforts in capacity building, policy reform, standard setting and implementation, policy dialogue and knowledge sharing. Yet significant additional tax revenues, raised in fair and efficient ways, are required to meet the global development challenges. The IOs welcome the increased emphasis on taxation, recognize their responsibility to further support countries’ efforts, and see deepening their collaboration and cooperation as an essential component of strengthening tax systems.
At the same time, the increased linkages between economies and progress in reform that has already been made are making ever clearer the commonality of many of the challenges that advanced, emerging and developing countries face. This makes it ever more urgent to fully exploit the potential synergies from bringing more closely together the experiences and expertise that the IOs, with their different priorities and roles, have built up.
The IOs propose to create a new Platform as a central vehicle for their enhanced cooperation, enabling them to develop a common approach, deliver joint outputs, and respond to requests for a global dialogue on tax matters. This note describes the Platform, and how it will support the IO’s work in all their member countries.
…In a new environment
An era of unprecedented international cooperation on tax matters is now underway, boosted by progress on exchange of information since 2009 led by the OECD and Global Forum on Transparency and Exchange of Information for Tax Purposes and, more recently the G20/OECD BEPS Project, with more inclusion of developing countries in making significant changes to the international rules. This evolving environment is underpinned by a series of converging initiatives and actions, including the recent decision to enhance the resources of the UN Committee of Experts in order to strengthen its effectiveness. Other developments include a new joint IMF/WBG initiative on strengthening tax systems in developing countries and fostering inclusive policy discussions, a partnership between the OECD and UNDP on Tax Inspectors Without Borders plus the Addis Tax Initiative designed to dramatically increase donor support for building tax capacity in poorer countries.
…With new expectations for International Organisations
These converging developments are raising expectations, not least for coherent action among the IOs. G20 Leaders have called for the OECD to develop an Inclusive Framework for the implementation of the BEPS project globally, and welcomed support from the IMF, OECD, UN and WBG to help developing countries to voice their own perspectives and implement this agenda.
The IOs of course have their own mandates for action in the tax area. They have already received requests from the G20, notably on toolkits. A further G20 request for a report from the IOs on more general capacity issues on DRM and tax systems development has been received. These will require more joint efforts and more requests for collaborative work are anticipated. Developing countries themselves, particularly low income countries, are seeking both more capacity support and greater influence on designing international rules.
* IOs: For the purposes of this note, this refers to the International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD), United Nations (UN), and the World Bank (WB)
BOX 1: The Platform and the Inclusive Framework – Links and Synergies
In response to the November 2015 call by G20 Leaders, the OECD is developing an Inclusive Framework for BEPS implementation. The Framework will monitor and support BEPS implementation, review progress made in the implementation of the BEPS measures and in particular of the minimum standards included in the BEPS package, and will complete some limited remaining technical work related to the BEPS Actions, (e.g. finalizing transfer pricing guidance on the application of transactional profit split methods on financial transactions). The Framework will include a mix of government tax officials from G20, OECD, and developing countries. The IMF, UN and WBG will be observers to the Framework, as is already the case in the OECD’s Committee on Fiscal Affairs.
The Platform will produce, as a major collective output of the IOs, the eight toolkits and reports that the G20 has requested the IMF, OECD, UN and WBG to develop. Most of these aim to translate the complexity of BEPS outcomes (in relation, for instance, to transfer pricing), into user friendly guidance for low capacity countries. Others address international tax issues not included in the BEPS project (such as indirect transfers of assets). The development of the toolkits will be informed by discussions in the Inclusive Framework. Beyond this, the Platform is also expected to identify and analyze emerging international tax issues, especially those of interest to developing countries including with a view to possibly bringing them to the attention of the Inclusive Framework.
A positive starting point from which to deepen collaboration
There is already a strong basis on which to deepen collaboration among the IOs in pursuit of these increased expectations. Examples include the IOs’ effective collaboration on a recent report on tax incentives in low income countries and, earlier, on a flagship report for the G20 to identify the key tax challenges facing developing countries. Another instance is the joint work of the IMF and OECD on taxation and debt bias, part of a report on non-financial corporate leverage coordinated by the FSB for the G20.
Objectives
The overarching aim for cooperation among the IOs is to better support governments in addressing the tax challenges they face. The Platform will provide a means to help achieve this, by providing a structured and transparent framework for:
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Producing concrete joint outputs and deliverables under an agreed work plan, implemented in collaboration by all or selected IOs, and leveraging each institution’s own work program and comparative advantage. The outputs may cover a variety of domestic and international tax matters.
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Strengthening dynamic interactions between standard setting, capacity building and technical assistance (experience and knowledge from capacity building work feeding into standard setting and vice-versa, including timing of implementation).
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Sharing information on activities more systematically, including on country level activities.
Principles to Guide Cooperation
The following key principles will guide cooperation among the IOs within the Platform:
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The IOs will continue to act to fulfill their own mandates and within their own rules of procedure.
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The substantive analysis, research, drafting of technical papers and the other activities undertaken within the Platform will be carried out by the staff of the IOs, based on their comparative advantages and capabilities. All of the Platform’s products will therefore be the responsibility of the IO staff involved, and not that of the Platform itself.
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The cooperation will seek consensus, but differences in views may be reflected in the outputs where consensus cannot be found.
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Economic Update: Madagascar’s slowed growth underscores need for improved public financial management
Madagascar’s economy did not rebound as expected in 2015, posting an estimated 3% growth that falls far short of initial projections, according to the new economic update for the country.
The April 2016 Madagascar Economic Update cites unfavorable domestic and external conditions for the slowed growth. The main drivers of growth decelerated, the report says, along with losses in tourism, rice production, and the expected high recovery of export processing, which have yet to materialize.
“The country is increasingly confronted by fierce international competition,” said Keiko Kubota, lead economist at the World Bank Country Office in Madagascar. “A strong rebound in economic activity in 2016 could be expected if the structural challenges related to governance and the business climate are adequately addressed.”
The report also examines the 2016 state budget, which presents the additional tax measures the government intends to implement to improve 2016 revenues. Madagascar’s tax policy is generally sound, the report says, and poor revenue performance results mainly from weak tax administration. The report recommends strengthening tax administration through reducing tax exonerations, exemptions and the special regimes, as well as the fight against corruption as critical to increasing revenue.
The report notes that the share of the budget allocated to public investment is increasing and the program for public investment is in line with the government’s priorities, including an increase in infrastructure and in the social sector. To ensure that the budget serves as an effective forecasting tool of public expenditures, the report recommends enhancing budget credibility by reducing the gap between the voted budget and execution results. More broadly, improvement should cover all aspects of public financial management, according to the report.
As in other Sub-Saharan African countries, the report notes that the local currency depreciated strongly against the US dollar. Inflation accelerated from the first quarter of 2015 and remained above 7% for the remainder of the year.
Given these macroeconomic developments, a revised budget was adopted in November 2015, which adjusted budget allocations and revenue projections. Due to the delay in adopting the revised budget, some of the measures introduced have not yet been implemented. In addition, the commitment of non-priority expenditures was suspended for an extended period. However, the revised target for revenues were reached although VAT on petroleum products shrank following the decline in import prices, according to the report. This decline in price allowed to reduce the burden of pump price subsidies in public expenditures and to lessen the trade deficit. It also eased the transition in March 2016 to an automatic adjustment of pump prices to international parameters.
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African Ministers pledge accelerated action on sustainable development, climate change and illegal trade in wildlife
Decisions taken at African Ministerial Conference on the Environment set stage for brighter future for continent
Ministers of environment and representatives of over 45 African countries on 19 April 2016 agreed to accelerate action on issues ranging from the implementation of the 2030 Agenda for Sustainable Development to climate change and the illegal trade in wildlife.
At the close of the sixth special session of the African Ministerial Conference on the Environment (AMCEN) in Cairo, they also pledged to engage strongly, with a common approach, in the second United Nations Environment Assembly (UNEA-2), which will be held in Nairobi from 23 to 27 May 2016, to shape the global environmental agenda in support of Africa’s priorities.
Dr. Khalid Fahmy, President of AMCEN and Egypt’s Minister of Environment, said, “The meeting welcomed the adoption of the Paris Agreement, and emphasized that the agreement accommodated many African concerns and interests. It stressed the need for African countries to continue engaging actively in climate change negotiations, in order to provide further guidance, and identify the modalities and rules regarding the implementation of the Agreement.
“The meeting stressed that adaptation (to climate change) remains the highest priority for Africa, and underscored the necessity for developed countries to adhere to and fulfill their commitments in the pre-2020 period.”
The meeting was held just over a month ahead of UNEA-2, where major decisions of relevance to Africa will be taken. African countries intend to table a set of resolutions, ranging from natural capital and illegal trade in wildlife, to health and the environment, with focus on lead battery recycling.
African countries’ effective engagement in UNEA-2 will ensure that national and regional priorities are addressed, especially follow-up on the implementation of 2030 Agenda for Sustainable development and the Sustainable Development Goals (SDGs), as well as Agenda 2063.
Mr. Ibrahim Thiaw, Deputy Executive Director of the United Nations Environment Programme (UNEP), said: “Africa is blessed with an abundance of natural resources, a dynamic and growing population and, crucially, an energy potential that the continent can and must tap into to support the global transformation to sustainability over the next few decades.
“The decisions taken at AMCEN today demonstrate that Africa’s leaders are committed to both the 2030 Agenda and the Paris Agreement as a means of building a sustainable future for every citizen on this diverse continent.
“I look forward to further engaging with African leaders at the upcoming second United Nations Environment Assembly, where we will share our ideas and drive to chart a course to building a healthy environment that supports healthy, prosperous and thriving human development.”
Implementation of the 2030 Agenda and Agenda 2063
The Ministers agreed on the urgent need for the sustainable management of Africa’s natural capital in support of implementation of the 2030 Agenda, the SDGs and Agenda 2063 and its first ten-year implementation plan. They also agreed to put in place policies and practices to reverse ecosystem degradation and promote sustainable consumption and production patterns. In addition, the forum agreed to create and strengthen private and public partnerships and establish centres for sustainable harnessing of natural capital, value addition, green industries and agro-processing centres.
Climate change and implementation of the Paris Agreement on Climate Change
The Ministers reaffirmed that adaptation to climate change is an essential priority for Africa and that there is an urgent need for immediate and adequate support for the implementation of adaptation measures to cover agreed full and incremental costs.
The forum also welcomed the progress made with regards to the two African owned and led initiatives – Africa Renewable Energy Initiative (AREI) and the Africa Adaptation Initiative (AAI) – and called for their swift implementation.
Illegal Trade in Wildlife
The Ministers committed to provide leadership to establish inter-agency task forces involving relevant sectors, including police, customs authorities, the judiciary, defense forces, environmental agencies and intergovernmental and non-governmental partners.
The forum also agreed to support the African common strategy on combatting illegal trade in wild fauna and flora and facilitate the implementation of its action plan.
Desertification, drought, floods and restoration of degraded land
The Ministers agreed to support the ongoing programme on land degradation neutrality initiated by the UN Convention to Combat Desertification (UNCCD). They requested member states to develop a Strategic Framework for Drought Management and Actions to Enhance Resilience to Drought and develop Early Warning Systems for African Countries, through the support and technical guidance of the UNCCD and other relevant partners.
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Northern Corridor meeting to announce oil pipeline route
The 13th Northern Corridor Integration Projects (NCIP) summit in Kampala kicked off on 19 April 2016 with several technical and ministerial meetings.
Running under the chairmanship of Ugandan President Yoweri Museveni, the major highlight of the conference is the impending announcement of the route the oil pipeline from Uganda will take with all indications pointing to the port of Tanga in Tanzania.
Energy minister Irene Muloni confirmed the development last week that it would be poignant to announce the route at the summit because it is a critical infrastructure project for the region.
Uganda, Kenya, Rwanda, South Sudan, Tanzania, Burundi, Democratic Republic of Congo and Ethiopia are attending this summit which is one of the most significant regional steps so far at propping up the region’s competitiveness through improving infrastructure.
The Secretary-General of the East African Community and the executive secretary of the Northern Corridor Transit Transport Coordination Authority will attend as observers. Private sector representatives from Uganda, Kenya and Rwanda will also participate.
Uganda Chamber of Mines and Petroleum (UCMP) will represent the oil and gas private sector while Private Sector Foundation and East Africa Business Council will represent the wider interest of the regional private sector.
The Northern Corridor is the transport corridor that links the EAC landlocked countries of Uganda, Rwanda, Burundi and South Sudan with the Port of Mombasa, Kenya. The corridor also serves Northern Tanzania, the Democratic Republic of Congo and Ethiopia.
Under the NCIP framework, the presidents and their respective governments continue to provide the political impetus necessary for the implementation of the projects in a faster and more efficient way. The forthcoming meetings will review the status of implementation of the Northern Corridor Integration Projects (NCIP) since the last Summit held in December 2015 in Kigali, Rwanda.
These projects are in the areas of infrastructure development, energy, information technology and socio-economic development.
Key among the regional projects is the Standard Gauge Railway, oil refinery project, pipeline, project financing and electricity generation and interconnectivity.
The others are around ICT, political federation, human resource capacity, commodities exchange, lands, immigration, trade, tourism, labour and services and airspace management.
“Significant progress continues to be made in the implementation of the projects. Some of the highlights include, ongoing construction of the standard gauge railway which has reached 70% completion on the Mombasa-Nairobi sector,” read a communiqué from ministry of foreign affairs.
The construction of Malaba-Kampala sector is expected to begin in July 2016.
Also already operational is the issuing of a single visa for tourists to the East African region covering Kenya, Rwanda and Uganda, and use of National IDs to ease travel within the region.
The other is the harmonization of cross-border ICT connectivity, legal and regulatory frameworks which has culminated into the establishment of the One Network Area (ONA) for telephone communication and sms. Work is in progress to add data and mobile financial services.
To date, the establishment of a Single Customs Territory and One Stop Border Posts have enhanced elimination of most non-tariff Barriers hence reducing the cost of doing business.
The transit time for cargo from the Port of Mombasa to Kampala has reduced from 18 days to 4 days. Business volumes have increased as well as earnings both for Revenue Authorities and private sector operators.
Also, transmission lines are being upgraded to facilitate cross-border power export and sales to enable a partner state with surplus power to sell to another with a deficit thereby contributing to stable power supply in the region and acceleration of industrialization.
The private sector is being engaged to participate in the projects including through public-private partnerships.
Establishment of centers of excellence through which selected universities and tertiary institutions will contribute towards developing the requisite human resource and capacity for the projects.
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Which are Africa’s fastest growing economies?
Ivory Coast is Africa’s fastest growing economy, according to the IMF’s latest World Economic Outlook. The West African nation’s GDP is expected to grow by 8.5% this year.
The Ivory Coast’s economy has benefited from government policies and structural reforms, which have resulted in strong inclusive growth, according to the World Bank. Strong economic activity has been maintained through a strong aggregate demand and increases in investment, both public and private.
Following in second place is Tanzania, with projected growth of just under 7% this year. Senegal completes the top three, with 6.6%. Countries from across Africa feature in the top 10, emphasizing the economic gains being felt around the continent.
As this map from the IMF highlights, compared with much of the developed world, economic growth is relatively high in Africa. GDP in many African countries is projected to grow by over 2% this year.
However, ahead of the World Economic Forum on Africa, it is important to recognize the challenges that many African economies face – the commodities slump, currency devaluations and geo-security risks all threaten growth.
The Forum will highlight the need for diversification in order to ensure inclusive economic growth. The Fourth Industrial Revolution has the potential to create new industries and help reduce inequality across the continent. By implementing reforms and establishing partnerships, African nations can take advantage of these rapid technological advances.
World Economic Forum on Africa 2016
Meeting Overview: 11-13 May, Kigali, Rwanda
Africa’s positive economic outlook is under pressure – mainly due to adverse changes in the global economy – and is expected to remain just below 5% in 2016. As many countries in the region improve their investment climate and undertake macroeconomic policy reforms, foreign direct investment flows are expected to continue to grow, although at a slower pace.
Low global prices for major commodity exports, currency devaluations and debt sustainability considerations, as well as geosecurity threats that have weakened growth in some countries underscore the urgent need for economic diversification for sustained inclusive growth. In this context, Africa’s leaders need to pursue new approaches to ignite structural transformation, particularly in the face of rapid technological changes that have the potential to create new industries and reduce inequality.
Rwanda, the land of a thousand hills, has dramatically transformed since the 1994 genocide. The country is emerging as a regional high-tech hub and boasts one of sub-Saharan Africa’s fastest GDP growth rates. It is one of the continent’s most competitive economies and a top reformer in improving the business environment. This remarkable progress showcases the country’s rapid evolution as a knowledge economy, powered by smart policies and investments. Nonetheless, further reforms and alliances are called for to accelerate development by leveraging digital transformation to expand socio-economic opportunities.
Under the theme, Connecting Africa’s Resources through Digital Transformation, the 26th World Economic Forum on Africa will convene regional and global leaders from business, government and civil society to discuss digital economy catalysts that can drive radical structural transformation, strengthen public-private collaboration on key global and regional challenges, and agree on strategic actions that can deliver shared prosperity across the continent.
Programme Objectives
There is widespread agreement that Africa needs to craft new approaches to trigger structural transformation. According to the Africa Competitiveness Report 2015, services are playing an increasingly important role in African economies; yet the share and value of services in regional and global trade are very low. In today’s increasingly connected world, with internet penetration at 26%, an integrated digital transformation strategy for Africa is imperative. Thus, the 26th World Economic Forum on Africa will address the following main sub-themes:
i) Governance & Institutions
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Many countries in Africa have fully liberalized their ICT markets and are reaping the benefits in increased investments and use. How will ICT drive Africa’s digital transformation?
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Informal employment forms the largest proportion of employment opportunities, about 77% in 2012, despite inadequate working conditions and social protection regimes. How is e-government transforming service delivery in the informal sector?
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Regional trade agreements are becoming more complex, particularly in light of negotiations of new mega-regional trade agreements that could lead to a $2.7 billion loss of Africa’s exports. What is the future of regional trade agreements in the world trading system?
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More than 500 million smallholder farmers in Africa are still dependent on rain-fed agriculture. How can climate-smart food systems transform their lives?
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In 2015 only 11 African countries offer liberal visas access to all African citizens. What visa innovations can facilitate the movement of people within the continent? Foreign direct investment flows into Africa have remained stable at $54 billion; this fell 16% globally. How can Africa’s leaders reduce the risk perception and attract higher investment?
ii) Finance & Growth
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About 20% of African households have access to formal or semi-formal finance. How is technology transforming Africa’s financial services industry?
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Africa is home to nine of the world’s 15 fastest growing economies and is an increasingly attractive environment for global business investments. How will the continent continue to grow in the face of a slowing global economy?
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By 2040, renewables can provide more than 40% of all power-generation capacity in the region. How can smart grid solutions enhance investments in renewable energy?
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External sources of financing have increased from $5 billion in 2003 to $30 billion a year in 2012, leaving a financing gap of $50 billion to fill. How can innovative partnerships bridge mega infrastructure financing gaps?
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Smart mining, the integration of ICT solutions in the entire supply chain of the mining industry, is projected to reach $13 billion by 2020, up from $5.12 billion in 2013. What technologies are transforming the mining industry in Africa?
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Factory activity accounted for 10% of Africa’s GDP over the past decade. Manufacturing is widely considered to be the ideal industry to drive Africa’s development due to the labour-intensive, export-focused nature of the business. How is distributed manufacturing transforming production and competitiveness?
iii) Human Development & Entrepreneurship
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Education policy can accelerate literacy and digital skills training in primary, secondary and tertiary education. What digital platforms are accelerating skills development?
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Africa has one of the highest mobile phone penetrations in the world. How are mobile health technologies transforming healthcare?
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According to UNCTAD, global creative services are growing significantly, yet Africa contributes only about 1%. How is the wireless revolution transforming African creative services?
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The potential annual economic losses due to gender gaps in labour participation are estimated at $255 billion in sub-Saharan Africa. What innovations are bridging the science gender gap?
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Young consumers are driving offline sales through online traffic and the potential is increasing as Africa’s middle-class consumers will grow from about 355 million people to 1.1 billion over the next three decades. How is digital disruption changing the retail landscape in Africa?
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About 40% of Africans live in urban settlements and traffic congestion and dwindling access to water and sanitation are growing. How can smart cities improve water and transport management?
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Uganda warns traders over Mombasa goods amnesty
Uganda has cautioned its traders to remove overstayed cargo at the Mombasa port before next month when a final waiver on storage charges expires.
An estimated 637 cargo containers destined for Uganda have been lying at the port for more than 21 days, the Uganda Revenue Authority (URA) said, raising concern over congestion at the gateway facility.
“Owners of these goods are requested to immediately clear the goods out of the port as delays in clearance will lead to accumulation of storage and customs warehouse rent charges. Please note that prolonged stay may lead to the goods being deemed to have been abandoned and be disposed of through auction to create space for incoming cargo,” URA said in a public notice published on Monday.
The Kenya Ports Authority (KPA) and the Kenya Revenue Authority (KRA) in March extended an amnesty to traders to removed overstayed cargo from the port.
The two agencies said all storage, demurrage charges and customs warehouse rent accrued on long stay cargo discharged at the port on or before November 30, 2014 would be waived in full.
“The cargo must however be cleared and removed from the port or container freight stations (CFS) within 60 calendar days with effect from March 14,2016 up to May 12, 2016,” the agencies said on February 29 adding that any cargo that shall not have been removed by the deadline would be destroyed.
“Importers are therefore advised to take advantage of this final amnesty and clear their goods before the expiry date,” they further said.
A 20-foot container attracts a storage fee of $25(Sh2, 525) a day and $40(Sh4, 040) for double the size, which the KPA currently forgoes, thanks to the waiver. The overdue cargo also attracts demurrage charges on containers used to store the merchandise.
When the waiver lapses, owners of the overstayed cargo will have to meet the full charges and risk having the cargo auctioned should they fail to remove them from the port. According to customs regulations, goods have to be cleared within 21 days after which they attract customs warehouse rent.
Failed to stir action
Previous waivers have failed to stir action among traders, forcing authorities in the region to grant numerous amnesties. Authorities at the port in February 2015 waived storage charges accrued on all cargo discharged at the facility by November 30, 2014 provided that the cargo was cleared and removed within 60 days.
The warehouse rent waiver was further extended by 60 days following a summit by regional Heads of State in Kampala on June 6, 2015.
The ineffectiveness of the waivers has partly been linked to political horse-trading between Nairobi and Kampala. In 2015, a long-running feud between Ugandan traders and Kenyan authorities over the auction of uncollected cargo at the port was escalated to the East African Community leadership amid claims of unfairness.
Uganda also raised concern over increased impounding of suspected counterfeit goods meant for its market. In an attempt to douse the feuds with Kenya, the URA resorted to issuing regular notices to traders to clear their cargo from the port to avoid penalties, including auctioning of overstayed goods.
In a deal between Kenya and Uganda, cargo containers destined for Uganda through Mombasa port have also since March 2014 been publicly listed to help ease congestion at the region’s main gateway facility through efficient and timely flow of information.
A special online portal provides an account of all container shipments bound for Kenya’s largest export market, including the date and time of arrival at the port of Mombasa, the consignees and the duration at the facility.
Kenya is a key gateway to the region in that the Mombasa port handles imports such as fuel and consumer goods for Uganda, Burundi, Rwanda, South Sudan, the Democratic Republic of Congo and Somalia and exports of tea and coffee from the region.
Mombasa port has in recent years experienced cargo congestion, which the KPA attributed to lack of space following delays by importers and clearing agents to promptly collect containers from the facility and various container freight stations (CFS).
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tralac’s Daily News Selection
The selection: Tuesday, 19 April 2016
Featured infographic: African states where over 80% of electricity is renewable
AMCEN: 'Agenda 2030 and Paris Agreement: from policy to implementation in Africa'
The need to sustainably harness Africa's vast reserves of natural capital will be among the top issues discussed by the ministers of the environment and high level officials from more than 40 African countries at a major conference on the environment this week in Cairo. In particular, the ministers will focus on the Africa Adaptation Initiative, which provides means for African countries to build resilience to the impacts of climate change, and the Africa Renewable Energy Initiative, which seeks to foster renewable energy capacity on the continent by 2020. In addition, ministers will look at how Africa can benefit from the finance, adaptation, and loss and damage provisions agreed upon in Paris. The meeting is also expected to produce strategies for tackling key issues facing the continent, such as the illegal trade in wildlife. It is estimated that the loss of elephants - a key tourist attraction - costs Africa up to $1.9bn annually.
ILO Africa: 'How to strategically engage fragile states in Africa'
The ILO's regional strategic meeting, concluding today in Dakar, examines the modalities of the Africa Region’s Engagement Strategy for Fragile States. The strategy for Africa places employment and livelihoods creation explicitly at the core of ILO engagement in fragile states and promotes social protection and strengthening of South-South cooperation. Participants of the Dakar Meeting are expected to provide concrete recommendations on the implementation process of the Africa Strategy for fragile states, design a resource mobilization plan for partnerships and clearly identify and mitigate risks. [Downloads available]
Taxing tobacco and the new vision for financing development (World Bank Blogs)
As part of the 2016 World Bank Group-International Monetary Fund Spring Meetings, a fascinating panel discussion 'A new vision for financing development', took place. MOderated by Michelle Fleury, BBC's New York business correspondent, it included President Jim Yong Kim, Bill Gates, Justine Greening (UK Secretary of State for International Development), Raghuram Rajan (Governor of the Reserve Bank of India), and Seth Terkper (Minister for Finance and Economic Planning of Ghana). The time has arrived to make tobacco taxation an important source of domestic resource mobilization that has the potential to generate substantial health and social welfare dividends across the world. [Bill Gates: ‘game-changers’ in financing development]
Open forum on Financing for Development follow-up (ECOSOC)
As the forum began its general debate, ministers and other high-ranking officials from Governments around the globe underscored the important role of the meeting, as well as the Addis Agenda itself, in financing the next era of sustainable development. Many called for increased capacity-building and the creation of enabling environments to assist developing countries in achieving the aims of the 2030 Agenda. Unfair trade rules were only one obstacle to sustainable development, said the representative of Uganda, speaking on behalf of the African Group. Others included inadequate resources exacerbated by illicit financial flows and unmet official development assistance commitments. Highlighting the importance of national ownership in sustainable development, he said the Group was committed to take the lead in formulating policies that would facilitate the integration of the Addis Agenda and the 2030 Agenda into its national plans and priorities. [Debate summary]
China-Africa trade and investment: Lin Songtian's address at 5th China-Africa Think Tanks Forum (FOCAC)
African countries differ in the level of productivity, development conditions and business environment. China will kick off pioneering work in some countries, and pool strength and resources to build some countries into role models in China-Africa production capacity cooperation and industrial alignment. In those 'demonstration countries', we will focus on developing cooperation demonstration zones, and use the successful development practice to guide industrial alignment and capacity cooperation between China and Africa. On the basis of comprehensive research, China has listed Ethiopia, Kenya, Tanzania and the Republic of Congo as the demonstration and pioneering countries for such cooperation. South Africa shall work as the locomotive in Africa's industrialization efforts. Egypt, Angola and Mozambique will be the priority partners for production capacity cooperation.
The UK’s Africa Free Trade Initiative inquiry: commentary by Darlington Mwape, Peter Lilley (Bridges Africa/ICTSD)
This inquiry can contribute to building on AFTi’s successes and creating a greater, more sustainable impact in Africa in the future. The report will be published and presented to the UK Prime Minister and Ministers from the Department of International Development, Foreign & Commonwealth Office, and Department for Business, Innovation & Skills in the summer of 2016. The findings will then be discussed with African governments, secretariats of Regional Economic Communities, the African Union, and other key policy making bodies.
Facing mega-regionals: what implications for Africa? (Bridges Africa)
The impacts that these mega-deals are expected to have on third countries remain fairly uncertain as all provisions of the agreements are not fully known, except for the TPP. However, it is apparent that African countries, which are not part of any of the three main mega-regional initiatives, are likely to be impacted by increased competition and preference erosion in MRTA markets. From a trade perspective, it is therefore essential to explore possible strategies that African countries could adopt to mitigate possible negative effects which could result from the formation of mega-regionals.
Dakar-Abidjan corridor highway project: ministerial declaration (ECOWAS)
The meeting was convened by the ECOWAS Commission to introduce the Dakar-Abidjan Corridor Highway Project and agree with Member States on the modalities for its implementation. The proceedings of the Ministerial meeting covered the following issues: programme context, lessons and components; report of the technical experts meeting; draft implementation work plan.
The 2016 Borderless Alliance Conference (18-20 May, Cotonou): Download the concept note.
South Africa: Investors pawns in political power play (Business Day)
When President Jacob Zuma arrived in Abuja last month, for what Parliament termed a "rapprochement" between Africa’s two largest economies, many hoped he might tackle the growing apprehension that Nigeria is no longer hospitable towards South African investments. But the visit raises a bigger question: can South African companies count on their government to protect their best interests abroad?
Betty Maina: 'East Africa needs a regional competition authority' (Business Daily Africa)
In fulfilment of the requirements of the EAC Competitions Act, 2016, and in preparation for the anticipated launch of the authority by July, the Council of Ministers directed the EAC Secretariat to commence recruitment of staff for key offices within the authority. To ensure uniformity and enhance cooperation between the individual partner states and the regional authority, the council further directed partner states to hasten formation of national competition authorities. This is geared towards ensuring that enforcement of the mandate of the regional authority goes in tandem with the rules and regulations guarding competition in the individual partner states. Kenya and Tanzania have already established fully operational competition authorities, with the other partner states also working on the establishment of the authority in their respective countries in line with the council directive. [The author is Principal Secretary, State Department of East African Affairs, Kenya]
Tanzania: Confirmed - TPDC opened 3 escrow accounts at Stanbic (IPPMedia)
The state-run Tanzania Petroleum Development Corporation confirmed yesterday that it opened three separate escrow accounts with Stanbic Bank Tanzania Limited as a condition for securing large Chinese loans for the $1.225bn Mtwara-Dar es Salaam natural gas pipeline project. "I will not respond to questions on TPDC’s financial matters. Ask TPDC," Ndulu responded curtly when approached by The Guardian to comment about the accounts.
Mozambique denies IMF allegations of loan concealment (EWN)
Mozambique objected to the International Monetary Fund’s accusation that officials concealed additional loans from Russia VTB Bank and Credit Suisse for defense spending, according to Reuters. The IMF cancelled a trip to Mozambique on Friday in wake of the alleged undeclared loans, but Finance Minister, Adriano Maleiane, stated that the accusation is misguided and stems from confusion. [IMF halts Mozambique aid after finding undisclosed debts of $1bn (FT)]
IGAD: Strengthening livestock policy hubs in members states
Incomplete works delaying East Africa power trading project (The EastAfrican)
Fighting the hidden tariff: global trade without corruption (OECD)
The 2016 edition of the OECD Integrity Forum (19-20 April) will put the spotlight on this hidden tariff. It will bring stakeholders to the table to develop a long-term vision for clean trade. The Integrity Forum fosters dialogue for policy actions and cooperative integrity efforts to prevent corruption in customs and to protect supply chains. In addition, new evidence and insights will be shared for countering illicit trade. [Downloads available]
Trade in counterfeit and pirated goods: mapping the economic impact (OECD/EUIPO)
In search of cross-border e-commerce trade data: technical note (UNCTAD)
This report explores possible sources of data for gauging cross-border e-commerce. Business-to-Business (B2B) e-commerce accounts for the dominant share of global e-commerce and is therefore also likely to be the most important component of cross-border sales online. However, as data on B2B e-commerce are generally scarce, attention is also given to consumer-oriented shopping (i.e.Business to Consumer (B2C) and Consumer-to-Consumer (C2C). In general, there is scant information on cross-border e-commerce.
Data protection regulations and international data flows: implications for trade and development (UNCTAD)
As the global economy shifts further into a connected information space, the relevance of data protection and privacy will further increase. Understanding different approaches to, and potential avenues for, establishing more compatible legal frameworks at national, regional and multilateral levels is important for facilitating international trade and online commerce. The rules surrounding data protection and cross-border flows of data affect individuals, businesses and governments alike, making it essential to find approaches that address the concerns of all stakeholders in a balanced manner. This study seeks to contribute to this end.
Managing sudden stops (World Bank)
The recent reversal of capital flows to emerging markets has pointed up the continuing relevance of the sudden stop problem. This paper analyzes the sudden stops in capital flows to emerging markets since 1991. [The authors: Barry Eichengreen, Poonam Gupta]
Nigeria's Emefiele: Why Yuan currency swap will reduce pressure on forex market (ThisDay)
Domestic beneficiation and value addition in the mineral sector in Africa: SA case study update (UNECA)
India’s trade deficit at a record low of $5bn in March (Livemint)
OECD DAC’s contribution to the World Humanitarian Summit
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Five years on, the progress and the future of the UK’s Africa Free Trade Initiative
With recent developments in trade and regional integration in Africa, the UK All-Party Parliamentary Group on Trade Out of Poverty is launching an inquiry into the progress and future of the UK’s Africa Free Trade initiative.
It has been five years since the Africa Free Trade initiative (AFTi) was launched. With the aim to help African countries integrate with each other and into the world trade system, the AFTi was a top priority in the UK’s five-year trade strategy published in February 2011. Though the AFTi has contributed to notable milestones in designing and implementing policies and programmes in the area of regional integration and trade facilitation in Africa, much more can be achieved in today’s fast-changing landscape of global trade.
The inquiry into AFTi launched by the UK All-Party Parliamentary Group on Trade Out of Poverty (APPG TOP) comes at a good time to explore the emerging opportunities in further expanding Africa’s trade; as an instrument to achieve sustainable growth, employment and poverty reduction; as well as defining the role of development partners, including the UK, in supporting countries so that they can realise these opportunities.
The Africa Free Trade initiative
Boosting trade and investment policy tools to achieve economic growth and development has been a priority in the UK’s trade strategy. The AFTi provides investment, technical and political support to trade reforms, with the aim to facilitate trade between African countries, and the rest of the world.
“Trade and enterprise have the power to change people’s lives. As we are seeing now on every continent, what will lift tens of millions out of poverty in the long run is the dynamic engine of economic growth. And that means African countries buying from and selling to each other, doing business with one another and the world,” wrote UK’s Prime Minister David Cameron, few months following the official launch of the initiative in February 2011.
The AFTi has since brought together regional trade initiatives from across the UK’s Department for International Development (DFID), the Department for Business Innovation and Skills (BIS) and the Foreign and Commonwealth Office (FCO) to cut red tape, reduce tariffs and improve infrastructure in Africa.
One of the ambitions of the AFTi was to link landlocked countries with the sea, and subsequently increase market access for these countries, by investing in One-Stop Border Posts (OSBP) and building soft and hard infrastructure to streamline trade bureaucracy. TradeMark East Africa, a US$700m multilateral Aid-for-Trade vehicle initiated by the UK, has been instrumental in reducing trade barriers in East Africa, such as implementing OSBP in countries including Burundi, Uganda, Tanzania and Kenya, and reducing custom clearance times at borders. For example, in Tanzania, time to cross borders was reduced by 30 percent through setting up four OSBPs in Holili, Mutukula, Kabanga, and Tunduma.
The AFTi has also provided technical and financial support to Africa’s regional integration efforts. Most notably, the AFTi has contributed to the launch last year of the Tripartite Free Trade Area which encompasses Africa’s largest regional economic communities namely, the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), and the Southern African Development Community (SADC).
As AFTi reaches its five-year mark, it is important to take a fresh look at the current progress and the new areas of opportunities where the UK can play a role in supporting trade and regional integration in Africa.
Opportunities for the future of African trade
With the changing landscape of global trade, new opportunities are opening up for African countries to expand, restructure and increase the value of their trade, both regionally and internationally.
The progress being made in regional and continental integration efforts in Africa presents significant potential for trade, economic and social gains. Negotiations on the Continental Free Trade Agreement (CFTA) – Africa’s own mega-regional agreement – began in February 2016. Once implemented, it is estimated that the CFTA would contribute to an increase in intra-African trade US$ 35 billion per year by 2022. The Tripartite Free Trade Agreement (TFTA) has also entered into a new phase of negotiations which will tackle issues beyond trade barriers of goods, such as trade in services and intellectual property. These are catalysts to long-term economic growth for a number of African countries.
Beyond trade agreements, changes in the global economy have created new market opportunities for African countries to tap into. With the number of mobile phone subscribers reaching 348 million in Sub-Saharan Africa in 2014, there has been much excitement and hope that digital technology can enable African countries to leapfrog traditional stages of industrial development. The changing economic structure and consumer demands of emerging economies, such as China, also provides a potential for African countries to accelerate their process of industrialisation. Trading through global value chains has real potential for Africa to realise its comparative advantage and participate in various levels of the value chain.
In light of these new opportunities for African countries, there is a need for development partners, such as the UK Government, to reflect on how the past and current policies can be redesigned to help African countries to overcome new challenges in order to realise these opportunities.
Inquiry into the UK’s Africa Free Trade initiative
With a new UK government in place since May 2015, and a new aid strategy launched in November 2015, now is a good time to review the progress, potential and future of the AFTi.
Launched by the All-Party Parliamentary Group on Trade Out of Poverty (APPG TOP), the inquiry into the AFTi is examining the lessons that can be learned, reviewing the challenges and barriers to achieving the goals that were set out, and considering what a future AFTi should look like, in particular the targets it should seek to achieve, and the means and partnerships through which it will be delivered. As part of the inquiry, the Committee[1], co-chaired by Lord Stephen Green, former UK Minister of State for Trade and Investment, and Ali Mufurki, Chairman of Infotech Investment Group, is engaging with a range of stakeholders to understand the recent developments on the African trade agenda, and examine what has been achieved in AFTi since 2011.
This inquiry can contribute to building on AFTi’s successes and creating a greater, more sustainable impact in Africa in the future. The report will be published and presented to the UK Prime Minister and Ministers from the Department of International Development (DFID), Foreign & Commonwealth Office (FCO) and Department for Business, Innovation & Skills (BIS) in the summer of 2016. The findings will then be discussed with African governments, secretariats of Regional Economic Communities, the African Union, and other key policy making bodies.
» Click here to view the Agenda for the Hearings, taking place on 19 April 2016.
Darlington Mwape is a Senior Fellow, ICTSD, and former Permanent Representative of Zambia to the WTO. Peter Lilley is a Member of Parliament, Co-Chair of All-Party Parliamentary Group on Trade Out of Poverty.
This article is published under Bridges Africa, Volume 5 - Number 3, by the ICTSD.
[1] Other Committee Members are Myles Wickstead, former Head of Secretariat, UN Commission for Africa and Darlington Mwape, Senior Fellow at International Centre for Trade and Sustainable Development (ICTSD) and former Permanent Representative of Zambia to the WTO.
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Mega-regional trade agreements: Threat or opportunity for the future of African trade?
How can Africa mitigate the potential negative impacts of mega-regional trade agreements and support its structural transformation efforts through trade?
Since the early 2000s, regional trade agreements (RTAs) – allowed under WTO rules – have flourished. Interestingly, this development has taken place in the context of minimal progress in multilateral trade negotiations, thereby suggesting strong interest by many countries to consider regional markets as an important avenue for expanding trade. The emergence of mega-regional trade agreements (MRTAs), which gather together not just neighbouring countries and account for large shares of world GDP and population, attests to this trend.
Presently, three major MRTAs are envisaged: the Transatlantic Trade and Investment Partnership (TTIP) between the European Union and the United States; the recently concluded Trans-Pacific Partnership (TPP) between the United States and eleven other nations across the Pacific Rim; and the Regional Comprehensive Economic Partnership (RCEP) between sixteen economies from Asia and the Pacific. If these agreements are implemented, they would considerably modify the world trade landscape with systemic challenges for the multilateral trading system. In particular, MRTAs tend to be ahead on numerous issues discussed within the WTO framework and have contributed to divert talks away from traditional Doha matters, which are particularly essential to many developing countries, especially from the African continent. The final declaration from the tenth ministerial conference of the WTO, held on 15-19 December 2015, in Nairobi, Kenya, is in itself very consensual but somewhat elusive about future multilateral negotiations. It recognises that “many members want to carry out the work on the basis of the Doha structure, while some want to explore new architectures.” At the same time the declaration reaffirms “the need to ensure that Regional Trade Agreements (RTAs) remain complementary to, not a substitute for, the multilateral trading system.”[1]
The impacts that these mega-deals are expected to have on third countries remain fairly uncertain as all provisions of the agreements are not fully known, except for the TPP. However, it is apparent that African countries, which are not part of any of the three main mega-regional initiatives, are likely to be impacted by increased competition and preference erosion in MRTA markets. From a trade perspective, it is therefore essential to explore possible strategies that African countries could adopt to mitigate possible negative effects which could result from the formation of mega-regionals.
Establishing the CFTA: A top priority for Africa in the context of mega-regionals
Empirical evidence based on computable general equilibrium (CGE) analysis confirms that while the establishment of the three major MRTAs would create vast export opportunities for their members, especially in RCEP countries, African economies would be hurt by the trade reforms[2]. Results suggest that reductions in their exports towards India and China would be particularly significant.
Nevertheless, if African nations are able to concurrently implement the Continental Free Trade Area (CFTA) – Africa’s own mega trade deal which is expected to span all 54 African Union states and for which negotiations were officially launched in June 2015 – then outcomes would radically change for Africa. Trade creation within the African continent brought about by continental integration reform would more than offset the trade losses generated by the MRTAs. All African economies, including the smallest ones, would be able to expand their trade with their African partners. It should be further stressed that the expansion in intra-African trade would benefit industrial sectors the most (e.g. electronics, machinery and transport equipment, chemicals, textile, metal products and processed food), thereby positively impacting Africa’s industrial development and structural transformation. The benefits would even be enhanced if measures to reduce trade costs are taken along with the CFTA.
Under this scenario, success in the ongoing CFTA negotiations, followed by speedy implementation of a continent-wide trade policy reform, is an imperative for Africa in order to mitigate the undesirable effects of mega-regionals. The CFTA will need to be ambitious and effectively phase out tariff barriers on trade in goods and services as well as vigorously combating non-tariff barriers which strongly impede intra-African exchanges. Of course, issues beyond strictly trade (e.g. investment, regulatory reforms, etc.) will also need to be tackled in the short to medium-term (as in the MRTAs) for the gains to be maximised. Yet, the continental market – even though full of potential – remains moderately small and is unlikely to provide trade opportunities that are ample enough to trigger a significant improvement of Africa’s position in the world trade landscape. Africa’s share in global trade is only about three percent today[3], which is almost the same as two decades ago. Therefore, Africa would have to look beyond its own market if it wants to play a greater role in international trade.
Reinforcing trade-related South-South cooperation
Findings from Mevel and Mathieu (2016) further suggest that if the CFTA and MRTAs are successfully established, deepening integration between African countries and MRTA members – from TPP and RCEP – would provide meaningful trade opportunities for African economies.
Whereas Africa’s export growth towards the countries of North, Central and South America would be generally dominated by traditional products (i.e. energy and mining), expansion of Africa’s exports to Asian nations, especially China, would show more potential to support Africa’s industrialisation efforts. Moreover, as the quasi totality of the trade deflection for Africa following the establishment of the MRTAs would be with RCEP countries, mainly India and China, closer trade ties between Africa and Asian economies would counterbalance the trade diversion effect triggered by mega-regional deals.
Nonetheless, as far as supporting Africa’s structural transformation is concerned, it would be if Africa enters into profound trade integration with Asian countries beyond just RCEP that the outcomes would appear to be the most promising. Indeed, the potential for diversifying Africa's goods exports to Western Asian economies – which includes the Middle East – would be noteworthy. Almost the entire surge of Africa’s exports towards the United Arab Emirates and Saudi Arabia, which are already well sourced in energy commodities, would benefit industrial products. The share of industrial goods would also dominate Africa’s exports to Turkey and be substantial regarding its exports to the rest of Western Asia. Yet, Africa’s exports of agricultural and food products – in particular cereals, crops and meat products – would also be significantly enhanced, especially towards Turkey and the rest of Western Asia. These countries would also have a sizeable demand in energy and mining products from Africa.
In such a scenario where African economies tighten their commercial ties with Western Asia, it should be highlighted that the gains coming from Africa’s trade expansion would not just be shared among those African countries having already close trade relationships with partners from the Middle East (e.g. North Africa nations and other members of the Arab League). Benefits would be fairly distributed across different countries from the five main African regions. Countries such as Nigeria, Kenya, Ghana, Côte d’Ivoire, Mauritius, Cameroon, and Zambia would even be expected to expand their exports to Asia and the Middle East by over two-thirds (as compared to a situation without further integration between Africa, Asia, and the Middle East), with a wide range of both industrial and agricultural exports being significantly stimulated.
Furthermore, it must be emphasised that deepening integration between Africa and its partners from the South is not just in Africa’s interest, as it would also strongly stimulate both imports and exports of its counterparts. Even the few third countries that could possibly be hurt following increased engagement between Africa and developing economies could easily mitigate their losses by undertaking trade facilitation reforms – in line with the WTO Trade Facilitation Agreement (TFA) – expected to create new trade opportunities and strengthen existing ones.
Conclusion and policy recommendations
In the context of the emergence of mega-regional trade agreements such as TTIP, TPP, and RCEP, Africa’s top priority should be to establish its Continental Free Trade Area (CFTA). This would not only help African economies to mitigate trade losses caused by the formation of major trade blocs, but also enhance trade policy coherence within the continent. An ambitious and inclusive continental-wide trade policy reform would allow for a better alignment of the multiple existing trade regimes across Africa, while addressing the issue of overlapping memberships among the African Regional Economic Communities (RECs). At a time when African countries are engaged in reciprocal – albeit asymmetrical – trade deals with external partners, such as the Economic Partnership Agreements (EPAs) with the European Union, the CFTA should ensure that any African country does not disadvantage its continental counterparts over external partners in terms of market access.
That being said, even a CFTA that is anticipated to boost intra-African trade and its industrial content will likely not suffice to improve Africa’s current marginal position in the global and rapidly evolving trade landscape. Although the CFTA constitutes a critical step towards the establishment of successful value chains and the promotion of upgrading processes that are much needed to enhance African economies’ competitiveness, the continent must strategically explore meaningful trade opportunities beyond its own regional market. Deeper trade and investment ties with developing and emerging economies from Asia, and most particularly from the Middle East, could well allow for promoting the industrialisation of African economies and the diversification of their exports. Such an outcome would make a substantial contribution towards achieving Africa’s structural transformation objective and elevating its standing on the world trade scene.
Therefore, Africa needs to promptly adjust its efforts and re-prioritise its engagement with various trade platforms. All the energies throughout the African continent must be better catalysed and dedicated towards negotiating and effectively implementing the reforms that best support Africa’s priorities, that is to say, deepening regional integration first and then strategically engaging in trade-related cooperation with partners from the South. Capacity building aiming at improving African negotiators’ skills to design, negotiate and implement such trade agreements must be reinforced, which requires strong support from international organisations and development partners.
Simon Mevel is an Economic Affairs Officer in the African Trade Policy Centre at the United Nations Economic Commission for Africa (ECA).
The opinions expressed here are only those of the author and do not necessarily reflect the views of ECA. The author wishes to sincerely thank David Luke, Coordinator of the African Trade Policy Centre, Economic Commission for Africa (ECA), for his very valuable comments.
This article is published under Bridges Africa, Volume 5 - Number 3, by the ICTSD.
[1] See Nairobi Package, available at: http://www.tralac.org/news/article/8699-10th-wto-ministerial-conference-nairobi-resource-box.html#outcomes
[2] Mevel S. and M. Mathieu. (2016). “Emergence of mega-regional trade agreements and the imperative for African economies to strategically enhance trade-related South-South Cooperation”. Paper selected for presentation at the 19th Annual Conference on Global Economic Analysis, Washington D.C., 15-17 June 2016.
[3] Author’s calculations based on UNCTADStat; accessed 21 March 2016.
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Fighting the hidden tariff: Global trade without corruption
OECD’s Integrity Forum has become one of the leading public fora on integrity and anti-corruption worldwide, bringing together relevant policy communities as well as the private sector, civil society organisations and academia. It takes place during the broader context of the OECD Integrity Week.
The 2016 edition of the Integrity Forum, taking place in Paris on 19-20 April 2016, will offer two tracks:
Integrity and Trade Track
International trade is a motor of the global economy and represents increasingly large volumes of goods, services, and financial flows. Yet, the economic benefits resulting from trade can suffer from a lack of integrity throughout the international supply chain. This can result in a substantial loss of revenue for governments, and can hamper competition and business activity. It can also entail important health and safety risks for societies. Integrity measures that protect cross-border trade not only produce advantages for the economy in general, but also for private companies, the public sector and society as a whole.
The 2016 edition of the OECD Integrity Forum will put the spotlight on this hidden tariff. It will bring stakeholders to the table to develop a long-term vision for clean trade. The Integrity Forum fosters dialogue for policy actions and cooperative integrity efforts to prevent corruption in customs and to protect supply chains. In addition, new evidence and insights will be shared for countering illicit trade.
High-level speakers will confront the issues of corruption that impact global trade, informal sessions will provide an opportunity to examine solutions in greater depth, authors, academics and students will share their findings during poster presentations, and lunch debates and roundtable discussions will give you the opportunity to share your experience directly with your peers.
Integrity Track
Recent economic, geopolitical and demographic developments have underscored the growing complexities that governments, businesses and citizens face in our increasingly globalised world. The Integrity Forum provides a platform to address the integrity dimensions of these pressing challenges.
Moreover, the Integrity Forum zooms in on new integrity instruments and responds to the growing demand for evidence-based policy recommendations.
The programme features the following sessions:
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In the Public Interest: Preventing Corruption in State-owned Enterprises
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Use of Offsets in Procurement of Defence Material
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Exploiting Tragedy: Corruption and the Refugee Crisis
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Corruption along the Extractive Value Chain: Mitigating and Preventing Risks through Incentives
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Corruption, Climate Change and Illegal Timber Trade
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Building Capacity for Collective Action
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Standards, Certification and Accreditation Instruments for Corporate Integrity
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Building the Evidence Base: from Integrity Data to Policy Insights
Bringing new ideas, evidence and insights: ResearchEdge Poster Sessions
In response to fast-moving insights from integrity research and practice, the Integrity Forum invites pioneers from a variety of backgrounds and academic disciplines to share their latest evidence and findings. Through poster sessions, participants are inspired to join the debate for mobilising integrity data to advance policy insights.
The poster sessions connect academic insights and evidence with policy-making. They highlight a selection of innovative research on integrity, anti-corruption and trade, resulting from a competitive Call for Papers by the OECD. Research covers topics such as Collective Action, Countering Illicit Trade, Proofing Supply Chains against Corruption, Corruption in Infrastructure Projects and the Impact of International Conventions to prevent Corruption.
The invited researchers will present their findings during the Integrity Forum ResearchEdge poster sessions and guided poster tours will be offered by renowned academics.
The full papers can be found here.
Fighting the hidden tariff: Global trade without corruption
Background
International trade has driven the global economy and development during the last few decades. Trade has risen in nearly all parts of the world, becoming one of the most dynamic sources of growth and a powerful enabler of economic development for many countries. In 2014, the total world exports of goods and services amounted to USD 23.6 trillion, of which the OECD countries generated USD 14 trillion, and the total imports of goods and services reached USD 22.8 trillion, of which 13.9 trillion were accounted for by OECD countries.
Considering the importance of international trade for global economic growth, the costs generated by non-tariff barriers, such as those related to the lack of integrity in border control and customs administrations, can be quite significant for the public and private sectors, citizens and society as a whole. Loss of revenue caused by customs-related corruption is estimated to cost World Customs Organization (WCO) members at least USD 2 billion in customs revenue each year, with India losing USD 334 million and Russia USD 223 million. Moreover, unnecessary trade barriers created by nontransparent, burdensome rules and procedures can constitute vulnerabilities that may create important incentives to engage in corrupt behaviour.
Trade facilitation measures have the potential to benefit all countries. It is estimated that a complete implementation of trade facilitation measures arising from the WTO Trade Facilitation Agreement could reduce trade cost by 16.5% for low income countries, by 17.4% for lower middle income countries, by 14.6% for upper middle income countries, and by 11.8% for OECD countries.
Implementing appropriate governance structures, accountability mechanisms and integrity policies in customs administrations alone has the potential to reduce trade costs by between 0.5% and 1.1% for the same country groups. These measures seek to eliminate opportunities for customs policy capture, extortion, offering bribes, as well as for numerous schemes allowing for the avoidance of taxes and tariffs, such as underreporting of exports and over-invoicing of imports.
All relevant stakeholders have an interest in elaborating and promoting mutually supportive trade integrity and facilitation policies that would remove unnecessary trade barriers while implementing effective checks and balances on fraud and corruption. Indeed, the cost for inaction is significant as it exposes society to global threats engendered by the dark side of globalization. For instance, a lack of effective integrity checks and balances in customs administrations may benefit organized crime by allowing illicit trade and smuggling to thrive, which range from strictly prohibited goods such as narcotics, to counterfeit consumer goods and pirated goods.
The aim is thus to find the right balance between easing red tape while having appropriate controls, taking into account the local context and its inherent risk areas. The main elements of a strategy to promote integrity in trade should respond to identified integrity risks and target most harmful behaviours and opportunities for seeking illicit rents arising from global supply chains. The measures discussed in this report build on OECD’s standards and good practices for the public and private sectors, and respond to main trade-related risks.
Finding appropriate tools and solutions to tackle corrupt practices in trade is not a simple endeavour, and there is no single fix solution that can effectively address all risks in a broad range of contexts. To effectively address lack of integrity in international trade, a risk based approach to promoting integrity is required, combined with ongoing dialog with relevant stakeholders outside government. An important starting point is to establish and enforce clear prohibitions against bribery and corruption that apply to both public and private sectors. Further priority measures emerged from good practices:
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Designing and implementing comprehensive risk management strategies for global supply chains for both public and private sectors;
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Reinforcing integrity controls in corruption risk areas in the public sector, including customs administrations and border control agencies;
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Combining incentives with enhanced enforcement to encourage businesses to implement good governance and integrity controls;
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Harmonising transparency, integrity and trade facilitation standards through trade agreements;
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Strengthening collaboration among all stakeholders to increase commitment to abide by existing rules, procedures and standards, and to identify corruption vulnerabilities and effective mitigation measures and to build a culture of integrity in collective action.
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Global trade in fake goods worth nearly half a trillion dollars a year: OECD & EUIPO
Imports of counterfeit and pirated goods are worth nearly half a trillion dollars a year, or around 2.5% of global imports, with US, Italian and French brands the hardest hit and many of the proceeds going to organised crime, according to a new report by the OECD and the EU’s Intellectual Property Office.
“Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact” puts the value of imported fake goods worldwide at USD 461 billion in 2013, compared with total imports in world trade of USD 17.9 trillion. Up to 5% of goods imported into the European Union are fakes. Most originate in middle income or emerging countries, with China the top producer.
The report analyses nearly half a million customs seizures around the world over 2011-13 to produce the most rigorous estimate to date of the scale of counterfeit trade. It points to a larger volume than a 2008 OECD study which estimated fake goods accounted for up to 1.9% of global imports, though the 2008 study used more limited data and methodology.
“The findings of this new report contradict the image that counterfeiters only hurt big companies and luxury goods manufacturers. They take advantage of our trust in trademarks and brand names to undermine economies and endanger lives,” said OECD Deputy Secretary-General Doug Frantz, launching the report with EUIPO Executive Director António Campinos as part of OECD Integrity Week.
Fake products crop up in everything from handbags and perfumes to machine parts and chemicals. Footwear is the most-copied item though trademarks are infringed even on strawberries and bananas. Counterfeiting also produces knockoffs that endanger lives – auto parts that fail, pharmaceuticals that make people sick, toys that harm children, baby formula that provides no nourishment and medical instruments that deliver false readings.
The report covers all physical counterfeit goods, which infringe trademarks, design rights or patents, and tangible pirated products, which breach copyright. It does not cover online piracy, which is a further drain on the formal economy.
It notes that emerging economies tend to have the infrastructure for large-scale trade but often suffer from governance gaps and may lack the institutions and enforcement capacity to effectively tackle counterfeiting. While China is the top provenance of fake goods, its most innovative companies also fall victim to counterfeiters.
The top countries whose companies had their intellectual property rights infringed in the 2011-13 seizures were the United States, whose brands or patents were affected by 20% of the knock-offs, then Italy with 15%, and France and Switzerland with 12% each. Japan and Germany stood at 8% each followed by the UK and Luxembourg.
Postal parcels are the top method of shipping bogus goods, accounting for 62% of seizures over 2011-13, reflecting the growing importance of online commerce in international trade. The traffic goes through complex routes via major trade hubs like Hong Kong and Singapore and free trade zones such as those in the United Arab Emirates. Other transit points include countries with weak governance and widespread organised crime such as Afghanistan and Syria. The report shows trade routes change greatly from year to year as counterfeit gangs spot new weak points.
Trade in Counterfeit and Pirated Goods
At a glance
Counterfeit and pirated products come from many economies, with China appearing as the single largest producing market. These illegal products are frequently found in a range of industries, from luxury items (e.g. fashion apparel or deluxe watches), via intermediary products (such as machines, spare parts or chemicals) to consumer goods that have an impact on personal health and safety (such as pharmaceuticals, food and drink, medical equipment, or toys). This report assess the quantitative value, scope and trends of this illegal trade.
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Imports of counterfeit and pirated goods are worth nearly half a trillion dollars a year, or around 2.5% of global imports.
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The total value of imported fake goods worldwide was USD 461 billion in 2013 (total imports in world trade of USD 17.9 trillion).
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Up to 5% of goods imported into the European Union are fakes.
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US, Italian and French brands the hardest hit.
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In many cases, the proceeds of counterfeit trade go towards organised crime.
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Most fake goods originate in middle income or emerging countries, with China the top producer.
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Postal parcels are the top method of shipping bogus goods, accounting for 62% of seizures over 2011-13.
What is covered?
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This report covers all physical counterfeit goods, which infringe trademarks, design rights or patents, and tangible pirated products, which breach copyright.
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The report does not cover online piracy, which is a further drain on the formal economy.
What are the health/safety implications?
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Counterfeit goods can endanger lives – auto parts that fail, pharmaceuticals that make people sick, toys that harm children, baby formula that provides no nourishment and medical instruments that deliver false readings.
What type of goods are hit?
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Fake products crop up in everything from handbags and perfumes to machine parts and chemicals.
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Footwear is the most-copied item though trademarks are infringed even on strawberries and bananas.
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World Development Indicators 2016: Highlights
In September 2015, leaders of 193 countries agreed on a set of 17 Sustainable Development Goals to guide global action over the next 15 years. Set out in the 2030 Agenda for Sustainable Development, the Sustainable Development Goals take over where the Millennium Development Goals before them left off – and in many cases aim to finish the job. Eradicating poverty, an objective shared by the World Bank Group, is a key element of this unfinished business. It remains the world’s greatest challenge.
World Development Indicators will report on progress toward the Sustainable Development Goals, as it did with the Millennium Development Goals. The Sustainable Development Goals cover a broader range of issues, and this edition expands coverage in the World view section. For each of the 17 goals, key indicators have been selected to identify important trends and challenges and elicit discussion on measurement issues.
Implementing the Sustainable Development Goals and measuring and monitoring progress toward them will require much more data than are currently available, with more accuracy, better timeliness, greater disaggregation, and higher frequency. The institutions fundamental to this effort should be supported through strong and renewed global partnerships. A new Global Partnership for Sustainable Development Data was launched alongside Agenda 2030 in September 2015. A key aim is to bring different groups together to ignite a data revolution for development.
From the MDGs to the SDGs with expanded data and illustrations of trends
Where possible, this edition of World Development Indicators includes new indicators to reflect the 169 targets of the Sustainable Development Goals, but the structure of the book remains the same as in previous editions: World view, People, Environment, Economy, States and markets, and Global links. Each section includes a brief introduction, a global map of a key indicator, a table, a section about the data, and an index of other indicators accessible online. World view retains the two tables showing progress toward the World Bank Group’s goals of eradicating poverty and promoting shared prosperity.
No distinction between “developing” and “developed” countries
Motivated by the universal agenda of the Sustainable Development Goals, this edition of World Development Indicators also introduces a change in the way that global and regional aggregates are presented in tables and figures. Unless otherwise noted, there is no longer a distinction between developing countries (defined in previous editions as low- and middle-income countries) and developed countries (defined in previous editions as high-income countries). Regional groupings are based on geographical coverage rather than a subset of countries that were previously referred to as developing. Two implications of this change are that a new aggregate for North America has been included in tables, and aggregates for Europe and Central Asia include countries of the European Union. Aggregates restricted to low- and middle-income countries are still available in the World Development Indicators database.
The WDI is part of a global effort to produce a global public good
Producing WDI is only possible with the help of over 50 international organizations, more than 200 national statistical offices and the experts in the country offices, Global Practices and Cross Cutting Solution Areas of the World Bank.
But we have a global challenge: only a few of the 169 targets in the Sustainable Development Goals can currently be tracked and measured completely. Both governments and development partners will need to continue investing in national statistical systems and other public institutions, where much of the data will continue to originate. At the same time, the statistical community needs to strengthen partnerships with the private sector and other emerging actors for advancing new techniques for data collection, analysis, and use.
World View
On September 25, 2015, the United Nations General Assembly formally adopted the 2030 Agenda for Sustainable Development, which sets out a new set of global goals, known as the Sustainable Development Goals. This is the first edition of World Development Indicators to include a discussion of the Sustainable Development Goals, which replaces the assessment of progress toward the Millennium Development Goals in previous editions.
The 17 Sustainable Development Goals and 169 associated targets build on the 8 goals and 18 targets of the Millennium Development Goals but are far wider in scope and far more ambitious. They focus on five themes: people, planet, prosperity, peace, and partnership. Countries have resolved to end poverty and hunger and ensure that all people can fulfill their potential in dignity and equality and in a healthy environment; to protect the planet from degradation and take urgent action on climate change; to ensure that all people can enjoy prosperous and fulfilling lives and that progress takes place in harmony with nature; to foster peaceful, just, and inclusive societies free from fear and violence; and to mobilize the means to implement Agenda 2030, focused on the poorest and most vulnerable, through strong global partnership.
Along with the goals and targets, a global monitoring framework with more than 200 indicators is being developed by UN member states, working closely with UN agencies and other stakeholders. For each goal, World view presents recent trends and baselines against key targets, largely using indicators available in the World Development Indicators database and drawing on the specialist knowledge of World Bank staff. Some indicators have been added, and in some cases data have been used from published studies or reports. An interactive presentation of key indicators for assessing the Sustainable Development Goals is available at http://data.worldbank.org/sdgs.
As in previous editions, World view also presents indicators that measure progress toward the World Bank Group’s twin goals of ending extreme poverty by 2030 and enhancing shared prosperity in every country, which are also central elements of Sustainable Development Goals 1 (end poverty in all its forms everywhere) and 10 (reduce inequality within and among countries). A major change is that the estimates of global and national extreme poverty rates have been updated to the international poverty line of $1.90 a day per person, in 2011 purchasing power parity terms. Estimates of indicators of shared prosperity for 94 countries, including the growth rates of the average income of the bottom 40 percent, are also included.
Measuring and monitoring progress against the Millennium Development Goals were major challenges and required substantial efforts on the part of national statistical agencies and others to improve the quality, frequency, and availability of relevant statistics. With a new, broader set of goals, targets, and indicators, the data requirements are even greater. Baselines and progress for few Sustainable Development Goal targets can be measured completely. Both governments and development partners will need to continue investing in national statistical systems and other relevant public institutions, where much of the data will continue to originate. At the same time, the statistical community needs to strengthen partnerships with the private sector and other emerging actors for advancing new techniques of data collection, analysis, and use.
Economy
The Economy section provides a picture of the global economy and the economic activity of more than 200 countries and territories. It includes measures of macroeconomic performance and stability as well as broader measures of income and savings adjusted for pollution, depreciation, and resource depletion.
Global real gross domestic product grew 2.4 percent in 2015, to about $74 trillion in current prices, and is projected to grow 2.9 percent in 2016. Low- and middle-income economies accounted for 33 percent of the global economy in 2015, an increase of 1 percentage point. They grew an estimated 4.3 percent in 2015 and are projected to grow 4.8 percent in 2016. Expected growth in high-income economies has been revised from earlier forecasts to 1.6 percent in 2015 and 2.1 percent in 2016.
The adjusted net savings indicator has been updated this year with new data on the health impacts of air pollution from the Global Burden of Disease 2013, an international scientific effort led by the Institute for Health Metrics and Evaluation at the University of Washington, Seattle. Damages include the costs of premature mortality due to exposure to ambient particulate matter, household air pollution due to cooking with solid fuels, and ambient ozone pollution.
In August 2015 the International Monetary Fund began using the Government Finance Statistics Manual (GFSM) 2014 framework for its Government Finance Statistics Yearbook and database. Affected series have been adjusted from 1990 onward. Historical series based on the previous (2001) framework, with data up to 2012, can be accessed through the World Development Indicators archives.
GFSM 2014 provides comprehensive fiscal data through accrual reporting and allows data inconsistencies to be detected and fiscal transparency to be improved. In turn, fiscal analyses by end-users will be more detailed and robust. The new framework emphasizes economically meaningful fiscal indicators and allows for the phased implementation of accrual accounting while supporting needed improvements in the compilation of cash-based fiscal statistics for the public and general government sectors and subsectors. It also harmonizes the system used to report fiscal statistics with other macroeconomic statistical systems – most notably the System of National Accounts and the European System of Accounts.
A key feature of GFSM 2014 is its distinction between transactions and other economic flows. Transactions cover all exchanges or transfers that take place by mutual agreement and the consumption of fixed capital (the economic equivalent of “depreciation”). Mutual agreement does not mean that transactions have to be entered into voluntarily (the payment of taxes is treated as a transaction despite being compulsory). Additionally, transactions cover monetary exchanges and in-kind activity (such as the receipt of commodity grants and non-cash remuneration). Other economic flows are the result of events that affect the value of non-financial assets, financial assets, and liabilities but that are not exchanges or transfers. These flows can reflect either price changes (including exchange rate movements) or volume changes due to one-off events (such as mineral discoveries or natural disasters).
Economic growth reduces poverty. As a result, fast-growing middle-income economies are closing the income gap with high-income economies. But growth must be sustained over the long term, and gains must be shared to make lasting improvements to the well-being of all people. The 2007 financial crisis spread from high-income to low-income economies in 2008. A year later it became the most severe global recession in 50 years and affected sustained development around the world. Average annual per capita GDP growth in low- and middle-income countries slowed from 5 percent over 2000-09 (the pre-crisis period) to 4.3 percent over 2009-14 (the post-crisis period), which was still faster than in high-income countries. High-income countries grew an average of 1.2 percent a year after the crisis, down from 1.5 percent before the crisis. The low- and middle-income countries in Middle East and North Africa saw the largest drop: Average annual per capita GDP growth fell 3.4 percentage points, from 3.1 percent in the pre-crisis period to –0.3 percent in the post-crisis period.
States and Markets
States and markets indicators encompass private investment and performance, the public sector’s role in nurturing investment and growth, and the quality and availability of infrastructure essential for growth. These indicators measure the business environment, government functions, financial system development, infrastructure, information and communication technology, science and technology, government and policy performance, and conditions in fragile countries with weak institutions.
This year, stock market data from the World Federation of Exchanges replaces estimates from Standard and Poor’s, which discontinued the Global Stock Markets Factbook in 2013, for indicators of listed companies, market capitalization, the value of shares traded, and the turnover ratio. Time series go back to 1975 where available; additional data, including indicators on fixed income and derivatives and equity markets can be found on the World Federation of Exchanges website.
Stock market size can be measured in various ways, and each produces a different ranking of countries. Both number of listed companies and market capitalization measure market size and are positively correlated with the ability to mobilize capital and diversify risk. Market liquidity is measured by the value of shares traded, which represents the transfer of ownership effected automatically through the exchange’s electronic order book. Finally, turnover velocity is the ratio between the electronic order book turnover of domestic shares, and their market capitalization; only domestic shares are used in order to be consistent between exchanges.
The data for market capitalization and listed domestic companies are provided for each exchange, and World Development Indicators uses two approaches to calculate country-level estimates. When there is only one reported exchange in a country, its data was used to represent that country. When there are several exchanges in a country, care was taken to avoid double-counting; for example, where companies are listed on more than one exchange in the country, the exchange that provided the most comprehensive data set was used. When different companies are listed on the exchanges, the data for number of listed companies and domestic market capitalization have been aggregated to obtain country-level figures.
States and markets also includes the latest updates to data on business regulations and the business environment, from the Doing Business initiative and Enterprise Surveys. This year, there are new measures of regulatory quality in registering property, dealing with construction permits, obtaining electricity, and enforcing contracts.
A new indicator of public-private partnerships has also been added to complement existing data on private participation in telecommunications, energy, transport, and water and sanitation infrastructure projects. Public-private partnership projects refer to brownfield concessions, greenfield projects, and management and leases but excludes merchants where private parties assume the risks without government guarantee. Public-private partnership projects help determine the gap between infrastructure demand and available resources, thus making important contributions to improving the efficiency of public services in infrastructure and extending delivery to poor people. As in previous editions, the latest trend data on various indicators related to information and communications technology are also presented, including goods trade, telecommunications revenue, mobile subscriptions, and Internet use.
The digital and information revolution has changed the way the world learns, communicates, does business, and treats illnesses. Information and communication technologies offer vast opportunities for progress in all walks of life in all countries – opportunities for economic growth, improved health, better service delivery, learning through distance education, and social and cultural advances. The Internet delivers information to schools and hospitals, improves public and private services, and increases productivity and participation. Through mobile phones, Internet access is expanding in low- and middle-income countries. The mobility, ease of use, flexible deployment, and declining rollout costs of wireless technologies enable mobile communications to reach rural populations. According to the International Telecommunication Union, by the end of 2015 the number of Internet users worldwide reached 3.2 billion.
Global Links
The world economy is bound together by trade in goods and services, financial flows, and movements of people. As national economies develop, their links expand and grow more complex. The indicators in Global links measure the size and direction of these flows and document the effects of policy interventions, such as tariffs, trade facilitation, and aid flows, on the development of the world economy.
The accommodative monetary policy implemented by the major central banks in 2014 through unchanged interest rates lowered risk premiums, improved liquidity in financial markets, and supported economic growth. However, global markets remain surrounded by uncertainties related to geopolitical tension in some regions.
International lending to low- and middle-income economies fell 18 percent in 2014, driven by a sharp 60 percent contraction in short-term debt, reflecting fresh turbulence and uncertainty in the global economy. Just over half of long-term debt inflows went to non-guaranteed private sector borrowers, compared with 62 percent in 2013. Bond issuance by public and private entities remained an important source of external financing, totaling $242 billion in 2014. There was also an important shift in borrower composition: bond issuance by public sector borrowers rose 32 percent to $146 billion, equivalent to 60 percent of total bond issuance in 2014 (compared with 46 percent in 2013). A principal driver was the purchase of domestically issued bonds by nonresidents.
Global inflows of foreign direct investment (FDI) declined 20 percent in 2014, due mainly to a 30 percent decrease into high-income economies. FDI inflows to these economies amounted to $899 billion, only 36 percent of the levels prior to the financial crisis. FDI inflows into low- and middle-income countries proved more resilient and were about 4 percent higher than 2013 levels, accounting for more than 40 percent of global FDI. Investors continue to be attracted by improved business and regulatory environments, growth prospects, and buoyant and expanding domestic markets. Although many economies receive FDI, flows remain highly concentrated: Brazil, China, and India account for more than half.
Global portfolio equity flows rebounded substantially, with an overall annual increase of 41 percent at the end of 2014. Equity flows to high-income economies increased 42 percent, and equity flows to middle-income economies increased 27 percent. Investors sought emerging markets perceived as offering high returns, leading to some diversification in the destination of portfolio equity flows, but in general portfolio equity flows remained highly concentrated in only a handful of middle-income countries. China recorded a 58 percent increase in net portfolio equity flows, to $52 billion; India recorded a 40 percent decline, to $12 billion; and Brazil’s net inflows remained unchanged, at $12 billion.
In 2014 inflows of international personal remittances totaled $528 billion, a 6 percent increase over 2013. Personal remittances are calculated in balance of payments statistics as the sum of personal transfers (payments between resident and nonresident individuals) and compensation of employees (the income of short-term nonresident workers and of residents employed by nonresident entities). Some 72 percent ($378 billion) of personal remittances were received by low- and middle-income economies. High-income economies received $150 billion, mostly as compensation of employees; the three top receivers, with about 37 percent, were Belgium, France, and Germany.
Over the past decade flows of foreign direct investment (FDI) to low- and middle-income economies have increased substantially. It has long been recognized that FDI flows can carry the benefits of knowledge and technology transfer to domestic firms and the labor force, productivity spillover, enhanced competition, and improved access for exports abroad. Moreover, they are the preferred source of capital for financing a current account deficit because FDI is non-debt-creating. Global inflows of FDI declined 20 percent in 2014, to $1.6 trillion, due mainly to a 30 percent decrease into high-income economies. Low- and middle-income economies continued to prove more resilient, with FDI inflows decreasing only 1.4 percent.
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Data protection regulations and international data flows: Implications for trade and development
Data protection frameworks must be compatible with international data flows for developing countries to benefit from the global digital economy
National and regional legal frameworks that protect data in the ever-expanding digital economy are often outdated, incompatible or missing, UNCTAD has found. This will store up problems for the future integration of developing countries into the global economy and threaten the amazing benefits they could derive from cross-border e-commerce.
In a new report, Data Protection Regulations and International Data Flows: Implications for Trade and Development, UNCTAD says that coherent and compatible data protection regimes will be ever-more important in the face of new technologies such as cloud computing, big data, and the Internet of Things. More dialogue between all stakeholders is needed to achieve adequate protection, the report urges.
According to UNCTAD’s Cyberlaw Tracker, as of April 2016, only 108 countries have data protection laws and 35 have draft laws. Around 60 developing countries have no data protection laws at all.
Existing national and regional regimes, such as those in the United States and the European Union, often contain similar principles but even they diverge in their approaches to dealing with cross-border data flows.
The report found that differing notions of privacy and a variety of different stakeholder interests creates tensions: individuals are concerned about their right to privacy and being able to safely and confidently use online services; governments are concerned about national security and safety; and businesses are concerned with compliance burdens and regulations that may hamper innovation and trade.
The report tracks the evolution of data protection, outlines and summarizes the current landscape of global, regional and national data protection regimes, identifies common challenges in the development and implementation of regimes, and presents policy options. It draws on contributions from 18 governments, regional and international organizations as well as representatives of the private sector and civil society to offer a single source of information for consultation by policymakers.
The report identifies eight policy options for countries as well as international and regional organizations to consider when adopting or revising data protection legislation and guidelines.
In order to promote international compatibility, it is important to avoid duplication and fragmentation in approaches to data protection.
Instead of pursuing multiple initiatives, the report suggests, global and regional organizations may need to concentrate on one unifying initiative or a smaller number of initiatives that are internationally compatible.
In developing and promoting international and regional data protection initiatives, consideration should also be given to the compliance burden, and the potential for adverse effects on trade, innovation and competition, especially from the perspective of small and medium sized enterprises (SMEs).
In this context, the report says that SMEs should participate in debates related to such initiatives, and underlines that provisions that build consumer trust and confidence in regulatory models will help to grow e-commerce around the world.
UNCTAD, as a convener of stakeholders from both developed and developing countries, offers a forum for discussion on this vitally important subject.
In this respect, the new data protection report was released on April 19, 2016, at an Ad Hoc Expert Meeting on Data Protection and Privacy during UNCTAD’s second annual E-commerce Week in Geneva, Switzerland.
Data protection regulations and international data flows: Implications for trade and development
In the global information economy, personal data have become the fuel driving much of current online activity. Every day, vast amounts of information are transmitted, stored and collected across the globe, enabled by massive improvements in computing and communication power. In developing countries, online social, economic and financial activities have been facilitated through mobile phone uptake and greater Internet connectivity. As more and more economic and social activities move online, the importance of data protection and privacy is increasingly recognized, not least in the context of international trade. At the same time, the current system for data protection is highly fragmented, with diverging global, regional and national regulatory approaches.
This study reviews the current landscape and analyzes possible options for making data protection policies internationally more compatible. It also provides a fresh and balanced take on related issues by considering the varied perspectives of different stakeholders. Written contributions from key international organizations, government bodies, the private sector and civil society offer valuable insight into the current state of affairs.
The findings of the study should help to inform the much needed multi-stakeholder dialogue on how to enhance international compatibility in the protection of data and privacy, especially in relation to international trade, and to provide policy options for countries that wish to implement new laws or amend existing ones. The study will serve as a basis for deliberation during the UNCTAD E-Commerce Week and for its capacity-building activities related to E-Commerce and Law Reform.
Importance of data protection and privacy laws
Data protection is directly related to trade in goods and services in the digital economy. Insufficient protection can create negative market effects by reducing consumer confidence, and overly stringent protection can unduly restrict businesses, with adverse economic effects as a result. Ensuring that laws consider the global nature and scope of their application, and foster compatibility with other frameworks, is of utmost importance for global trade flows that increasingly rely on the Internet.
Many social and cultural norms around the world include a respect for privacy. While underlying privacy principles contain many commonalities across countries, interpretations and applications in specific jurisdictions differ significantly. Some protect privacy as a fundamental right, while others base the protection of individual privacy in other constitutional doctrines or in tort. Still others have yet to adopt privacy protections. Such differences will increasingly affect individuals, businesses and international trade.
The information economy is increasingly prominent and promises to provide many opportunities, but could also generate some potential drawbacks. Internationally compatible data protection regimes are desirable as a way to create an environment that is more predictable for all stakeholders involved in the information economy and to build trust online.
New technological developments are adding urgency to this need. Cloud computing has quickly risen to prominence, disturbing traditional models in various areas of law, business and society. Certain projections estimate that the cloud computing industry will have a projected global market worth of $107 to $127 billion by 2017. The Internet of Things is also rapidly developing, and has a direct nexus to management of data. While forecast reports vary greatly, one report estimates that value-added services related to the Internet of Things will grow from around $50 billion in 2012 to approximately $120 billion in 2018, and that there will be between 20-50 billion connected devices by 2020. Another report forecasts a potential economic impact of between $3.9 and $11.1 trillion per year in 2025.
Data protection regulation must carefully correspond to the evolving needs and possibilities associated with these changes in order to facilitate potential benefits. In 2014, approximately $30 trillion worth of goods, services and finance was transferred across borders. Around 12 percent of international trade in goods has been estimated to occur through global e-commerce platforms like Alibaba and Amazon. The international dimension of flows has increased global GDP by approximately 10 percent, equivalent to a value of $7.8 trillion in 2014. Data flows represent an estimated $2.8 trillion of this added value.
Key Concerns
As the contributions to this study demonstrate, concerns related to data protection and privacy online manifest themselves in many different dimensions.
Governments – specifically in those developing countries attempting to adopt data protection legislation – are having problems modeling their data protection regimes, though most opt for an approach consistent with the EU Directive. Common challenges include (1) the length of time it takes to pass legislation, (2) financial costs associated with implementing and enforcing a data protection regime, and (3) a lack of public and private sector knowledge and cooperation among governmental entities regulating in parallel. In some countries, a lack of understanding and fear within society can also exacerbate one or more of the aforementioned difficulties.
On the consumer side, concerns related to payment system integrity, hidden costs, fear of fraud and product quality are often more pronounced in the context of international e-commerce. Building trust in the online environment is key, and there has been a decline in trust with regards to transactions with both government and private actors. Studies show that consumers are concerned about how their personal data are collected and used, and that these concerns are increasing. A lack of clarity with regard to protection and avenues for redress tends to further aggravate these concerns.
Businesses are concerned that (1) too stringent protection regimes will unduly restrict activities, increase administrative burdens and stifle innovation; (2) a lack of clarity and compatibility between regimes add uncertainty, with negative effects on investments; and (3) given the nexus between cross-border e-commerce and data protection, divergent regimes will inhibit the adoption and proliferation of emerging technological developments, reducing potential accompanying societal benefits.
Key messages
Although there is significant divergence in the detailed data protection laws of the world, there is more common ground around the core set of data protection principles that are said to be at the heart of most national laws and international regimes. This set of core principles can serve as a useful starting point for efforts towards achieving more compatibility and harmonization.
There is no single agreed model for data protection law at this stage. However, compatibility is the stated objective of many global and regional data protection initiatives.
Numerous challenges in the development and implementation of data protection laws exist. This study concentrates on seven areas where action is particularly needed.
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Addressing gaps in coverage
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Addressing new technologies
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Managing cross-border data transfers
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Balancing surveillance and data protection
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Strengthening enforcement
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Determining jurisdiction
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Managing the compliance burden
Policy options for developing and implementing national laws
The number of national data protection laws has grown rapidly, but major gaps persist. Some countries have no laws in this area, some have partial laws, and some have laws that are outdated and require amendments. The study includes key policy options for nations that are developing, reviewing or amending their data protection laws.
For those countries that still do not have relevant laws in place, governments should develop legislation that should cover data held by the government and the private sector and remove exemptions to achieve greater coverage. A core set of principles appears in the vast majority of national data protection laws and in global and regional initiatives. Adopting this core set of principles enhances international compatibility, while still allowing some flexibility in domestic implementation.
Strong support exists for establishing a single central regulator when possible, with a combination of oversight and complaints management functions and powers. Moreover, the trend is towards broadening enforcement powers, as well as increasing the size and range of fines and sanctions in data protection.
Addressing the issue of cross-border data transfers using specific text and promoting one or more mechanisms that businesses can use to enable international data flows is crucial. In an increasingly globalized economy where more and more economic activities are undertaken online, remaining silent on the issue is not a viable option. Allowing a range of options for companies to consider appears to be the accepted, modern approach to managing this issue.
National data protection laws should avoid (or remove) clear obstacles to trade and innovation. This may involve avoiding or removing data localization requirements that go beyond the basic options for the management of cross border data transfers. A useful test that has emerged in this area is the requirement that such provisions should not be ‘disguised restrictions on trade’.
It is also increasingly difficult to ignore the need to balance government surveillance requirements against data protection. In some jurisdictions, data protection laws will be the appropriate place to address this issue. In others, it may be addressed through different legal arrangements. Countries need to implement measures that place appropriate limits and conditions on surveillance.
Policy options for global and regional data protection initiatives
The study discusses key policy areas for global and regional groups that play a role in data protection.
In order to promote international compatibility, it is important to avoid duplication and fragmentation in the regional and international approaches to data protection. It would be preferable for global and regional organizations to, instead of pursuing multiple initiatives, concentrate on one unifying initiative or a smaller number of initiatives that are internationally compatible. Where possible, similarities in underlying principles can be leveraged to develop mechanisms for recognition and compatibility between different frameworks.
Future work towards achieving greater compatibility will require the effective involvement of all stakeholders, including government, private sector and civil society representatives. Their involvement needs to go beyond general discussions to include formal engagement in the policy development process. This active involvement will also help develop measures that promote a higher level of certainty and confidence amongst stakeholders, which will increase the overall efficiency of legal frameworks.
The study includes some detailed guidance on the growing consensus around key conditions and limitations on surveillance initiated by governments. Most regional and global initiatives are silent on the issue of surveillance. It is essential that national laws and global and regional initiatives acknowledge the existence of surveillance issues and attempt to address these issues directly. While surveillance issues often have an international or cross-border dimension, the extraterritorial nature of data flows and surveillance, as it relates to state sovereignty, must be specifically addressed. The United Nations statement on digital rights may serve as a platform for considering the connection between data protection and surveillance.
In developing and promoting international and regional initiatives on data protection, consideration should also be given to the compliance burden, and the potential for negative impacts on trade, innovation and competition, especially from the perspective of SMEs. In this context, SMEs should be consulted and participate in debates related to such initiatives. Finally, prioritizing provisions that build consumer trust and confidence in regulatory models will help grow e-commerce activity.
Developing efficient policies across the globe is of utmost importance, especially with the advent of recent technological advances. Policies should strive to balance various legitimate stakeholder concerns while also carefully avoid solutions that will overly restrict trade. Getting the balance wrong can have serious consequences for either the protection of fundamental rights or for international trade and development. The study provides various examples of good practices that can be built upon.
Striving for balanced, flexible, and compatible data protection regulation has become an urgent goal. Some countries have powerful regulatory mechanisms, while others have outdated legislation or none at all. In order to achieve adequate protection that allows for innovation and facilitates trade, it is essential to continue national, regional and global multi-stakeholder dialogue. International organizations dealing with trade and development, such as UNCTAD, can provide the platform for such dialogue.