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Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development: Communiqué – 2016 Spring Meetings
Communiqué of the Ministers of the Intergovernmental Group of Twenty-Four, held in Washington, D.C. on April 14, 2016
1. We, the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development, held our ninety-fifth meeting in Washington D.C. on April 14, 2016 with Mauricio Cárdenas, Minister of Finance and Public Credit of Colombia in the Chair, Abdulaziz Mohammed, Minister of Finance and Economic Cooperation of Ethiopia as First Vice-Chair; and Ravi Karunanayake, Minister of Finance of Sri Lanka as Second Vice-Chair.
2. We congratulate Ms. Christine Lagarde on her appointment for a second term as Managing Director of the IMF.
The Global Economy and the International Monetary System
3. The recovery of the global economy remains modest, with greater downside risks. Growth in advanced economies remains sluggish, while it is moderating in emerging markets and developing countries (EMDCs), which still account for the bulk of global growth. The sharp drop in commodity prices has not materialized in positive effects globally, as has been expected, as we continue to face weaker global demand, tighter financial conditions, more volatile capital flows, and heightened security challenges. These headwinds could further weaken our growth outlook and contribution to global growth.
4. In light of this global reality, managing our policy space, making our economies more resilient to support macroeconomic stability, as well as achieving higher, more balanced and inclusive growth remain our priorities. Exchange rate flexibility, where appropriate, and reserve buffers, where available, could contribute to cushioning the impact of external shocks. We will continue to strengthen our fiscal and structural reforms and our financial systems, based on country-specific priorities, to diversify our economies and enhance our growth prospects, promote employment, competition, and productivity, while implementing macroeconomic and social policies to address inequality and alleviate poverty.
5. We welcome the IMF’s ongoing work towards strengthening the International Monetary System (IMS) with efforts in three key areas: mechanisms for crisis prevention and adjustment; global cooperation on issues and policies affecting global stability, including spillover effects from systemic economies; and a large enough and more coherent Global Financial Safety Net (GFSN). We also support the IMF’s review of the GFSN, including the adequacy of the IMF resources and its lending toolkit, and look forward to concrete follow-up steps. In this regard, we reiterate our call for predictable and adequate liquidity support in times of need. We note the potential for greater and more effective cooperation between the different layers of the GFSN, especially between the Fund and regional financing arrangements (RFAs). We also call for further work from the IMF and other International Financial Institutions (IFIs) on mechanisms to support countries coping with the sharp drop in commodity prices. We welcome the inclusion of the renminbi in the SDR basket. We look forward to the discussion on possible allocation of SDRs and support further work to examine the broadening of SDR use in the IMS.
6. We support the continued reform of global financial regulation and the strengthening of the anti-money laundering and combating the financing of terrorism (AML/CFT) framework, but highlight the need to address their unintended consequences. In this regard, we call on the IMF, the World Bank and global financial regulators, to develop concrete measures to address the decline of correspondent banking, as a result of de-risking by global banks, in order to mitigate financial exclusion. This phenomenon, which could adversely impact the functioning of the financial system of affected countries, further constrains access to credit and other financial services, including remittance transfers.
7. To facilitate timely and orderly debt restructuring, we support the IMF’s continued efforts to promote the use of strengthened pari passu and collective action clauses in sovereign bond issues. We take note of the large outstanding stock of sovereign debt that does not include these provisions, and support more work to explore solutions to address potential holdout problems for such debt. At the same time, we welcome Argentina’s efforts to end a decade long dispute with holdout creditors to regain access to international capital markets.
8. We continue to call for support, including through additional non-IDA concessional financing, from IFIs for developing countries disproportionately affected by the refugee and security crises, as well as by internally displaced populations. These countries are providing a global public good by hosting those that are forcibly displaced. We welcome the MENA Concessional Financing Facility and other initiatives of the World Bank Group (WBG), and call for a mainstreaming of such instruments in supporting other middle-income countries in such fragile situations, in partnership with others. We also call for IFIs to strengthen their attention on the impact of migration, including those that occur for economic reasons.
Financing for Development
9. We reiterate the importance of the 2030 Agenda for Sustainable Development and the Addis Ababa Action Agenda. We welcome the Paris Agreement that sets out our global, shared responsibility to deliver on the climate and development agenda, while respecting the principle of common but differentiated responsibilities. The availability of concessional finance will play a key role in lowering the up-front costs of greenhouse gas emissions, climate-resilient investments as well as in mitigating the risks related to climate change. We look forward to a concrete roadmap from developed economies toward providing USD 100 billion per year by 2020 to support mitigation and adaptation in developing countries and strong advocacy by the MDBs in this regard. We also seek the urgent replenishment of the Climate Investments Funds. We continue to urge the international community to work with small middle-income countries and those in fragile situations that are vulnerable to climate change, in improving their debt sustainability, including through enhancing their access to concessional financing. We look forward to the successful outcomes of the 22nd Session of the Conference of the Parties (COP) to be held in Marrakech, Morocco later this year.
10. Multilateral Development Banks (MDBs) should emerge as a strong partner for developing countries in Disaster Risk Management (DRM) to enable them to achieve the Sendai Framework targets by 2030. We call for MDBs to increase financial support to developing countries and facilitate their access to new technologies. Overall, continuous work on DRM will prevent disasters from undermining the progress towards achieving the Sustainable Development Goals (SDGs).
11. Adequately and appropriately scaling up quality investments in sustainable infrastructure will be particularly critical to delivering the development, climate and economic growth agenda. In addition to mobilizing our domestic resources through financial deepening, we call for scaled-up support from MDBs through strengthening policy and institutional frameworks, increasing lending, and effective leveraging of private sector resources. We note the ongoing efforts by MDBs to optimize the use of their own balance sheets, while promoting dialogue with credit rating agencies to foster more appropriate methodologies in assessing the MDBs’ financial strength. We welcome the forthcoming inaugural global infrastructure forum. We call for further and productive dialogue towards ensuring the adequate capitalization of MDBs.
12. Effective international tax cooperation is an essential complement to our efforts to mobilize domestic resources. We strongly support the participation of developing countries on an equal footing in the widespread and consistent implementation of outcomes of the G20/OECD Base Erosion and Profit Shifting (BEPS) Project. We welcome the joint initiative of the IMF and the WBG on capacity building on tax administration and call for delineating concrete steps on how they can support enhancing the participation and voice of developing countries on international tax issues. Furthermore, we urge the IMF and the WBG to strengthen their support to combat illicit financing flows.
13. Concessional finance will continue to be a vital source of financing in low-income countries (LICs). We welcome the advancement of innovations under IDA18 to leverage financing flows across all sources of finance. We stress, however, that as IDA integrates non-concessional finance among its instruments, it should ensure adequate targeted concessional resources for the poorest and most vulnerable clients, and guard against burdening them with higher cost liabilities. These resources should be additional, rather than substitute for contributions from development partners in the light of ambitious global agreements on SDGs, COP21, and the Sendai Agreement. We call on the IMF to step up efforts to mobilize additional resources for the Poverty Reduction and Growth Trust (PRGT) and to allow more flexibility in accessing General Resources Account (GRA) resources by eligible LICs. More broadly, we ask for further strengthening of the IFIs’ engagement with and support for fragile and conflict affected countries, especially by enhancing institutional capacities and providing financial support towards higher resilience. We call on advanced countries to fulfill their commitments to Official Development Assistance (ODA). We look forward to increased donor contributions to IDA18.
Governance and Reform of International Financial Institutions
14. We welcome the entry into force of the 2010 Quota and Governance Reforms of the IMF that have made progress in shifting the distribution of quota shares to EMDCs, and note that there is still a long way to go in this respect. We call for the full implementation of the 2010 governance reforms, including those on Board representation. We look forward to the completion of the 15thGeneral Review of Quotas by the Annual Meetings in 2017, and to a new quota formula that further shifts quota shares to EMDCs while protecting the quota share of the poorest countries. The realignment of quotas must reflect the rapidly growing weight of EMDCs in the global economy, and this must not come at the expense of other EMDCs. We call for putting greater weight to GDP measured in Purchasing Power Parity (PPP) in determining the economic weight of countries. We express our strong and continued support for a quota-based and adequately resourced IMF. We reiterate our longstanding call for a third Chair for Sub-Saharan Africa in the IMF Executive Board, provided it does not come at the expense of other EMDCs’ Chairs.
15. We call for a World Bank’s shareholding reform process that reflects its original and overarching goal, as established in the Istanbul Principles: to enhance the voice and representation of Developing and Transition Countries for strengthening the legitimacy and effectiveness of the Bank. In this regard, we call for a World Bank’s shareholding review that meaningfully increases the voting power of developing countries and moves toward equitable voting power, while also protecting the voting power of the smallest poor countries. Economic weight should be the primary component of the new formula with as much weight on this component as possible. In addition, we ask that greater weight be given to the GDP PPP in determining the economic weight of countries in the formula. We caution against regressive outcomes that could compromise the gains from previous reforms and look forward to an agreement on the dynamic formula by the 2016 Annual Meetings and consideration of Selective Capital Increase and General Capital Increase, by the Annual Meetings of 2017. We also call upon the World Bank to strengthen the pillar of Representation in its Board of Executive Directors in the voice reform process.
16. We look forward to an implementable, simple, transparent, and predictable Environmental and Social Safeguards Framework of the World Bank that gives a greater role to the use of country systems and does not impose undue burden in terms of cost and time on borrower countries, maintaining the primacy of their development objectives. We call on the World Bank to allocate budgetary resources necessary to strengthen countries’ capacity to implement the new Framework.
17. Finally, we reiterate our call for strengthening the ongoing efforts towards greater representation by nationals from under-represented regions and countries in the form of recruitment and career progression to achieve balanced regional and gender representation, including at managerial levels, in the WBG and the IMF.
Other Matters
18. The next meeting of the G-24 Ministers is expected to take place on October 6, 2016 in Washington, D.C.
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The future of food: Why healthy, safe and sustainable food is a basic necessity
“We need to look afresh at agriculture in Africa as a series of systems, and to see it not as a way of life, but a business”, said African Development Bank Acting Vice-President for Operations, Kapil Kapoor, at a World Bank Spring Meetings panel on ‘The Future of Food’ on Wednesday. But the challenges of food and agriculture are global: while 2 billion people in the world are undernourished, 2 billion are obese or overweight. The world wastes one-third of the food it produces.
The paradoxes continue: “How is it,” asked Kapoor, “that the continent with two-thirds of the world’s arable land and plentiful water resources, struggles to feed its own people – to the extent that it imports US $35 billion of food a year – and creates so little agricultural produce?” Speaking on behalf of Bank Group President Akinwumi Adesina, the former Nigerian Minister of Agriculture, he announced the imminent unveiling of a continent-wide strategy to ‘Feed Africa’, which will be shared with African and international audiences alike at the Bank’s Annual Meetings in Lusaka from May 23, 2016.
“The strategy is in part the result of new and holistic thinking among our partners in government”, he said. “Last October, in Dakar, the Bank convened a ‘Feed Africa’ conference which brought together Ministers of Agriculture, Finance and Health in an almost unprecedented move to see agriculture across all its component parts, at the nexus of health, economic growth, and a sustainable planet. The goal is nothing if not ambitious: we believe that by 2025 the continent of Africa can be a net exporter, not an importer, of food.”
Kapoor set out a number of the challenges, not least those of the different political economies of different countries in Africa, and of poorer countries which are not ready to debate the diversification of the food supply, until they have the basics of food supply guaranteed. He charted the contrasts of African food poverty and a growing African middle class with aspirations about food, as about other aspects of life. He stressed the role of partnership in transforming African agriculture. “We have found a huge matrix of players in agriculture in Africa, but little coordination. And the role of the private sector is key: every conversation we have with governments is essentially a conversation with and about the role of the private sector. It is the private sector which will bring about change.”
The event was moderated by former White House chef and now NBC TV food analyst chef Sam Kass, who in September 2015 served a meal made from food waste to Heads of Governments meeting at the UN in New York, as they discussed common approaches to the COP21 climate change summit in Paris three months later. “Food is the ultimate expression of who we are and where we are from”, he said. “We cannot ignore its cultural aspects.”
Other panelists were Juan José Freijo, Consumer Goods Forum and Global Head of Sustainability, Brambles; Bonnie McClafferty, Director, Global Alliance for Improved Nutrition; Johan Rockström, Co-Founder, EAT Initiative, and Juergen Voegele, Senior Director, Agriculture Global Practice, World Bank.
Voegele vocalised many of the challenges of the sector. “The agriculture sector is way behind the curve”, he said, “while for instance the energy sector has invested in research and debate, and found solutions, like renewable energy. Agriculture has simply not had these conversations, and when the leading agriculture research agency CGIAR has a research budget of less than US $1 billion a year, no wonder we are behind. We need an agricultural sector that is productive, resilient, and low-imprint. Every country needs to think through its own agriculture journey... but we can collectively help countries align around certain key principles and priorities.”
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tralac’s Daily News Selection
The selection: Thursday, 14 April 2016
Starting today:
In Mauritius: the inaugural African Economic Platform
Announced by the Chairperson of the AU Commission, Dr Nkosazana Dlamini Zuma, during the just-concluded 26th AU Summit of Heads of State and Government, the AEP will contribute to fast track African economic transformation toward the realisation of Africa’s Agenda 2063. The participants expected to attend this first African Economic Platform will come from the public sector, led by Heads of State and Government; the African private sector, led by captains of commerce and industry, and the African higher education sector. This is a strategic approach by the African Union to bring together these three sectors to engage in discussions on cooperation and collaboration deemed to be critical for the continent’s growth and tangible economic transformation. [Concept paper]
In Lusaka: the Commonwealth's Africa trade prospects consultation
Next week:
On Tuesday, in London: hearings for the UK’s Africa Free Trade Initiative inquiry
This inquiry seeks to answer the following three main questions: i) What has been achieved in AFTi since 2011 and what lessons can be learned? ii) Is there a case for a successor to AFTi in the area of further facilitating trade and investment within Africa as a driver of growth and poverty reduction, and between African and the rest of the world, including the UK? iii) What should a future AFTi look like, what targets should it seek to achieve, and through which means and partnerships should it be delivered?
On Tuesday, in Midrand: a briefing on SADC certificates of origin and the new VAT rules
Roberto Azevêdo: 'Embracing change: forging global trade partnerships' (WTO)
Empirical evidence suggests that the deeper the RTA, the greater the potential for the development of production chains which span national borders. WTO members in the Asia-Pacific region in particular have greatly benefited from these global value chains. As production networks expand and regional and global value chains become more important, it becomes critical to more rapidly harmonize differences in legislation, rules and infrastructure, which impact international trade and investment. This appears to be what we see occurring more and more in modern RTAs and other regional networks.
Southern African Business Forum: launch of regional working groups (The Herald)
Following the launch [yesterday in Johannesburg] Gainmore Zanamwe, Regional Trade Adviser at the SADC Secretariat, said: “Both the Revised RISDP and the SADC Industrialisation Strategy call for the development of a Regional Private Sector Partnership and Collaboration Strategy and the establishment of a platform for the Public-Private Dialogue to improve the involvement of private sector in regional integration. To this end, the SADC Secretariat and Member States will be working with the regional public and private sector as they collaborate under the SABF’s six Regional Working Groups, which include Industrialisation and Regional Value Chains, Transport Corridors, Trade Facilitation, Movement of Services and Skills, Water and Energy.”
After their official launch, the SABF Working Groups begin their work in earnest, including establishing a work programme for the next year. Decisions and plans will vary from group to group, focusing on a range of activities from policy interventions and public-private co-operation geared at policy reform. Other groups may focus on the development of elements of regional infrastructure projects. The next major milestone is the 2nd Annual SABF Conference on the margins of the SADC Heads of State Summit in Swaziland, where progress reports from the six Working Groups will be presented. [SADC moves on industrialisation of region]
Botswana: Businesses ill-informed about EU trade prospects – envoy (Mmegi)
Many Botswana businesses are unaware of how to export to the European Union, a trade official said at a recent journalists’ seminar on EU cooperation. John Taylor, who is the trade officer for the EU delegation in Botswana, also said local businesses do not know how to take advantage of the EU trade benefits. “When I came here to talk about trade and interact with the trading community and administration, I was shocked. What we heard was about the wonderful opportunities with China and the US,” he said.
Kenya: Maize exports to Tanzania rise on high prices (Business Daily Africa)
Latest market data indicates that 145 tonnes of maize have been shipped to Tanzania through Isebania border in the last 30 days alone as farmers seek better prices in the regional market. Data prepared by the Regional Agricultural Trade Intelligence Network (Ratin) shows that a 90-kg bag of maize currently retails at Sh4,898 in Dar es Salaam, the highest unit price in East Africa.
International regulatory cooperation and domestic regulatory coherence: this week's tralac Newsletter
Public interest considerations behind SAB merger delay (IOL)
Public interest considerations of the planned merger between the world’s largest brewer Anheuser-Busch (AB) InBev and fellow brewing company SABMiller appear to be behind the delay in the Competition Commission’s assessment of the transaction, according to competition law analysts. AB InBev has agreed to an extension to May 5, after the commission missed Tuesday’s deadline. It had also missed its previous deadline of April 5. [Patel ‘hijacking’ cartel watchdog’s powers]
Mihe Gaomab II: ‘NACC guarding against future medical costs in Namibia' (Namibian Competition Commission)
The Commission opposed this application. NAMAF’s application was argued in the High Court on 26 November 2015. On the 18th March 2016, through a landmark judgement which solidified the precedence of the competition law on jurisdiction of all undertakings in Namibia, the High Court squashed NAMAF and the medical aid fund’s application and profoundly agreed with the Commission’s arguments by ruling that NAMAF and medical aid funds are subject to the jurisdiction of the Competition Act. This means that the Commission has regard to the ways and means of how NAMAF has conducted its modus operandi especially on how they set the medical tariffs. Following this judgment, the Commission intends to now file its application interdicting NAMAF and the Funds from engaging in the unlawful conduct and to seek further appropriate redress mechanisms.
COMESA: EOI for consultancy services for baseline study to assess industrial research and development, technology and innovation capacities (AfDB)
Specifically, the study aims at assessing the capacities, state infrastructure for industrial R&D and technology, and associated systems of innovation with a view to generate recommendations on appropriate areas of tripartite intervention to improve capacities, and strengthen Industrial R&D infrastructure and associated systems of innovation in the tripartite countries.
The Second IORA Economic and Business Conference concluded yesterday in Dubai: an Indian perspective
Migration and Development Brief 26: recent developments and outlook (World Bank)
Remittances to developing countries grew only marginally in 2015, as weak oil prices and other factors strained the earnings of international migrants and their ability to send money home to their families, says the World Bank’s latest edition of the Migration and Development Brief, released today. Officially recorded remittances to developing countries amounted to $431.6bn in 2015, an increase of 0.4% over $430bn in 2014. The growth pace in 2015 was the slowest since the global financial crisis. Global remittances, which include those to high-income countries, contracted by 1.7% to $581.6bn in 2015, from $592bn in 2014.
The estimated 1% rise in remittances to Sub-Saharan Africa in 2015 represents some recovery from the 0.2% rise in 2014. Remittances to Nigeria, accounting for around two-thirds of total remittance inflows to the region, are estimated to have declined by 0.8% to $20.7%, and remittances to South Africa are estimated to have fallen by 5.2% to $0.9bn. Regional growth in remittances in 2015 was largely driven by strong remittance growth in Kenya (8.3% to $1.6bn) and Uganda (21.1% to $1.1bn). Remittance flows to the region are projected to rise by 3.4 and 3.7% in 2016 and 2017, respectively.
Independent power projects in sub-Saharan Africa: lessons from five key countries (World Bank)
The five case study countries, namely Kenya, Nigeria, South Africa, Tanzania, and Uganda were selected because they present the largest and most diversified experience with independent power projects over the longest time period. The primary objective of this study is to evaluate the experience of IPPs in Sub-Saharan Africa and explore how they may be improved. Lessons from past experiences and a review of best practices from the region and from around the world can greatly help countries attract more and better IPPs. [The authors: Anton Eberhard, Katharine Gratwick, Elvira Morella, Pedro Antmann]
Natural resource revenues and public investment in resource-rich economies in sub-Saharan Africa (UNU-WIDER)
Using panel data for the period 1990–2013, we find in line with the scaling-up hypothesis that resource rents significantly increase public investment in SSA and that this tends to depend on the quality of political institutions. We also find evidence of a positive effect of public investment on economic growth, which also depends on the level of resource rents. Using some of the components of public investment, such as health and education expenditure, we find a negative effect of resource rents, suggesting among other things that public spending of resource rents is directed more to other infrastructure investments.
World Bank, AIIB sign first co-financing framework agreement (World Bank)
The agreement outlines the co-financing parameters of World Bank-AIIB investment projects, and paves the way for the two institutions to jointly develop projects this year. In 2016, the AIIB expects to approve about $1.2 billion in financing, with World Bank joint projects anticipated to account for a sizable share. The World Bank and the AIIB are currently discussing nearly one dozen co-financed projects in sectors that include transport, water and energy in Central Asia, South Asia and East Asia. Under the agreement, the World Bank will prepare and supervise the co-financed projects in accordance with its policies and procedures in areas like procurement, environment and social safeguards.
Quantifying the effects of trade liberalisation in Brazil: a CGE model simulation (OECD)
Brazil remains a fairly closed economy, with small trade flows relative to its share of world income. This paper explores the effects of three possible policy reforms to strengthen Brazil’s integration into global trade: a reduction in import tariffs, less local content requirements and a full zero-rating of exports in indirect taxes. A simulation analysis using the OECD Multi-Region Trade CGE model suggests that current policies are holding back exports, production and investment in Brazil. The model simulations suggest significant scope for trade policy reforms to strengthen industrial development and export competitiveness. Results also show that the expansion of investment and production would be accompanied by significant employment gains.
AfDB President strengthens alliances in South Africa
Mozambique plans to raise US$1bn a year for roads and bridges (Club of Mozambique)
André Thomashausen: 'How Mozambique subsidizes South Africa' (Club of Mozambique)
Regional experts meet towards actualisation of Dakar-Abidjan Corridor Highway (ECOWAS)
Senegal truckers tired of taking the long way around The Gambia (BBC)
On ECOWAS road transit (editorial comment, The Daily Observer)
Strong US$ affects Zim exports (The Herald)
China moves on $4 bln Ethiopian export project (Natural Gas Daily)
UNCTAD's latest Transport Newsletter
WTO: India opposes US, EU bid to hold small-group talks (The Hindu)
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NACC guarding against future medical costs in Namibia
Almost two years ago, the Commission concluded its investigations against NAMAF and 10 Medical Aid Funds in which it found that NAMAF and its fund members contravened the competition law and does price fixing of medical tariffs in Namibia.
Shortly after the Commission’s decision was published in the government Gazette, NAMAF and the Funds brought an application before Court wherein they contest the Commission’s jurisdiction on the basis that neither NAMAF, nor the Funds could satisfy the definition of an ‘undertaking’ as defined in the Competition Act.
The Commission opposed this application. NAMAF’s application was argued in the High Court on 26 November 2015. On the 18th March 2016, through a landmark judgement which solidified the precedence of the competition law on jurisdiction of all undertakings in Namibia, the High Court squashed NAMAF and the medical aid fund’s application and profoundly agreed with the Commission’s arguments by ruling that NAMAF and medical aid funds are subject to the jurisdiction of the Competition Act (see an earlier article here).
This means that the Commission has regard to the ways and means of how NAMAF has conducted its modus operandi especially on how they set the medical tariffs.
Following this judgment, the Commission intends to now file its application interdicting NAMAF and the Funds from engaging in the unlawful conduct and to seek further appropriate redress mechanisms.
It is an anecdotal fact that medical costs forms a significant consumption behaviour of both the rich and the poor. Hence the Commission will guard cautiously against any implications of the landmark judgement in Namibia.
The experience of the neighbouring country, South Africa had the Competition Commission of South Africa ruling in 2014 wherein the decision was made to have a free fall of medical tariff setting by medical aids, doctors, private medical practitioners, hospitals, clinics etc. This had the effect of the cost of the services being disproportionate and excessive and that despite the protection that medical aid schemes are meant to provide, the consumer making use of medical arrived end up significantly paying more and consumptively poorer whenever there was access to private healthcare.
This means that consumers in South Africa are increasingly paying more for the excess even in presence of the medical aid referred to as medical cover gaps. In the last few years, research shows that there have been something like over 250,000 gap cover schemes that have emerged in South Africa.
This has prompted the Competition Commission’s to do an inquiry in South Africa in 2015 to address the problem of the pricing of private healthcare in South Africa. The South African Government over the last 15 years has also taken some steps to attempt to regulate price of medicine, price of healthcare services, etc due to the vision and resilience of the Minister of Health in that country.
It is crucially important that Namibia does not fall into a “price increase trap” of higher medical costs on Namibia, as it will obviate consumer protection and put medical costs out of reach especially for the poor and the middle class.
It is the Commissions view that on a post high court judgement basis of seeking redress mechanisms that the Commission through a consultative and engaged process with Ministries of Finance and Industrialisation, Trade and SME Development and most importantly the Ministry of Health and NAMFISA to assist in setting in place certain institutions and mechanisms to control the price of medicines by regulation as, of course, medicines is a very key component of healthcare.
This would promote greater transparency, clarity, and balanced representation of all actors in the Health Sector of Namibia and set about what healthcare services actually cost and the composition of health care costs and its formation in general in the Health sector.
The Commission is assured that there will also be greater access to health care costing and healthcare provision with both the consumer, government and private practitioners having managed access to that information which allows a system that allows reasonable regulation of prices to the benefit of all of us.
And in the context of National Health Insurance which as we all know it is the government’s grand plan for universal access to healthcare services through the Social Security Commission. And for overcoming some of the costing, tariff setting and financing problems, the issue of both the public and private healthcare sectors has to be addressed on uniform and coherent basis.
The Competition Commission Aims to consult broadly to gain consumer, economic, social and political will with to regard to the regulatory dispensation and aims to engage with the private healthcare companies on a post competition law due process to ensure this is effected.
The Commission aims to fulfill the Nation's constitutional obligation that states generally that everyone has a right of access to healthcare services in Namibia because good health is fundamental to good life and contributes to fair economic, political and social justice in the country.
Mihe Gaomab II is the CEO of the Namibian Competition Commission.
This article will appear in the April 2016 issue of Consumer News Magazine, Namibia.
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Independent power projects in Sub-Saharan Africa: lessons from five key countries
The track record of Sub-Saharan Africa’s power sector is dismal. Two out of three households in Sub-Saharan Africa, close to 600 million people, have no electricity connection. Most countries in the region have pitifully low access rates, including rural areas that are the world’s most underserved. In some countries, less than 5 percent of the rural population has access to electricity.
Chronic power shortages are a primary reason. The region simply does not generate enough electricity. The Republic of Korea alone generates as much electricity as all of Sub-Saharan Africa. Across the region, per capita installed generation capacity is barely one-tenth that of Latin America.
The need for large investments in power generation capacity is obvious, especially in the face of robust economic growth on the continent, which has been the key driver of electricity demand over the last decade. The International Energy Agency predicts that the demand for electricity in Sub-Saharan Africa will increase at a compound average annual growth rate of 4.6 percent, and by 2030 it will be more than double the current electricity production. The World Bank estimated in 2011 that Sub-Saharan Africa needed to add approximately 8 gigawatts (GW) of new generation capacity each year through 2015 (Eberhard and others 2011). But, in fact, over the last decade an average of only 1-2 GW has been added annually.
The cost of addressing the needs of Sub-Saharan Africa’s power sector has been estimated at US$40.8 billion a year, which is equivalent to 6.35 percent of Africa’s gross domestic product (GDP). The existing funding is far below what is needed. This large funding gap cannot be bridged by the public sector alone. Private participation is critical. Historically, most private sector financing has been channeled through independent power projects (IPPs). IPPs are defined as power projects that mainly are privately developed, constructed, operated, and owned; have a significant proportion of private finance; and have long-term power purchase agreements (PPAs) with a utility or another off-taker.
Like any other private investment, IPPs will not materialize in the absence of a suitable enabling environment. The primary objective of this study is to evaluate the experience of IPPs and see what is necessary to maximize their contribution to mitigating Sub-Saharan Africa’s electric power woes.
Investment in Power Generation in Sub-Saharan Africa: An Overview
Current Power Generation Systems in Sub-Saharan Africa
In 2012, the 48 countries of Sub-Saharan Africa had a total grid-connected power generation capacity of only 83 GW. South Africa accounts for over half of this total. The remaining Sub-Saharan African countries have a combined capacity of only 36 GW, and just 13 of these countries have power systems larger than 1 GW. Twenty-seven countries have grid-connected power systems smaller than 500 megawatts (MW), and 14 have systems smaller than 100 MW.
Across Sub-Saharan Africa (excluding South Africa, which uses mostly coal), hydropower contributes just over half the capacity. Fossil fuels, primarily natural gas and diesel or heavy fuel oil, along with some coal, make up almost all the remainder. Renewables such as biomass, geothermal, wind, and solar add about 1 percentage point.
Power Generation Capacity Additions and Investment over the Past 20 Years
Between 1990 and 2013, only 24.85 GW of new generation capacity was added across Sub-Saharan Africa, of which South Africa accounted for 9.2 GW (figure ES.1). In the first decade of this period, 1990 to 2000, the countries of Sub-Saharan Africa other than South Africa added only 1.84 GW, and some even lost capacity. Between 2000 and 2013, investments picked up in these countries with an additional 13.8 GW installed. However, 94 percent of this increase occurred in only 15 countries, leaving dozens that added hardly any capacity at all. And as in the decade between 1990 and 2000, some actually lost capacity. Civil strife and lack of adequate system maintenance were the prevalent causes.
Between 1990 and 2013, investments in new power generation capacity totaled approximately $45.6 billion ($31.3 billion, excluding South Africa), or far below what is required to meet Africa’s growth and development aspirations. Although public utilities have historically been the major sources of funding for new power generation capacity, that trend is changing. Most African governments are unable to fund their power needs, and most utilities do not have investment-grade ratings and so cannot raise sufficient debt at affordable rates. Official development assistance (ODA) and development finance institutions (DFIs) have only partially filled the funding gap. ODA and concessional funding has fluctuated considerably over the past two decades and has recently been overshadowed by IPP and Chinese-supported investment. Indeed, private investments in IPPs and Chinese funding are now the fastest-growing sources of finance for Africa’s power sector (figure ES.2).
Independent Power Projects
IPPs in Sub-Saharan Africa date to 1994. Representing a minority of total generation capacity, IPPs have mainly complemented incumbent state-owned utilities. Nevertheless, IPPs are an important source of new investment in the power sector in a number of African countries.
IPPs are now present in 18 Sub-Saharan countries – all with varying degrees of sector reform and private participation. Currently, 59 projects (greater than 5 MW) are in countries other than South Africa, totaling $11.1 million in investments and 6.8 GW of installed generation capacity. Including South Africa adds 67 more IPPs, bringing the total to 126, with an overall installed capacity of 11 GW and investments of $25.6 billion.
IPPs in Sub-Saharan Africa range in size from a few megawatts to around 600 MW. The overwhelming majority of IPP capacity (82 percent) is thermal; only 18 percent is fueled by renewables. However, there is important growth in renewables. For example, three wind projects reached financial close between 2010 and 2014, and seven small hydropower projects are on the horizon. South Africa procured 3.9 GW in private power between 2012 and 2014, all of which is renewable.
As shown in figure ES.3, there have been three major IPP investment spikes: 1999-2002, 2008, and 2011-2014. The first two spikes were due to the financial close of a small number of comparatively large projects. In 2011, IPP investments began taking off. Excluding South Africa, total IPP investment for projects in Sub-Saharan Africa between 1990 and 2013 was $8.7 billion, whereas in 2014 alone another $2.3 billion was added. Previously, IPP investments in South Africa had lagged those in other Sub-Saharan countries, but between 2012 and 2014 that country closed $14 billion in renewable energy IPPs.
Although the conditions were varied in the countries where IPPs and other private participation took root, certain themes were common. With the exception of South Africa and Mauritius, none of the Sub-Saharan African countries with IPPs had an investment-grade rating. The possibility of a traditional project-financed IPP deal in this climate was limited. DFIs that invest in the private sector have made a significant contribution to funding IPPs (figure ES.4).
Chinese-Funded Power Generation Projects
In addition to IPPs, significant increases in generation capacity have stemmed from Chinese-funded projects. Chinese-funded generation projects can be found in 19 countries in Sub-Saharan Africa. Eight of these countries have IPPs as well as Chinese-funded projects.
Between 1990 and 2014, there were 34 such projects in Sub-Saharan Africa, totaling 7.5 GW. Chinese-funded projects far exceed IPPs in terms of total megawatts, especially for the years 2010-14, with an average size of 226 MW, in contrast to the IPP average of 98 MW. As of 2014, Chinese-funded projects exceeded IPPs in total megawatts and in total dollars invested.
The majority of Chinese-funded projects are large hydropower projects, for which Chinese engineering, procurement, and construction contractors have become renowned worldwide. The typical project structure involves a contractor plus a financing contract. The majority of these projects received funding from the China ExIm Bank (responsible for soft loans and export credit) on behalf of the Chinese government. Additional finance has been provided by other banks owned in whole or part by the Chinese government.
Conclusions
Independent power projects make a significant contribution to meeting Africa’s power needs. There is no doubt that IPPs are worth the effort. But it is not only the quantum of private investment in IPPs that is relevant; equally important are investment outcomes and, especially, the price and reliability of the electricity produced. The challenge ahead is for African countries to create the conditions to attract more and better IPPs and thus help overcome the continent’s power deficit.
Competition still poses a conundrum in Africa, which is why this study pays particular attention to unpacking the trade-offs attached to competitive procurement. When procured competitively, IPPs have generally delivered power at lower costs than directly negotiated projects, and their contracts have held up better. Despite this, unsolicited and directly negotiated deals have been the norm across Sub-Saharan Africa, accounting for over 70 percent of all IPP megawatts procured.
After 20 years of reform efforts in Africa, nowhere on the continent is full wholesale or retail competition to be found in power sectors. Countries that have attracted the most finance have a wide range of sector policies, structures, and regulatory arrangements. In 13 such destinations for IPP investments, vertically integrated, state-owned utilities predominate. The presence of a regulator is also not definitive in attracting investment. Although the countries with the most IPPs all have formally independent regulators, some countries with regulatory agencies do not have any IPPs.
There seems to be no clear relation among reforms, degree of competition, and the success of countries to attract IPPs. Thus it is reasonable to ask what are the merits of competition in this context, and what are the key reform elements that can help African countries most advantageously attract IPPs? Responses to these questions may be condensed into five main conclusions:
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Systematic and dynamic power sector planning is crucial to identifying the generation projects that best meet a country’s power needs and define the potential space for IPPs. Sound planning means that countries are able to project future electricity demand correctly, decide on best supply (or demand management) options, and anticipate how long it would take to procure, finance, and build the required generation capacity. Planning tools must be updated regularly and new building opportunities allocated based on clear criteria. Finally, there must be an explicit link between planning and the timely initiation of the generation procurement process.
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Competitive procurement of IPPs helps ensure that projects are implemented transparently and at the lowest cost. Two decades of experience in power procurement in Sub-Saharan Africa have amply demonstrated that a lack of competition in procuring new generation capacity has extensive drawbacks, ranging from immediate effects on project outcomes (higher prices, unraveling contracts, and so on) to more general effects on the overall governance of the electricity sector and its investment climate. IPP investment in Africa will rely on long-term contracts with off-takers where electricity demand is growing at medium or high rates. Where long-term contracts for new power are competitively bid rather than directly negotiated, there is a potential for reduced prices. Also, competitive procurement can stimulate the development of potentially bankable projects, especially renewable energy. African governments have not done enough to offer competitive tenders or auctions with clear ground rules; standardized, long-term contracts with IPPs; and reliable timelines. In the absence of these, project developers and funders have offered unsolicited bids. Designing and running competitive tenders are not trivial tasks. But if a core government team is authorized to do the work and sufficient resources are allocated for this purpose, then experienced transaction advisers can be hired to help. And the benefits of lower prices invariably justify the initial cost of running these tenders.
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Direct negotiations and unsolicited offers are not ruled out. Indeed, sometimes they are unavoidable, but governments that engage in unsolicited proposals or directly negotiated deals must develop the capacity to properly assess the costcompetitiveness of these projects and the technical and financial capabilities of the project developers – thereby negotiating cost-competitive contracts. In addition, unsolicited bids may be opened to more scrutiny by instituting a public tender.
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The financial viability of utilities is a critical factor in attracting IPP investments. IPP contracts should be undertaken with financially viable off-takers, whether they be utilities or large customers. Most IPPs are project-financed, and their bankability rests on secure revenue flows. Although credit enhancement and security measures can mitigate risk, a financially strong off-taker provides a sustainable basis for securing long-term contracts with IPPs. A sustained effort to better the performance of utilities must be at the center of countries’ reform agendas and also be consistently supported by development partners through financial and technical assistance.
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Reforms, especially those improving the investment climate, remain important. Although IPP investment trends do not appear to be correlated with specific power sector institutional arrangements, the importance of reforms geared toward promoting a sound investment climate should not be discounted. Unraveling potential conflicts of interest between incumbent state-owned generators and IPPs, through unbundling generation from transmission, is in principle positive for private investment, as is more transparent contracting among state generators, IPPs, and independent transmission companies and system operators. Having a regulator in place is especially important, but the mere existence of a regulatory agency is not enough. The quality of regulation capacity is non-negotiable: the regulator must be independent and endowed with competent – and sufficient – human resources.
In conclusion, investment in Africa’s power sector IPPs is growing, but not fast enough. The region does not have sufficient power. All sources of investment need to be encouraged. For IPPs to flourish, the countries of Sub-Saharan Africa need dynamic, least-cost planning, linked to the timely initiation of the competitive procurement of new generation capacity. This must be accompanied by building an effective regulatory capacity that encourages the distribution utilities that purchase power to improve their performance and prospects for financial sustainability – and to widen access to electricity. Such efforts promise to promote economic and social development across the region.
Five Case Studies
1. Kenya’s Electric Power Promise
Kenya is among the countries in Sub-Saharan Africa with the most extensive experience in independent power projects (IPPs). Its first IPPs date back to 1996, and since then the country has closed a total of 11 projects for a total of approximately 1,065 megawatts (MW) and $2.4 billion in investment. While from a global standpoint these numbers are small, IPPs will soon represent more than one-third of Kenya’s total installed generation capacity. Most of the plants procured over the past two decades use medium-speed diesel/heavy fuel oil (MSD/HFO); some are geothermal and wind plants. And more IPPs are on the way: for example, in September 2014, a 900-1,000 MW coal plant was awarded to a consortium led by the Kenyan companies Gulf Energy and Centum Investment Company. Despite this momentum, the actual process of procuring new geothermal and wind power has become more muddled and complex with a series of procurements conducted by the publicly owned Geothermal Development Company (GDC) and directly negotiated wind projects.
What can be learned from Kenya’s IPP experience, particularly in terms of planning, procurement, and contracting? How do Kenya’s IPPs measure up to their public counterparts, and what areas might require further improvement?
2. Independent Power Projects and Power Sector Reform in Nigeria
While Nigeria has the largest population and economy on the African continent, 46 percent of its citizens live below the poverty line and less than 50 percent have access to electricity. The demand for electricity far outweighs available capacity, which is less than 5 gigawatts (GW) for a population of about 170 million (Compare this with South Africa, which has an installed capacity of 43 megawatts [MW] for a population one-third the size of Nigeria’s.) The actual generation output rate in Nigeria, meanwhile, is far below installed capacity. In fact Nigeria’s output rate per capita is among the lowest in the world, owing to poor operation and maintenance, aging generation and transmission infrastructure, fuel supply constraints, and vandalism.
Nonetheless, Nigeria has embarked on the most ambitious electricity sector reform effort of any country in Africa. Reforms were initiated in 2001 with the publication of a new power policy. The objectives of the reforms were to improve efficiency, attract private participation, and strengthen power sector performance so as to enable economic and social development. To this end, policy makers set a goal of achieving 40 GW of capacity by 2020 – a goal that now seems out of reach.
As part of the reform process, Nigeria unbundled the generation, transmission, and distribution subsectors; privatized power generation stations and distribution utilities; appointed a private management contractor to manage the transmission company; and established a bulk trader. Barring South Africa, the country also boasts the largest investment in independent power projects (IPPs) in Sub-Saharan Africa.
Since 1998, five large IPPs have been developed. Several generations of IPP transactions may be attached to distinct phases of the sector reform process. The first generation of IPPs emerged before the reforms began in earnest and included a project-financed plant. A second generation of IPPs was developed after President Olusegun Obasanjo took office in 1999 and the new power sector policy was published in subsequent years. Two stopgap projects emerged during this period, financed by international oil companies (IOCs) and with equity contributions from the Nigerian National Petroleum Corporation. After a hiatus of a number of years, and the rejuvenation of the reform process under President Goodluck Jonathan, who took office in 2010, a third generation of IPPs was developed including a predominantly Nigerian-financed IPP that intends to serve a local grid with mainly industrial demand. Today, a new power market is being established, and a fourth generation of classic, project-financed IPPs is emerging. IPP contracts have had to be designed and negotiated afresh in the new market conditions, and appropriate credit enhancement and security measures put in place to mitigate payment and termination risks.
Nigeria thus represents a fascinating case study of accelerating investment in new power capacity, in an electricity sector undergoing radical reform. Will the next generation of IPPs be successful and lead to further investment in much-needed power generation capacity? Will risks be mitigated? Will sector reforms foster financial sustainability? Will greater competition be possible in the future?
3. Investment in Power Generation in South Africa
South Africa is a latecomer in introducing private investment and independent power projects (IPPs) into its electricity sector. For nearly a century, its national electricity utility, Eskom, dominated the power market. Various attempts to introduce IPPs were half-hearted and unsuccessful. However, this has changed during the past four years.
South Africa now occupies a central position in the global debate about how best to accelerate and sustain private investment in renewable energy. In 2009, the government began exploring feed-in tariffs (FiTs) for renewable energy, but these were rejected in favor of competitive tenders. The resulting program, known as the Renewable Energy Independent Power Project Procurement Programme (REIPPPP), has successfully channeled substantial private sector expertise and investments into grid-connected renewable energy in South Africa at competitive prices.
To date, 92 projects have been awarded to the private sector, and the first projects are already online. Private sector investments of more than $19 billion have been committed for projects that total 6,327 megawatt (MW) of renewable energy. Prices of renewable energy dropped during the four bidding phases, with average solar photovoltaic (PV) tariffs decreasing by 71 percent and wind dropping by 48 percent in nominal terms. Most impressively, these achievements occurred during a four-year period, from 2011 to 2015. Additionally, there have been notable improvements in economic development that have primarily benefitted rural communities. Important lessons can be learned from this process for both South Africa and other emerging markets contemplating investments in renewable energy and other power sources.
4. Power Generation Results Now, Tanzania!
Tanzania has a vast array of conventional and renewable energy resources, and yet the country struggles to generate sufficient power to fuel growth and development. It has only 1,583 megawatts (MW) in installed generation, and imported fuel is a critical piece of its electric power generation. Network failures undermine what little power is produced. As a result, approximately 46 percent of the nation’s total power consumption is from off-grid self-generation (averaging $0.35/kilowatt-hours, kWh).
What has prevented Tanzania from harnessing its domestic resources in an economically efficient way, and what may be done differently going forward? There appear to be three key elements that directly affect Tanzania’s electricity supply industry and generation procurement. The first is a lack of coherent and up-to-date planning; the second is related to the planning and contracting nexus, including the allocation of public and private generation projects. The third element is a lack of sustained commitment to private sector investment and competitive bidding practices. The gas sector also suffers from many of the same issues, with direct implications for power production.
5. Power Generation Developments in Uganda
Uganda occupies a unique space in the history of power sector reform and investment in Africa. It was the first country to unbundle generation, transmission, and distribution into separate utilities and to offer separate, private concessions for power generation and distribution. Critics said that Uganda’s power system was too small to reap the possible benefits that might flow from competition in generation, and more focused management of transmission and distribution (T&D). The years that immediately followed the reforms seemed to bear out the critics’ views: the private distribution operator struggled to reduce losses, and there were delays in investments in large new hydropower capacity, resulting in costly dependence on short-term thermal power.
Despite ongoing challenges, Uganda’s power sector reforms are now bearing fruit. The performance of the distribution utility has improved. Losses are down, and collections, investment, and connections are up, although access rates remain low. After a torturous start, Uganda concluded the largest private hydropower investment in Africa, the Bujagali plant, built by an independent power project (IPP). Simultaneously, it has attracted a raft of smaller IPP investments, including the innovative competitive bids for small hydropower, biomass, and solar projects solicited under the global energy transfer feed-in tariff (GETFiT) program, which was developed jointly by Uganda’s Electricity Regulatory Authority (ERA) and the Kreditanstalt für Wiederaufbau (KfW, German Development Bank). After South Africa, Uganda has the largest number of IPPs in Sub-Saharan Africa and the only other competitively bid grid-connected solar photovoltaic (PV) program.
Alongside these IPP successes, Uganda has now embarked on two large Chinese-funded hydropower projects. Private investment in power is still politically contested, and IPPs are seen locally to be potentially expensive, complex, and time-consuming.
Uganda thus offers much pertinent experience and many valuable lessons in power sector reform, private sector participation, IPPs, competitive bidding, grid-connected renewable energy, and Chinese-supported projects.
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DG Azevêdo: “The role of the multilateral trading system in the midst of mega-regionalism: responding to the problems of trade and investment”
Director-General Roberto Azevêdo visited Jakarta, Indonesia, on 12-13 April to discuss the implementation of recent WTO agreements and future work of the organization. During the visit DG Azevêdo met with President Joko Widodo and the Minister of Trade Thomas Lembong. He also met with a number of other government officials and representatives of the private sector.
In a roundtable discussion on 12 April with the Indonesia Chamber of Commerce and Industry and the Employers’ Association of Indonesia, the Director-General called on Indonesia to ratify the Trade Facilitation Agreement, an outcome of the Bali Ministerial Conference, as it could reduce Indonesia’s trade costs by around 13% and would create a friendlier climate for the private sector.
He also highlighted Indonesia’s important role in ensuring that negotiations in the Nairobi Ministerial Conference reached a positive outcome. Outcomes from Nairobi, he said, will help benefit farmers and exporters in Indonesia and will also be important to the country’s development strategy, which includes food security as a key element. Looking ahead, Indonesia has the opportunity to contribute to the important conversation now under way among WTO members about how to move forward the work of the WTO, DG Azevêdo said.
DG Azevêdo also met with academics and students on 13 April at a seminar organised by the Indonesian Economist Association, the Centre for Strategic and International Studies, and the Institute for Development of Economics and Finance.
“The role of the multilateral trading system in the midst of mega-regionalism: responding to the problems of trade and investment”
Remarks by Director-General Roberto Azevêdo
It is a great pleasure to be with you today – and to be back in Indonesia.
This is my first visit since the WTO’s successful Ministerial Conference in Bali in 2013.
The conference was a historic moment for the WTO.
I was told at the time that Bali is affectionately referred to as the ’Morning of the World’.
After a tough period in global trade negotiations, I expressed the hope that our time in Bali would prove to be the ’morning of the World Trade Organization’.
And that has proved to be the case.
Our Bali conference delivered the first multilateral trade agreement since the WTO was created, two decades earlier.
It proved that the WTO could negotiate important outcomes.
And it showed that the organisation could deliver results with real economic impact, which will make a real difference to people’s lives.
I will come back to the results of Bali later. But I would like to pay a sincere tribute once again to the government of Indonesia for its hospitality and leadership which made the success of the Bali conference possible.
As a result, this country will forever be associated with a vital moment in the history of the multilateral trading system.
Of course, Indonesia has always been a committed and engaged member at the WTO.
The country was one of the founding members of the organization – and remains a central player.
Indonesia is an active user of our dispute settlement mechanism, which helps countries settle their trade differences in a transparent and objective manner.
And you play an important role as the coordinator of an influential group of developing countries in the agriculture negotiations – known as the G-33.
I think this strong engagement shows two things.
First, it shows Indonesia’s confidence in the WTO, and the system of global trade rules that it embodies.
Second, it shows your belief that the WTO can help the country to improve its trading terms.
And right now, this engagement is more important than ever.
We are meeting at a time when the economic scenario is very mixed.
Last week I announced the WTO’s new trade forecasts. In 2015 global goods trade grew at 2.8%. And we expect it to remain at the same level this year. This would make 2016 the fifth consecutive year of sub 3% growth.
This is not unprecedented – we saw lower growth in the early 1980s. And we expect to come out of this pattern of low growth in the coming years, with trade growth forecast to pick up to 3.6% in 2017. But, nevertheless, it is a worrisome situation.
Of course, Indonesia has not been immune from some of the headwinds we’ve seen in recent times. Factors such as the dramatic fall in commodity prices and lower growth in China have had an impact here, as they have had in many other economies.
But I think there are reasons to be optimistic.
Indonesia has both a strong vision for the way forward in the medium term economic plan, and an extremely strong basis on which to build.
Indonesia is the largest economy in ASEAN. It is one of the most populous countries in the world – with a young, dynamic workforce. It has abundant natural resources. And it has an improving business climate – jumping 11 places in the World Bank’s 2016 rankings for the ease of doing business. This performance was in part due to reforms which improved access to credit and made it easier to pay taxes.
In a wider context, a range of reforms have helped to transform the economy – such as diversifying away from agriculture, so that manufacturing now accounts for a greater share of the country’s GDP.
Similarly, efforts on infrastructure development and to improve education and healthcare could have a very significant effect.
The government has set an ambitious trajectory, towards achieving 8% growth by 2019.
Trade can play an important role here. And I believe that some of the recent agreements struck at the WTO can help Indonesia in securing further growth, development and job creation.
The WTO provides the framework of rules by which global trade is governed.
These rules aim to avoid unilateral, discriminatory or arbitrary measures, helping to level the playing field between developed and developing countries.
In this way the WTO provides a kind of constitution for global trade – and I believe that the fundamental principles enshrined therein will remain constant.
Nevertheless, of course there are areas where the rules can be adjusted and updated to ensure that trade flows more freely, and to tackle some specific issues – particularly those faced by developing countries.
Changes to the rules come through negotiations – and with 162 members at the table it has historically proved very tough to reach consensus.
Our ministerial conference in Bali changed all that.
Members reached consensus on a range of important issues at that conference – including the Trade Facilitation Agreement.
This Agreement is about streamlining, simplifying and standardising customs procedures, thereby reducing the time and expense of moving goods across borders, and driving down the costs of trade. The impact will be very significant – greater than removing every single remaining tariff around the world.
Indonesia has already taken positive steps to facilitate trade, such as improving existing infrastructure, including Tanjung Priok port.
It used to take an average of 6.4 days for containers to leave the port after being unloaded. Improved systems have brought the time down to just over four days. This is very positive, but it is still four times longer than it takes in Singapore.
So there’s still work to do, and the Trade Facilitation Agreement can help to complement these efforts.
Studies show that when fully implemented, the Agreement could reduce Indonesia’s trade costs by around 13%.
This would have a big impact. It would lower the barriers for doing business overseas, which have often prevented companies – particularly SMEs – from accessing foreign markets.
Moreover, by further streamlining business processes, the Agreement will help to create an even friendlier climate for private sector investment.
But, in order to benefit from the Agreement, first it must be ratified. This is one immediate and very positive step that Indonesia could take. And, of course, it would be fitting for the country where the Trade Facilitation Agreement was delivered to lead the way in bringing it into force.
Since Bali, the WTO has continued to deliver – and to do so in ways which can benefit Indonesia.
Our most recent ministerial conference was held in December last year, in Nairobi.
At that meeting members took the historic decision to abolish agricultural export subsidies.
This was the biggest reform in agricultural trade rules in the last 20 years – and it fulfils a longstanding demand of developing countries.
By eliminating this trade-distorting support for exports, it will help to level the playing field in agriculture markets to the benefit of farmers and exporters here in Indonesia.
Under the decision, developed members have committed to remove such subsidies immediately, except for a handful of farm products. Developing members have the flexibility to cover marketing and transport costs for agriculture exports until the end of 2023.
Of course, there is much more to do in order to reduce distortions in the agricultural markets, but this is a significant step forward.
In Nairobi, members also pledged to negotiate in the next two years a decision on public stockholding of grains for food security purposes.
In addition, they made a commitment to negotiate a mechanism allowing developing countries to shield local farmers from import surges of food products which can harm domestic production.
As food security is a key element of Indonesia’s development strategy, the negotiations stemming from these recent decisions will be very significant.
And, as in Bali, I want to acknowledge Indonesia’s important role in ensuring that the negotiations in Nairobi reached a positive outcome.
The active engagement of Minister Tom Lembong and his resounding call for WTO ministers to summon the political will and flexibility needed to reach an agreement was instrumental to the success of the conference.
As a result of these breakthroughs, engagement in the work of the WTO is at a level today that I have not seen for a long time.
And with a great deal of effort also being put into regional trade deals, I think many are asking how the different tracks work together.
Actually, although a lot of focus has been put on regional initiatives lately, they are not a new phenomenon. They have long co-existed with the global system, and have largely acted in a positive way, reinforcing cooperation on trade.
In my view, a healthy trading system would see progress and engagement at all levels.
Our recent efforts to analyse these issues supports this conclusion. It shows that regional agreements have WTO DNA, and in the areas where they overlap with WTO rules we have found no obvious conflicts.
A bigger consideration is where such initiatives cover areas that are not currently covered by the WTO. And this puts the spotlight back on the current WTO agenda.
An important conversation is now underway among WTO members about how we should move our work forward.
It is clear that all WTO members want to deliver on the so-called Doha negotiating issues, such as domestic subsidies in agriculture, fisheries subsidies, and improved market access for agricultural produce, industrial goods and services. However, members do not agree on how to tackle these issues.
In addition, some would like to start discussing a wider range of topics, including other, non-Doha issues. Investment promotion, e-commerce, and small and medium-sized enterprises are a few of the broad areas that have been raised so far.
This is an important conversation. And despite some gaps, there are some important commonalities.
For example, there is a strong desire to keep development at the centre of our efforts and to continue making positive efforts to integrate developing countries into trading flows.
In addition, members want to achieve more – and to do it faster.
I think this is an exciting opportunity for Indonesia. You have the opportunity to shape the future of global trade talks in your interests.
I encourage you to bring your issues to the table. Clearly agriculture and food security are priorities. I have also heard a lot of discussion here in Jakarta about increasing the level of investment in the country. So there are a range of interests which you could seek to pursue.
This debate is happening now – and I urge you to stay engaged.
Your voice will be as important as ever.
I have tried to demonstrate today how important trade and the WTO are for Indonesia. But I think it’s also clear just how important Indonesia is for the WTO.
It was here in Indonesia that the WTO delivered its first major negotiating success.
And I hope that you will be at the heart of many more successes in the years to come.
Thank you for listening.
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2016 African Economic Platform
The African Economic Platform will bring African leaders from public, private, philanthropic and academic sectors to engage on four (4) critical matters leading to implementable initiatives. As agreed, to ensure that the basic human rights of our peoples are at the centre of Agenda 2063, we have to ensure that rights to education, to food and nutrition, to health care, to safe water, sanitation and energy are enshrined in our respective endeavours to implement Agenda 2063.
The Continent is at a fork in the road. Notwithstanding the current challenges faced by the continent, sustained growth remains the key ingredient to unleash the potential of the continent when adequate skills are continuously harnessed and free movement of the African people becomes a real facility accessible to all. We know that development aid has helped, but will not deliver sustainable growth and transformation in Africa. The continent must continue to explore and tap into innovative and domestic finance for the effective implementation its transformation through trade and industrialisation.
A study by NEPAD and ECA (2014) shows that Africa is responsible for a significant proportion of its development finance as more than $527.3 billion comes from domestic taxes compared to $73.7 billion received in private flows and 51.4 billion in official development assistance. Supplemental revenues come from pension funds, diaspora remittances, earnings from minerals and fuels, international reserves held by reserve and central banks, liquidity in the banking sector, the growing marketplace for private equity funds and potential resource flows from securitisation of remittances.
Following the January 2016 African Union Summit, we find it appropriate to take the decisions and conversations forward in order to ensure that business and political leaders, find realistic and achievable common ground to ensure that terrorism in Africa will not find fertile ground in poverty. It is our belief that Africa has the required internal resources to finance the transformation of its people and the continent. Furthermore, that shared prosperity and well-being are achievable for ordinary Africans across the continent.
While African countries taken separately may have diverging issues, the African Economic Platform will allow for four (4) interconnected issues to anchor the programme. As a result, the time invested will result in greater collaboration on matters of common interest for effective African integration leveraging on two (2) billion Africans.
Critical issues
Four critical areas that have the potential when realised in their right mix, in each country and region, to elevate the socio-economic conditions of Africans, have been identified. We ought to leave Mauritius with the assurance that Africans will be equipped with adequate skills on the largest visa-free continent, in order to use their skills through the value chain of our natural resources making African industrialisation, the premise of greater intra-African trade. For this purpose, we agree to focus our discussions on (1) skills, (2) trade, (3) industrialisation and (4) free movement.
More specifically, the African Economic Platform aims at securing:
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Commitment from all parties to remove policy obstacle for doing business in Africa;
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Implementation of policies for sustained and inclusive growth;
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Increase African awareness of continental issues in a global context; and
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Integrate youth perspective and commitment into the #AfricaWeWant
Trade
What would it take for African countries to stop exporting the bulk of their oil, diamonds and maize to foreign countries rather than to other African countries?
Trade creates linkages that are essential to the integration agenda. Although intra-African trade is not a panacea for development, it is quite important. Small Medium Enterprises could become more competitive by creating economies of scale across their respective regions. As they grow, SMEs can strengthen product value chains and facilitate the development of technology and knowledge.
Trade incentivises and spurs infrastructure development and attracts foreign direct investment expanding intra-African trade. This is key to accelerating economic growth on the continent. Especially important for the continent’s many small, non-coastal countries that face tremendous challenges trading internationally.
Unfortunately, Africa’s current internal trade is challenged by the fact that most of its exports go to the world’s advanced economies like the US,UK and China, and most of its imports come from those same advanced economies. In this respect, the African Economic Platform ought to reflect on:
Economic diversification in order to encourage many African countries to specialise in complementary goods to exchange with each other;
Conflict as it diminishes the capacity for African states to engage in intracontinental trade. These factors lead to low levels of economic growth, destroy needed export infrastructure, and slow and reverse regional integration;
Infrastructure is and has always been a major issue for Africa. Like conflict, infrastructural deficiencies reduce economic growth and productivity, and raise transportation costs.
The unnecessary delays, harassments and massive graft associated with corruption among those engaged in intraregional trade in Africa needs to be addressed in order to increase trade. This will require a coordinated and harmonised implementation of stringent protocols on the free movement of goods and people across the region by, in particular, dismantling the numerous security outposts and checkpoints along the borders. This process will facilitate trade, reduce smuggling activities and promote regional investments in trade.
To reduce trade diversion, a supranational body or the region’s more prosperous countries should fill any vacuum created by the stepping back of non-African trading partners. Regional innovation and technology policies should be crafted to ensure the diffusion of technology, and a comprehensive competition policy outlining the rules of the game in the form of rewards and sanctions for the conduct of national economies in intraregional trade could also be designed. There is a need for greater efficiency in the delivery of trade-related services by banks and other financial institutions in the region. Adequately capitalized export-import banks should be encouraged to support trade within African countries by facilitating the painless and swift transfer of export receipts and import payments.
To effectively stimulate growth across sectors and among nations in the region, significant efforts must be undertaken to address these challenges if the benefits of intra-Africa trade are to be truly realised.
Conclusion
The resolution of the issues identified through dialogue and effective determination are central to the implementation of the programs that support the Agenda 2063. We, Africans, affirmed our determination to build an integrated, prosperous and peaceful Africa, driven and managed by its own citizens, representing a dynamic force in the international arena.
The African Economic Platform thus offers a high-level forum for public-private sector consultations. While we recognise that efforts on the part of governments are required to enhance political stability, promote peace and security, strengthen public administration, raise confidence in the legal and regulatory frameworks, gain more ground in the war against corruption and invest more in capacity development, the African private sector should seize the opportunities to accompany ongoing reforms aimed at expanding the fiscal space to support implementation.
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DG Azevêdo: A healthy trading system requires progress and engagement at all levels
Speaking at the annual meeting of the Inter-Pacific Bar Association in Kuala Lumpur, Malaysia, on 14 April, Director-General Roberto Azevêdo maintained that the proliferation of regional trade agreements (RTAs) in recent years has helped to expand world trade.
But he also highlighted that some trade issues can only be solved globally and “it is at the global level that we need to take a considered view of the evolution of RTAs and of the trade negotiating agenda” to achieve a balanced, harmonious and inclusive framework.
“Embracing change: forging global trade partnerships”
Remarks by Director-General Roberto Azevêdo
Good morning – I’m very pleased to be here today. I would like to thank the Inter-Pacific Bar Association for the kind invitation.
We are meeting at a challenging time for global trade.
Last week I announced the WTO’s new trade forecasts. In 2016 we expect global goods trade to grow at 2.8% in volume. This would make 2016 the fifth consecutive year of sub 3% growth. The most critical variable in the trade expansion equation is, of course, GDP growth. And as long as GDP growth remains subdued, the trade numbers are likely to follow a similar trend.
This is not unprecedented – we saw low trade growth in the early 1980s. And we expect to come out of this pattern of low growth in the coming years, with trade growth forecast to pick up to 3.6% in 2017.
But, nevertheless, it is a worrisome situation.
And while the level of trade growth has stayed fairly constant in recent years, it is interesting to note that its composition is changing.
A key driver of trade growth from 2011-2013 was import demand in Asia.
In the last two years this has shifted. Demand in the US and Europe is driving today’s modest growth, making up for slowdowns in Asia and elsewhere.
In fact, if Asia’s contribution to trade had matched its average of recent years, world trade would have grown 3.5% in 2015, rather than 2.8%.
And trade growth is not just a dry economic indicator, unrelated to the real world.
It matters because trade can act as a driver of broader economic growth and job creation. It certainly isn’t the only driver, but it is an essential component of any strategy for sustainable economic growth.
And so the gloomy picture I have painted so far leads us to the question: what can we do to respond? How can we get the engine of trade firing again?
We have the power to act.
Governments have pushed monetary and fiscal policies to the limit in recent years but there is still room to move on trade. A more activist approach here could help to stimulate global demand.
One step would be for governments to remove the trade restrictive measures that they have introduced in recent years. Only 25% of the restrictive measures that WTO members put in place since the 2008 financial crisis have been removed. So action here could make a big difference.
We can also put in force trade agreements we have reached recently. By implementing the Trade Facilitation Agreement alone we could add another US$ 1 trillion to global trade. Most of that as exports from developing countries - around US$ 730 billion.
Another step is, of course, striking new deals. And we are seeing a lot of activity on this front – both at the regional level, and through the World Trade Organization.
Sometimes these different tracks are talked about as if they were in conflict with each other – but this is not the case. These approaches do not require an "either/or" strategy. Quite the opposite.
While they have grown rapidly in recent years, bilateral and regional trade initiatives are not a new thing. Actually they pre-date the creation of the global trading system.
These different kinds of initiatives have long co-existed and complemented each other – and I have no doubt that they will continue to do so.
Today, virtually all WTO members are involved in at least one of these initiatives.
270 regional trade agreements – or RTAs – are in force and have been notified to the WTO.
Over a third of these RTAs involve the Asia-Pacific region.
Obvious most recent examples in the region would include the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership. And of course there are other important initiatives such as the Silk Road Economic Belt and the Maritime Silk Road, which attempt to build and develop linkages between several partners.
To take the example of the TPP, many of the 12 partners involved already have existing bilateral agreements with each other. The added advantage of this broader agreement is the potentially enormous market it creates. Instead of dealing with a number of different sets of rules or standards, the TPP could mean that trade takes place under similar conditions between all the countries involved.
As many other recent undertakings, the TPP is an example of deep integration through regional trade agreements. While earlier RTAs concentrated on only liberalizing tariffs, more recent RTAs have gone further.
Empirical evidence suggests that the deeper the RTA, the greater the potential for the development of production chains which span national borders.
WTO members in the Asia-Pacific region in particular have greatly benefited from these global value chains.
As production networks expand and regional and global value chains become more important, it becomes critical to more rapidly harmonize differences in legislation, rules and infrastructure, which impact international trade and investment.
This appears to be what we see occurring more and more in modern RTAs and other regional networks.
The silk-road economic belt, for instance, is rebuilding traditional links by concentrating on issues of connectivity such as improved infrastructure including road and rail links and port facilities. It will also try and better connect Asia with Europe, especially landlocked Central Asia and improve trade facilitation.
These are all important steps that need to be taken to free up international trade and facilitate greater integration in value chains.
But how does all of this regional activity fit within the global framework of the World Trade Organization?
The WTO has 162 members – and rising. Our rulebook covers 98% of global trade. So, by and large, RTAs operate within these rules.
Indeed, our analysis of regional agreements shows that they all have WTO DNA. And in the areas where they overlap with WTO rules we have found no obvious conflicts.
A bigger consideration is where such initiatives touch on areas that are not currently covered by the WTO. This creates a potential scenario where different RTAs deal with the same issue in different ways.
No-one would suggest that regional agreements should not venture into these areas. But I think conversations in the WTO could help us establish whether a multilateral approach is feasible or desirable. If so, we would have a much more balanced, harmonious and inclusive framework.
A healthy trading system requires progress and engagement at all levels. And we have to acknowledge that one reason for the proliferation of regional agreements over recent years was a lack of progress in striking trade agreements globally through the WTO.
I’m pleased to say that we are now changing this situation. The WTO has actually delivered an impressive amount over the last couple of years.
I’ll come back to this in a moment, but it’s also important to note that a healthy trading system isn’t just about negotiating trade agreements – the WTO’s work extends far beyond negotiations. We also monitor trade policies, build trading capacity in developing and least-developed countries, and we have built one of the most effective dispute settlement systems in international law.
Indeed, although some RTAs have provisions on disputes, most of the dispute settlement mechanisms provided are rarely used. Meanwhile the level of activity in the WTO’s dispute settlement system is rising very rapidly. We have dealt with over 500 disputes in the WTO’s 21 year history. And of course most of the disputes brought to the WTO involve parties who are also themselves part of an RTA.
There is great value in this work. But let me come back to the progress we’ve been making in our negotiating work – as this is where we are focusing our discussion today.
As I say, the WTO has recorded a number of big breakthroughs in just two years.
At our Ministerial Meeting in Nairobi last December WTO members agreed to abolish agricultural export subsidies. This was the biggest reform of agricultural trade rules in the last 20 years.
There is much more to do in order to reduce distortions in the agricultural markets, but there’s no doubt that this is a major step forward.
In Nairobi, members also agreed a number of steps on food security and to support trade in least-developed countries.
And a group of WTO members struck a deal to expand the WTO’s Information Technology Agreement. This deal will eliminate tariffs on 201 new generation IT products – trade in which is worth around 1.3 trillion dollars. That’s bigger than the global automotive sector.
These achievements build on the success of our previous Ministerial Meeting, held in Bali in December 2013.
Important outcomes were achieved there, including the WTO Trade Facilitation Agreement.
By streamlining, simplifying and standardising customs procedures, this Agreement will dramatically cut the time and cost of moving goods across the border.
Studies show that when fully implemented, the Agreement could reduce trade costs of members by an average of 14.5%. This could increase global merchandise exports by up to 1 trillion dollars per year. And it could have a range of connected benefits – helping SMEs to trade, helping economies to diversify their exports, providing a better climate for investment, and helping countries to join global value chains.
These outcomes are economically very significant. And I think they illustrate the importance of pursuing different tracks in trade negotiations.
Some problems can only be solved globally. Eliminating agricultural export subsidies and acting on trade facilitation could only be achieved effectively at this level.
In the same way, it is only at the global level that we can successfully and comprehensively address topics such as domestic subsidies in agriculture and in the fishery industry.
In addition, it is at the global level that we need to take a considered view of the evolution of RTAs and of the trade negotiating agenda.
At the WTO’s Nairobi meeting, ministers instructed us to look at the systemic implications of RTAs, with a view to enhancing their transparency, and increasing our understanding of them. They also instructed us to consider how to bring our negotiating work forward, both regarding the pending Doha issues, but also any non-Doha issues.
So, besides finding solutions for the core issues we had been dealing with, we now also must consider what else we must look into more closely. Members are talking about electronic commerce, small and medium enterprises, facilitation of investments, and many other subjects that they would like to talk about.
Some of these issues are already being developed in RTAs so this is also an opportunity to advance in a more coherent and inclusive way.
Clearly we must work to ensure that different trade initiatives complement one another.
But I think that all of the activity I’ve described today is a reason for optimism.
It shows a growing desire to use trade and trade agreements of all kinds to foster economic growth and development.
Certainly at the WTO I am seeing a level of engagement and excitement about our work that surpasses anything I have seen for a long time.
So I invite all of you to participate in this very lively debate that is shaping the trade agenda for the next several years.
I look forward to our discussions this morning.
Thank you for listening.
Remittances to developing countries edge up slightly in 2015
Remittances to developing countries grew only marginally in 2015, as weak oil prices and other factors strained the earnings of international migrants and their ability to send money home to their families, says the World Bank’s latest edition of the Migration and Development Brief, released on 13 April.
Officially recorded remittances to developing countries amounted to $431.6 billion in 2015, an increase of 0.4 percent over $430 billion in 2014. The growth pace in 2015 was the slowest since the global financial crisis. Global remittances, which include those to high-income countries, contracted by 1.7 percent to $581.6 billion in 2015, from $592 billion in 2014.
The slowing in remittances growth, which began in 2012, was exacerbated last year by low oil prices, which are taking a toll on many oil-exporting remittance-source countries, such as Russia and the Gulf Cooperation Council (GCC) states.
As a result, many remittance-receiving countries, including India, the world’s largest remittance recipient, and Egypt saw remittances contract in 2015, as flows from the GCC countries slowed considerably. Remittances contracted by 20 percent to countries in the Europe and Central Asia region, with the heaviest impacts on Tajikistan and Ukraine, as a struggling Russian economy, and depreciation of the Russian ruble against the dollar contributed to the decline in remittances to the region.
India retained its top spot in 2015, attracting about $69 billion in remittances, down from $70 billion in 2014. Other large recipients in 2015 were China, with $64 billion, the Philippines ($28 billion), Mexico ($25 billion), and Nigeria ($21 billion).
“Remittances are an important and fairly stable source of income for millions of families and of foreign exchange to many developing countries. However, if remittances continue to slow, and dramatically as in the case of Central Asian countries, poor families in many parts of the world would face serious challenges including nutrition, access to health care and education,” said Augusto Lopez-Claros, Director of the World Bank’s Global Indicators Group.
Remittance flows are expected to recover this year, after a bottoming out in 2015, with growth driven by continued economic recovery in the United States and the Euro Area, and a stabilization of U.S. dollar exchange rates of remittance-source countries. In addition to currency movements, oil prices are a key downside risk to this outlook. Should the price of oil suffer unexpected declines, remittances from Russia and the GCC would be further buffeted.
The global average cost of sending $200 was about 7.4 percent in the fourth quarter of 2015, down slightly from the previous quarter and 0.6 percentage points below the end of 2014. Sub-Saharan Africa, with an average cost of 9.5 percent, remains the highest-cost region.
However, major international banks continue to close correspondent banking accounts of money transfer operators (MTO) to limit exposure to money laundering and other financial crimes. A World Bank survey confirms that account closures are widespread, with adverse impacts on remittance costs and flows in rural and remote regions. For example, over the past two years, 84 accounts of 32 Philippine remittance providers (including both banks and MTOs) were closed by 33 foreign banks in 13 major remittance-sending countries, according to the Philippine central bank.
A special feature on natural disasters and epidemics notes that migration and remittances have long played important roles in helping to cope with natural disasters, although the vast majority of people displaced by a disaster move for only a short period and remain in their home country.
The diaspora has assisted people affected by disasters by sending more money home. However, remittances may also fall if the disaster disrupts the money-transfer infrastructure. While climate change is likely to result in increased frequency and severity of weather-related disasters, the international community currently lacks a legal and institutional framework to cope with the resulting migration from the affected areas.
“The diaspora provides significant help during natural disasters, as in the case of Nepal’s earthquake last year. However, we know little about how it responds to communities in times of epidemics such as Ebola. We need more data and research on this topic,” said Dilip Ratha, lead author of the Brief and head of the Global Knowledge Partnership on Migration and Development (KNOMAD).
Regional Remittance Trends
Among geographical regions, Latin America and the Caribbean saw the most rapid growth rate in remittances in 2015, of 4.8 percent, due to the recovery in labor markets in the United States. Growth is expected to continue in 2016, albeit at a slower pace, with remittances expected to reach $69.3 billion this year, from $66.7 billion last year.
Remittances to East Asia and the Pacific rose by 4.2 percent in 2015, down from 7.4 percent in 2014. Nevertheless, the region remained the top remittance recipient amongst all geographical regions. Remittances are projected at $131 billion this year, up from $127 billion in 2015.
Remittances to South Asia grew by 2 percent in 2015, down from 4.3 percent in 2014, due to a contraction in flows to India, the world’s largest remittance recipient, and Sri Lanka, despite a spike in remittances to Nepal in response to the earthquake. The region is expected to attract $123.3 billion in remittances this year, compared to $117.9 billion in 2015.
Sub-Saharan Africa saw a modest growth of 1 percent in remittances in 2015, compared to 0.2 percent in 2014. Remittances to the region are expected to increase further this year, by 3.4 percent, to $36 billion, from $35.2 billion in 2015.
Remittances to the Middle East and North Africa contracted by 0.9 percent in 2015, from 4 percent growth in 2014, largely due to a decline in inflows to Egypt, the region’s largest remittance recipient. However, remittances to the region are expected to grow by 2.6 percent this year to $51.6 billion, from $50.3 billion in 2015.
Remittance flows to Europe and Central Asia were severely affected in 2015, contracting by 20.3 percent, due to the depreciation of the Russian ruble against the dollar and the slowdown in economic activity in Russia, a major source of remittances for the region. The region should, however, see a robust recovery this year, with remittances expected to grow by 5.1 percent to $36.3 billion, from $34.6 billion in 2015.
The Migration and Development Brief and the latest migration and remittances data are available at www.worldbank.org/migration and www.knomad.org
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tralac’s Daily News Selection
The selection: Wednesday, 13 April 2016
Profiled tweet, @AddyNjau: Based on threats Chinese products pose to EAC market, a cost-benefit analysis on China-EAC FTA should be conducted
Featured commentary, by Bruce Byiers, Jan Vanheukelom: 'Doing regional integration differently in Africa' (EurActiv)
Launching today, in Johannesburg: Industrialisation Working Group (SABF)
The Working Group aims at strengthening and building up cross-border value chains to implement RISDP and the SADC Industrialisation Strategy. It will be constituted as a regional platform for a constant Public-Private Dialogue (PPD) to identify existing and potential regional value chains and exchange on required policies to create an enabling environment for inclusive regional value chains.
Concluding today, in Lusaka: The Commonwealth's Africa Regional Planning Workshop for its #HubandSpokesII project
Underway, in Pretoria: African Competition Forum research skills workshop, cross-country sectoral studies project
Mauritius: Defining a new strategy for economic diplomacy (Government of Mauritius)
One of the objectives of the seminar [16 April] is to find ways to give a new orientation to the country’s diplomatic strategy and to adapt to the new challenges of economic openness. The seminar is meant to be a brainstorming exercise for officers of various levels of the ministry around the new vision of the Minister for Mauritian diplomacy.
Zimbabwe - South Africa: Law to avoid double taxation gazetted (The Herald)
Legal provisions to support an agreement between Zimbabwe and South Africa to avoid double taxation have been gazetted, but legal experts say that an official statement has must be made on when the regulations will come into effect. When the double taxation regulations come into force the new agreement will replace the outdated pact between the two countries, signed in 1965. Enforcement of the law is governed by article 28 of the bilateral agreement, and will depend on when the countries complete legal procedures to bring it into force.
Implementation of Nairobi Ministerial Decision on Preferential Rules of Origin for Least Developed Countries (WTO): Document submitted by Benin on behalf of the LDC Group to the formal meeting of the Committee on Rules of Origin [22 April]. This short note aims at raising some issues:
East Africa: Rigid statutes limit regional ICT policies (Daily Nation)
The East Africa Communications Organisation report says that “regulatory bodies in Kenya and Uganda have independence in decision making,” a move that the rest of the countries ought to emulate. Decisions by Burundi’s communications regulator are subject to approval by the Office of the President. Rwanda’s regulator, on the other hand, answers to the prime minister. Decisions by the regulator could be cancelled on grounds of threat to security of Rwanda or a foreign country. Tanzania’s Communications Regulator is answerable to the minister responsible for communications who ensures rules are in compliance with the codes of conduct. EACO has, therefore, recommended that “member states should guarantee the separation of functions relating to policymaking, regulation and service provision. [Download:Workshop for Regulators and Policy Makers report]
Uganda reportedly set to confirm Tanzania as pipeline route (IPPMedia)
The Tanzanian delegation led by top ministry representatives are reported to have successfully made the country’s case for the pipeline to pass through Tanzania as a safer and more cost-effective option, despite Kenya's aggressive lobbying for the project. "The conclusion and recommendations of the Ugandan government is that the Tanzania route provides the most economic and robust option for transportation of Uganda's crude oil because of the various advantages it has over the routes through Kenya," a senior ministry official told The Guardian. "The Kaabale (Uganda)-Tanga route promotes the development of an integrated regional pipeline project for oilfields of Kenya, South Sudan, the Democratic Republic of the Congo, Tanzania, Rwanda and Burundi," the official added.
Namibia: Foreign reserves adequate for CMA agreement (New Era)
The level of foreign exchange reserves held by the Bank of Namibia has expanded significantly compared to 2014. The central bank’s latest annual report indicates that foreign reserves increased by 74.3% to N$23.6bn up from N$13.5bn in December 2014. The bank admitted though that the increase was mainly due to the successful issuance of the 10-year Eurobond, amounting to $750m during October 2015. [Total debt levels slow 14% to N$119bn]
Uganda: Status of Investment FY 2014/15 report (Uganda Investment Authority)
India registered the largest number FDI licensed projects, totaling to 65 and this accounted for 26% of all the FDI projects in 2014/15, which were 372 in number. India has been front runner as regards the number of foreign projects in Uganda since 2011. China was the second highest source of foreign projects in all the last four financial years. In 2014/2015 China contributed the largest amount of FDI planned investment ($528.9m) and this accounted for 56% of all the FDI planned investment in financial year 2014/15 ($1.4bn). The country is a front runner in source of FDI to the country when it comes to the value of investment.
Buhari: ‘Nigeria must not be a consumer market for Chinese products’ (Vanguard)
Nigeria must not be seen as a consumer market alone, but an investment destination where goods can also be manufactured and consumed locally, President Muhammadu Buhari, has said. He also ordered immediate establishment of technical committees to finalize discussions on infrastructure projects. Speaking at the opening of a Nigeria-China Business/Investment Forum, yesterday, in Beijing, capital of China, President Buhari said trade and economic relations between both countries must be mutually beneficial and reciprocal. He called on the Nigerian and Chinese business communities to work harder to reduce the trade imbalance between both countries.
Standard Bank strengthens position by connecting Africa clients (Moneyweb)
“We are committed to the growth in Africa and we have the ability to service [businesses] seamlessly across the region,” said Greg Brackenridge, CfC Stanbic Bank East Africa regional chief executive. Brackenridge was speaking at the launch of Standard Bank’s inaugural trans-regional conference on Tuesday, which hosts Standard Bank clients from South Africa, Zambia, Uganda, Kenya and Tanzania.
ECOWAS CET will enhance trade policy – Shippers Authority (Ghana Business News)
Madam Sylvia Asana Dauda Owu, Deputy Chief Executive Officer of the Ghana Shippers’ Authority, has said the implementation of the ECOWAS Common External Tariff (CET) would provide better trade policy across the sub-region. She said this would include applying special protection measures aimed at addressing any trade imbalances across Member States thereby providing a real boost to the manufacturing sector and trading in general. Mrs Afua Eshun, Advocacy Manager for Borderless Alliance, said the workshop aims at strengthening the capacity of customs officials at the border in understanding the CET and raise awareness among the private sector and cross-border traders for a better understanding of the provisions of the CET.
NEPAD to collaborate with Thomson Reuters to accelerate pace of innovation
This collaboration comes on the heels of the AU's Science, Technology and Innovation Strategy for Africa 2024 initiative, a continental strategy that aims to accelerate Africa's transition to an innovation-led and knowledge-based economy by boosting production in the science, technology, and innovation sectors. Thomson Reuters will contribute the following: i) data to assist the evaluation of key innovation indicators, ii) training to accurately evaluate these performance indicators and monitor continent-wide scientific research, iii) collaboration in producing academic research and proprietary white papers, iv) ensure the inclusion of African journal data into international indexes, making the research more visible and accessible.
Updates from NEPAD/RECs: Signing of the South Sudan Accession Treaty scheduled for 15 April, SADC/UN to strengthen collaboration on preventive diplomacy, Ibrahim Mayaki: 'No option but to innovate in the way we do the business of agriculture'
World Bank agricultural sector risk assessments: Tanzania, Ghana
OECD Committee for Agriculture: Ministerial declaration
Declare that we: Express our firm conviction that the agriculture and food system can contribute very significantly to global solutions in all these areas. We also note that while policies for food and agriculture have begun to change, international and domestic policy settings are not sufficiently aligned with emerging needs. We further note that there is a growing urgency for integrated policy approaches that will better enable farmers and the food sector to simultaneously improve productivity, increase competitiveness and profitability, improve resilience, access markets at home and abroad, manage natural resources more sustainably, contribute to global food security, and deal with extreme market volatility, while avoiding trade distortions. Welcome further dialogue under the auspices of G7, G20, APEC, WTO and other forums planned to be held in 2016 and beyond, and, finally, agree to come together again at OECD within the next five to six years to take stock of progress on implementing policies to achieve a more productive, sustainable and resilient food system. [Summary by Co-Chairs]
Global Food Policy Report calls for improved global food system (IFPRI)
Finally, the new global food system needs to be friendly toward business to encourage well-functioning markets and cooperative private sectors. Private sector investment is crucial in advancing agricultural technology and productivity and thus need to be included in the broader food policy debate. Policymakers should focus on mitigating the effects of price volatility and on creating an enabling environment for public-private partnership. Such an environment will require adequate transportation, communication, and energy infrastructure, as well as transparent financial institutions and agricultural extension services.
Latin America faces policy dilemmas post boom (World Bank)
As detailed in 'The commodity cycle in Latin America: mirages and dilemmas', the latest semi-annual report by the World Bank’s Chief Economist Office for Latin America and the Caribbean, the region is expected to contract by 0.9% in 2016. South America, which has borne the brunt of the fall in commodity prices and in Chinese growth, is expected to contract by more than 2% this year, on the back of sharp recessions in Brazil and Venezuela. However, in Mexico, Central America and the Caribbean — which depend less on commodity exports and are more closely tied to the economic recovery in the United States — growth is expected to remain positive in 2016, coming in at 2.5%.
Politics pushes more money out of South Africa (Business Day)
South Africa credit rating downgrade could hit Kenya’s new Eurobond offer (Business Daily)
India: What explains the jump in foreign exchange reserves? (Livemint)
Raghuram Rajan builds record reserves to strengthen Asia’s worst currency (Livemint)
The IMF's World Economic Outlook is posted: download
EASSI: Poor skills, lack of capital threaten women engaged in cross-border trade (New Times)
Mauritius-based investment fund acquires InterContinental Hotel Lusaka
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Global Food Policy Report calls for improved global food system
Last year witnessed the culmination of the Millennium Development Goals (MDGs) and the launch of a new global development agenda – the Sustainable Development Goals (SDGs). According to IFPRI’s 2016 Global Food Policy Report (GFPR), launched in Washington, DC last week, achieving the ambitious aims of the SDGs – which include eliminating extreme poverty, hunger, and malnutrition while encouraging sustainable growth and conserving the environment by 2030 – will require coordinated action at the global, regional, national, and local community levels.
A key component of reaching the SDGs will be creating a more sustainable, inclusive, and efficient global food system. While the current food system feeds 6 billion people, according to the report, it still leaves nearly 800 million people hungry; at the same time, many of those 6 billion people who eat calories do not eat nutritiously enough and thus suffer from malnutrition. In addition, the global food system is responsible for the livelihoods of millions of people, many of whom remain impoverished in rural developing areas due to a lack of productivity and market access. Finally, as the world faces increasingly scarce natural resources and stronger climate change-driven weather shocks, global agricultural systems are quickly becoming unsustainable and need to become more climate-smart.
A better functioning global food system would be more efficient, inclusive, climate-smart, sustainable, nutrition- and health- driven, and business-friendly. The specific application of these characteristics and their role in the global food system is discussed as follows.
Functioning Markets: The FAO reports that by 2050, global food producers will need to produce 70 percent more food than they do today in order to feed the world’s population. However, the world’s natural resources will not be able to support such an increase in production using current agricultural techniques. Thus, the challenge is how to feed more people using fewer resources. One solution is increasing the efficiency of global agricultural trade so that food can move more efficiently between countries that have it and countries that need it. The decision by the 10th WTO Ministerial Meeting in December to end agricultural export subsidies is a strong step toward reducing trade distortion and thus making agricultural trade more efficient, according to the GFPR.
Food Waste: Another important factor in increasing the efficiency of the world’s food systems is the reduction of food waste and loss. According to the FAO, around 30 percent of the food produced around the world annually ends up lost or wasted at some point along the global agricultural value chain. Food loss occurs most often in the production and processing stages in developing countries and is due to factors such as improper harvesting and storage techniques and loss to pests and disease; food waste, on the other hand, is most common during the consumer stage in developed countries when food is discarded due to safety or quality concerns. Addressing food loss and waste will require efforts to improve the infrastructure, technology, and transportation available to producers in developing countries and to educate both producers and consumers about ways to minimize loss and waste.
Access and Inclusion: Smallholder farmers (those who farm less than 2 hectares of land) make up the majority of the world’s agricultural producers; these households also make up half of the world’s poor and hungry population, according to the report. A lack of access to assets, such as tractors and fertilizers, and higher value markets makes smallholder production less efficient. In addition, female farmers and youths can play an important role in increasing agricultural productivity and ending poverty and hunger, but these groups also face constraints in terms of their access to assets and agricultural markets. Thus, ensuring that the world’s agricultural system becomes more inclusive of these poor and marginalized groups is essential to boosting agricultural outputs, particularly of more nutritious crops. The GFPR estimates that closing the gender gap in agricultural production could reduce the number of undernourished people by 12-17 percent, or 100 to 150 million people. Policies to enhance inclusion can include increasing access to agricultural inputs and financial services like insurance and credit, as well as ensuring that women have equitable land rights.
Climate-Smart: Making agriculture and food production systems more climate-smart is the third key factor in achieving the SDGs, according to the GFPR. With climate change already bringing about shifts in temperature, precipitation, and weather volatility worldwide, it will continue to have important implications for crop yields in the coming decades. Unfortunately, many of these implications will likely be negative – the World Bank estimates that global cereal yields will decline by 20 percent by 2050 due to climate-change driven shocks. These negative effects will hit smallholder farmers particularly hard because this population is already more vulnerable due to limited resources and capacity to adapt. In addition, agricultural production is itself a driver of climate change, producing one-fifth of total greenhouse gas emissions according to the FAO. Therefore, making the global food system more climate-smart is crucial on both ends – reducing future emissions and helping farmers adapt to the negative effects caused by current emissions levels. Climate-smart techniques such as no-till farming, the use of more resilient crop varieties, and the use of agroforestry can also help improve agricultural yields, thus improving food security as well as protecting the environment.
Sustainability: The concept of a sustainable food system goes hand-in-hand with a climate-smart food system. Efforts are increasing to make sure that intensified agricultural production does not come at the cost of efficient use of natural resources and reduced environmental impacts. The report identifies several agricultural technologies that can enhance both sustainable production and food and nutrition security; these include the use of heat- and drought-resistant crop varieties and the use of more efficient drip irrigation systems.
Consumption Patterns: A sustainable food system will also require addressing three global diet trends: overconsumption of calories, overconsumption of protein (particularly animal-based protein), and growing global demand for resource-intensive beef products. These trends all pose risks to human health, but also have negative implications for the environment, requiring significant resource use and resulting in significant greenhouse gas emissions from intensified production. Changing people’s dietary preferences can be a challenge, however. Both governments and private sector companies will need to be engaged in consumer education and in setting incentives to shift consumers’ diets to healthier, less resource-intensive products.
The world’s current food system tends to focus solely on meeting caloric needs rather than focusing on nutrition and health; according to the World Bank, 2 billion people worldwide suffer from some type of micronutrient deficiency, and as many as 795 million are undernourished. In addition, nearly 162 million children under the age of five are stunted, particularly in Africa south of the Sahara and South Asia. These rates of undernutrition will have significant impacts on countries’ economic development, as malnutrition can result in cognitive impairments that lower educational attainment and ultimately labor productivity.
At the other end of the spectrum, overnutrition – or consuming more calories than needed for optimal health – has become another global health risk, with 2 billion people worldwide either overweight or obese. A food system that emphasizes adequate, appropriate consumption of nutritious food can help battle both under- and overnutrition. Policies should focus on encouraging agricultural value chains to produce greater quantities of nutritious foods; such interventions could include the establishment of “cold chains” to keep perishable foods like fruits and vegetables fresh or contract farming arrangements that encourage farmers to grow more nutritious crop varieties.
Private Sector Engagement: Finally, the new global food system needs to be friendly toward business to encourage well-functioning markets and cooperative private sectors. Private sector investment is crucial in advancing agricultural technology and productivity and thus need to be included in the broader food policy debate. Policymakers should focus on mitigating the effects of price volatility and on creating an enabling environment for public-private partnership. Such an environment will require adequate transportation, communication, and energy infrastructure, as well as transparent financial institutions and agricultural extension services.
To track progress on these six characteristics, the GFPR calls for the establishment of a food system index, as well as for increased research into how to realistically and sustainably improve the global food system.
This blog was orginally published on the IFPRI-led Food Security Portal.
» Download: 2016 Global Food Policy Report (PDF, 5.16 MB)
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Global economy faltering from too slow growth for too long
Global growth continues, but at a sluggish pace that leaves the world economy more exposed to risks, says the IMF’s latest World Economic Outlook (WEO).
The WEO forecasts global growth at 3.2 percent in 2016 and 3.5 percent in 2017, a downward revision of 0.2 percent and 0.1 percent, respectively, compared with the January 2016 Update (see table).
In a recent speech, IMF Managing Director Christine Lagarde warned that the recovery remains too slow, too fragile, with the risk that persistent low growth can have damaging effects on the social and political fabric of many countries.
“Lower growth means less room for error,” said Maurice Obstfeld, IMF Economic Counsellor and Director of Research. “Persistent slow growth has scarring effects that themselves reduce potential output and with it, demand and investment,” he added.
The current diminished outlook calls for an immediate, proactive response, Obstfeld noted. To support global growth, he emphasized, there is a need for a more potent policy mix – a three-pronged policy approach based on structural, fiscal, and monetary policies.
“If national policymakers were to clearly recognize the risks they jointly face and act together to prepare for them, the positive effects on global confidence could be substantial,” Obstfeld added.
Moderate recovery in advanced economies
Growth in advanced economies is projected to remain modest at about 2 percent, according to the WEO. The recovery is hampered by weak demand, partly held down by unresolved crisis legacies, as well as unfavorable demographics and low productivity growth.
In the United States, expected growth this year is flat at 2.4 percent, with a modest uptick in 2017. Domestic demand will be supported by improving government finances and a stronger housing market that help offset the drag on net exports coming from a strong dollar and weaker manufacturing.
In the euro area, low investment, high unemployment, and weak balance sheets weigh on growth, which will remain modest at 1.5 percent this year and 1.6 percent next year.
In Japan, both growth and inflation are weaker than expected, reflecting in particular a sharp fall in private consumption. Growth is projected to remain at 0.5 percent in 2016 before turning slightly negative to -0.1 percent in 2017, as the scheduled increase in the consumption tax rate goes into effect.
Emerging and developing economies slowing further
While emerging markets and developing economies will still account for the lion’s share of world growth in 2016, prospects across countries remain uneven and generally weaker than over the past two decades.
The WEO projects their growth rate to increase only modestly – relative to 2015 – to 4.1 percent this year and 4.6 percent next year.
This forecast reflects a variety of factors:
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Slowing growth in oil exporters, with oil price decline, and still weak outlook for non-oil commodity exporters, including in Latin America.
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The modest slowdown in China, where growth continues to shift away from manufacturing and investment to services and consumption.
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Deep recessions in Brazil and Russia, and weak growth in some Latin America and Middle East countries, particularly those hit hard by the oil price decline and intensifying conflicts and security risks.
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Diminished growth prospects in many African and low-income nations due to the unfavorable global environment.
On the positive side, India remains a bright spot – with strong growth and rising real incomes. The ASEAN-5 economies – Indonesia, Malaysia, Philippines, Thailand, and Vietnam – are also performing well. And Mexico, Central America, and the Caribbean are beneficiaries of the U.S. recovery and, in most cases, lower oil prices.
Risks are on the rise
In the current environment of weak growth, risks to the outlook are now more pronounced. These include:
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A return of financial turmoil, impairing confidence. For instance, an additional bout of exchange rate depreciations in emerging market economies could further worsen corporate balance sheets, and a sharp decline in capital inflows could force a rapid compression of domestic demand.
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A protracted period of low oil prices could further destabilize the outlook for oil-exporting countries.
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A sharper slowdown in China than currently projected could have strong international spillovers through trade, commodity prices, and confidence, and lead to a more generalized slowdown in the global economy.
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Shocks of a noneconomic origin – related to geopolitical conflicts, political discord, terrorism, refugee flows, or global epidemics – loom over some countries and regions and, if left unchecked, could have significant spillovers on global economic activity.
On the upside, the recent decline in oil prices may boost demand in oil-importing countries more strongly than currently envisaged, including through consumers’ possible perception that prices will remain lower for longer.
Raising growth still a priority
More aggressive policy actions to lift demand and supply potential could foster stronger growth in both the short and longer term.
The WEO emphasizes a three-pronged approach of mutually reinforcing policy levers. These include (1) structural reforms, (2) fiscal support, with growth-friendly composition of revenue and spending, and fiscal stimulus where there is a need and where fiscal space allows, and (3) monetary policy measures.
There is strong need and scope for further structural reforms. Analytical work featured in the WEO finds that labor and product market reforms in advanced economies can give a strong boost to growth prospects over the medium to long term. Carefully prioritizing and sequencing reforms is essential to boost their short-term effects.
Product market reforms – which aim to boost competition among firms and make it easier to start a business or attract investment – should be implemented forcefully, as they boost output even under weak macroeconomic conditions and without weighing on public finances. Where possible, narrowing unemployment benefits and easing job protection should be accompanied by other policies to offset their short-term cost on vulnerable groups.
Reforms that are coupled with fiscal support will be the most valuable at this juncture, including reducing inefficient taxes on labor and increasing public spending on research and development and active labor market policies (reforms aimed at getting the unemployed back into work, such as job training programs).
In many advanced economies, accommodative monetary policy remains essential to support economic activity and lift inflation expectations. In many emerging market and developing economies, monetary policy must grapple with the impact of weaker currencies on inflation and private sector balance sheets. Exchange rate flexibility, where feasible, should be used to cushion the impact of terms of trade shocks.
Finally, further financial sector strengthening is essential, including to create a context in which monetary, fiscal, and structural policies can be most effective.
The WEO warns that policymakers also need to make contingency plans and design collective measures for a possible future in case downside risks materialize. Cooperation to enhance the global financial safety net and global regulatory regime is also central to a resilient international and financial system.
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tralac in the news ~ Regional Courts entrenching rules-based governance in trade integration
Regional courts are increasingly becoming important in entrenching rules-based governance for regional trade and integration and ensuring the protection of private party rights.
Delegates attending the annual Trade Law Centre (TRALAC) conference in Swakopmund, Namibia, April 7-8 April 2016, were informed that since only States are the parties to trade and regional integration agreements private parties have always faced problems.
“Private parties derived no rights from regional agreements yet they are the traders, service providers and investors who frequently suffer the consequences when such agreements are violated,” Prof. Gerhard Erasmus of the TRALAC said at the opening of the conference.
“There is in fact double jeopardy; they do not normally enjoy standing before the international dispute settlement fora such as the Dispute Settlement Unit of the World Trade Organization; only states are parties to such disputes.
The conference attracted participants from the public and private sectors from the eastern and southern Africa region. They included technical officers from the Common Market for Eastern and Southern Africa (COMESA) and Southern Africa Development Community (SADC.
The chairman of the TRALAC board Mr. George Lipimile, who is also the Chief Executive Officer of the COMESA Competition Commission, officially opened the conference.
The COMESA Court of Justice which was represented by five judges and the Registrar was cited for praise for making a landmark ruling in a matter involving a private company and the State of Mauritius. The judgment was made in favour of the company; Polytol Paints in 2013.
More recently, the COMESA Court found that it has jurisdiction to hear a case between Malawi Mobile (a mobile company incorporate in Malawi) and the government of Malawi. An appeal by the government is still to be decided.
Urging for deeper inclusion of the private sector in the formulation of regional trade laws and policies, delegates noted that the benefits of trade and economic integration depended on the commercial activities of private parties across borders. Hence private sector activities ensured the economic gains that underpinned free trade and integration efforts.
“The quest by private parties to resolve disputes and hold governments accountable for the commitments that they have undertaken, can make an important contribution to the development of rules-based governance for trade and integration in Africa,” the Executive Director of TRALAC, Ms Trudi Hartzenberg observed.
The conference agreed that there was room for private party participation in enforcement of the Treaties’ provision at the national level through litigation in national and regional courts and lobbying for the enhancement of Panel process that deal with Non-Tariff Barriers.
The key issues in focus at the conference included rules-based governance in African trade and integration; safeguards and trade remedies; standards, private litigation, dispute resolution and community law developments and connecting Africa for competitiveness.
» Find out more about the 2016 tralac Annual Conference.
OECD Meeting of Agriculture Ministers: Declaration on better policies to achieve a productive, sustainable and resilient global food system
Ministers and heads of delegations of OECD’s 34 members and partner countries met in Paris for the first time in six years to explore challenges and opportunities facing the global food system.
Ministers attending the OECD Committee for Agriculture Ministerial Meeting reached a consensus and adopted a joint declaration with commitments on how to move forward and work towards better agricultural policies. The Declaration on Better Policies to Achieve a Productive, Sustainable and Resilient Global Food System was adopted by Ministers and Representatives of OECD Members, Argentina, Colombia, Costa Rica, Indonesia, Latvia, Lithuania, Peru, Romania, Saudi Arabia, South Africa, Ukraine and Viet Nam on 8 April 2016.
Minister Stéphane Le Foll of France and Secretary Tom Vilsack of United States, Co-Chairs of the meeting, led a day and a half of intensive discussions on the future of agriculture and agriculture’s role in the global future. Over the course of this meeting of Ministers and senior policy-makers from countries, who together account for a huge proportion of the world’s production and consumption of food and agricultural products, came to recognize that the challenges facing all of us are collectively well understood and widely shared. Ministers discussed a wide range of practical and pragmatic approaches that might be taken to dealing with them, especially through the work of OECD. Participants in the meeting recognised the work already underway at OECD on some of these approaches. The new paradigm identified for agriculture and food policies should nonetheless be reflected in depth within OECD’s work.
The organization should strengthen its efforts, in collaboration with other interested international organisations and partner countries, to build the evidence base for the best policy mixes that can achieve the shared policy goals agreed at this meeting while considering the local context and the conditions for a successful implementation. Ministers especially encouraged the systematic integration of environmental and climate performance within agriculture and food policy monitoring and recommendations and a continued focus on the role of innovation in all its forms in sustainable productivity growth.
In addition, they recommend expanded attention to sector-wide resilience that encompasses farms, food chains, and rural communities within and across countries. Ministers acknowledged the high value of the well-established agricultural policy monitoring and evaluation work, global market outlook and in-depth agriculture policy evaluations. They also encouraged OECD to continue its role of providing international comparisons and a forum for exchange of information and expertise. Ministers would welcome a CoAg follow-up report of the Ministerial focused on those new elements. Ministers also suggested that a meeting of Agricultural Ministers occur at a logical point when progress on our shared goals for agriculture can be assessed and adjusted consistent with the post-COP21 plans and the timeframe for meeting the SDGs.
The mood of the meeting was positive considering the challenges facing the sector. Ministers and other participants were energized by the opportunities for agriculture to contribute to solutions, and they expressed confidence that the identified challenges can be met. The task for Ministers and members of governments is to ensure that the policies and institutions are in place to enable farmers to continue to be resilient and responsive by enhancing their robustness and ability to adapt to the new risks they face. Effective international cooperation will be key to addressing those challenges and to enabling the agriculture and global food system to continue to supply sufficient, safe, nutritious food where it is needed while protecting the future of our natural resources, our rural communities, and the broader human population.
Declaration on Better Policies to Achieve a Productive, Sustainable and Resilient Global Food System
Meeting of the OECD Committee for Agriculture at Ministerial Level, 7-8 April 2016
We, the Ministers and Representatives of Argentina, Australia, Austria, Belgium, Canada, Chile, Colombia, Costa Rica, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Indonesia, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Peru, Poland, Portugal, Romania, Saudi Arabia, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, United States and Viet Nam, met in Paris at the meeting of the OECD Committee for Agriculture at Ministerial Level on 7-8 April 2016, to discuss the opportunities and challenges for the global agriculture and food sector and to explore appropriate policy responses. We placed a high priority on developing policies to underpin competitive, sustainable, productive and resilient farm and food businesses.
CONSIDERING that:
1. A growing, higher income and more urbanised population will continue to demand a more varied and nutritionally balanced diet. The bio-economy, including renewable energy, will also increase demand for food and agricultural products. While responding to these opportunities, the agriculture and food sector will confront increased competition for natural resources, it will have to adapt to changing temperatures, precipitation patterns, and more frequent extreme weather events, improve its impact on the environment, and address the provision of ecosystem services. There are multiple challenges in improving the well-being of farm households, especially of smallholders and women, while facilitating structural change. A range of health-related issues is coming to the fore, among them animal disease risks, antimicrobial resistance and human health and nutrition. The sector will, in some countries, also be expected to contribute significantly to climate change mitigation while improving global food security.
2. International focus on these and related issues has been particularly prominent over the past year. The WTO’s 10th Ministerial Conference confirmed the importance of agriculture and food in international trade relations, addressed one of the most distortive policies by eliminating export subsidies and disciplining other forms of export measures, but left other issues unresolved. The Paris Agreement on Climate Change laid out the ambition to limit global warming to well below 2°C and to pursue efforts to limit it to 1.5°C, while indicating that this should be done "in a manner that does not threaten food production". The new sustainable development goals adopted by the United Nations General Assembly on 25 September 2015 [A/RES/70/1] call, in particular, to end hunger, achieve food security and improved nutrition, and promote sustainable agricultural productivity improvement, by 2030. There have been repeated calls by governments at the G20, Asia-Pacific Economic Cooperation (APEC), Association of Southeast Asian Nations (ASEAN), Expo Milan 2015, Global Forum for Food and Agriculture 2016 (GFFA) in Berlin, and elsewhere for a renewed focus on sustainable productivity growth and reductions in food waste and losses.
DECLARE that we:
3. Express our firm conviction that the agriculture and food system can contribute very significantly to global solutions in all these areas. We also note that while policies for food and agriculture have begun to change, international and domestic policy settings are not sufficiently aligned with emerging needs. We further note that there is a growing urgency for integrated policy approaches that will better enable farmers and the food sector to simultaneously improve productivity, increase competitiveness and profitability, improve resilience, access markets at home and abroad, manage natural resources more sustainably, contribute to global food security, and deal with extreme market volatility, while avoiding trade distortions.
Shared goals for the agriculture and food sector
4. Share the following goals for the agriculture and food sector:
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To provide all consumers with reliable access to safe, healthy and nutritious food.
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To enable producers everywhere, big and small, male and female, to operate in an open and transparent global trading system and to seize available market opportunities to improve their standards of living.
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To contribute to sustainable productivity and resource use, solutions to climate change, resilience in the face of risk, and the provision of public goods and ecosystem services.
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To contribute to inclusive growth, and development, within and across countries.
Policy principles for an integrated approach to agriculture and food
5. Agree a set of policy principles to ensure an integrated approach to agriculture and food policies reflecting these. In pursuit of the shared goals, policies need to:
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Be coherent with economy-wide measures, including in relation to growth, development, trade, investment, employment, well-being, and the environment. Special efforts are needed, particularly in less developed economies, to improve the enabling environment in which the sector operates (from health and education to physical infrastructure and land rights), to encourage much needed public and private investments, and to enable farms of all sizes, including smallholders, to choose the growth path which offers them the greatest opportunity.
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Be transparent (with explicit objectives and intended beneficiaries), targeted (to specific outcomes), tailored (proportionate to the desired outcome), flexible (reflecting diverse situations and priorities over time and space), consistent (with multilateral rules and obligations) and equitable (within and across countries), while ensuring value for money for scarce government resources.
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Support a better-functioning multilateral trade system which will enable further integration of the sector, so that competitive suppliers are able to pursue market opportunities on an equitable, transparent, market oriented and nondiscriminatory basis. This will allow the sector to take advantage of the benefits of trade for inclusive economic growth, sustainable development, and global food security, while observing the principles of responsible business conduct.
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Make innovation a priority in order to achieve sustainable productivity growth, including through organisational change, cross-sectorial cooperation, greater public and private investment in research and development, technology transfer and adoption, education and training, and advisory services.
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Foster production systems that use available water, land, forest, energy, soil and biodiversity resources sustainably and which promote animal, plant and human health.
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Foster greater resilience of farmers to risk, to enable them to cope with more frequent, unpredictable events, such as weather-related shocks, disease outbreaks, and market volatility.
Creating the evidence base for a new policy paradigm
6. Note the value of open dialogue in building mutual understanding and trust amongst countries and emphasise the importance of enhanced international cooperation, particularly in the areas of trade, investment, innovation and climate change. We recognise the important role played by the OECD in support of policy reform efforts in its members and increasingly, in partner countries, in the field of food and agriculture. We invite the OECD, in collaboration with other interested International Organisations and partner countries, to further elaborate concrete actions, both individual and collective, to improve agriculture and food sector productivity, sustainability, and resilience.
7. Invite the OECD to accelerate efforts to build a solid evidence-base on the best policy mixes to achieve the shared goals. We emphasise that the well-established work on agriculture policy monitoring and market outlook should remain a high priority, and be complemented by advice tailored to specific countries so as to take account of the diversity of economic, environmental, social, and food security situations across and within countries.
8. Note the following priorities for urgent attention of the OECD:
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Comprehensive and consistent policy packages that target development of productive, sustainable and resilient food systems, capable of delivering food security for all, reflecting the needs of countries at different stages of development and with different resource endowments, encompassing economy-wide measures as well as measures specific to the agriculture and food sector.
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Innovation policies and systems that include basic and applied scientific research & development; technology adaptation, transfer and adoption; public-private partnerships; intellectual property rights; and education, skills, and advisory & extension services; institutional change.
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Integrated policies which improve agricultural productivity to foster sustainable use of water, land, forest, energy, soil and biodiversity resources, to promote improved economic and environmental performance and preservation of ecosystems, as well as to enable effective climate change adaptation and mitigation.
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Risk management policies to enhance both individual and sector-wide resilience, with an appropriate balance between private, market and public actions.
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Policies to promote the development of well-functioning, competitive, and transparent food systems and responsible business conduct, along the food chain.
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Policies to promote human, animal, and plant health throughout the food supply chain.
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Trade and domestic policies that foster well-functioning and more integrated international and domestic markets, including through Global Value Chains, and that contribute to more widespread inclusive growth, sustainable development, and global food security.
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Practical actions to foster increased international cooperation, in particular through regulatory cooperation, trade, investment, open data and knowledge and technology sharing.
9. Welcome further dialogue under the auspices of G7, G20, APEC, WTO and other forums planned to be held in 2016 and beyond, and, finally, agree to come together again at OECD within the next five to six years to take stock of progress on implementing policies to achieve a more productive, sustainable and resilient food system.
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Doing regional integration differently in Africa
No country alone can solve the development challenges of a continent made up of 54 countries. Conflicts spill over boundaries. Disease is not stopped by border controls. And climate change doesn’t carry a passport, write Jan Vanheukelom and Bruce Byiers.
In an age where the Internet rules and we are more connected than ever, it is hard to believe that countries still struggle to trade with their neighbours. The decades following independence brought countless policies and political statements in support of regional integration in Africa to address these regional and continental challenges. On the surface it appears to be a key issue for many. But the reality is very different, with a distinct lack of implementation across Africa. Even the chairperson of the African Union, Nkosanzana Dlamini-Zuma, has noted that while there are plenty of policies, the problem lies in implementation. This creates growing frustration with the gap between commitments and what takes place on the ground.
In our recent study on regional integration, PERIA (Political economy of regional integration in Africa), we looked at Africa’s six largest regional organisations, including the African Union, to better understand why this is and, in response to recent calls for ‘Doing Development Differently’, to see how regional integration can be ‘done differently’.
Many regional agendas remain purely aspirational, as African Union member states or their ruling elites see little interest in empowering – and paying – the regional organisations to monitor and ultimately enforce implementation or punish member states for non-implementation. There is also very weak organised demand from civil society and the private sector, lowering the political cost of non-implementation.
In Africa, the big players on the bloc rule the roost. Powerful countries such as Nigeria, South Africa and Ethiopia have more political and economic clout when it comes to driving and blocking regional dynamics and institutions. Personalities also wield power. The influence of charismatic regional leaders, as heads of regional organisations, can shape the implementation of agendas.
Donors also influence the process. The EU – including the EU institutions and a number of EU member states – is the largest supporter of Africa’s regional organisations and programmes. Donors pick up a large share of the regional bills, representing at least half of the combined operational and programme costs of regional organisations. But poorly managed and targeted aid is partly to blame for leading regional organisations to ‘signal’ intent when genuine commitment is not in fact present. It is also partly responsible for ‘agenda inflation’, with more and more areas added to the ‘to-do’ lists of regional organisations, resulting in reduced ownership as ‘support’ to regional agendas overflows into steering agendas. This results in missed opportunities to genuinely strengthen the institutional functions that are pivotal for the governance of regional organisations.
How can this be done differently? There is one major exception to these findings, and this can be found in peace and security. The African Union and some of its Regional Economic Communities have set clear mandates to deliver on peace operations in a number of unwieldy, violent conflicts. The African Union can even sanction member states that violate the constitutional provisions on the transfer of power.
Peace and security has more support from member states than other sectors such as trade, infrastructure development or climate change. National ruling elites have stronger vested interests in maintaining stability or preventing violent conflicts as, in contrast to other areas, the costs of inaction are high; though there are also examples of national elites that turn a blind eye to – and even support – insurgents in their neighbouring countries.
There are also other anomalies. Critical junctures such as natural disasters and political and other crises can trigger progress, but also block regional organisations and dynamics. The initial relative success of the Southern African Power Pool can be traced to a fortuitous combination of conditions in the mid-nineties related to drought, post-apartheid dynamics and surplus production by South Africa’s state-owned monopoly producer of electricity.
All this highlights the need to be more conscious of the political-economic drivers and obstacles to regional cooperation and the need for support strategies to take these into account. This of course will not be quick or easy.
Rather than taking a one-size-fits-all approach – something which cannot work in a continent with such economic and geographical variation – there is a need to focus on designing policies and support programmes that represent a ‘good fit’, better building on cross-country and regional cooperation where there is political, economic and administrative alignment of interests and traction.
What can a policy-maker do? We propose starting from ABC… Doing regional integration differently firstly requires that Ambitions be revised. Aspirational agendas serve a purpose, but should not be seen as the be all and end all for policy-makers – aiming too high can also be a source of frustration. Rather, policy ambitions need to be set according to a realistic understanding of actors and interests, and therefore where there is genuine room for manoeuvre. In turn, this requires more attention to Brokerage between the wide range of different actors and organisations that can help build in-country and cross-country coalitions to support problem-solving and the creation of regional public goods. Finally, it also requires identifying and working with influential Champions in these demanding regional processes – at both the technical and political levels. Though by no means quick or simple, only such an approach will serve to further regional agendas and deal with the large development challenge facing the African continent and its people.
Jan Vanheukelom is a senior advisor on political economy and governance, and Bruce Byiers is a senior policy officer on economic transformation and trade at ECDPM. All opinions in this column reflect the views of the author(s), not of EurActiv.com PLC.
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No option but to innovate in the way we do the business of agriculture
Africa now has the ability to feed itself and the world. This is not only a possibility but an absolute necessity if our continent is to meet the challenge of high and inclusive growth. But this Green Revolution will require a sense of a common goal and could be unleashed by innovative financing.
Of all the challenges that Africa faces, there is one that transcends and embraces all the others: I mean agriculture. Our continent today runs the risk of missing a unique opportunity to develop and offer its youth the jobs it has the obligation to provide if it wants to avoid social implosion.
Agriculture, which employs or provides livelihoods to 60% of the population while contributing 20-30% to Africa’s GDP, is the sector that could by itself enable to save the greatest number of Africans from extreme poverty while giving them their dignity back.
And yet, it typically attracts less than 5% of lending from financial institutions on the continent, leaving farmers and agricultural enterprises starved of the capital they need to operate and grow their businesses.
The scope for growth is all the more important that the situation is highly paradoxical: Africa imports the equivalent of $ 50 billion of food every year. Yet more than half of the arable land unexploited in the world are on the continent!
The 12th CAADP PP taking place in Ghana this week is organised around the theme “Accelerating Implementation of CAADP through Innovative Financing and Renewed Partnership”. The theme reflects the urgency being placed on implementation by the African Union and its members.
To solve the agricultural equation, we must join forces and continue our efforts to define a common agricultural policy. In 2003, in Maputo, we really started to turn the corner in laying the foundations for pan-African agricultural initiatives. The Heads of State and Government of the African Union then decided to devote 10% of their national budgets to agriculture. In 2014, in Malabo, they reiterated their commitment to further increase investment, both public and private, in agriculture.
Innovative financing will be key in unlocking Africa’s Green Revolution. Innovative financing is a means of mobilizing additional resources for investment in agriculture or solving long-running market failures that can unlock private investment. Now we should aim at a growth model that is public-sector enabled, and private sector scaled.
Because of the rural and dispersed nature of agricultural production, where banks and formal financial institutions often lack a presence, mobile technology provides a convenient and low-cost distribution channel to reach farmers and agro-enterprises with electronic payments and information products, as well as savings, credit, and insurance products, among others. It can also help to transfer targeted financial support for small farmers and agribusiness.
Investments in infrastructure will also help drive increased private investment and production in the agriculture sector. Often resulting in public goods that benefit a broad base of economic activity, investments in irrigation, transport and market infrastructure in particular are critical to improving economic returns and productivity in the agriculture sector.
The next step is to put in place a system that ensures the prices and the flow (or storage) of production, combined with a system of variable levies at the external borders of Africa (taxes on imports) protecting productions potential competition from products from outside. This will require innovative financial mechanisms and technologies as well.
A proactive agricultural policy should be common because it requires us to share not only our resources, but also our minds and our wills. It should be common because it cannot be implemented without regional infrastructure, energy and logistics in particular, that will allow our farmers to compete and enter into a process of value creation. We should harness the latest innovations and technologies because Africa has no other option but to leapfrog if it wants to realize its tremendous potential.
Dr Ibrahim Assane Mayaki is CEO of the New Partnership for Africa's Development (NEPAD).
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Africa needs to trade with itself – here’s how
Trade not aid. It’s an idea we hear quite a bit in reference to Africa. Last summer, when Barack Obama addressed the African Union – the first US president to do so – he made sure to bring it up: “So many Africans have told me, we don’t want just aid, we want trade that fuels progress.”
And yet, while trade might be the gateway to development, the statistics in Africa aren’t too impressive, especially when it comes to one of the biggest opportunities for growth: trade among African countries. In 2014 in Europe, for example, 69% of exports were to other countries on the continent. In Asia, that figure stood at 52% and in North America at 50%. Africa had the lowest level of intra-regional trade, at just 18%.
Movement from political will to policy action as far as improving regional cooperation is ongoing but remains slow to materialize. Customs procedures are onerous, visa restrictions are high, while failure to produce value-added goods and to diversify from natural resources and goods different from neighbouring countries continues to stifle trade.
There is one way of boosting intra-regional trade, and with it economic growth and development: technology. But for technology to be able to transform trade in Africa, there are a few important steps we must first take.
Getting the right infrastructure
Infrastructure development is a top developmental priority in Africa, particular in two critical areas: electricity and transport. Access to electricity forms the basis of an industrialized economy and hence trade; yet less than 30% of Africans have access to electricity, compared to about 40% in similar low-income countries from other regions. Unless we can do something to tackle this issue, we have no hope of increasing intra-regional trade in Africa.
More progress is being made in another area: transport. Africa is huge – far bigger than you’d think from looking at a map. Connecting this vast continent is not without its challenges, but already great investments are being made in major carriage ways and regional railway projects, such as the Standard Gauge Railway that will connect Kenya, Uganda, Rwanda and South Sudan.
That’s good but not good enough. In Africa, 90% of trade happens by sea, which means ports also need to be modernized, expanded and maintained so as to push greater trade volumes, enable government to collect more taxes and curb illegal activities.
Internet for all
It’s not just with electricity access that Africa lags behind. It’s also with one of the most powerful tools for boosting trade, opening up new economic opportunities and fostering innovation and entrepreneurialism: the internet.
Some countries are leading the way – Nigeria, Egypt and Kenya, for example – but most countries on the continent are still far behind when it comes to internet penetration rates. While the global average stands at almost 50%, penetration rates in Africa were just 28.6% at the end of 2015. It’s such a priority issue that the Forum has launched an online conversation, #internetforall.
If we were able to connect more people on the continent, the boost to trade could be enormous. Apps such as M Farm, which connects buyers with farmers and enable farmers to sell goods at the correct market value, platforms such as Google’s Africa Connected, which allows entrepreneurs to use Google products to build their businesses, or Konga, an ecommerce platform known as Nigeria’s biggest online mall, are just two examples of how the internet could fuel trade.
But unlocking the power of the internet is about more than giving people a modem and letting them get on with it. The internet can only kickstart intra-regional trade if connection goes hand in hand with improved education and understanding of the numerous possibilities the internet can offer all levels of entrepreneurs.
There’s a long-standing discussion in Africa and beyond about the importance of STEM subjects. That isn’t the issue here. As we’ve seen in other regions, you don’t need a PhD in computer sciences to make the most of everything the internet has to offer. Instead, what matters is giving people opportunities to learn, create and innovate through affordable and consistent internet access, thereby fostering an entrepreneurial ecosystem. Africans need to go from being consumers of online content to being mass producers of it.
Governments must promote competition in the telecommunications sector, harmonize regional laws to ensure digital payments can be made across borders, and facilitate the movement, release and clearance of goods across borders. Technological solutions such as drones might be one way to go.
Trade that fuels progress
We know all too well the opportunities trade can offer for development and growth. Africa is in a unique position in that it has the chance to trade with an untapped market: itself. Nobody is saying that will be easy. But technology will go a long way to making this ambition a reality.
Jacqueline Musiitwa is the Founder of Hoja Law Group and a former Mo Ibrahim Foundation Fellow at the World Trade Organization.
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Implementation of Nairobi Ministerial Decision on Preferential Rules of Origin for Least Developed Countries
Document submitted by Benin on behalf of the LDC Group to the Formal Meeting of the Committee on Rules of Origin, taking place on 22 April 2016
Paragraph 31 of 10th WTO Ministerial Declaration states “Work on all the Ministerial Decisions adopted in Part II of this Declaration will remain an important element of our future agenda.” In this context, Least Developed Country Members of the WTO are of the view that implementation of the Decision on Preferential Rules of Origin for Least Developed Countries is one of the major works of the Committee of Rules of Origin.
Paragraph 4 of the said Ministerial Decision requires specific actions to be taken by Preference-granting Members and at the Committee on Rules of Origin as subsidiary body on this issue and therefore, its implementation issues should be kept as standing Agenda of CRO meetings. These actions include:
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Notification of measures being taken by the preference granting members to implement the decision (paragraph 4.2);
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Notification of Preferential rules of origin (Paragraph 4.3);
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Submission of Import data to the Secretariat (Paragraph 4.3);
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Modalities for calculation on utilization rate to be developed by CRO (Paragraph 4.3); and
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Developing template for notification of preferential rules of origin (Paragraph 4.3)
This short note aims at raising some issues to discuss way forward to carry out these functions and implement the overall content of the Ministerial Decision on Preferential Rules of Origin for LDCs adopted at the Nairobi WTO Ministerial.
Elements for a discussion on how to implement the Ministerial Decisions on Preferential Rules of Origin adopted at the Nairobi WTO Ministerial
Paragraph 4.2 of the Decision on preferential rules of origin for LDCs adopted at Nairobi (hereinafter the Decision) provides for a deadline of 31 December 2016 for Developed Preference Granting countries to implement the provisions contained in the Decision and provides flexibilities for developing countries in implementing such Decision.
1. How do developed preference granting members intend to comply with the deadline of 31 December 2016 to implement the commitments undertaken in the Decision?
2. How do developing preference granting members intend to comply with the 31 December 2016 deadline or how do they intend to gradually comply with the commitment to implement the Decision?
Paragraph 4.3 of the Decision provides for a commitment “Preferential rules of origin shall be notified as per the established procedures. In this context, it is important to have the information on the present status of notification on preferential rules of origin and how the preference granting members are going to abide by this commitment.
3. How have preferential rules of origin been notified to the WTO?
4. Are the Members that are yet to notify their preferential rules of origin going to do so before the next meeting of the CRO?
Paragraph 4.3 of the Decision provides for a commitment to “annually provide import data to the Secretariat as referred to Annex 1 of the PTA Transparency Mechanism, on the basis of which the Secretariat can calculate utilization rates, in accordance with modalities to be agreed upon by the CRO”.
It has emerged from discussions with the Secretariat that some members have provided such import data, other members have provided incomplete data, and some members have yet to notify such data. It is also necessary to ensure that the data is made available to other organizations such as UNCTAD who may assist LDCs in monitoring utilization rates.
5. How do preference-granting members intend to comply with the commitment to “annually provide import data to the Secretariat as referred to Annex 1 of the PTA Transparency Mechanism”?
6. What measures are they undertaking to notify such data well before the next Committee on rules of origin meeting so that the LDCs could analyse the utilization rates under the different preferential arrangements?
7. Could the secretariat provide a report at the CRO meeting of 22 April of the current notification and their accuracy?
8. How will the CRO undertake work on developing modalities for calculation of utilization rate?
Paragraph 4.3 mandates the CRO to: “develop a template for the notification of preferential rules of origin, to enhance transparency and promote a better understanding of the rules of origin applicable to imports from LDCs”. The LDC group is currently studying an appropriate format for such notification that will be presented at the next CRO meeting. Meanwhile it would be interesting to hear from Members their views on such possible format as well as from the experience of the secretariat with current notifications and ways and means to improve their transparency.
9. What are the views of the preference granting countries on the best format to adopt for notifying the preferential rules of origin according to paragraph 4.3 of the Decision?
10. What are the experiences and lessons learned that the WTO Secretariat may draw from the current notifications of preferential rules of origin in favour to LDCs made to the Secretariat so far?
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tralac’s Daily News Selection
The selection: Tuesday, 12 April 2016
Profiled trade and development conferences now underway:
In Ibadan: the 'Africa Feeding Africa' conference
In Arusha: the EAC-USAID Regional trade and feed the future coordination conference
In Dubai: the 2nd Indian Ocean Rim Association Ministerial Economic and Business Conference and the Annual Investment Meeting
In Washington: the WB/IMF Spring Meetings
Diarise: UNCTAD/TMEA discussion on trade facilitation and regional integration in Africa (21 July, Nairobi)
Third Africa Think Tanks Summit: communiqué (ACBF)
Infographic: Kenyan coffee export trend since 1990
Africa's pulse (World Bank)
Terms-of-trade shock and impact on economic performance in Sub-Saharan Africa (Section 2): The region can be classified into three groups according to terms-of-trade exposure to price declines: (a) vulnerable countries (those with terms-of-trade deterioration that exceeded 10%), (b) less vulnerable (with terms-of-trade decline less than 10%, and (c) terms of trade gainers (with positive change in their terms of trade as a result of a price shock to the commodity basket). According to the simulation, the distribution of gains and losses in the terms of trade across countries in the region is asymmetric.
For instance, terms-of-trade losers (31 out of 48 SSA countries) are predicted to have an average loss of about 17%. These countries represent 63% of the region Gross Domestic Product and about 74% of its population. The group of less vulnerable countries is formed by 19 countries that registered terms-of-trade losses that did not exceed 10%. The group represents more than 15% of the region’s GDP and about 40% of its population. The group of terms of trade gainers comprises 17 countries with terms-of-trade gains. More than 25% of SSA’s population lives in this group of countries, which produces about 36% of the region’s GDP. The magnitude of the terms-of-trade gains is considerably smaller than the losses in the vulnerable countries: they fluctuate between 0.1% (Lesotho) and 7.8% (Eritrea). The majority of countries in this group benefited from cheaper energy prices; however, these gains were partly offset by decreased prices for in non-energy commodities in some countries. For instance, gains from lower oil prices in Botswana and South Africa were partly offset by weaker prices of iron ore and nickel, respectively. [Related, regional economic updates from the World Bank: The impact of China on Europe and Central Asia, East Asia Pacific, South Asia]
Demand for World Bank lending on the rise as countries face headwinds
Network analysis of foreign investment into African cities, 2003–2014
Firstly, on the left, we see a powerful North-West African network region with Cairo, Tripoli, Tunis and Algiers at the heart of it. The thicker the red line between cities and countries, the more investment taking place. Secondly, we see a very intense Sub Saharan core with Luanda, Lagos and Johannesburg as the kingpins. It is by far the strongest cluster of interaction in Africa. It means that this city cluster interacts more with each other than with the other two core regions. Thirdly, a smaller network region is seen which could almost be regarded as a Nigerian sub-region because of the strong presence of Abuja and Delta State. Interestingly it seems strongly connected to commodity ports like Richards Bay, Mossel Bay and Port Sudan. [The author: Ronald Wall]
Botswana: 2015 Article IV Consultation (IMF)
There are important risks to the outlook. In the near term, the main downside risks are: (i) sluggish growth in key advanced and emerging economies, that could lead to continued weakness in the demand for diamonds (and copper); (ii) unresolved economic problems in South Africa and continued depreciation of the Rand, which could lower SACU receipts and have a negative impact on regional investors’ sentiment12; and (iii) delays in plans to restore reliability and self-sufficiency in the water and electricity sectors, which would have adverse impact on costs, the fiscal balance, and the business environment; as well as delays on other structural reforms (e.g. deregulation and removal of red tape).
Unlocking Nigeria’s potential: the path to well-being (Boston Consulting Group)
Studies show that Nigeria will need to invest about $3 trillion in infrastructure over the next 30 years, or roughly $100 billion a year. That is equal to nearly 20% of current GDP annually. The upshot: it will be critical to attract substantial outside investment in the form of public-private partnerships. We recommend five actions for addressing Nigeria's infrastructure crisis: [Download] [Emefiele: Agriculture can’t survive on high lending rate (ThisDay)]
Nigeria: Customs loses N230bn revenue to CBN’s forex ban on 41 items (ThisDay)
The Nigeria Customs Service recorded a loss of N230 billion in the last quarter of 2015 due to the Central Bank of Nigeria’s closure of the foreign exchange window to 41 imported items. The Comptroller General of Customs, Col. Hameed Ibrahim Ali (rtd), who made the disclosure, said a request for the review of the policy had been tabled before Vice-President Yemi Osinbajo.
World Bank, Shippers’ Council meet over trade facilitation (The Punch)
A trade facilitation team from the World Bank on Monday met with the management of the Nigerian Shippers’ Council over the ratification of the Trade Facilitation Agreement. The visit was aimed at encouraging Nigeria’s consent to the TFA, which is a trade instrument designed by member nations of the World Trade Organisation. Nigeria’s Ambassador to the WTO, Ademola Adejumo said: “As an importer, you don’t need to run to about 13 agencies to submit your documents for approval. Under a single window arrangement, you can get everything done from the comfort of your office. This is one of the measures that the NSC has been facilitating with the Nigeria Customs Service and other relevant agencies at the ports." [Nigeria, Djibouti to foster trade ties (ThisDay)]
REC updates: ECOWAS to mediate in Senegalese trucker boycott of Gambia (M&G Africa), Magufuli, Kagame: Two aces in the East African Community (Daily News)
Singapore’s approach to Africa: promising, but more to do (Eurasia Review)
According to IE Singapore, in 2013-2014 there were already more than 60 Singaporean companies operating in over 50 countries in Africa. Projects spanned a wide range of sectors from agri-business, food & beverage, and oil and gas, to eGovernment services, communications technology, and transport & logistics. While Singapore’s engagement in Africa is not as familiar as the common narrative around Chinese, American and European investment, the growing interest and seriousness is promising. Singapore also shares developmental experience with African countries under the Singapore Cooperation Programme, recently signing a memorandum of understanding with Rwanda in 2015. Moreover, the Singapore Ambassador to the African Union recently suggested that Ethiopia and Singapore “should consider signing a cultural cooperation agreement”.
TICAD-related: Japan's Africa ambitions (Al Jazeera), Dar, JICA ink 116bn/- ‘conducive business’ loan deal (Daily News)
Mozambique: The political economy of public expenditures in agriculture (IFPRI)
Agricultural public investments are more likely to be made that have two key features: higher attributability to politicians and donors of the output of public spending, and a shorter lag time between expenditures incurred and outputs produced. Evidence on geographical targeting of agricultural public funds corresponds more closely with theories suggesting that resources are used to sway communities opposed to the ruling party, rather than to reward political supporters. Examination of the effect of actors' and organisations' incentives and constraints on resource allocation in agriculture points to the importance of not treating “government,” “the ruling party” and other institutions as monolithic bodies; the paper instead highlights how differentiated interests within seemingly coherent institutions drive what gets public expenditure attention in the agricultural sector.
Large-scale agricultural investments and rural development in Tanzania: lessons learned, steering requirements and policy responses (DIE), Tanzania aims to surpass Brazil in sisal production (Business Day)]
Mozambique cell phone savings project: baseline survey (IFPRI)
Smallholder households in rural Mozambique are typically characterized by low agricultural productivity, which is in part caused by very low levels of usage of inputs. In the study area, in four districts of Nampula province, farmers are generally far from towns where agricultural input providers are based and formal banking services are available. In absence of these services, smallholders typically face liquidity constraints during the planting season when returns to input usage are the highest. In order to explore potential policy solutions to this challenge, the project combines training and incentives to use mobile money technology alongside targeted input marketing visits to promote formal saving strategies and increase take-up of basic inputs, primarily seeds and fertilizer.
Exporter Dynamics Database version 2.0: what does it reveal about the trade collapse? (World Bank Blogs)
The impacts of modern preferential trade agreements (NBER)
Trudi Makahaya: 'Reclaiming Africa’s history of economics' (Business Day)
President Zuma: South Africa's oceans economy initiative (GCIS)
Angolans, foreigners forbidden to leave Angola with more than $10000 (Club of Mozambique)
East African Employers Organization wants EA work permit fees removed (Arusha Times)
Malawi: consultancy services on the taxation of the informal sector (AfDB)
India-EU free trade impasse may end, says CII (The Hindu)
Lawrence Summers: 'The four most prominent candidates for President all oppose the principal free-trade initiative of this period: TPP'
Global migration revisited: short-term pains, long-term gains, and the potential of south-south migration (World Bank)
South-South cooperation: global force, uncertain identity (DIE)
Stockholm Declaration: ‘Addressing fragility and building peace in a changing world’
Early days, early opportunity: SDG projections for sub-Saharan Africa (Development Progress)
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Africa’s Pulse: Global economic weakness continues to be a drag on Africa’s economic growth
Low commodity prices continue to impede growth
Amid falling commodity prices and continuing weakness in global growth, Sub-Saharan Africa’s gross domestic product (GDP) growth decelerated to an estimated 3.0% in 2015 from 4.5% in 2014, according to the latest World Bank projections. This low pace of growth, which translates into an increase in the region’s GDP per capita of less than 0.5%, was last seen in 2009 following the global financial crisis, and contrasts sharply with the robust 6.8% average annual GDP growth in Sub-Saharan Africa (SSA) from 2003-2008.
These figures are outlined in Africa’s Pulse, the World Bank’s twice-yearly analysis of economic trends and latest data for the region. The 2016 growth forecast remains subdued at 3.3 percent, way below the robust 6.8 percent growth in GDP that the region sustained in the 2003-2008 period. Overall, growth is projected to pick up in 2017-2018 to 4.5 percent.
The fall in commodity prices – particularly oil, which fell 67 percent from June 2014 to December 2015 – represents a significant shock for the region, as fuels, ore and metals account for more than 60% of the region’s exports. The impact is seen most in oil-exporting countries, where average growth is estimated to have slowed from 5.4% in 2014 to 2.9% in 2015. Growth fell sharply in Nigeria, the Republic of Congo, and Equatorial Guinea. Activity also weakened significantly in non-energy mineral-exporting countries, including Botswana, Sierra Leone, South Africa and Zambia. In several commodity exporters, adverse domestic developments, such as electricity shortages, severe drought conditions, policy uncertainty, and security threats, exacerbated the direct impact of declining commodity prices.
There were some bright spots, mostly among oil importers, where economic activity remained robust. Côte d’Ivoire saw broad-based growth, supported by a favorable policy environment, rising investment, and increased consumer spending. Ethiopia and Rwanda continued to post solid growth, supported by public infrastructure investment, private consumption, and a growing services sector. Elsewhere, growth remained buoyant in Kenya, amid improving economic stability; Tanzania registered strong growth, underpinned by expansion in construction and services sectors.
The external environment confronting the region is expected to remain difficult. In a number of countries, policy buffers are weaker, constraining these countries’ policy response. Delays in implementing adjustments to the drop in revenues from commodity exports and worsening drought conditions present risks to Africa’s growth prospects.
“As countries adjust to a more challenging global environment, stronger efforts to increase domestic resource mobilization will be needed. With the trend of falling commodity prices, particularly oil and gas, it is time to accelerate all reforms that will unleash the growth potential of Africa and provide affordable electricity for the African people,” says Makhtar Diop, World Bank Vice President for Africa.
Several countries are expected to see moderate growth. Among frontier markets, growth is expected to edge up in Ghana, driven by improving investor sentiment, the launch of new oilfields, and the easing of the electricity crisis. In Kenya, growth is expected to remain robust, supported by private consumption and public infrastructure investment.
The projected pickup in activity in 2017-2018 reflects a gradual improvement in the region’s largest economies – Angola, Nigeria, and South Africa – as commodity prices stabilize and growth-enhancing reforms are implemented.
With commodity prices expected to remain low for longer amid a gradual pickup in global activity, the Pulse forecasts that average growth in the region will remain subdued at 3.3% in 2016. For 2017-18, growth is projected to average 4.5%. The projected pickup in activity in 2017-18 reflects a gradual improvement in the region’s largest economies – Angola, Nigeria, and South Africa – as commodity prices stabilize and policies become more supportive of growth.
“With external conditions likely to remain less favorable than in the past, African countries need to accelerate the pace of structural reforms aimed at boosting competitiveness and diversification,” said Punam Chuhan-Pole, World Bank Africa acting chief economist and author of the report. “In most countries this will mean improving the business climate, reducing the cost of cross-border trade, reforming the energy sector to ensure affordable, reliable, and sustainable energy services, and making the financial sector more inclusive.”
African Cities as Engines of Growth
As Africa undergoes rapid urban growth, there is a window of opportunity to harness the potential of cities as engines of economic growth. The rapid decline in oil and commodity prices has adversely affected resource-rich countries and signaled an urgent need for economic diversification in Africa. Urbanization and well managed cities provide a major opportunity to offer a springboard for diversification.
The growth of cities, when well managed, can spur economic growth and productivity. But African cities are currently not delivering agglomeration economies or reaping urban productivity benefits. Today cities in Africa are crowded, disconnected, and costly for families and for companies, according to World Bank research. They suffer from high housing and transport costs, in addition to the high cost of food that takes up a large share of urban household budgets.
Housing and transport are particularly costly in urban Africa. Housing prices are about 55 percent higher in urban areas of African countries relative to their income levels. Urban transport, which includes prices of vehicles and transport services, is about 42 percent more expensive in African cities than cities in other countries. Like households and workers, firms also face high urban costs. Cross-country analysis confirms that manufacturing firms in African cities pay higher wages in nominal terms than urban firms in other countries at comparable development levels.
To build cities that work – cities that are livable, connected, and affordable, and therefore economically dense – policy makers will need to direct attention toward the deeper structural problems that misallocate land, fragment development, and limit productivity.
“To ensure growth and social development, cities need to become less costly for firms and more appealing to investors,” says Punam Chuhan-Pole, Acting Chief Economist, World Bank Africa and the report’s author. “They must also become kinder to residents, offering services, amenities. All of this will require reforming urban land markets and urban regulations and coordinating early infrastructure investment.”
Terms of trade
Africa’s Pulse finds that the recent commodity price drops have deteriorated the region’s terms of trade in 2016 by an estimated 16%, with commodity exporters seeing large terms-of-trade losses. Across the region in 2016, the impact of this shock is expected to lower economic activity by 0.5 percent from the baseline, and to weaken the current account and fiscal balance by about 4 and 2 percentage points below the baseline, respectively.
Some 12 countries, housing nearly 36% of the region’s population and representing about half of its economic activity, are considered vulnerable in terms-of-trade losses that are expected to exceed 10%. About 17 countries with more than 25% of SSA’s population, fall into the group of countries with terms-of-trade gains.
Moving Forward
Sub-Saharan Africa countries will continue to face low and volatile prices in global commodity markets. The rapid decline in oil and commodity prices has signaled an urgent need for economic diversification in Africa. Governments must take steps to adjust to a new, lower level of commodity prices, address economic vulnerabilities, and develop new sources of sustainable, inclusive growth. Africa’s growing urban centers offer a springboard for diversification. But they need better institutions for effective planning and coordination that can raise urban economic density and productivity, and spur the region’s transformation.
The Report’s Key Messages
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Global growth has been weak, and the external environment facing Sub-Saharan Africa is expected to remain difficult in the near-term. Commodity prices are expected to remain low and volatile and external financing conditions are expected to tighten.
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Key policy challenges to the region’s economies include adjusting to a new, lower level of commodity prices, addressing economic vulnerabilities, and developing new sources of sustainable, inclusive growth.
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Africa now has a narrow window of opportunity to harness the power of cities as engines of economic growth. But for urbanization to bring the benefits that it should, governments should reform land markets and urban regulations to enable investment and development, and coordinate early infrastructure investments. Cities must offer services, amenities, and housing for the poor and the middle class.
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Successful urbanization will also support Africa’s agricultural and rural transformation by effectively absorbing the labor being released by these sectors; by providing a market for agricultural produce; and by financing further transformation and commercialization.
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For most countries in the region, the adjustment to the low commodity prices will need to include stronger efforts to strengthen domestic resource mobilization to reduce overdependence on revenue from the resource sector.
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Sharp commodity price drops have deteriorated the region’s terms of trade in 2016 by an estimated 16%, with commodity exporters seeing large terms-of-trade losses.
Recent Developments: Sub-Saharan Africa
Outlook
The external environment confronting SSA is expected to remain difficult in the near term. Commodity prices are expected to remain low, amid a gradual pickup in global activity, especially in emerging markets and developing economies, and external financing conditions are expected to tighten.
The prospects for a significant pickup in private consumption growth in oil exporters remain weak for the near term. The removal of subsidies to alleviate pressure on budgets has resulted in higher fuel costs in Angola, which, coupled with currency depreciation, will weigh on consumers’ purchasing power. By contrast, lower inflation in oil importers, owing in part to lower fuel prices, should continue to boost consumer spending. However, food price inflation caused by ongoing droughts in several countries, high unemployment as in South Africa, and the price level impact of currency depreciation, combined with interest rate increases, could moderate these effects.
Gross fixed capital formation is expected to slow across the region, driven by weak investment growth among oil exporters and large mineral exporters. China’s rebalancing, lower commodity prices, and deteriorating growth prospects in many commodity exporters are expected to result in further declines in FDI flows. Domestic policies also weigh on private investment. In Nigeria, the central bank’s foreign exchange control measures are tightening credit conditions and curtailing private investment. In South Africa, policy uncertainty and low business confidence could weigh on investment flows. By contrast, in several low-income, non-oil commodity exporters, governments are expected to continue with their public infrastructure investment program, drawing in part on public-private partnerships, donor aid, and, in some cases, financing from Chinese entities. Some countries are also turning increasingly to domestic borrowing through the issuance of treasury bills. Nevertheless, the pace of investment growth in low-income countries is expected to slow somewhat. Already, countries, such as Mozambique, Tanzania, and Uganda are experiencing delays in inward investment in their resource sectors, caused by the decline in commodity prices. Moreover, the tightening of global financing conditions has prompted many countries to delay tapping the international bond market.
The fiscal policy stance in commodity exporters is expected to remain tight in 2016 as commodity prices remain low. But in some countries, further fiscal adjustment may be necessary unless commodity prices pick up swiftly or external resources are available to smooth the adjustment. With fiscal deficits widening across the region, other countries, including the low-income non-oil commodity exporters, are also increasingly facing the need for fiscal consolidation to build buffers and resilience.
Net exports are expected to make a negative contribution to real GDP growth in the near term, despite currency depreciations. Low commodity prices will depress export receipts, especially among oil exporters, even as export volumes rise in some countries. The pull from advanced economies is expected to remain modest, given their moderate prospects for medium-term growth. Among oil importers, current account balances are expected to deteriorate in many countries on account of continued strong import growth, driven by capital goods imports for infrastructure projects.
Against this backdrop, the region faces the following expectations:
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Activity is expected to remain weak in the region’s three largest economies in 2016. In Nigeria, foreign exchange restrictions (if maintained) will continue to weigh on economic activity, exacerbating the effects of low commodity prices. In South Africa, the deterioration of the business environment will depress investment growth, while high unemployment and interest rate hikes will limit private consumption. In Angola, low oil prices, a weak investment climate, and rising inflation will weigh on real GDP growth.
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Among the region’s frontier markets, growth is expected to rise moderately in Ghana, driven by improving investor sentiment, launching of new oilfields, and overcoming the electricity crisis. Real GDP growth is expected to remain subdued in Zambia, because of low copper prices and power shortages, and as higher interest rates and food costs stemming from the weakening currency weigh on private consumption. However, growth is expected to remain robust in Kenya, supported by private consumption and public investment. In Côte d’Ivoire, improved investment climate and strong domestic demand will help to keep growth high.
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The outlook for the region’s low-income countries is expected to include a modest pickup in growth in oil and mineral exporters in 2016 as they continue to adjust to low commodity prices. In Mozambique, delayed investment in the liquefied natural gas sector and rising inflation will weigh on real GDP growth in 2016.Growth is also expected to slow in the Democratic Republic of Congo as the copper sector continues to struggle and political uncertainty weighs on investor sentiment. Post-Ebola recovery, aid-driven infrastructure investment and some limited growth in iron ore exports should help boost activity in Guinea, Liberia, and Sierra Leone. However, political and security uncertainties are expected to remain a drag on economic growth in Burundi, Burkina Faso, Mali, and Niger, and drought could adversely impact activity in Ethiopia. For most other countries, growth is projected to remain robust, supported by domestic investment and lower oil prices.
Risks
The balance of risks to the outlook remains tilted to the downside.
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On the external front, a sharper than expected slowdown in China through the rebalancing of growth toward consumption and services would lead to a further decline in commodity prices and investments that could lead to a cancelation of planned investment projects in resource sectors, and further weaken activity in commodity exporters. Weaker than expected growth in the Euro Area could further weaken the external demand for exports, and reduce investment flows as well as official aid. Tighter global financing conditions would result in higher borrowing costs that could affect the region through higher risk premia and reduced sovereign bond access for emerging and frontier countries.
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On the domestic front, delays in adjustment to external shocks in affected countries would create policy uncertainties that could weigh on investor sentiment and weaken the recovery. A worsening of drought conditions would dampen growth in agriculture, reduce hydroelectricity production, and accentuate inflationary pressures. Boko Haram insurgencies and terrorist attacks remain a concern in West Africa and Kenya, while the risks of political upheavals are substantial in Burundi and South Sudan.
Policy Challenges
Commodity exporters across the region face a new, lower level of commodity prices to which they need to adjust. Furthermore, with commodity markets, and external conditions more generally, likely to be less supportive than in the past, the region will also need to focus on developing new sources of growth. Meanwhile, widening fiscal and current account deficits have increased economic vulnerabilities, which are reflected in depreciating currencies and rising inflation. This has prompted central banks in many cases to raise interest rates, even as the economy was slowing, further undermining growth. Responses to these challenges will vary, depending on country-specific conditions.
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For most countries in the region, the adjustment to the low commodity prices will need to include stronger efforts to strengthen domestic resource mobilization, to reduce overdependence on revenue from the resource sector. In particular, resource-rich countries would benefit from improving their non-resource tax systems. Although tax revenues as a share of GDP have increased in SSA since the 1980s, much of the improvement was driven by growth in commodity revenues. Excluding resource-based revenues, there has been limited improvement in the domestic mobilization of tax revenues in the region. Stronger efforts to broaden the tax base and strengthen tax administration would help increase domestic revenue.
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Exchange rate flexibility could help the adjustment to the low commodity price environment. In countries where exchange rates are flexible, policy makers may need to tighten their macroeconomic policy stances, and strengthen their monetary policy frameworks, to prevent inflation induced by currency depreciation from becoming a constant threat.
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The increased vulnerabilities across the region point to the need for greater efforts to build policy buffers and resilience to external shocks. This will require measures to rationalize current expenditure, particularly the wage bill, and improve public financial management and the quality of spending. In oil-exporting countries, in particular, measures would be needed to increase public investment efficiency. Countries where a deeper and faster fiscal adjustment is required as a result of the commodity price shocks may face a difficult trade-off between boosting development spending and building buffers. In these countries, to the extent possible, fiscal adjustment should be designed to minimize the impact on growth and on vulnerable populations. In this context, provision of countercyclical financial support could help to build policy space for essential expenditures and ease adjustment.
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Accelerating the pace of structural reforms aimed at boosting competitiveness and diversification will be critical for raising growth prospects and reducing extreme poverty (box 1.2). In most countries this will require greater efficiency of infrastructure investment, energy sector reforms, a more inclusive financial sector, and improvements in the business climate.
BOX 1.2: Driving Diversification in Africa through Trade and Competition
African countries experienced some of the fastest growth rates in exports in the decade and a half since the turn of the century. This was mostly driven by rising prices for commodity exports such as oil and metals, with limited impacts on local economies. As a result, the exports of many African countries are highly concentrated in a few commodities. There has been some progress toward diversification in some countries (Ethiopia and Rwanda, for example), but others have become even more dependent on just a few products (Chad, Sierra Leone).
The global economy is more challenging, but opportunities to drive diversified growth through exports are important for Africa. Falling demand in key markets, such as China, and the resulting decline in commodity prices are undermining Africa’s immediate growth prospects. The dominant commodity exports are sold on global exchanges and cannot be simply diverted to other markets.
Nevertheless, there is an opportunity for Africa to exploit its comparative advantages in agriculture, low production costs in manufacturing, and services to drive more inclusive export-led growth. Integration into regional and global value chains offers a route for African firms and individual services providers to provide their goods and services to the global market. These opportunities are enhanced by the duty preferences that African producers can receive in key markets, such as the United States under African Growth and Opportunity Act, the European Union through Economic Partnership Agreements or Everything but Arms, China, and other African countries through regional agreements.
High trade logistics costs and limited domestic competition undermine the ability of African entrepreneurs to exploit new export opportunities. Africa’s infrastructure constraint is beginning to be addressed, but trade logistics costs remain high relative to other regions. In some cases, such as apparel, trade preferences can offset these high costs and are allowing new exports to emerge.
Maintaining a competitive exchange rate is essential, but reducing trade costs is necessary to scale up and sustain these new activities for long-term job creation and poverty reduction. Importing (materials, machinery, technology, knowledge, and skills) to export is indispensable to be able to enter modern value chains and diversify exports more broadly. Hence, attention must be given to reducing the costs to import as well as export by reducing those tariffs that remain relatively high, rationalizing procedures, including electronic submission of documents, disciplining the use of permits and licenses and other regulatory measures that create barriers to trade, improving access to trade-related information, and increasing coordination between agencies involved in the trade process. Competitive and efficient input and output markets are essential to support trade development, but African markets lack competition. The level of competition is lower in African countries than in competitors and in many cases a single firm accounts for more than 50 percent of the market in key sectors, such as trucking services and fertilizer distribution.