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Why Zimbabwe’s diamond mines need better regulation, not state ownership
Zimbabwe, like many African countries, faces an ongoing struggle to secure fair compensation for its mineral wealth. The question of how to maximise government revenues from the mining sector is a complex matter.
But turning the sector over to state-owned mining companies has rarely optimised mining revenues. What’s needed instead are improvements in management practices, regulations, regulatory capacity and the investment environment.
This issue is back in the Zimbabwean spotlight after the country’s president, Robert Mugabe, announced that the government will take over all diamond operations. His move came soon after the government failed to renew mining licences. Private mining companies were ordered to cease operations, leave their equipment and vacate their premises.
Diamond mining in Zimbabwe has a short but turbulent history. The country’s diamond resources are concentrated in Marange, in its eastern region near the border with Mozambique. A number of private mining companies have operated in partnership with the state-owned Zimbabwe Mining Development Corporation (ZMDC) since the late 2000s. This arrangement began after thousands of artisanal miners were violently forced off the newly discovered alluvial deposits.
The government holds a 50% share in diamond operations through ZMDC. Despite this, it has reportedly received insignificant revenues from the sector in recent years.
Royalty payments, which are calculated on production volume, plunged to a mere US$23 million last year. That’s down from US$84 million in 2014. Tax payments, which are calculated on profits, have also been negligible.
Zimbabwe’s former finance minister, Tendai Biti, recently estimated that mining companies may have looted as much as US$14 billion from Zimbabwe over the past seven years.
Other factors explain declining revenues
It is very possible that the decline in royalty payments and tax revenues is due to production volumes being under-reported, tax avoidance and diamond smuggling. Zimbabwe has inadequate regulation and the diamond sector lacks transparency. But there are a number of other factors that have likely contributed to the sector’s declining production and government revenues.
First, Marange – Zimbabwe’s largest diamond field – is an alluvial deposit. This makes production at low cost possible, using very basic technology and sometimes even just bare hands. The result has been rapid depletion of the deposit.
Some experts believe that much of Marange’s alluvial resources have already been exploited. This would leave mainly kimberlites, which are more capital intensive to produce.
Second, about 90% of Marange’s diamonds are of relatively low quality. They therefore don’t yield high prices on the world market. They also tend to sell at discounted prices on world markets because of trade sanctions that have been extended to early 2017. These are being enforced by the US and the European Union because of human rights violations.
Third, mining companies have resisted government pressure to develop open-pit or underground operations. Given the low quality, alluvial nature of Marange’s deposits and the fact that they are likely already very depleted, it is unclear whether upgrading operations to reach deeper resources would be economically viable.
Even if upgrading operations were feasible, this would require considerable capital investment. Mining companies are unlikely to make these investments because Zimbabwe’s business environment is unstable and threatening.
Such an oppressive business environment hits mining companies the hardest. They cannot move their operations elsewhere, as they are tied to where the natural resources are located.
Zimbabwe also has an inclination towards expropriation. It is therefore hardly surprising that mining companies are reluctant to invest, preferring the easy pickings of alluvial mining.
State control
The newly created state-owned Zimbabwe Consolidated Diamond Corporation is set to take over the mining companies’ assets and assume all production operations. But consolidating operations under state ownership is not, in isolation, going to solve government’s efforts to raise its revenues from the sector.
There is a very good reason that only a handful of state-owned mining companies are engaged in production operations worldwide. Where they have been established they have tended to be less efficient, partly because they are often shielded from competition. They have also been more poorly managed than their private-sector counterparts, leading to deficient outcomes.
Successful state participation in the mining sector is rare. Among the few exceptions are Debswana in Botswana and Namdeb in Namibia. Both are joint ventures between the governments and the diamond giant De Beers. But their experiences cannot be easily replicated in Zimbabwe.
For starters, Zimbabwe’s alluvial diamond deposits may be far more fleeting than the deep, extensive deposits in Botswana and Namibia. This makes it improbable that Zimbabwe will enjoy the same long-term horizons as those countries.
Further, Zimbabwe lacks a trusted, experienced and private-sector company with the capital and technical expertise needed to develop open-pit or underground mines. Zimbabwe also lacks the resources to go it alone.
The alternative to state ownership
Rather than state ownership, Zimbabwe needs to improve management practices, regulations, regulatory capacity and the investment environment. Necessary reforms include enacting a comprehensive regulatory regime to govern the fiscal and other facets of the entire diamond supply chain. In addition, Zimbabwe should ensure strict transparency and accountability of the diamond sector.
All mining sector laws and regulations should comply with international standards. These include the Extractive Industries Transparency Initiative and Kimberly Process Certification Scheme minimum requirements. All contracts should be published, together with production volume and revenue information. It is also vital that state-owned entities be subject to the same reporting, disclosure and other requirements as private companies.
The capacity to regulate the mining sector must be strengthened. Relevant regulatory institutions must have autonomy and adequate enforcement capabilities. This is particularly pertinent since the Zimbabwean government will be acting as both a commercial entity and as the regulator.
As a commercial entity it will be aiming to maximise profits, potentially at any cost. As the regulator it will be enforcing environmental, social and other regulations, which may lower the profitability of operations.
Given this conflict of interests, the government may fail to adequately regulate the diamond sector. Otherwise regulatory failures may lead to corruption, revenue leakages, and social and environmental violations.
Finally, it is imperative that government improves Zimbabwe’s investment environment to attract more responsible mining companies. Until then, only fly-by-night investors with high-risk thresholds will be willing to operate in its mining sector. But with such investors, Zimbabwe’s diamond mining will continue to yield little benefit for the country.
Sarah Logan is an Economist at the International Growth Centre.
The Conversation is funded by the National Research Foundation, the Knight Foundation and Barclays Africa. The Bill & Melinda Gates Foundation is a Strategic Partner.
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Continental talks on implementing Agenda 2063
Regional Economic Communities (RECs) from the African continent led by the African Union and other strategic continental institutions have concluded talks on the 10 year implementation plan for the Agenda 2063.
The forum organized by the AU and hosted by COMESA brought together chief executives and senior officials from all RECs, the African Development Bank, the UN Economic Commission for Africa (UNECA) New Partnership for Africa Development (NEPAD) and the Africa Capacity Building Foundation (ACBF) among others.
The objective of the forum was to receive inputs, share experiences and harmonize approaches on the RECs priorities and programmes with regards to the flagship projects in the context of 10 year implementation plan for the Agenda 2063 10-year.
Key areas in focus are Infrastructure (transport, energy, ICT, etc.); Industrialization, commodities and Trade; Agro-processing sector; Mobility and Free movement of people; Continental Free Trade Area; Skills and youth unemployment; gender equality and Peace, security and Governance, in the context of Year of Human rights (2016).
Speaking during the opening session, Deputy Chair of the African Union Commission Mr. Erastus Mwencha said the low level of integration and transformation was the most critical issues facing the continent.
“Until we deal with those two points, we are in a vicious circle, going through cyclical ups and downs and creating more hurdles in the way of our African economic development,” Mr Mwencha said.
“As we look at our agenda today, in developing agenda 2063, we have examined 35 national development plans; implemented true participatory approaches and come up with a set of seven aspirations and 20 goals that are of highest importance to the people of Africa, and are in perfect alignment with the post 2015 sustainable development goals.”
The meeting will discuss the proposed allocation of roles and responsibilities among the AUC and the RECs and other institutions in the implementation of Agenda 2063, and the status of implementation of the outcomes of the last two AUC-RECs-AfDB-UNECA Joint Coordination meetings held in Addis Ababa, in May 2015 and Johannesburg, in December 2014, respectively.
In his statement, the Minister for Foreign Affairs of Zambia Hon Harry Kalaba said in order for national strategies for economic transformation to be pursued successfully, it is vital that they are complemented by strong regional policies.
“Agenda 2063 present landmark undertakings which if implemented to the full potential will positively influence the future of our continent,” the Minister said.
The meeting will receive updates on work in progress on the implementation of the first Ten-year plan of Agenda 2063 and a strategic discussion on how to accelerate implementation of flagship projects by the AUC, RECs and other institutions; It will also make recommendations on the delineation of roles and responsibilities amongst AUC, RECs, NPCA and other relevant institutions to ensure the execution of different programmes in the implementation of Agenda 2063 and improve teamwork, responsibility sharing and strengthen role of RECs in the AU.
Acting COMESA Secretary General Amb. Nagla El Hussainy described the Agenda 2063 as a guarantee of the unity of purpose. She said: “What is needed is pooling of capacities we have in every organization involved in the implementation and make sure we are synergizing efforts to deliver appropriately as one.” The opening session was also addressed by the UNECA Executive Secretary Dr Carlos Lopes and the representative of the African Development Bank Ms. Moono Mupotola.
Seven RECs participated in the meeting. They included COMESA, the East African Community (EAC) Southern Africa Development Community (SADC) Economic Commission for Western Africa States (ECOWAS), Economic Community of Central African States (ECCAS) intergovernmental Authority on Development (IGAD) and the Community of Sahel Saharan States (CENSAD).
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tralac’s Daily News Selection
The selection: Friday, 11 March 2016
Convened today:
In Nairobi: an export strategy development meeting for Kenya. For updates follow @IndustryKE, @ExportsKenya, @IndustryKE, @AdanMohamedCS, @Kiptoock or #ExportsKE
In Arusha: EABC team undertakes a review exercise on EAC Common External Tariff to submit harmonized positions. For updates: @EABCArusha or #EABCCETReview
Regional Integration Policy and Strategy 2014-2023 (AfDB)
This Regional Integration Policy and Strategy for 2014-2023 is the blueprint for the Bank’s long-term support to Africa’s economic integration. It builds on the experiences of the Bank and other development partners in implementing regional integration programs. Anchored on the Bank’s Ten Year Strategy for 2013-22, it reflects the continent’s priorities as expressed in the many integration initiatives. Furthermore it distills current thinking on the economics of integration coming from the Bank, other multilateral development banks, the African Union Commission, the Economic Commission for Africa as well as think tanks, researchers and academics.
Extract: Many RECs are in “mixed” neighborhoods, with fragile states grappling with challenges of reconstruction and transformation, alongside island economies and middle income countries, which also require innovative instruments to support their participation in regional programs. Yet, the operational structures of many RECs hinder their capacity to design, coordinate and monitor the integration process in a way that addresses different country challenges. Strong political support for regional integration has to be translated into action by ratifying protocols and affording sufficient attention to regional integration in national development plans. This gap illustrates national capacity and budgetary constraints and the resulting tension in supporting national or regional programs, as well as national concerns about uneven gains and losses. [Download]
Starting today, in Lusaka: AU-RECs-UNECA-AfDB-NEPAD-ACBF Joint Coordination Meeting
Starting, on Monday: Rwanda to host the inaugural African Transformation Forum (New Times)
A preview: Full agenda for SADC Council of Ministers (SARDC)
According to a draft agenda, the council on 14-15 March will consider and approve the budget for the 2016/2017 financial year and review progress made in implementation of the previous budget plan. The budget for 2015-2016 was US$79.4m. It is estimated that more than 70% of the SADC budget comes from International Cooperating Partners — a situation which compromises the ownership and sustainability of regional programmes. In this regard, the 2016/2017 SADC budget is expected to consider alternative financing modalities that will allow the region to take full control of its development plan. Another key issue for discussion is the finalization of an action plan of the recently adopted SADC Industrialization Strategy and Roadmap 2015-2063, as well as implementation of Phase 1 of the strategy, which covers the period 2015-2020. The strategy that is being implemented in three phases aims to promote industrialization by ensuring that member states harness the full potential of their vast and diverse natural resources.
Debating the future of monetary integration in Sub-Saharan Africa: Mauritius ATI seminar
Participants’ views converged on the prerequisites for monetary integration such as more trade and economic integration. The exposure of potential monetary union members to large asymmetric shocks and the risks associated with large current account imbalances were recognized as sources of concern. Some participants noted that while monetary unions - such as the CFA zone - have contributed to price stability, there are more gains to be achieved on growth and economic development from trade integration, than perhaps from monetary integration. They discussed whether Africa should focus more on those integration objectives. [Reposting: ECOWAS convergence workshop]
Continental Free Trade Area Negotiating Forum: update (UNECA)
The main outcomes of the meeting were: i) Adoption of the draft rules of procedure of the negotiating institutions, including the CFTA-NF, which will be provisionally applied pending endorsement by the Committee of Senior Officials and African Ministers for Trade; ii) Election of a temporary bureau which is composed as follows: Chair - Egypt, 1st Vice-chair - Senegal, 2nd Vice-chair - Cameroon, 3rd Vice-chair - Kenya, Rapporteur – Botswana; iii) Adoption of tentative dates for the 2nd meeting of the CFTA-NF, scheduled from the 18 to 22 April 2016 in Addis Ababa.
Presentations from the ECOWAS/UNCTAD stakeholder consultation on the African Continental Free Trade Area:
Opening statement (Dr Ekwow Spio-Garbrah, Minister of Trade and Industry, Ghana)
To a large extent, the successful implementation of the CFTA would depend on how well it meets the needs of the private sector. It is generally expected that the rules that African countries enact for the conduct of trade such as the CFTA are meant to be exploited by the private sector. Private sector engagement and sensitization on the CFTA is therefore critical at all levels. In this regard there should be a concerted drive to engage in high level consultations and sensitization with the private sector in the entire negotiation process of the CFTA and the public at large across the continent to ensure this will not be just another Addis-driven “top-down” political exercise to ensure the successful establishment of the CFTA within the time frames.
Scope of the CFTA negotiations, principles, objectives and institutional framework (Mr Bonapas Onguglo, UNCTAD)
Key challenges: Commitment to integration varies across countries. Some countries have not undertaken any liberalization within their respective RECs FTA. Accordingly if they cannot commit themselves to a smaller FTA, it will be difficult for them to commit to a CFTA. Some countries also remain sceptical of regional integration fearing domination by richer or more powerful states or ceding power to a supranational body.
With new passport, East Africa leads the way on integration - again (Daily Maverick)
The East African Community has launched its regional passport, replete with all necessary bells and whistles. It's a big step for the region, but unquestionably in the right direction. Why is southern Africa so slow in following suit? [The author: Simon Allison]
EALA enacts legislation on disaster risk reduction (EAC)
The passage of the Bill is a culmination of about two years of work during which time the Assembly has consistently advocated for it. Debate on the Bill, originally moved for second reading in August 2013, was halted following a request by the Council of Ministers to consult and consider its policy implications. At the same time, the move was to allow for pursuit of the ratification of the EAC Protocol on Peace and Security which among other objectives, provides for co-operation in DRR management and crisis response. The Protocol on Peace and Security has since been ratified by all Partner States. The next stage is the process of Assent by the EAC Heads of State in line with Article 63 of the Treaty for the Establishment of the East African Community. [Kenya and Tanzania in tussle over EAC court (The Star)]
SADC financial inclusion strategy workshop report (Finmark Trust)
FinMark Trust, in collaboration with the SADC Secretariat hosted a SADC financial inclusion strategy workshop in February 2016. The workshop which was represented by 14 countries was the result of the Report on Financial Inclusion, where the Ministers of Finance and Investment directed the SADC Secretariat to partner with FinMark Trust to develop a Regional Financial Inclusion Strategy. To this end, a draft strategy was developed by FinMark Trust and presented to SADC stakeholders on 11th and 12th February 2016 at Centurion Lake Hotel in Pretoria. At the workshop, inputs were obtained from stakeholders before finalisation of the strategy for submission to the Ministers of Finance for consideration. The report highlights the key messages from the two-day workshop. [Download]
Namibia: Trade deficit grows by 43%, highest since 2006 (New Era)
The just released Annual Trade Statistics Bulletin for 2015 shows that the country’s trade deficit grew as money spent on imports expanded by 6%, while export revenue dropped by 9.8%. The latest figures by the Namibia Statistics Agency indicate a trade deficit amounting to N$39.2bn compared to N$27.4bn registered in 2014. Key export markets for locally produced goods were Botswana (N$13.1bn), South Africa (N$11.4bn), Switzerland (N$8.9bn), Angola and Spain (both at N$2.6bn). The top commodities exported by Namibia were diamonds, copper cathodes, fish, copper ore and zinc. Namibia’s imports during 2015 were mainly sourced from South Africa (N$62bn), China (N$6.3bn), Switzerland (N$2.4bn), Botswana (N$2.3bn) and the Bahamas (N$2.1bn). [Minister expresses concern about over-dependence on food imports (StarAfrica)]
CAADP implementation: 2nd Permanent Secretaries Leadership Retreat (AU)
The 2nd PS CAADP Retreat comes at the pinnacle of the renewed launch of CAADP country implementation. Expected outcomes of the retreat include: to reflect on thematic and policy factors and issues presenting either opportunities or challenges to delivering on the Malabo commitments, validate the revised Country CAADP Implementation Guidelines, to solicit country perspectives on (i) the CAADP-Malabo Financing Architecture (ii) the technical networks arrangement to mobilise and make accessible expert support arrangements; and (iii) the revised CAADP Partnership architecture.
Cultural goods remain economic driver in digital age (UNESCO)
The study from the UNESCO Institute for Statistics, 'The globalisation of cultural trade: a shift in cultural consumption – international flows of cultural goods and services 2004-2013', takes an in-depth look at the export and import of cultural goods and services around the world. “Trade in cultural goods totalled $212.8bn in 2013, nearly double the amount in 2004,” said Silvia Montoya, Director of the UIS. “This is further evidence of the critical role cultural industries play in today’s global economy.” UNESCO found that China is now the lead exporter of cultural goods, followed by the United States. In 2013, the total value of China’s cultural exports was $60.1bn – more than double that of the US at $27.9bn.
10 practical steps to create an Emissions Trading System (World Bank Blogs)
This week, the World Bank’s Partnership for Market Readiness – jointly with the International Carbon Action Partnership – launched 'Emissions trading in practice: handbook on design and implementation', a new guide for policymakers that distills best practices and key lessons from more than a decade of practical experience with emissions trading worldwide.
Egypt lowers gas prices to steel manufacturers by 36% (Ahram)
Egypt lowered gas prices to steel manufacturers by almost 36%t to $4.5 per million thermal units with the hope of cutting the country's import bill, the industry and foreign trade ministry said in a statement on Thursday. The decision is estimated to save the country $1.1bn in foreign currency currently spent on importing billet (steel raw material) and raise production capacity to increase exports by $600m, said the ministry in the statement.
Administrator Gayle Smith: ‘US leadership in international development’ (USAID)
Finally, and this is a new and I think extraordinarily positive development, USAID is acting on the fact that our role as a development agency is also to bring analysis, solutions, and expertise to the mix when it comes to seizing the opportunities and tackling the challenges that confront our government every day and in every corner of the world. That means using our early warning systems to enable the U.S. to respond early to crises, sharing our analyses of state fragility and long experience with transitions to help shape effective policies, and garnering decades of experience in individual countries to help inform our next steps. Our challenge now is to build the systems to ensure USAID’s extraordinary foundation of knowledge is brought to the policy table with rigor and with regularity.
ACP, EU pave the way for a crucial Joint Council of Ministers meeting in Senegal (IDN)
Cecilia Malmström: 'EU trade priorities in 2016'
WBG, ISO partnership highlights how countries benefit from international standards
WTO Committee on Agriculture: statement by the Chair
Christophe Bellmann: 'Advancing LDC concerns in the post-Nairobi context' (Bridges Africa)
D. Ravi Kanth: 'WTO case exposes Barack Obama’s hypocrisy' (Livemint)
Japan to support South Sudan customs service
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Advancing LDC concerns in the post-Nairobi context
As the dust from the Tenth WTO Ministerial Conference held in Nairobi, Kenya settles and delegates resume their discussions in Geneva, this piece reviews some of the key MC10 outcomes and assesses possible ways forward to advance the concerns of least developed countries (LDCs).
The Nairobi Ministerial produced a set of specific decisions, including most significantly new rules on export competition providing for the gradual phase out of export subsidies and establishing initial disciplines on export credit and food aid. It also reiterated the Bali decision on public stockholding and achieved incremental progress on specific least developed country (LDC) issues such as market access for cotton, an updated timeframe for the services waiver, rules of origin and the right to use – under modalities to be determined – a special safeguard in agriculture (for further analysis of the Nairobi decisions see the article “Evaluating agriculture in the Nairobi package” in this issue).
Beyond these decisions, however, the real challenge in Nairobi consisted in overcoming persistent divergences on the future of the Doha Development Agenda (DDA) and in defining possible parameters for future negotiations. On this critical point, the declaration sheds little light on what exactly lies ahead, but makes it clear that the “post-Nairobi” landscape will look markedly different from the one preceding the ministerial. Four elements deserve specific attention here.
First, paragraph 31 reaffirms the strong commitment by all WTO members to advance negotiations on the remaining Doha issues including agriculture, non-agricultural market access (NAMA), services, TRIPS, rules, and the broader notion of “development.” At the same time, members remained at odds over the reaffirmation of the DDA mandate, with paragraph 30 explicitly acknowledging opposing viewpoints without reconciling them. This controversy around the mandate essentially reflects a desire by some members to review the terms of engagement in the DDA, not least to ensure higher levels of commitments from large emerging economies than what is currently envisaged. By extension it raises the broader question of differentiation among WTO members beyond the current “recognised categories” of developed, developing, and least developed countries.
Third, the declaration reflects a view held by some that new approaches need to be explored as a way to “achieve meaningful outcomes.” Such approaches would probably include plurilateral negotiations whether they take the form of critical mass agreements applied on a most favoured nation (MFN) basis or more excluding initiatives following the Government Procurement Agreement (GPA) model. At the Eighth Ministerial Conference, the final consensus statement already made reference to different negotiating options. At that time, members privileged a step by step strategy, focusing on small packages of low hanging fruits. In parallel, however, several plurilateral initiatives where launched as illustrated by the Trade in Services Agreement (TISA), the Environmental Goods Agreement (EGA), or the Information Technology Agreement (ITA II) concluded in Nairobi. Finally, paragraph 34 states that some members “wish to identify and discuss other issues for negotiation,” while others do not. The declaration doesn’t specify what those issues are, but several topics have already been floated by proponents including investment, digital trade, global value chains, or regulatory coherence, to list just a few.
Overall, these tensions over differentiation or the single undertaking are not new. Nor is the push for new issues, several of which are partially covered in existing agreements (e.g. investment or regulatory convergence) or already on the agenda (e.g. work programme on e-commerce). The main difference this time – besides the fact that members’ divisions have been explicitly reflected in the declaration – is that ministers fell short from agreeing on a possible way forward. In Bali, the declaration mandated the preparation of a clearly defined work programme on the “remaining DDA issues.” This time, members came back to Geneva with no deadline, no clear parameters for future engagement, and persistent uncertainty about the overall negotiating framework. Even more worrying – and perhaps at the root of the current situation – is the fact that large developed players seem to have lost interest in the DDA negotiations.
Traditionally, trade issues among advanced economies, namely the EU, the US, and Japan were addressed through multilateral talks. In the course of the DDA, they reluctantly accepted to engage on issues such as agriculture domestic support pushed by the developing country G20 and others, assuming that they could sell such reforms domestically in exchange for enhanced export opportunities – largely in their respective markets (e.g. the US would look at the EU beef market or the Japanese pork market). Since 2008 however, large players have found alternative pathways to deal with their trade issues as illustrated by the EU-Japan FTA; the conclusion of the Trans-Pacific Partnership (TPP); or the EU-US Transatlantic Trade and Investment Partnership (TTIP). Such negotiations not only tend to result in more ambitious liberalisation outcomes compared to Doha, they also conveniently exclude politically sensitive issues such as domestic support, while embracing a wider set of issues including investment or regulatory convergence. In short, with the mega-regionals, large players don’t really need a DDA anymore, at least not under its current form. They have achieved most of their liberalisation objectives outside of the WTO, without losing any multilateral bargaining chip. Granted, this doesn’t cover emerging economies but under the draft negotiating texts, the real market access gains they could have expected from China or India for example would have been very small anyway. For LDCs who essentially remain “deal takers” in these negotiations, the fact that large trading powers lose interest in the DDA and that negotiating elements are removed from the Doha equation, will obviously result in fewer trade-offs and less leverage opportunities to advance their concerns.
What prospects in the post-Nairobi context?
Based on the above, three combinable scenarios can be envisaged. First, members may spend time arguing about whether the DDA is dead or alive, re-interpret what was agreed in Nairobi, or simply engage in a blame game. Others may want to condition any further talks on prior reaffirmation of the DDA. For the reasons highlighted above, such an approach is unlikely to generate meaningful results. Second, large players may continue to disengage, and simply pursue their “competitive liberalisation strategy” through preferential agreements. They may even bet on the fact that several developing and emerging economies will ultimately express interest in joining such regional negotiations as already indicated after the conclusion of the TPP. Finally, members may decide to take some time off, engage in a period of reflection and identify which issues should be pursued either multilaterally or plurilaterally, taking advantage of the openings offered by the post-Nairobi landscape.
While all of the three scenarios highlighted above are possible, the third is probably the only one which would offer some prospects for LDCs. Under this scenario, the group would need to proactively articulate its priority interests as opposed to being only reactive. These interests have arguably been articulated before but they were framed under the overall DDA approach. Post-Nairobi, there might be a need to revisit longstanding LDC proposals, focusing on the underlying concerns behind them and devising specific strategies to advance them. Food security, special and differential treatment, fisheries subsidies, or non-tariff barriers will obviously be on the agenda, but such a reassessment should not be limited to the current DDA structure. From a development perspective, the main consideration should be whether an issue – “new” or “old” – helps address the structural handicaps affecting LDCs or not. In a similar vein, LDCs should consider ideas floated by others, looking at them either as leverage points or in their own merit, taking into account the fact that disciplines in those areas will be increasingly crafted outside of the WTO where LDCs are not represented. Based on this analysis, LDCs could engage with other WTO members, test the waters, and find possible supporters. Only then should concerns of format and configuration come into play.
Christophe Bellmann is a Senior Resident Research Associate at the ICTSD.
This article is published under Bridges Africa, Volume 5 - Number 2, by the ICTSD.
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IMF, policymakers, and academics debate the future of monetary integration in sub-Saharan Africa
The Africa Training Institute (ATI), the IMF, and the Banque de France jointly organized a high-level seminar at the ATI in Mauritius on March 7-8, 2016. Over 30 high-level policymakers from across sub-Saharan Africa and academics from Africa, America, and Europe gathered to discuss the future of currency areas, with a focus on conditions under which they remain an appropriate mechanism for improving welfare in their member countries.
In their opening remarks, IMF Deputy Managing Director Carla Grasso and Institute for Capacity Development Director Sharmini Coorey underlined the timeliness of this seminar. Monetary integration is arguably one of the most pressing macroeconomic policy questions of our times, with urgent questions regarding governance and design of the Euro area on the one hand, and enthusiasm for further monetary integration in Africa on the other.
Participants’ views converged on the prerequisites for monetary integration such as more trade and economic integration. The exposure of potential monetary union members to large asymmetric shocks and the risks associated with large current account imbalances were recognized as sources of concern. Some participants noted that while monetary unions – such as the CFA zone – have contributed to price stability, there are more gains to be achieved on growth and economic development from trade integration, than perhaps from monetary integration. They discussed whether Africa should focus more on those integration objectives.
A panel that focused on the need to develop capacity before starting regional integration agreed on the need for better infrastructure development in all sectors – both physical and IT – as well as for strengthened human resources as prerequisites for reaping the benefits of any form of regional integration.
In the second ATI Presidential Lecture, Dr. Carlos Lopes, Executive Secretary, UN Economic Commission for Africa, made a strong appeal to African leaders to deliver on their agreed upon strategy of industrialization in Africa as a prerequisite for a successful regional integration. He noted the priorities of investing in infrastructure and the development of both human resources and institutions. He argued that, while Africa is late in the industrialization race, some factors play in its favor going forward. These include the continent’s large internal market, the declining cost of fossil fuel energy and large potential for renewable energy, low labor costs, and the large gains in employment that could be realized from even a modest increase in the value chain produced within Africa given the low current level.
Several participants were skeptical about the gains from fiscal unions at this stage, as a complement to monetary unions, given that many countries do not feel ready to give up political sovereignty, which comes with the implementation of a fiscal union. However, with a single monetary policy, fiscal rules are necessary to avoid the free rider problem even in the absence of a deficit monetization risk.
Asymmetric shocks in a monetary union can be significant given the economic structure of many African countries as commodity exporters. Here, several speakers emphasized that the rich literature on optimum currency areas can be a valuable reference, as it discusses mitigating factors such as factor mobility, diversification, financial integration, and fiscal mechanisms in the face of such asymmetric shocks. However, making such mitigating factors require structural reform.
The seminar concluded that monetary integration should not be pursued too fast and that priority should be given to implementing a comprehensive structural reform agenda as it emerged from the discussion.
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Getting the Continental Free Trade Area negotiations underway
Negotiators adopt Procedural Rules for the CFTA Trade Negotiating Forum
It is imperative that African negotiators remain on course as they push for a single market for goods and services, removing tariff and non-tariff barriers to intra-African trade and paving the way for increasing levels of investment in Africa, says African Trade Policy Center (ATPC) Coordinator, Mr. David Luke.
Speaking on 22 February 2016 at a capacity building workshop preceding the first meeting of the Continental Free Trade Area Negotiating Forum (CFTA-NF) that laid the groundwork for upcoming substantive negotiations, Mr. Luke said negotiators should work together to position the continent to take advantage of trade and investment opportunities that will lead to transformational development.
“The level of ambition should be high, embracing the 54 member states with the aim of creating a 21st century single economic space for freer trade in goods and services,” he told participants.
The meeting was held in Addis Ababa, Ethiopia, with participants laying the foundation for the CFTA negotiations, which will be conducted until the CFTA’s 2017 deadline. Negotiations for the establishment of the CFTA were launched by Heads of State at their 25th African Union Summit in Johannesburg, South Africa, last year. Participants were drawn from all the 54 member States, the African Union Commission.
AU Trade and Industry Commissioner, Fatima Haram Acyl, said it was critical for negotiators to deliver the CFTA by October 2017.
“The whole world is watching and waiting. Africa must prove to itself and the whole world that it can agree internally on solutions towards its own development,” she said.
“We can and will prevail. With your commitment, the establishment of an African Continental Free Trade Area can and will become a reality.”
Mr. Luke also led discussion on areas of consensus and disagreements so far in relation to the structure and content of a CFTA agreement. He further identified capacity and technical entry points where the ATPC can support negotiators.
The first CFTA-NF meeting kicked off with a two-day workshop for member states and regional economic communities with the main aim of strengthening the capacity of negotiators as they proceed with the trade negotiations. Resource persons at the workshop were drawn from the AUC, ATPC, UNCTAD and the UK Trade Advocacy Fund (TAF).
The main outcomes of the meeting were:
i) Adoption of the draft rules of procedure of the negotiating institutions, including the CFTA-NF, which will be provisionally applied pending endorsement by the Committee of Senior Officials and African Ministers for Trade;
ii) Election of a temporary bureau which is composed as follows:
Chair: Egypt
1st Vice-chair: Senegal
2nd Vice-chair: Cameroon
3rd Vice-chair: Kenya
Rapporteur: Botswana
iii) Adoption of tentative dates for the 2nd meeting of the CFTA-NF, scheduled from the 18 to 22 April 2016 in Addis Ababa, Ethiopia.
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ECOWAS/UNCTAD/GIZ Stakeholder Consultation on the Development of a Regional Strategy for the CFTA Negotiations
The Trade Directorate at the ECOWAS Commission is in the process of formulating an ECOWAS Regional Strategy for engagement with other partners in the Continental Free Trade Area (CFTA) Negotiations.
To commence this process, the ECOWAS Commission, in collaboration with UNCTAD, through its Regional Office for Africa, and GIZ, has organised a three-day brainstorming session from 9-11 March 2016 in Accra, Ghana, to propose a Regional Strategy for engagement with other RECs and Members in the forthcoming CFTA negotiations.
The Meeting will facilitate consultations and dialogue among selected ECOWAS Member States and the ECOWAS Commission on the CFTA for a start, with a view to developing regional strategy for engagement with other partners in the CFTA negotiations. It is further intended to provide an occasion to review the opportunities and challenges that confront ECOWAS Member States in the implementation of the Community’s Goods and Services Protocols and Supplementary Protocols. Progress made towards regional integration within the ECOWAS region, in particular, in the areas of goods and services trade, the challenges, and the role partners can play in building capacity for the CFTA negotiations will also be highlighted.
Background
In January 2012, the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union approved an Action Plan for Boosting Intra-African Trade (BIAT) and the establishment of a Continental Free Trade Area (CFTA) by an indicative date of 2017. According to the approved Road Map, during the period 2012 to 2014, Regional Economic Communities (RECs) – recognised by the African Union – are to ensure the effective implementation of their regional trade agreements. ECOWAS, in particular, was encouraged to ensure that its regional trade area was working effectively and to prepare to engage for negotiations that were scheduled to commence from February 2016.
As part of the preparations for the CFTA negotiations, the ECOWAS Commission partnered with the African Union Commission and UNECA in organising a Consultative Meeting on the CFTA. Issues that were discussed included the current state of play of trade liberalization in the ECOWAS region, principles guiding the negotiations for the CFTA, institutional arrangements and private sector views as well as preparedness of the Member States towards the negotiations.
The limited institutional and human resource capacities in the region hindered the formulation of a coherent trade strategy that is closely integrated within the region’s overall development strategy. Yet, it is essential that ECOWAS Member States adopt a well thought out and structured approach before engaging other RECs in the CFTA negotiations.
Opening Statement by Hon Dr Ekwow Spiogarbrah, Minister of Trade and Industry, Ghana
It is an honour for me to address this ECOWAS/UNCTAD Stakeholder Consultation on the Development of a Regional Strategy for the Africa Continental Free Trade Area (CFTA) Negotiations.
Let me at the outset thank ECOWAS, UNCTAD and GIZ for organizing this Stakeholders Consultation to enable ECOWAS Member States Strategize for the CFTA negotiations in order to derive maximum benefits and minimize the losses from the Agreement.
Ghana was happy to see that the vision of the Pan African Movement for regional integration is now gradually becoming a reality with the launching of the CFTA in Johannesburg, South Africa in June 2015 by African leaders to establish a Continental Free Trade Area by 2017 to accelerate and deepen the continent’s market integration.
The importance of trade to the growth and development of any nation has become unquestionable. Trade, certainly, has the potential of ensuring economic growth and lifting millions of people out of poverty.
By virtue of the peculiarities of most African countries including the small sizes of our markets and the attendant weak purchasing power of consumers, the potential of trade and private sector development has not been fully realised.
As you may be aware, Free Trade Areas (FTAs) have become extremely important strategy for development across the regions of the world as a result of the increasingly deepening of globalization and integration. Major continents of the world are finding it prudent to pool resources and markets together in order to become more competitive and reap the benefits of integration. The experience of regions such as the EU, ASEAN, NAFTA and MERCOSUR, which used FTAs as building blocks in their process of regional integration, indicates that FTAs can make important contributions to successful market integration and contribute significantly to economic growth and development of the participating nations.
For instance, the creation of the EU internal market led to an increase in the level of Intra-EU trade which now stands at about 63% and has contributed enormously to growth of GDP and employment.
In Africa, the East African Community (EAC) trade data indicated that international trade in the region more than doubled from $1.6 billion in 2004 to $3.5 billion in 2010 as a result of choosing the path of integration.
African regional integration through a continental Free Trade Area has become more eminent and critical now than ever, because of the proposition and the conceptualization of Action Plans to implement a number of Mega Trade deals/Agreements like Trans-Pacific Partnership (TTP), Transatlantic Trade and Investment Partnership (TTIP), and Regional Comprehensive Economic Partnership (RCEP). Since these have serious and major implications for Africa’s development, it is incumbent on African countries to fast-track and boost intra-African trade in order to be relevant in the global economy.
It is gratifying to acknowledge progress that was made in June 2015 by the COMESA, SADC and EAC for adopting the Tripartite Free Trade Area (TFTA) which is made up of 26 countries with a population of nearly 625 million people and a total GDP of approximately US $1 trillion. It is further envisaged that the 26-country Tripartite FTA, together with other regional FTA processes, would set the stage for a broader and a grand Continental Free Trade Area.
As have been projected by the United Nations Economic Commission for Africa (UNECA), a successful implementation of a Continental Free Trade Area could increase intra-African Trade by as much as $35 billion per year, or 52% above the baseline by 2022. Consequently, imports from outside the continent could decrease by $10 billion per year, whereas Agricultural and Industrial exports would increase by $4 billion (7%) and $ 21 billion (5%) above the baseline respectively. Additionally, it has been projected that coupled with complementary Trade Facilitation measures to boost the speed and reduce the cost of customs procedures and port handling, the share of Intra-African Trade would more than double over the baseline to 22% of total trade by 2022.
The creation of a single continental market for goods and services, with free movement of business people and investments, would help bring closer the Continental Customs Union and the African Common Market and turn the 54 single African economies into a more coherent, larger market. Furthermore, the CFTA would facilitate the exploitation of economies of scale; help move factors of production across borders; increase rate of diversification and transformation of our economics; reduce venerability of external shocks and boost employment opportunities.
The engagement of the private sector in the initiation of government policies at the national, sub-regional levels and continental remains pertinent. With privatization and deregulation in the last few decades, most governments have largely retreated from business and entrusted the private sector to take the lead in stimulating growth and creating jobs. The most resilient economies are those which have managed to establish a true partnership between government and the private sector.
To a large extent, the successful implementation of the CFTA would depend on how well it meets the needs of the private sector. It is generally expected that the rules that African countries enact for the conduct of trade such as the CFTA are meant to be exploited by the private sector. Private sector engagement and sensitization on the CFTA is therefore critical at all levels. In this regard there should be a concerted drive to engage in high level consultations and sensitization with the private sector in the entire negotiation process of the CFTA and the public at large across the continent to ensure this will not be just another Addis-driven “top-down” political exercise to ensure the successful establishment of the CFTA within the time frames.
The role of financial institutions in ensuring the successful implementation of the CFTA is also crucial since business transactions and advisory services will be provided by them. Consequently, the AU and Member States should get some friendly international and Pan African financial institutions involved in the process from now to provide financial support and technical advice.
Admittedly, deriving benefits from international trade remains a challenge for most of our countries as measures such as Rules of Origin, infrastructure deficits, lack of diversification, overly high standards and technical barriers disguised as trade policy tools continue to restrict us from taking advantage of market access opportunities, thereby hampering our effective integration into the multilateral trading system.
It is in this light that we all have to put our shoulders to the wheel, as Politicians, Public Officers, Businessmen, Farmers, among others, on the continent to enable us drive and fast track the various integration processes in order for us to reap and enjoy the many benefits inherent in integration.
I would like to conclude by reiterating that the CFTA remains a viable vehicle for improving the economic development of our countries. African leaders are urged to give this noble dream of the CFTA a push to see to its success in our time with strong political will. I wish you a successfully stakeholder consultation.
Thank you.
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World Bank Group and ISO partnership highlights how countries benefit from international standards: Open trade, access to markets and innovation
The International Organization for Standardization (ISO) and the World Bank Group announced on 10 March 2016 the signing of a Memorandum of Understanding (MoU) to help increase countries’ awareness and involvement in the development, adoption and use of international standards that promote open, fair and transparent trade.
The MoU serves as the foundation for future cooperation in the areas of knowledge generation and dissemination; encouraging research and promoting awareness; improving monitoring and evaluation; and enhancing capacity around international standards that give countries the opportunity to participate in global trade and that contribute to economic development, social progress and protection of the environment.
Kevin McKinley, Acting Secretary-General of ISO said: “We are pleased to partner with the World Bank Group in this way. This signing is an important first step in working towards shared objectives supporting sustainable economic development, as well as fair and transparent trade. Working with the Bank Group is a unique opportunity to help developing countries strengthen their national quality infrastructures to better integrate with regional and global markets. This partnership with the World Bank will also support our collective efforts to achieve the United Nations Sustainable Development Goals.”
Anabel Gonzalez, Senior Director, Trade & Competitiveness Global Practice, World Bank Group said: “This signing underscores the World Bank Group’s commitment to support the integration of developing countries in the global economy. International standards play a crucial role in helping countries increase productivity, access international markets and maximize the benefits of joining value chains. We have an important role to play in strengthening the capabilities of developing countries and their firms to participate in the development of international standards, as well as in complying with those standards. This alone can contribute to addressing the challenges of ending extreme poverty and boosting shared prosperity. We look forward to working closely with ISO to not only highlight the role international standards play in increasing global trade but the benefits countries will receive by actively taking part in the development of these standards.”
About the World Bank Group
The World Bank Group (WBG) is one of the world’s largest sources of funding and knowledge for developing countries. It comprises five closely associated institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), which together form the World Bank; the International Finance Corporation (IFC), the Bank’s private sector arm; the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). The World Bank works closely with the rest of the World Bank Group to help developing countries reduce poverty, promote economic growth, and build shared prosperity. The institution provides a combination of financial resources, knowledge and technical services, and strategic advice to developing countries.
About the International Organization for Standardization
The International Organization for Standardization (ISO) is an independent, non-governmental international organization with a membership of 162 national standards bodies. Through its members, it brings together experts to share knowledge and develop voluntary, consensus-based, market relevant International Standards that support innovation and provide solutions to global challenges. These standards give world-class specifications for products, services and systems, to ensure quality, safety and efficiency and help facilitate international trade.
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WTO Members look at way forward in agriculture talks
WTO members considered the way forward in agriculture talks at the first informal meeting of agriculture negotiations after the WTO Nairobi Ministerial Conference on 8 March. Members identified a broad set of issues for their continuing negotiations and stressed the central role of agriculture in development.
The Chair of the agriculture negotiations, New Zealand Ambassador Vangelis Vitalis, briefed members on recent consultations he held, noting that there appeared to be a shared understanding that members wanted to work for agriculture-related outcomes for the WTO 11th Ministerial Conference in 2017. He reported that members were also committed to delivering expectations set out in the Nairobi Ministerial Declaration and Decisions, as well as continuing agricultural reform with reference to the built-in reform agenda in Article 20 of the WTO Agreement on Agriculture.
Members stressed that the WTO remains the primary forum to collectively address subsidies and ensure open markets in agriculture. The Nairobi decision to eliminate agriculture export subsidies and disciplines on other forms of export support has been a significant step in the reform process. The Ministerial Decision on Cotton was identified both by the Chair and many members as an important step forward in the negotiations, though it was widely acknowledged that more work was needed.
However, members recognized that the reform is far from complete. Ambassador Vitalis reported that his consultations suggested that members had six broad areas of ongoing interest for the negotiations, including that:
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The Special Safeguard Mechanism for developing countries and a permanent solution on public stockholding remain top priorities for some members.
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Reduction or elimination of domestic support in agriculture, including in cotton emerged as the clear priority for many members, and many signaled that the WTO serves as a primary forum to work on this area.
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Negotiations to further open markets for agriculture products remain important for a large group of members.
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Implementation of the Ministerial Decision on Export Competition will be monitored by the WTO Committee on Agriculture. At the same time, some members signal the need to further work in the area.
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Several members observed the importance to negotiate across all pillars of agriculture, as part of the wider agriculture reform agenda set out in the WTO Agreement on Agriculture.
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Finally, some other issues in agriculture were raised, for example export restrictions, sanitary and phytosanitary standards, private standards in agriculture products, and subsidies for biofuel and bio-energy.
Ambassador Vitalis suggested that the way ahead should be characterized as ‘defining by doing’ and advised members he would hold another round of consultations to work with members on the content as well as the format of the continuing discussions. He encouraged members to talk with each other and to share more information.
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The changing global trade landscape: Implications for African Commonwealth countries
Although the global trade landscape is continuously changing, a connection between Commonwealth countries makes a difference from a trade perspective.
The global trade landscape is continuously changing. Deeply scarred by the financial crisis of 2008, the world has seen the anemic economic recovery marked by a weakened trade-growth nexus. Along with this, the phenomenal rise of developing countries, the intensification of global value chains, the proliferation and deepening of regional trading arrangements, including the rise of mega-regionals, and climate change concerns are all having profound implications for global trade.
Although not a trading bloc, the Commonwealth’s favourable trading environment can be attributed to its unique nature, a diverse grouping of 53 countries of which 18 are located in Africa (Figure 1). These countries share historical ties, predominantly use English as one official language and have similar legal and administrative systems and large diaspora networks.
The continued effects of the global financial crisis
The global economic slowdown following the 2008 global financial crisis has had a significant impact on world trade. A simple trend projection suggests that had the post-crisis growth rate of trade flows matched the growth rate achieved between 2000 and 2008, the volume of global exports of goods and services in 2014 could have been as much as US$16 trillion higher than actually achieved. Commonwealth members have not been immune to this crisis. During the global financial crisis, their total exports fell by a massive US$600 billion: from US$2.9 trillion in 2008 to US$2.3 trillion in 2009. The exports of African Commonwealth countries dropped from US$246 billion in 2008 to US$190 billion in 2009 while their imports also dropped from $254 billion to $205 billion. The individual country experiences, however, differ widely.
One very encouraging development since the 1990s is Sub-Saharan Africa’s (SSA) impressive economic growth and trade performance, which, despite the global economic slowdown, remained steady. During the 2000s, SSA’s combined GDP grew at an annual average rate of more than five percent. Eight SSA Commonwealth countries (out of total of 18) registered an average GDP growth of more than five percent. Indeed, for the first time in many decades, SSA has outpaced overall global economic performance during a period when the world economy has experienced a downturn.
Increasing south-south trade
The growing prominence of developing countries is another salient feature of the shifting global trade landscape. Over the past two decades, the share of these countries in global merchandise exports has increased from around 30 percent to 50 percent. Although this shift is mainly driven by Asian economies, the contribution of African countries has increased from six percent in 2000 to nine percent in 2013 (Figure 2). This implies that, while traditional developed countries remain important markets, developing countries also provide enhanced trading opportunities.
However, one challenge of South-South trade lies in making it broad-based and more diversified, as primary commodities supplied by a handful of African countries currently dominate their exports to emerging economies. This has important implications for the economic and export diversification prospects of commodity-exporting African countries. For commodity-dependent exporters, one further concern relates to how the growth slowdown in China is going to unfold.
The unfolding global trade landscape
The proliferation of Regional Trade Agreements (RTAs) transcending regional boundaries with widening coverage of policy areas is another factor reshaping the global trade landscape. When the WTO was established in 1995, the number of active RTAs was 150, but by April 2015, 612 RTAs have been notified to the WTO, of which 406 are in force.
Trading through regional arrangements is shaping the global trade landscape in an unprecedented way. An overwhelming majority of African developing countries are members of several RTAs. However, for many of them, realising the benefits of increased trade is yet to happen. Additionally, laying aside participating countries’ limited capacity to negotiate and manage these overlapping arrangements, these RTAs can lead to adverse consequences for non-participating countries. This proliferation of RTAs, including those covering much broader ambits to generate trade rules and provisions in new areas, could weaken the multilateral trading system, especially in the absence of dynamism in WTO-led trade negotiations. A strong rules-based multilateral system is the best placed to protect small and poor countries, and promoting trade multilateralism while keeping up the momentum of RTAs constitutes a challenge.
Global value chains (GVCs) are fundamentally changing the traditional concept of an entire production process being undertaken by one firm located in one country. Because of the increasingly interconnected production processes, more trade is taking place in intermediate inputs. This geographic separation of production processes presents opportunities for African countries, since it requires specialisation in relatively limited number of tasks. It allows firms to enter into export markets without developing the full range of vertical capabilities along the value chain. Unfortunately, these GVCs currently bypass most African countries, and North America, Europe, and East Asia are recognised as the three major global GVC hubs. The experience of other Commonwealth countries’ participation in GVCs also varies enormously.
An analysis of 43 Commonwealth countries shows that between 2000 and 2012 the Commonwealth’s share of global trade in value added has remained steady around 16 percent, with the average share of domestic value added in Commonwealth members’ total exports estimated to be 68 percent in 2012, close to, yet below the global average of 70 percent. While GVCs present export opportunities through specialisation in only a relatively limited number of tasks, most Commonwealth African countries, being predominantly commodity exporters, are at a disadvantageous position in terms of linking into these chains. They lie at the bottom of the integration stage in GVCs, with limited capacity to upgrade. For small African states in particular, participation in GVCs is constrained by their inherent characteristics and associated trade challenges, for example their small market size, their lack of competitiveness, and so forth.
Climate change is one of the greatest challenges facing the international community with important implications for trade, growth and sustainable development. While climate change will impact all countries, the economic, social and environmental impacts of climate change will be most severe for the world’s poorest and most vulnerable economies, especially SSA, least developed countries (LDCs), and small island developing states (SIDS). These economies have high export concentrations in a range of climate-sensitive sectors, including agriculture, resource extraction, fisheries, and tourism. Over the medium to long term, climate change will significantly affect their trading capacity and competitiveness. Measures to deal with climate challenges will involve significant costs and pose a development challenge to weaker developing countries, especially LDCs. These countries have contributed the least to the causes of climate change and also have the least capacity to manage and adapt to it.
Ways forward
This shifting nature of the trade landscape implies a need to provide more intensive attention to broad priorities for improved trade performance of developing economies in general and African countries in particular. The achievement of a coherent, accountable, effective, and enabling global trading environment represents an overarching issue to many Commonwealth developing members. Central to this will be greater coherence and accountability among international support mechanisms and regimes.
The Commonwealth Trade Review – a report that was launched by the Commonwealth Heads of Government Meeting in Malta in November 2015 – highlights five of these priorities: building productive capacity; effectively managing trade policy and negotiations; addressing implementation gaps; promoting private sector development; and securing a trade-supporting global architecture. Since these determinants of trade success are interlinked, concerted efforts are required to generate the desired impact.
Aid for trade (AfT) remains important. However, there remains much scope to make this even more effective. Resource availability compared to actual needs is extremely limited. One particular objective of AfT – that is, helping countries with their trade-related adjustment needs – has hardly been utilised, even though it could be used to help develop productive capacity. Predictability of AfT has also been a major issue, with resources disbursements falling short of commitments on a regular basis. Therefore, more targeted and sustained AfT support is needed to promote export sector development.
For other emerging regions, trade preferences have played an important role in helping to develop trading capacity. Over time however, these mechanisms have largely been eroded. African countries should make the most of them before they disappear completely. This should be pursued together with trade promotion policies to attract investment and diversify exports. The first Commonwealth Trade Review also highlights important ways in which the “Commonwealth effect” could be more effectively harnessed.
Salamat Ali Phd. University of Nottingham, United Kingdom. He was also a member of the drafting team responsible for preparing the Commonwealth’s flagship publication on international trade.
This article is based on the Commonwealth Trade Review, November 2015. The Review provides a detailed assessment of the changing international trade landscape and offers new perspectives on Commonwealth trade in a global context. It demonstrates that a Commonwealth connection makes a difference from a trade perspective.
This article is published under Bridges Africa, Volume 5 - Number 2, by the ICTSD.
The Commonwealth is an association of 53 independent states, comprising large and small, developed and developing, landlocked and island economies. As the main intergovernmental body of the association, the Commonwealth Secretariat works with member governments to deliver on priorities agreed by Commonwealth Heads of Government. It provides technical assistance and advisory services to members, helping governments achieve sustainable, inclusive, and equitable development.
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Cultural goods remain economic driver in digital age – UNESCO report
A United Nations Educational, Scientific and Cultural Organization (UNESCO) report launched on 10 March 2016 finds that the trade in cultural goods doubled from 2004 to 2013 despite a global recession and a massive shift among consumers of movies and music towards web-based services.
The study from the UNESCO Institute for Statistics (UIS), The Globalisation of Cultural Trade: A Shift in Cultural Consumption – International flows of cultural goods and services 2004-2013, takes an in-depth look at the export and import of cultural goods and services around the world.
“Trade in cultural goods totalled $212.8 billion in 2013, nearly double the amount in 2004,” said Silvia Montoya, Director of the UIS, in press release. “This is further evidence of the critical role cultural industries play in today’s global economy.”
UNESCO found that China is now the lead exporter of cultural goods, followed by the United States. In 2013, the total value of China’s cultural exports was $60.1 billion – more than double that of the US at $27.9 billion.
While the US has lost its position as the top exporter of cultural goods, it reportedly remains the top importer of these goods. In general, developed countries play a smaller role in cultural exports, but still dominate imports. Meanwhile, emerging markets are growing their exports of cultural goods. Turkey and India strengthened their position in recent years, joining the world’s top 10 exporters of cultural goods.
Products gaining ground
Art and crafts have moved up in the ranking of the ten most traded cultural goods, fuelled by gold jewellery – a safe harbour in uncertain times. Gold jewellery exports represented more than $100 billion in 2013.
Statues, statuettes and paintings also gained ground. Their share of the trade in art and crafts was worth $19 billion in 2013.
Products losing ground
From 2004 to 2013, the “dematerialisation,” or the digitisation of products, such as music, movies and newspapers, had an enormous impact on these industries, as their products moved into the realm of cultural services, often sold as web-based subscriptions.
Trade in recorded music products, for example, declined by 27 per cent from 2004 to 2013, and trade in movies fell by 88 per cent during the same period; however, audio-visual services as a whole steadily gained ground.
Despite the downturn in the trade of print products, reflected by the decline in newspapers, books held their ground as an important cultural export in some regions, growing by 20 per cent from 2004 to 2013.
The measurement challenge
As more and more cultural goods move from the tangible to the digital, the report notes that obtaining accurate data on the flow of these goods is becoming more challenging. Finding new sources of data and cooperation between international organizations in the promotion and improvement of cultural trade statistics, especially in the developing world, will help improve the understanding of the real contribution of the trade in cultural goods to the global economy.
» Download: The Globalisation of Cultural Trade: A Shift in Cultural Consumption – International flows of cultural goods and services 2004-2013 (PDF, 8.3 MB)
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Namibia trade deficit grows by 43%, highest since 2006
The just released Annual Trade Statistics Bulletin for 2015 shows that the country’s trade deficit grew as money spent on imports expanded by 6 percent, while export revenue dropped by 9.8 percent.
The latest figures by the Namibia Statistics Agency (NSA) indicate a trade deficit amounting to N$39.2 billion compared to N$27.4 billion registered in 2014.
The trade deficit widened by just over 43 percent, which is the country’s highest trade deficit since 2006.
“Foreign trade statistics play an important role in Namibia’s economy as it measures value and quantities of goods that, by moving into or out of a country, add or subtract from a nation’s material stock of goods,” explained Ndamona Kali, who was the acting statistician general of the NSA when the report was compiled. She added that foreign trade statistics are essential for the formulation of monetary, fiscal, commercial and regional integration policies.
Also, reliable trade statistics are crucial in the Southern African Customs Union (SACU) to determine revenue sharing among member states.
The report, which was released on Thursday, further states that goods imported into Namibia increased by N$5.5 billion to N$97.6 billion in 2015, from N$92.1 billion recorded in 2014.
On the other hand, overall exports declined by N$6.3 billion or 9.8 percent to N$58.4 billion compared to N$64.7 billion registered in 2014.
The NSA noted this was mainly due to a contradiction in foreign demand for domestic goods by countries like Angola, the United States of America, Canada and Germany.
Key export markets for locally produced goods were Botswana (N$13.1 billion), South Africa (N$11.4 billion), Switzerland (N$8.9 billion), Angola and Spain (both at N$2.6 billion). The top commodities exported by Namibia were diamonds, copper cathodes, fish, copper ore and zinc.
Namibia’s imports during 2015 were mainly sourced from South Africa (N$62 billion), China (N$6.3 billion), Switzerland (N$2.4 billion), Botswana (N$2.3 billion) and the Bahamas (N$2.1 billion).
The major commodities that inflated the country’s import bill for 2015 include mineral fuel and oils, vehicles, boilers, electrical machinery and equipment, and copper ore.
In terms of economic blocs, SACU remains the main source of imports and export revenue for Namibia. Other significant economic blocs include the European Union, SADC-NON-SACU, the Common Market for Eastern and Southern Africa (COMESA) and the European Free Trade Association (EFTA).
» Download: Namibia Annual Trade Statistics Bulletin 2015 (PDF, 3.46 MB)
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tralac’s Daily News Selection
Under way, in Botswana: ICN competition authority conference
New: The African Governance and Space (AFRIGOS) project – a five-year project examining transport corridors, border towns and port cities in four regions of Africa
Diarise: 2016 SIID Annual Lecture by Morten Jerven, 7 April: 'Africa by numbers – knowledge and governance', 2016 LSE Africa Summit, 22-23 April: update
Committee on Sanitary and Phytosanitary Measures: update on the Standards and Trade Development Facility (WTO)
Note by the Secretariat prepared for the formal meeting of the Committee on Sanitary and Phytosanitary Measures, 16-17 March: A new report [by Jennifer M. Rathebe], entitled 'The implementation of SPS measures to facilitate safe trade: selected practices and experiences in Malawi, South Africa and Zambia', is available on the STDF website. The report examines how SPS measures are implemented in practice for selected products in Malawi, South Africa and Zambia, and identifies opportunities and good practice to reduce SPS-related transaction costs, while reinforcing health protection. The report includes a number of country-specific recommendations, as well as more general recommendations that can be of interest to other countries interested in facilitating safe trade. [Report: Activities of the Europe-Africa-Caribbean-Pacific Liaison Committee]
Global Trade Watch: trade development in 2015 (World Bank)
After dramatically declining in the first half of 2015, global trade recovered but at a slower pace over the rest of the year, so that world imports grew by only 1.7% in 2015 compared to 3% in 2014. According to a new World Bank Group paper, Global Trade Watch: Trade Development in 2015, by World Bank Group Economists Cristina Constantinescu, Aaditya Mattoo and Michele Ruta, global trade in 2015 reflected persistently weak demand and structural changes in world trade, compounded by falling commodity prices and China’s transition to a new growth path.
Africa and the Middle East: Having experienced a deep plunge in export values since mid-2014, Africa and the Middle East contributed significantly to the recent decline in world trade values. This was mostly a nominal phenomenon (Figure 17). The downturn in oil and commodity exports also reflects sluggish volume growth in recent years, which can be explained by factors such as depressed global demand (Figure 18). China and other Emerging Asian countries together account for more than half of the decline in export values of Africa and the Middle East. The recent pickup in exported volumes may reflect the gains in competitiveness from lower prices, although this was not sufficient to avoid the revenue losses.
The changing global trade landscape: implications for African Commonwealth countries (Bridges)
An analysis of 43 Commonwealth countries shows that between 2000 and 2012 the Commonwealth’s share of global trade in value added has remained steady around 16%, with the average share of domestic value added in Commonwealth members’ total exports estimated to be 68% in 2012, close to, yet below the global average of 70%. While GVCs present export opportunities through specialisation in only a relatively limited number of tasks, most Commonwealth African countries being predominantly commodity exporters, are at a disadvantageous position in terms of linking into these chains. [The author: Salamat Ali]
CFTA negotiations: two updates
Concept note for the ECOWAS/UNCTAD/GIZ stakeholder consultation (UNCTAD)
The meeting will facilitate consultations and dialogue among selected ECOWAS Member States and the ECOWAS Commission on the CFTA for a start, with a view to developing regional strategy for engagement with other partners in the CFTA negotiations. It is further intended to provide an occasion to review the opportunities and challenges that confront ECOWAS Member States in the implementation of the Community’s Goods and Services Protocols and Supplementary Protocols. Progress made towards regional integration within the ECOWAS region, in particular, in the areas of goods and services trade, the challenges, and the role partners can play in building capacity for the CFTA negotiations will also be highlighted. More specifically, the meeting has the following objectives:
Viola Sawere: 'Pro-competitive services sector regulation - a possible direction for the AU CFTA Agreement?' (tralac)
A practical question is what should be the starting point and ambition for the CFTA services chapter. Clearly, Article 6 of the Abuja Treaty embeds the acquis principle i.e. CFTA agreement will build on the achievements so far in the eight African Regional Economic Communities. However, learning from the WTO General Agreement on Trade in Services, the Trade in Services Agreement currently under negotiation, and other non-African FTAs, the value of the agreement will depend on its response to business challenges and sector development.
COMESA judges trained on regional integration issues (COMESA)
Sponsored by the Trade Law Centre a non-profit making capacity-building organization, the judges who took over about eight months ago went through intensive two-day training in international trade law and policy and dispute resolution within regional economic communities. The training took place at the University of Cape Town, South Africa 7-8 March 2016. As Judge President of the Court Justice Lombe P. Chibesakunda observed during the opening of the training, COMESA Court judges are appointed from different legal/judicial backgrounds to find themselves thrust into the realm of regional and international trade law and policy.
State of the EAC Address: delivered by Tanzania's Prime Minister, Kassim Majaliwa (EALA)
During the past few years, the EAC region experienced major threats, to its development, peace and security concerns. The food and fuel crisis; the rise of piracy in the Indian Ocean waters off the East African coast; and the terrorist threat posed by the Al Shabaab militia operating from bases in Somalia, served as a wakeup call on the need to expedite and deepen East African integration on all the fronts, including the economic, social and political fronts. At the pragmatic level, there are several challenges impacting negatively on the integration agenda. Some of these include; resource availability to implement regional development programs that are critical for attracting investments in the region by reducing the costs of doing business (eg. Railway and road networks linking EAC Partner States and reliable energy); Domestication of National Laws to conform to the EAC Common Market Protocol to enable the citizens enjoy the rights and freedoms enshrined in the Protocol and its subsequent implementation.
Zimbabwe: IMF staff completes 2016 Article IV Consultation Mission (IMF)
At the conclusion of the mission, Mr Fanizza issued the following statement: Economic difficulties have deepened. Zimbabwe cannot wait and needs to act now. The El Niño-induced drought has hit the economy hard. Lower commodity prices and the appreciation of the U.S. dollar have compounded difficulties. Policy action is needed to reverse this trend. Once the SMP is completed successfully - as an initial step toward reform and re-engagement with international partners - a comprehensive and ambitious economic transformation program is needed to revive the Zimbabwean economy and to cement support among international partners. [Zimbabwe Poverty Atlas 2015 (pdf, ZimStat)]
Investment in Mozambique falls 74.5% in 2015 (Club of Mozambique)
The value of investment projects authorised in Mozambique fell by 74.5% in 2015 over the previous year to US$1.7bn, according to figures from the Centre for Investment Promotion. The CPI data, cited by Portuguese news agency Lusa, showed that foreign direct investment fell by 60%, Mozambican investment decreased 83.2% and loans and supplies fell 94.1%. Spain leads the list of projects approved, with a total of US$320m, ahead of China and the United Arab Emirates, in a list in which Portugal ranks fourth and South Africa fifth.
Namibia: New tax collecting agency (Informante)
Government intends to improve the tax collection system through the establishment of a semi-autonomous revenue agency. This agency has been long coming as most, if not all, the countries within SADC already have a similar agency up and running. The agency will help with revenue collection efforts which need to be increased from policy and administrative levels and they will help as government’s measures to control expenditure. Currently, taxes are collected through the Inland Revenue and Custom and Excise Department’s at the Ministry of Finance.
NCCI defends local informal traders (The Namibian)
The chief executive officer of the Namibia Chamber of Commerce and Industry, Tara Shaanika, says it cannot be fair to have Chinese informal traders in Namibia. Shaanika was responding to a question on whether it is fair for Chinese small businesses to move to informal areas to do business as is currently the case. “I am certain that most of the Chinese informal traders did not get permission from the Ministry of Industrialisation, Trade and SME Development to set up retail shops as required by our regulations,” Shaanika said yesterday.
Ghana: Committee presents 'Made in Ghana' draft policy document to cabinet (News Ghana)
The policy document, according to Dr Ekow Spio Garbrah, Minister of Trade and Industry, will help to ensure that government agencies, Metropolitan, Municipal and District Assemblies prioritize Made in Ghana products and services in their procurement processes. The document covers about 20 different product items.
Crop Prospects and Food Situation: update (FAO)
Thirty-four countries, including 27 in Africa, are currently in need of external assistance for food due to drought, flooding and civil conflicts, according to a new United Nations report released today. The figure has grown from 33 last December, after the addition of Swaziland, says the FAO in its Crop Prospects and Food Situation report. At the regional level, FAO and WFP are supporting SADC to develop a coordinated response to minimize the impact and strengthen the resilience of the affected population. [Africa regional review]
Uganda: As good as the company they keep? Improving farmers’ social networks (World Bank)
Extension services have a history of being relatively expensive and not always effective. At the same time, studies show that informal social networks can be very beneficial in helping increase productivity. In Uganda, the authors tested the value of informal social networks for women farmers by connecting the least-productive 30 percent to some of the most productive women farmers in their own villages. Results show significant gains in productivity indicating that the path to better outcomes is contained within their own community.
Making the most of extractive industries data (World Bank)
To help overcome some of these challenges and improve the quality, accessibility and use of EITI data, the World Bank recently launched a report at the EITI Global Conference in Lima, ‘Options for EITI Data Reporting and Access: the good, the better and the best’. Recognizing that countries have varying capacities to report data, the report provides recommendations on the good, better and best practices in reporting various types of EITI data in a standardized format and how best to make it accessible. It answers questions such as:
Related: What you didn't hear about EITI last week: six new elements of the 2016 Standard and their potential for impact (NRGI), Zimbabwe: Publish What You Pay position paper on mining reforms
President Jacob Zuma: address to the South Africa-Nigeria Business Council (GCIS)
SADC Investment Promotion Agencies Forum: update (IPPMedia)
SADC: Harmonisation of National Qualification Framework meeting (Malawi News Agency)
Gift Mugano: 'Can SEZs attract FDI' (The Herald)
Kenya expects 20% jump in guest numbers (Daily Nation)
Nigeria: House insists N1.04tn MTN fine must be paid in full (ThisDay)
Nigeria: Manufacturers seek 18 months access to forex for backward integration (Vanguard)
Egypt's Central Bank lifts US-dollar caps for corporations (Ahram)
Nigeria’s GDP slows to 2.11% in 4th quarter as oil sector contracts (ThisDay)
India said to mull taking EU to WTO over threat to drug exports (Livemint)
Related News
Emerging economies drive global trade volatility in 2015
After dramatically declining in the first half of 2015, global trade recovered but at a slower pace over the rest of the year, so that world imports grew by only 1.7 percent in 2015 compared to 3 percent in 2014.
According to a new World Bank Group paper, Global Trade Watch: Trade Development in 2015, by World Bank Group Economists Cristina Constantinescu, Aaditya Mattoo and Michele Ruta, global trade in 2015 reflected persistently weak demand and structural changes in world trade, compounded by falling commodity prices and China’s transition to a new growth path.
“This paper builds on our earlier research that showed the global trade slowdown began in the early 2000s but has become more evident since the great recession, and had both cyclical and structural determinants,” the authors said. “Now we have found that in the context of the broader global trade slowdown, 2015 appears to have distinct characteristics compared to previous years. And our estimates suggest that cyclical factors dominated in 2015, accounting for approximately two thirds of the trade slowdown.”
The authors found that while weak import demand was mostly concentrated in advanced economies in previous years, trade developments in 2015 can be traced to emerging economies. Emerging Asia which makes up more than a quarter of world trade was the epicenter of the global trade slowdown and the initial rebound. Other regions also played a role. In particular, trade developments in Latin America, Europe and Central Asia mostly reflected lower imports of recession hit commodity exporters such as Brazil and Russia.
In addition, the paper also says that lower commodity prices and China’s transition to a new growth path were two mutually reinforcing factors that created weak import demand in emerging economies. Lower commodity prices reduced commodity producers’ incomes leading those countries to import less from all other regions, including China. At the same time, China’s gradual shift from investment to consumption and the decline in its industrial production reduced China’s imports from other regions, including commodity producers. If China’s imports had not fallen in 2015, world merchandise import volume growth would have been 2.1 percent instead of the actual 1.7 percent.
China’s transition is affecting the pattern of production and trade in East Asia and beyond, and the impact can also be seen in changes in manufacturing and services trade. Manufacturers, particularly in East Asia, suffered significant declines in export quantities but are now recovering. Since the slowdown was concentrated in China’s industrial sector, which is both more import intensive and more strongly linked to global value chains, the impact on trade was magnified. However, in the longer term, rebalancing from investment to consumption is also likely to create opportunities.
“We could see gains in global trade going forward as a result of China’s transition. Rebalancing from investment to consumption is likely to create opportunities for exporters of final goods and may eventually boost upstream intermediate and capital goods sectors that are now adversely affected,” according to the authors. “In addition, China’s increasing demand for services could spur growth in the global services sector.”
The move from investment to consumption is already shifting China’s demand from goods to services. Part of this demand is being served by cross-border imports and consumption abroad, in which growth is already visible. China’s share of services in imports has grown – from around 15 percent at the beginning of 2011 to close to 22 percent in the first half of 2015.
Report traces trade slowdown in 2015 to commodities and Asia economic dynamics
Emerging economies in East Asia were the “epicenter” of the 2015 trade downturn and also of the rebound later in the year, according to the report. Other regions also played a role. In particular, trade developments in Latin America, Eastern Europe and Central Asia mostly reflected lower imports of recession hit commodity exporters such as Brazil and Russia.
The sharp decline in commodity prices and China’s diminished growth and a gradual shift away from industrial production and investment contributed to weak import demand in emerging economies.
These two factors were mutually reinforcing: Lower commodity prices reduced real incomes in commodity producing countries, leading those countries to import less from all regions, including China; at the same time, the gradual shift from investment to consumption in China and the sharp downturn in Chinese industrial production in early 2015 reduced China’s imports from other regions, including commodity producers.
Looking ahead, world trade growth is likely to remain sluggish on account of the persistent economic difficulties and structural factors. However, the long term impact of the decline in commodity prices and China's transition on global trade may be more benign.
A focus on China’s rebalancing
The fluctuations in global trade are occurring during a time of transition and rebalancing in China’s economy from industrial production and investment to services and consumption. If China’s imports had not fallen in 2015, world merchandise import volume growth would have been 2.1 percent instead of the actual 1.7 percent.
“Recent experience suggests that how rebalancing takes place is likely to affect how much global trade fluctuates in the transitional period,” according to the report. “The trade consequences of rebalancing are also likely to have positive aspects.”
The economic transition in China had an immediate impact on manufacturing in East Asia, which experienced a sharp contraction in regional trade in the first half of 2015 and is now beginning to rebound. China’s industrial sector is import-intensive and closely linked to East Asian value chains, which magnified the impact on the region.
In South Asia, the adverse effect was felt primarily by India, both in terms of exports to China and other countries in East Asia, and because of the unfavorable effect on its markets in Africa and the Middle East, which accounted for one-quarter of India’s exports in 2014.
Commodity exporters in Africa, the Middle East, Eastern Europe, Central Asia, and South America experienced a sharp decline in export values rather than export volumes. The glut in fuels was an important factor – though expectations of diminishing demand for commodities in China may also be playing a role. China accounts for 13 percent of world commodity imports and its share is as much as 40 percent for certain metals. The impact of the transition on different commodity exporters depends on their exposure to demand in China.
The beneficiaries over the longer term could include exporters of consumption goods – evidence of which is already emerging from current data – and, eventually, of upstream intermediate and capital goods used in their production. Rising wages in China may also encourage industrial production and exports from lower-cost developing economies.
The gradual rebalancing of the economy from investment to consumption is also shifting China’s demand from goods to services. Part of this demand is being met by cross-border imports and consumption abroad, and growth in these areas is already visible. Services imports have grown from around 15 percent of all of China’s imports at the beginning of 2011 to close to 22 percent in the first half of 2015. If services markets become more open, China’s increasing demand for services could spur further trade growth in the services sector.
The Global Trade Watch series is a joint product of the Trade & Competitiveness Global Practice and the Trade & International Integration Team of the World Bank’s Development Economics Research Group. It provides up-to-date data from various sources along with analysis of recent trade developments.
WTO Committee on Sanitary and Phytosanitary Measures: Update on the Standards and Trade Development Facility
Note by the Secretariat prepared for the Formal Meeting of the World Trade Organisation Committee on Sanitary and Phytosanitary (SPS) Measures, 16-17 March 2016.
OVERVIEW
The Standards and Trade Development Facility (STDF) is a global partnership that supports developing countries to implement international food safety, animal and plant health standards, guidelines and recommendations, and hence to gain and maintain access to markets.
The STDF acts as a coordinating and financing mechanism. As part of its coordination role, the STDF increases awareness, identifies and disseminates good practice and strengthens collaboration in SPS capacity building. Sections two to five of this document highlight recent work undertaken by the Facility as part of its coordination function. As a financing mechanism, STDF provides grants for projects and support to applicants on SPS project development through project preparation grants (PPGs). Information is available in sections six and seven of this document. Annex 1 provides a brief overview of on-going STDF projects and PPGs.
Delegates who would like to receive more information on the STDF are invited to visit the STDF website and subscribe to the STDF electronic mailing list. The next STDF Working Group meeting will be held on 14-15 March 2016.
PRIORITIZING SPS INVESTMENTS FOR MARKET ACCESS – INFORMATION SESSION
Developing countries face considerable demands to enhance their SPS capacity in the context of broader domestic economic and social policy objectives, including the desire to boost agri-food exports. In most cases, the resources available to governments from national budgets, donors and/or private businesses are insufficient to meet all of the identified needs, especially when prevailing export-oriented SPS capacity is weak. This requires hard choices to be made between competing investments that may all be likely to bring appreciable benefits, for example in terms of export performance, agricultural productivity and/or health protection. The STDF has developed a framework to help inform and improve SPS planning and decision-making processes. The framework – known as “Prioritizing SPS Investments for Market Access” (P-IMA) – aims to inform decisions on where to invest in SPS capacity building.
The STDF will hold an information Session on the P-IMA framework on Wednesday, 16 March 2016 from 13:00 – 14:00 at WTO headquarters in Geneva. The objective of the information session is to briefly present the new P-IMA user Guide and share experiences from countries that have used this approach. A new STDF briefing note on the P-IMA framework is available on the STDF website.
IMPLEMENTING SPS MEASURES TO FACILITATE SAFE TRADE – REPORT ON SOUTHERN AFRICA
A new report, entitled “The Implementation of SPS Measures to Facilitate Safe Trade: Selected Practices and Experiences in Malawi, South Africa and Zambia”, is available on the STDF website. The report examines how SPS measures are implemented in practice for selected products in Malawi, South Africa and Zambia, and identifies opportunities and good practice to reduce SPS-related transaction costs, while reinforcing health protection. The report includes a number of country-specific recommendations, as well as more general recommendations that can be of interest to other countries interested in facilitating safe trade. A new STDF briefing note draws on the findings of the report on Southern Africa as well as similar STDF-funded research in Southeast Asia. It highlights opportunities to improve the implementation of SPS measures in a way that facilitates safe trade, while minimizing transaction costs, based on the SPS Agreement.
The findings and recommendations of STDF’s work on implementing safe trade are aligned with the 2014-15 Aid-for-Trade (AfT) work programme, “Reducing Trade Costs for Inclusive, Sustainable Growth”, which reiterated that high trade costs inhibit many developing countries from fully exploiting their trade and development potential. Trade costs remain particularly high in some critical sectors where growth is associated with strong poverty reduction effects, most prominently in the agriculture sector. The new AfT work programme for 2016-2017 will focus on “Promoting Connectivity” and will continue to build on insights emerging from the AfT work in 2014-2015. More information is available on the WTO website.
ELECTRONIC SPS CERTIFICATION
The STDF will organize an information seminar on Electronic SPS Certification on Tuesday 5 July 2016 at WTO headquarters in Geneva, back-to-back with the WTO SPS Committee. The main objective will be to share information and experiences about the use of electronic certification (e-certification) in the SPS area, including identification of key challenges and opportunities for developing countries. The seminar will be open for SPS delegates, other trade and development officials as well as for those working in the area of certification. Information on the seminar, including a detailed programme and on registration, will be made available in the coming weeks on the STDF website.
JOINT EIF/STDF ANALYSIS ON SPS ISSUES IN DTIS STUDIES
The STDF and the Enhanced Integrated Framework (EIF) Secretariat have undertaken a joint study that analyses the coverage of SPS issues in EIF Diagnostic Trade Integration Studies (DTIS) and identifies good practice for future studies and their implementation. The study highlights a number of good practices and lessons learned to inform SPS analysis in future DTIS reports and processes. First and foremost, the EIF Secretariat may wish to explore more systematic ways of engaging the international standard-setting bodies, as well as organizations or programs with a specific role in SPS capacity building, in the preparation of DTIS reports and their follow-up. It is expected that the study will be available on the STDF website by mid-April 2016.
PROJECT DEVELOPMENT
The STDF provides advice and support to applicants on issues related to SPS project development and finances project preparation grants (PPGs). PPGs, normally up to US$50,000, are available to help applicants articulate their SPS needs and develop technically sound and sustainable project proposals. PPGS can be requested to: (i) apply SPS capacity evaluation and prioritization tools; (ii) prepare feasibility studies before project development to assess the potential impact and economic viability of proposals in terms of costs and benefits; and (iii) develop project proposals for funding by donors or the STDF.
A total of 70 PPGs have been approved and funded by the STDF since its inception. Information on on-going and completed PPGs is available on the STDF website. The STDF Working Group may approve additional PPGs for funding at its next meeting on 14-15 March 2016.
PROJECT IMPLEMENTATION
Project grant financing up to a maximum of US$1,000,000 is available from the STDF. Favourable consideration is given to projects that: (i) identify, develop and dissemination good practice in SPS-related technical cooperation, including the development and application of innovative and replicable approaches; (ii) apply regional approaches to address SPS constraints; and/or (iii) implement collaborative approaches across food safety, animal and plant health and trade.
Beneficiaries must contribute to the project from their own resources, either in the form of financial or in-kind contributions such as staff time, use of premises, vehicles or other existing assets.
A total of 75 projects have been approved for STDF funding since its inception. Information on on-going and completed PGs is available on the STDF website. The STDF Working Group may approve additional projects for funding at its next meeting on 14-15 March 2016 – depending on the resources available in the STDF trust fund.
Annex 1 provides an overview of on-going STDF projects and PPGs. Since its inception, the STDF has devoted 54% of its project and PPG resources to LDCs and other low income countries (OLICs). Hence, the STDF continues meeting its target to devote at least 40% of its project and PPG resources to LDCs and OLICs. In particular the allocation of PPG resources to LDCs and OLICs remains high (i.e. 74% of the overall budget for PPGs). 50% of the number of STDF projects and PPGs has gone to Sub-Saharan Africa, 20% to Asia, and 17% to Latin America and the Caribbean. In addition, 11% of STDF projects and PPGs can be classified as global.
Applications for STDF funding can be made at any point in the year but should be received at least 60 working days in advance of each Working Group meeting in order to be considered at that meeting. The next deadline for the submission of applications is 19 July 2016.
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Rt Hon. Majaliwa delivers State of EAC Address to EALA
The Prime Minister of the United Republic of Tanzania, Rt Hon. Kassim Majaliwa delivered the State of EAC Address at the commencement of the 5th Meeting of the 4th Session of the 3rd Assembly in Dar es Salaam, Tanzania.
Rt Hon. Majaliwa delivered the Speech on behalf of the President of the United Republic of Tanzania, H.E. John Pombe Joseph Magufuli, who is also the Chair of the Summit of EAC Heads of State.
The remarks gave a score-card on a number of areas related to the pillars of integration.
On the Customs Union, the Prime Minister noted the consolidated gains of the Single Customs Territory which initially commenced in 2014 on a pilot basis along the Northern and Central corridors. He cited this was realized through the finalization of key operational instruments entailing revision of business manuals, development of M&E tool framework, deployment of staff and revision of enforcement framework.
Rt Hon. Majaliwa remarked that the Community had adopted the use of One Stop Business Posts (OSBPs) as a trade facilitation concept to minimize delays at the border posts and on the major corridors in the region. He informed the House that out of the 15 borders earmarked to operate as OSBPs, 7 had been completed and 4 others were operating as OSBPs using bilateral agreements.
The Prime Minister remarked that intra-EAC trade was expected to register phenomenal increase in the next few years.
“Trade is now at 23%, over and above intra-African Trade figure of 12%. There has been a 300% increase in the value of trade from 2 Billion USD in 2005 to 6 Billion USD in 2014,” Rt. Hon Majaliwa said. “These numbers coupled with the combined GDP of 110.3 Billion makes our region a formidable trading bloc,” he added.
The Prime Minister stated that the Business community in the region had established a Code of Conduct which he said, would check on corruption. Rt Hon. Majaliwa thus hailed the East African Business Council (EABC) for signing commitments to the ethical business standards to guide collaboration between various stakeholders in promoting trade.
He urged the region to push for total removal of Non-Tariff Barriers (NTBs). “We all admit that we have done well in eliminating tariff related barriers, we must resolve to do away with the remaining ones,” Rt Hon. Majaliwa added, citing the examples of removal of various roadblocks in the region.
On Infrastructure, the Prime Minister remarked that Partner States were actively engaged in the Standard Gauge Railway with Republic of Kenya having completed coverage of about 200 km out of 472 km of formation as of September last year.
On the Common Market, the Prime Minister gave an account of achievements realized in the Partner States to date.
He however lamented that the region continued to face challenges, citing delay of issuance of electronic Certificate of Origin which were yet to be adopted regionally, and the need to fastrack the completion of the Annex on Mutual Recognition of Academic and Professional Qualifications. The Prime Minister was further categorical that the slow pace of harmonization of national laws into the EAC context hampered implementation of the commitments.
The Prime Minister lauded the Speaker for EALA’s continued role in legislation, oversight and representation and urged the Assembly to double its efforts in sensitization of the publics.
In his welcoming remarks, the Speaker of the EALA, Rt Hon. Daniel F. Kidega remarked that EAC integration process was stronger given the commitment of various stakeholders in the process.
He however urged the EAC to instill quick interventions with regards to the Common Market Protocol. He said there was need to move faster and ensure free movement of persons as well as the rights to residence.
“As politicians we feel the tenets of the Common Market Protocol have not been fully met over the last five years. A sticking area concerns that of free movement of persons and the rights to residence. The East African Trade Union Confederation (EATUC) and the East African Employers Organisation (EAEO) did petition EALA on the matter, of which was debated and passed by the House,” Rt Hon. Kidega said.
The Speaker hailed the United Republic of Tanzania for its commitment to harmonising work and resident permits as well as the necessary fees in line with providing preferential treatment to the citizens of the EAC Partner States. He remarked that the Republics of Rwanda, Kenya and Uganda had already abolished work permit fees and introduced inter-state passes and that the move encouraged workers to move freely in search of opportunities.
Rt Hon. Kidega hailed the Summit of the EAC Heads of State for the significant announcements made at the 17th Summit of the EAC Heads of State held last week in Arusha, Tanzania. He welcomed the entry of the Republic of South Sudan to the EAC fold and said EALA looked forward to welcoming the legislators.
The EALA Speaker also lauded the Heads of State for launching the EAC International e-Passport. The e-Passport which replaces national and EAC Passports takes effect in January 2017.
Speaker of Parliament of Tanzania Rt Hon. Job Ndugai, said the region was looking forward to inclusion of the new Legislators from the Republic of South Sudan and it would enlarge the bloc. He further urged the EALA to be bold as it plays its rightful place in the integration process.
The State of EAC Address is delivered annually to the EALA by the Chairperson of the EAC Heads of State. The State of EAC Address sets the momentum and impetus for the integration process by reflecting on general policies that relate to the Community’s progress while outlining the strategic challenges which require attention.
The novelty of the State of EAC Address dates back to the year 2008 when H.E. President Yoweri Museveni made the first inaugural Address to this Assembly in Arusha.
During the two week Sitting, EALA shall debate on the EAC Disaster Risk Reduction Bill, 2012, EAC Bill on Persons with Disabilities, 2015 and the EAC Supplementary Appropriation Bill. The Assembly is also to consider, debate and approve various Reports of Committees of EALA.
State of the East African Community (EAC) Address 2016
by Honorable Kassim M. Majaliwa, Prime Minister of the United Republic of Tanzania
Let me begin by thanking you, Rt. Hon. Daniel Fred Kidega, for accepting me to grace this Fifth Meeting of the Fourth Session of the Third Assembly on the State of the East African Community. I also thank the Speaker of the Tanzania Parliament, Rt. Hon. Job Ndugai for the gracious hospitality in facilitating the East African Legislative Assembly (EALA) to transact its business here in Dar-es-Salaam.
As some of you might be aware, His Excellency, Dr. John Pombe Magufuli, the President of the United Republic of Tanzania had agreed to attend this meeting personally in his capacity as Chairperson of the Summit of the East African Community (EAC) Heads of State. However due to equally other important engagements, His Excellency President is unable to fulfill this commitment. Given the importance of this Meeting, he has appointed me to represent him. His Excellency President sends warm greetings to you Mr. Speaker, and to all Members of the East African Legislative Assembly. He wishes you every success of this Meeting.
Allow me also to sincerely congratulate you on your leadership both in the East African Legislative Assembly and in the East African Community. We all look into you for strategic direction and wisdom to steer the affairs of this House to greatest heights possible. I wish you the best of luck and assure you of my personal support as well as that of the Government of the United Republic of Tanzania in discharging your noble duty. Whatever way you think, I or we can be useful, please let us know.
I am here today because of the noble decision you and the Honourable Members of this august House took some time back to institute and maintain an annual event for Chairperson of the Heads of States of the East African Community Partner States to address this meeting. I therefore, thank you, for affording me this rare opportunity to address this august Assembly and share my thoughts with the distinguished Members about the East African Community and the East African integration process.
State of Customs and Trade in the Region
When the Community was revived in 1999, we committed ourselves to integrate stage by stage basis beginning with a Customs Union through the Common Market, Monetary Union and ultimately a Political Federation. As we meet today, it is encouraging to note that the Community has made progress towards that lofty agenda.
Implementation of a Single Customs Territory (SCT)
It is heartwarming; indeed, to note that implementation of the Customs Union which started in 2005 has been a success. Indeed, goods which meet the criteria of Rule of Origin (RoO) have been moving across borders without paying taxes. However, Non-Tariffs Barriers (NTBs) remain a challenge.
Implementation of Single Customs Territory (SCT), which initially commenced on a pilot basis along the Northern and Central corridors in 2014, was consolidated in 2015 through finalization of key operational instruments entailing: revision of business manuals; development of Monitoring and Evaluation Tool; Framework for Deployment of Staff in other Partner States; and revision of the Enforcement and Compliance Framework. To ensure real time flow of information and minimum clearance time for goods, Ports and customs system interconnectivity has been further enhanced.
The Partner States Customs Administration are progressively expanding the scope of goods covered under the single Customs Territory (SCT). A turnaround of 3 to 4 days has been realized along the Central Corridor in tandem with the reduction in turnaround time realized on the Northern Corridor. Customs officers from Uganda, Rwanda, and Burundi are deployed and are operating in Kenya and Tanzania. Likewise Tanzania has officers deployed in Nairobi and Mombasa. The flexibility in deployment of Customs Officers has further eased clearance of goods such that goods move directly from points of dispatch in a Partner State to the owner’ s premises in another Partner State without going through further Customs checks.
Development of One Stop Border Posts
The Community has adopted the use of One Stop Border Posts (OSBPs) as a trade facilitation concept to minimize delays at cross border points on major transport corridors in the Region, often as a result of poor facilities, manual processes, lengthy and unintegrated procedures and poor traffic flow. It entails combining two stops into one and consolidating functions in a single public facility for exiting one Country and entering another. The effect is reduced travel time for passengers and freight vehicles.
Out of 15 borders earmarked to operate as One Stop Border Posts in the Region, seven (7) have been completed and four (4) are operating as One Stop Boarder Posts using bilateral agreements. The seven are; Gasenyi/Nemba; Ruhwa; LungaLunga/Horohoro; Holili/Taveta; Isebania/Sirari; Kagitumba/Mirama Hills; and Rusumo.
The four that are operational are; Gasenyi/Nemba; Rhuwa; Holili/Taveta and Rusumo. Five (5) border stations which are almost completed are; Namanga, Busia, Malaba, Mutukula, and Kobero/Kabanga. Work has also commenced on Katuna/Gatuna.
Intra-EAC Trade
With the improved infrastructure in place, intra East African Community trade is expected to register phenomenon increase in the next few years. Trade is now at 23 percent, over and above intra African trade figure of 12 percent. There has been a 300 Percent increase in the value of trade from, 2 Billion US Dollars in 2005 to 6 Billion US Dollars in 2014. These numbers, coupled with the combined EAC GDP of 110.3 Billion US Dollars with an average annual rate of growth of 2.6 Percent makes our Region a formidable trade and economic block in Africa.
Private Sector
We regard the Private Sector as the engine of growth and development in our Region. I am happy to report that the private Sector in the Region has developed a Code of Conduct for Business together with its Rules and Procedures as an initiative aimed at enhancing ethical business practices in the areas of Human Rights, Labour Standards, Environment, and Anti-corruption.
As you are all aware, corruption and unethical business practices are the major hindrance to economic growth within our Community. Corruption in its many forms includes graft, extortion, embezzlement and bribery. According to the African Union, Africa looses $150 Billion due to corruption every year. Corruption and bureaucracy have been identified as the key factors that hinder movement of goods between the borders of EAC Countries.
In this regards, we commend the East African Business Council for developing the Code of Conduct and Ethics to promote anti-corruption and business ethics and integrity within the East African Community. The East African Business Council members have signed commitment to the ethical standards which will guide stakeholders, employees, shareholders/investors, suppliers, contractors and agents to be actively involved in promoting integrity and corruption prevention.
Non-Tariffs Barriers (NTBs)
As I mentioned before, non-tariffs barriers remain a challenge and it is incumbent upon us, therefore, to ensure that all remaining non-tariff barriers to trade are removed in the East African region. We all admit that we have done very well in eliminating tariff related barriers, we must resolve to do away with the remaining ones. Commendable work has been and continues to be done to address the transport related ones such as road blocks, weigh bridges and other check points on the roads as well as customs red-tape at Ports and exit points.
The progress made so far, at the ports of Mombasa and Dar-es-Salaam and, on the Northern and Central Corridors with regard to road blocks shows that it is possible to eliminate these non-tariff barriers. Measures are being taken in earnest to reduce road blocks on the Tanzania side of the Central Corridor whereby Police road Blocks and Inspection centres have been reduced from over 50 along the central corridor to 5. The roadblocks or inspection centres remained are: Mikese Weighbridge, (Morogoro); Nala weighbridge (Dodoma); Njuki weighbridge (Singida); Mwendakulima weighbridge (Shinyanga) and Nyakahura weighbridge (Kagera). The focus is to have three inspection points to be centred at the three proposed weighbridges (Vigwaza-Coastal Region, Manyoni-Singida Region and Nyakanazi-Kagera Region).
At the regional level, the EAC Non-Tariffs Barriers (NTBs) Act was enacted in March 2015, and is undergoing assent by the Heads of State. The objective of this Act is to enhance and facilitate trade by removing conditions that affect and distort trade in goods in the Community; creating an environment which is conducive to trade in the Community and effective movement of goods within the Community; and removing restrictions that make importation or exportation within the Community and outside difficult or costly. The EAC Competition Authority has been established and the Council will soon appoint Commissioners from the Partner States in accordance with Section 38 of the EAC Competition Act.
Regional Infrastructure Programme
With the recognition that the provision of basic regional infrastructure and adequate, reliable energy supply are a prerequisite of regional integration and development, the EAC is frontloading the implementation of the East African Power Master Plan, among the other regional Master Plans that have been identified in the critical areas of Roads and Railways. Preparations in this regard are advanced on a comprehensive mobilization of resources from the Public and Private Sector, both local and foreign investors, for the development of the identified priority projects in the regional infrastructure.
These projects, which have received the encouragement of our development partners, are in Roads (requiring investments to the tune of USD 20 Billion); Railways rehabilitation and extensions under the East African Railways Development Master Plan (USD 30 Billion); Civil Aviation, including operations of airlines and airports (USD 15 Billion); Maritime development, including expansion of Ports and new Ports development (USD 10 Billion); and implementation of East African Power Master Plan, including power generation, construction of interconnections and scaling up existing infrastructure (USD 5 Billion) – in total over USD 80 Billion worth of investments that need to be raised.
Development of Regulations for the Vehicle Load Control Bill and the One Stop Border Post (OSBP) Bill
I am happy to report that following the enactment of the One Stop Border Post Bill and the Vehicle Load Control Bill by this august Assembly in April 2013 and May 2013 respectively, all the Partner States have assented to the Bills. The Acts will enhance trade facilitation and protect the region’ s road infrastructure from early destruction by overloaded trucks. The EAC will be the first Regional Economic Community in Africa to have common laws and standards for One Stop Border Posts and Vehicle Load Control operations.
Harmonization of Long Distance Freight and Bus Driver Training and Licensing Standards
The Community has developed harmonized training curriculum for long distance freight and bus drivers. Once adopted, the curriculum will provide a regional standard for training, certification and licensing of long distance drivers, who are critical in the economic development of our Partner States. This is meant to enhance drivers’ skills and contribute to the reduction of road traffic accidents in the region.
Progress on Standard Gauge Railways Project
Partner States are actively engaged in the Standard Gauge Railways (SGR) project. In Kenya, the overall physical completion of Phase 1 (Mombasa-Nairobi) was 40 Percent as of September 2015 with over 200km out of 472 km of formation completed ready to receive the permanent way. Imported Mechanized track laying equipment are already on site for laying sleepers and rails. Commercial Agreement for construction of the Nairobi-Naivasha section has been signed and construction launched in September 2015.
In Uganda, the Tororo-Pakwach and the Pakwach-Gulu-Atiak-Nimule-Juba lines will be upgraded to SGR. Preliminary design and feasibility studies are underway. Engineering, Procurement and Construction (EPC) contract was signed between the Government of Uganda and China Harbour Engineering Company (CHEC) on 30th March 2015. Construction is expected to commence in 2016. This also applies to the Malaba-Kampala-Kasese line and the Kasese-Bihanga-Kigali-Bujumbura line and Kasese-Kisangani line.
In Tanzania, development of the Uvinza-Musongati railway line is ongoing. A Memorandum of Understanding (MoU) was signed with Government of Burundi on 12th March 2014 and the feasibility study and design of the line commenced in March 2015. With regard to the Dar-es-Salaam-Isaka-Kigali/Keza-Gitega-Musongati railway line, feasibility and detailed design study was completed in 2014 and Transaction Advisor engaged. Nineteen (19) applications for Expression of Interest (EOI) for Public Private Partnership (finance, design, build, maintain and operate) were received in August, 2015. The EOI’s have been evaluated and forwarded for “No-Objection”. Studies are on-going for the Tanga (Mwambani)-Arusha-Musoma with Spurs to Minjingu and Engaruka, linking to New Kampala Port at Bukasa via Lake Victoria. There is still more to be done to secure and enhance investments and funding for the East African infrastructure programs and projects.
The State of the EAC Common Market
As stipulated in the Treaty for the Establishment of the East African Community, the Common Market is the next stage after the Customs Union. As you may recall, the Common Market Protocol was signed in 2009 and came into force in 2010. This Common Market is what answers the very question about movement of people, capital and services within the region. The implementation of the Common Market Protocol is at the heart of the EAC’s integration agenda and as such there is need to fast-track its implementation.
The following key achievements have been registered by the respective Partner States under the Common Market Protocol:
Republic of Burundi
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Burundi continues according zero (0) customs tariff on goods originating and traded among the EAC Partner States;
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Registration of the total value of goods exported or imported by Burundi to or from other EAC Partner States and accorded Community Tariff Treatment is conducted regularly by the Burundi Revenue Authority (OBR) and the system of registration has been improved;
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The total value of imports from the rest of the world by Burundi as well as the value of goods from the EAC Partner States that were not charged internal tariffs for each financial or semi financial year are registered through the system developed by OBR. Further, the Republic of Burundi does not impose any NTBs;
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Burundi has enacted Laws and administrative procedures that guarantee citizens of other EAC Partner States six months period of stay in the country, and lastly;
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Burundi continues to recognize the academic qualifications, experiences obtained, licenses and certifications obtained for the workers from other EAC Partner States.
The Republic of Uganda
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Reduced the number of NTBs from five to three during the period January – June, 2015;
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The value of goods from other Partner States accorded zero-tariff treatment grew by 9 Percent;
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359 EAC Standards on traded goods have been adopted and are being applied; and lastly;
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With regard to operationalization of the EAC Competition Act, Cabinet passed the Principles of the Competition and Consumer Protection Bills;
The United Republic of Tanzania
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Certificate of origin are now issued electronically in the spirit of reducing the cost of doing business. The system cuts down the time used to process the certificate of origin by 50 Percent;
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Continued to facilitate the free movement of goods from other EAC Partner States by according zero custom tariff on all goods originating as per EAC Rules of Origin (RoO);
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Continued to facilitate the free movement of services and persons from other EAC Partner States by according EAC citizens with Six Months stay as a visitor;
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Recorded an increase of 176 tariff lines from 4445 tariff lines out of 5393;
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Non-Tariff Barriers (NTBs) were reduced from thirteen (Jan-June 2014) to seven (Jan-June 2015);
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A total of 3,222 simplified Certificate of Origin were issued by June, 2015 as compared to 2,355 certificates issued in 2014;
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The number of business entities registered doubled compared to 5 business entities registered by June 2014;
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Has amended the Capital Markets and Securities (Foreign Investors) Regulations 2003 through G.N. No. 338 published on 19 September, 2014 of which in Section 3, foreign investors are allowed to purchase securities of listed companies;
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Has removed restrictions in the capital markets on secondary trading of Bonds. (G.N. 338 of 19/9/2014);
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Has enacted a Non-citizen (Employment Regulation) Act 2015 which caters for EAC Common Market Protocol;
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Amended the Immigration Regulations of 1997 to reflect the provisions of EAC Common Market Protocol;
The Republic of Kenya
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Initiated the development of an SMS based NTBs Reporting System to facilitate reporting and subsequent elimination of NTBs. The system is expected to be in place by 30th June, 2016. Two bilateral meetings with the Republics of Uganda and the United Republic of Tanzania were held to consider the outstanding NTBs;
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To enhance economic and monetary policy coordination, national laws that need to be amended to conform to Protocol on the Establishment of the East African Community Monetary Union Protocol have been identified. As part of this, the draft Commercial Bank of Kenya (CBK) Bill 2014 (Section 72) which provides for four and a half months import cover has been prepared to amend Section 26(1) of the CBK Act which provides for 4 months of imports cover. This will ensure that CBK Act is in line with the Article 6(2)(d) of the Protocol which provides for a reserve cover of 4.5 months of imports;
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The implementation of Capital Markets (futures exchanges) regulations 2013 is on-going. The Capital Markets (licensing requirements for futures brokers and conduct of business) draft regulations have been developed. This therefore, means that Kenya has a regulatory framework on sale or issue of derivative products;
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To enhance the development and integration of financial, payment and settlement systems the Central Bank of Kenya on January 15th 2015, took over the settlement of cash and securities transactions, previously done by Central Depository and Settlement Corporation (CDSC) and select commercial banks after trading at National Security Exchange (NSE). This now allows settlement of all capital markets transactions to be executed through Commercial Banks of Kenya’s Real Time Gross Settlement System and Kenya Payment and Settlement System (KEPSS);
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Facilitated free movement of workers, persons and service suppliers to move across the region in line with the provision of the Protocol; and lastly
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Kenya prepared a draft policy on harmonization of national laws. The decision to develop this document is informed by the need for Kenya as a country to have a system in place to facilitate informed and effective harmonization and approximation of laws to be in line with EAC Treaty and other international obligations.
The Republic of Rwanda
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Non-Tariff Barriers (NTBs) imposed by Rwanda were eliminated;
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In the Legal and Judicial sector, the Investment Code, Law No. 006/2015 of 28 March 2015 was enacted in May 2015;
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Harmonization of Monetary Financial Statistics (MFS) and Financial Soundness indicator for example Rwanda has disaggregated the CIF data into three components namely; cost, insurance and freight; and lastly
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Harmonization of Demographic and other social statistics for example Rwanda has adopted the modern methods such as use of multiple sampling frames and data capture tools such for undertaking agricultural survey and censuses.
Challenges in the Common Market
While implementing the EAC Common Market Protocol, all the Partner States are facing a few common challenges for example:
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The issuance of electronic Certificate of Origin has not been adopted regionally;
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The Annex on Mutual Recognition of Academic and Professional Qualifications is still work in progress that needs to be fast trucked; and lastly;
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Slow pace of harmonization of National Laws into the EAC Context has hampered the implementation of the Common Market Protocol commitments.
The Summit has urged the Council of Ministers to address these challenges urgently so as to make the East African Common Market a reality.
Enhancing Democracy, Peace, Security and Stability
Subscribing to the ideals of the democracy, good governance, human rights and rule of law are critical tenets of the East African Community. We all agree that, better governed Partner States contribute to a prosperous region. It is also true that badly governed Partner States frustrate the integration process. It impedes trade, cooperation, as well as movement of people, goods, services and capital. Moreover, it deters investment and makes the Region unfavourable destination for tourism, investment and trade.
Peace, security and stability must and should continue to be high on our agenda. I am happy that as I address this august House, our Region is peaceful, secure and stable. Democratic values and institutions continue to take root and shape in our countries. Since last year, this year and next year, East African Partner States had and will be holding elections. Let the elections in our Region be credible, free and fair which abide and respect the Constitutions and the relevant laws of the Partner States. Our citizens should come out of these electoral processes, peaceful and united as one nation and one people.
Our Region is not without security challenges. Terrorism and transnational crimes are security challenges facing the Region which require a regional response for effective control and success. I am glad that efforts are ongoing at regional level to address these challenges. There is closer cooperation between the defense and security organs of our respective Countries. They share intelligence and undertake joint or coordinated actions. This is very much welcome and we should encourage it. It is important that our Region remains seized with the peace and security agenda, for it determines the sustainability and future of the EAC.
The Role of EALA in the Integration Process
This esteemed House is one of the important pillars of our Community. It is the Organ that carries the voice and aspirations of our people.This is where people’ s interests are raised, aggregated and translated into laws. Since ours is a people’ s integration, then this House is at the heart of our integration agenda.
I commend the good work being done by this House in regard to its core functions namely; legislative, oversight and representation. This is amply evident. A number of Bills were passed by this House during the last financial year which include: The East African Community Integration (Education) Bill, 2014; The East African Community Cooperative Societies Bill, 2014; The East African Community Creative and Cultural Industries Bill, 2015; The East African Community Elimination of Non-Tariff Barriers Bill, 2015 and The East African Community Electronic Transactions Bill, 2015.
It could not be possible for the EAC to achieve so much within this short period of its existence without the good work being done by the EALA. Many of the Bills passed by this House and Resolutions adopted have contributed significantly towards advancing the EAC integration process.
Considering that the Community is people-centered and market-driven, this Assembly must continue to be people’s Assembly and you must be seen to be spending more time deliberating on issues of concern to the people of East Africa. I appreciate the efforts you are doing in reaching out to your respective National Parliaments, governments and various interest groups. I am aware also, that during this meeting you will be undertaking several outreach and sensitization activities. This is the way to go. I urge you to do more of this all over East Africa. This way, you will increase people’s awareness and enhance the relevance of this Parliament and the Community to them.
East Africa Court of Justice
I am glad to report that with the Extension of the Jurisdiction of the East African Court of Justice in February 2015, the Court is now ready to handle trade and investment related matters, as well as issues associated with the East African Monetary Union. The extension of the Jurisdiction of the Court has enhanced confidence of the East African citizens in a legally-buttressed regional legal system.
EAC Integration Challenges and Way Forward
During the past few years, the EAC region experienced major threats, to its development, peace and security concerns. The food and fuel crisis; the rise of piracy in the Indian Ocean waters off the East African coast; and the terrorist threat posed by the Al Shabaab militia operating from bases in Somalia, served as a wakeup call on the need to expedite and deepen East African integration on all the fronts, including the economic, social and political fronts.
At the pragmatic level, there are several challenges impacting negatively on the integration agenda. Some of these include; resource availability to implement regional development programs that are critical for attracting investments in the region by reducing the costs of doing business (eg. Railway and road networks linking EAC Partner States and reliable energy); Domestication of National Laws to conform to the EAC Common Market Protocol to enable the citizens enjoy the rights and freedoms enshrined in the Protocol and its subsequent implementation.
A major challenge is on the removal of Non-Tariff Barriers (NTBs) or restrictions other than customs duties or tariffs and other specific market requirements that make importation or exportation of products difficult and costly within the Region; and lastly inadequate sensitization and awareness on the benefits of regional integration among the ordinary citizens in the Region.
The Summit of the EAC Heads of State together with the Council of Ministers and all the Organs and Institutions are already addressing some of these challenges.
As Leaders, we need to intensify sensitization and awareness creation among our people for them to realize the full benefits of the integration process. The EAC Secretariat, EALA and the Ministries responsible for EAC Affairs in the Partner states have an eminent and premier role to contribute to the sensitization and mobilization of the East African citizenry towards the integration agenda.
Conclusion
In conclusion, let me state that the EAC should maintain constant orientation as a decisive organization with clear, results focused appreciation of the mission in practical, measurable and demonstrable interventions. In our pursuit of the regional program, we must leave no doubt as to our seriousness of purpose and commitment to protect our sovereignty and promote peace, security, stability and development in the East African region. Our singular resolve must be to ensure the sustainability of our enlarged Community.
Let me reiterate that the EAC is today positioned to overcome many of the challenges that confront it and decisively move to a higher stage of integration. We need to be bold and resolute in our commitment and in our resolve.
Once again, I thank the Assembly for its contributions to the cause of East African unity and development and I thank the Honorable Speaker for accepting me to address this august Gathering. There is no doubt that with determination and consistency of purpose we shall overcome all obstacles and take our Region to greater heights of achievement.
Finally, let re-affirm my Governments commitment and support to the East African Integration and Development Process.
With these many words, I thank you once again Honourable Speaker and members of this Assembly for the invitation and wish the 5th Meeting of the 4th Session of the 3rd Assembly great success.
I thank you all.
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Global crop prospects benign, but hunger intensifies in areas suffering from conflict
Food security worsens further in Southern Africa due to drought
Thirty-four countries, including 27 in Africa, are currently in need of external assistance for food due to drought, flooding and civil conflicts, according to a new edition of FAO’s Crop Prospects and Food Situation report released on Wednesday, 9 March.
The figure has grown from 33 last December, after the addition of Swaziland.
Drought associated with El Nino has “sharply reduced” 2016 crop production prospects in Southern Africa, while expectations for the harvest in Morocco and Algeria have been lowered due to dry conditions.
Also in areas of Central America and the Caribbean, ongoing dry conditions linked to El Niño may affect sowings of the main season crops for the third consecutive year.
Moreover, persistent conflicts in Iraq, the Syrian Arab Republic, Yemen, Somalia, and the Central African Republic have taken a heavy toll on the agricultural sector, further worsening the humanitarian crisis in those countries.
In most cases, the impact of conflict extends into neighbouring countries such as Cameroon and the Democratic Republic of Congo that are hosting refugee populations.
In several countries already in need of external assistance for food, conditions generally worsened in the past three months, according to the report from FAO’s Global Information and Early Warning System (GIEWS), mainly in the Southern Africa sub-region, where food prices have reached record highs.
The report also warned that last year’s reduced production would negatively impact the food security situation in the Democratic People’s Republic of Korea, where “most households were already estimated to have borderline or poor food consumption.”
Elsewhere, the outlook for the 2016 crops already in the ground, mostly winter grains in the northern hemisphere, is generally favourable. Early forecasts indicate large 2016 wheat crops in most countries of Asia.
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African Development Bank Group Regional Integration Policy and Strategy 2014-2023
Integrating Africa: Creating the next global market
Executive summary
The vision of the Bank Group is for a stable, integrated and prospering continent of competitive, diversified and sustainably growing economies participating fully in global trade and investment. The objective is to foster regional and economic integration on the continent by increasing the effectiveness of Bank Group support to Regional Member Countries, regional organizations and the private sector.
This Regional Integration Policy and Strategy for 2014-2023 is the blueprint for the Bank’s long-term support to Africa’s economic integration. It builds on the experiences of the Bank and other development partners in implementing regional integration programs. Anchored on the Bank’s Ten Year Strategy for 2013-22, it reflects the continent’s priorities as expressed in the many integration initiatives. Furthermore it distills current thinking on the economics of integration coming from the Bank, other multilateral development banks, the African Union Commission, the Economic Commission for Africa as well as think tanks, researchers and academics.
Regional economic integration aims to create larger, more attractive markets, link landlocked countries to international markets and support intra-African trade. Thus, the Bank’s strategy is anchored on two mutually reinforcing pillars: the first is supporting regional infrastructure development, and the second, enhancing industrialization and trade. Implementation will be aided by a cross-cutting pillar: strengthening country and regional mechanisms and institutional capacities.
To promote inclusive growth and a transition to green growth under this strategy, the Bank will tackle key constraints to boosting intra-African trade and investment, increasing the continent’s participation in regional and global value chains, supporting value addition and job creation, and using technology to develop cleaner infrastructure. It will use its knowledge instruments, technical assistance and role as a strategic partner and catalytic financier to promote economic inclusiveness, including that of countries in fragile situations, small and micro enterprises, women and youth. The Bank will also pay attention to promoting green growth, protecting the environment and managing knowledge.
New resource discoveries, such as oil, gas and coal in Eastern and Western Africa, present opportunities for investment. Technology-driven opportunities in agriculture can support regional value chains, attract foreign investment and boost output, as seen in the rising importance of Chinese and Indian investments. Increasing the diversity of investment sources offers chances to develop the continent’s natural resources, infrastructure and value chains. Moreover, Africa’s current demographics are set to make the continent home to the world’s youngest population by 2040 – that, allied with pertinent skills and an enabling business environment, presents a potential youth dividend. The Bank will leverage its Human Capital Strategy for Africa (2014-2018) to build skills for better jobs, equal opportunities and competitiveness. Moreover an expanding middle class, now put at 355 million, raises Africa’s profile both as a market and a destination for investment.
But only regional integration will help create larger markets that are attractive to the investment and trade, critical for generating sustained growth, creating jobs and transitioning to inclusive growth.
Cooperation arrangements through the RECs are expected to foster Africa’s integration. Recent regional infrastructure and trade-related initiatives and various regional infrastructure master plans provide an added impetus for a more coherent approach to integration. And at the national level, macroeconomic stability and robust growth, partly reflecting economic and governance reforms, have enhanced the potential to attract foreign investments.
The new policy will be implemented through Regional Integration Strategy Papers and Country Strategy Papers. Bank support to regional infrastructure development is to be guided by continental and regional priorities, especially the Program for Infrastructure Development in Africa’s Priority Action Plan, and will focus on design, implementation and maintenance activities. The Bank will promote public-private partnerships in infrastructure development – from planning, design, preparation and construction to operations, management and monitoring. That will help ease financial burdens on governments in regional infrastructure, offer expertise and ensure that infrastructure functions effectively. The Bank will in parallel encourage countries to adopt frameworks and international principles to guide private sector participation in infrastructure. Indeed, one objective of the Strategy is to stimulate private interest, both domestic and foreign, in regional projects, thus boosting private investment.
The Bank will thus leverage its strategies for regional integration, private sector development and financial sector development to support regional and national mechanisms and programs to attract foreign investors, particularly into regional infrastructure, industries and other trade-development investments. It will support building capacity to implement current regional investment agreements and ensure their alignment with bilateral investment agreements among RMCs. It will support the harmonization of financial governance and standards by leveraging partnership with the Bretton Woods Institutions and the African Peer Review Mechanism. To develop regional financial markets, it will support programs to link national capital markets and develop regional capital markets. The Bank will support the African Financial Markets Initiative and support the strengthening of national payments systems to meet international standards and harmonize them regionally.
The Bank will also support trade facilitation measures, including before and after the border issues, one-stop border posts, coordinated border management and customs reform and modernization. It will tackle nontariff measures along transport corridors and advocate for reforms within RECs and RMCs. It will develop a Transport and Trade Facilitation Framework and conduct related assessments to guide the design of transport infrastructure projects to facilitate trade. And it will provide catalytic financing, technical assistance and training to address priorities identified in the WTO Trade Facilitation Agreement.
Alongside its transactional support, the Bank will boost the ability of indigenous financial institutions and development finance institutions to participate in trade finance and to intervene in SME markets. The Bank will also provide capacity building primarily for SMEs and their aggregators. It will also ensure that traditionally disadvantaged sectors – such as agricultural businesses, micro, small, and medium enterprises, and women-owned businesses – have equal access to trade finance.
The new strategy demands coordinated implementation throughout the Bank and with external partners. Internal implementation will be through a collaborative and decentralized approach, with ONRI providing strategic leadership and direction. The Bank will refine its guidelines for managing and monitoring regional integration. It will ensure that sector and thematic strategies and frameworks with regional dimensions are aligned with the Strategy and that the Strategy is reflected in the business plans of ONRI and other departments.
Operations will be designed and implemented by regional and sector departments, with ECON, OSHD and ONRI involved in technical assistance and capacity building (as well as knowledge management and knowledge-based advocacy). All departments will be involved in dialogue through their activities, but ERCD, ONRI and the field offices will be the most involved in strategic communication with stakeholders. The Africa Legal Facility will provide capacity building and advisory legal support to regional infrastructure and extractive industry projects.
ONRI will provide leadership as regional integration becomes mainstreamed across the Bank, and its role in regional operations will expand beyond setting priorities and arbitrating among sectors. It will coordinate and sequence sector department inputs, while leading the preparation of RISPs with regional and sector departments. It will also ensure that regional dimensions are defined at entry in national projects. An appropriate mechanism will be put in place to facilitate this.
The Bank will deploy its full range of financing and technical assistance instruments to support the Regional Integration Policy and Strategy for 2014-23. RISPs and CSPs are the main programming instruments for regional and country operations. The Bank will aim for even greater alignment between CSPs and RISPs for regional operations. ONRI will lead the design of a new generation of RISPs after 2015 with sector and regional departments. It will also work with operations departments to develop guidelines for the RISPs to ensure that lessons from the midterm reviews of the current RISPs will inform future RISPs.
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Climate deadline looms for African food crops
Researchers have produced a timescale of how projected climate change is set to alter the face of agriculture in Sub-Saharan Africa.
Climate change is widely projected to have a significant adverse impact on food security if no adaptation measures are taken, they explain. In their study, the team provides timings of the “transformations” needed to help minimise these impacts.
The findings have been published in the journal Nature Climate Change.
Agricultural activities are considered to be one of the main drivers to reduce poverty and improve food security among the planet’s undernourished population, which is estimated to be 800-850 million people.
Climate change is widely expected to have a destabilising effect on food production systems, the authors observe, and previous studies have concluded that adaptation “will be required if food production is to be increased in both quantity and stability to meet food security needs during the 21st Century”.
Co-author Julian Ramirez-Villegas from the University of Leeds, UK, said the study carried out by the CGIAR research programme on Climate Change, Agriculture and Food Security (CCAFS) set out to quantify for the first time when changes to food production were likely to happen.
“Rather than focusing on what we need to do by a certain time, we know that there is a range of options and then we put deadlines on these options,” he told BBC News.
The team assessed when areas growing nine of Sub-Saharan Africa’s staple crops – which account for half of the region’s food production – would have to undergo “transformational adaptation”, which refers to a fundamental shift in an area’s food production system. For example, stop growing crops and switch to livestock farming instead.
Dr Ramirez-Villegas said the study found that six of the nine crops assessed were “stable in respect to transformation and adaptation”.
“It does not mean there will not be impacts, for example the yields might decrease,” he added.
“But there are three – beans, maize and bananas – that are more unstable and are therefore projected to have large amounts of area under transformational change.
“In the case of beans, in particular, we see about 60% of the area in need of transformation and adaption (under a high warming scenario – +3.0°C/5.4°F) because the climate shifts away from the conditions were you can actually grow the crop.”
‘Climate-smart’ crops
However, he added that it was not all bad news as technological advancements offered hope of increasing resilience to changes in the growing conditions.
One example was “climate smart” crop varieties. In 2015, researchers reported a breakthrough in the development of temperature-resilient beans that could help sustain a vital source of protein for millions of people around the globe.
“Also, in the longer term, where transformation is unavoidable, you can shift crops,” Dr Ramirez-Villegas explained.
“Just because people are no longer able to grow one crop, it does not mean that people have no options. In most cases, we find that there are alternative crops that remain suitable for those places.”
He said the team found that there were only “very specific pockets” where farmers would have to shift away from the nine staple crops that were assessed in the study.
“In those cases, livestock might constitute an alternative livelihood option, or people might completely change their livelihood by migrating, for example, or by completely changing the land-use,” he suggested.
In order to maximise the options available to farmers to cope with projected climatic changes, Dr Ramirez-Villegas said that there were two areas that needed addressing.
“We need to work on the barriers to the adoption of technologies, as we know that in Sub-Saharan Africa, adoption levels are sometimes low,” he observed.
“What we also need to do is to put planned adaptation into national development plans.”
In a separate study, published in The Lancet, researched warned that climate change could be responsible for more than half-a-million deaths by the middle of the century.
The research was described as the strongest evidence yet that “climate change could have damaging consequences for food production and health worldwide”.
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WTO Committee on Sanitary and Phytosanitary Measures: Activities of the Europe-ACP Liaison Committee
This report has been prepared for the Formal Meeting of the World Trade Organisation Committee on Sanitary and Phytosanitary (SPS) Measures, 16-17 March 2016.
CONTEXT
The Europe-Africa-Caribbean-Pacific Liaison Committee (COLEACP) is a private sector association entrusted by the ACP Group of States to support the private and public sectors in ACP countries in complying with EU market requirements. COLEACP is entrusted with the implementation of major cooperation programmes to protect the interests of ACP countries facing major regulation changes in Europe (Food Safety), managing to turn them into sustainable development programmes, thus reducing the potential negative effect of the change in European rules and fulfilling obligations for technical assistance contained in the SPS Agreement in the WTO. For example, the challenge of traceability could be converted into an opportunity to streamline business management and improve profitability; or else the need for managerial advice capabilities of the weakest players in the sector could become a vast training system whose main actors are locals (consultants, experts in companies, utilities, NGOs, training centers, universities, etc.). This has led to a network of nearly 1,000 local experts “trained” or “formatted” to COLEACP’s tools and training methods. The local side (90% of missions) is concretely involved in improving and multiplying the tools, and is summarized in the name “fair and revolving training system”.
Over the past 15 years, COLEACP has provided technical assistance to ACP companies to help them meet SPS requirements arising from regulations and standards. As the market requirements have changed, COLEACP has adapted its support accordingly. The areas covered by PIP2 support have expanded from its original focus on food safety regulations and standards to also address social and environmental initiatives; and targeting sustainability, food security, and poverty alleviation in a broader context.
The EDES programme is the response from the European Union to the introduction of regulations on feed and food. This has allowed COLEACP to extend its working methods to other sectors, with at time surprising success (e.g. Cameroonian coffee) thanks to the multiplier factors. The coffee and cocoa sectors have responded particularly well to these participative multi-stake holders’ approaches but unfortunately they will remain unsatisfied since EDES’s operations have been terminated. About fifteen countries, through their ministries, as well as producers’ associations, and European industry representatives have expressed their interest to benefit from more COLEACP support in the coming years. It will be necessary to find ways to extend the positive experiences to the greatest number of small producers.
The 2015-2030 COLEACP vision significantly increases the power of positive experiences from the PIP1 & 2 programmes and EDES. In order to finalize the conversion of our defensive approach into an “offensive and positive” one, the major theme is sustainability (3 pillars). This implies to anticipate market requirements and approach sustainability criteria as a means of improving the competitiveness of SMEs and small producers based on a voluntary approach. This new programme of “competitiveness through sustainability” allows multi-stakeholder partnerships, including civil society, to take their true dimension.
DG_DEVCO has already committed 20 million euros to this new programme for the fruit and vegetable sectors. COLEACP is still searching for financial partners for $60 million over the 2016-2025 period in order to continue ramping-up for a more substantial social impact in relation to the challenges of migration, decent jobs, food safety, nutrition, and food security.
COLEACP APPROACH
The model developed by COLEACP is unique in that it provides targeted assistance to the private sector, while also ensuring that the capacity of the enabling environment to support the sector over the long-term is also strengthened. This includes the development of local services, as well as supporting to national food safety systems in ACP countries. COLEACP has also developed a comprehensive cascade training system that encompasses both the public and private sectors, and which ensures greater sustainability of programme impact over the long-term. The following sections explain the COLEACP methodology in supporting: 1) producers and exporters; 2) service providers; and 3) national food safety systems. In conclusion, examples are given on how this approach can be used to benefit not only export markets, but also have an impact on local markets and food security.
Under the PIP2 and EDES programmes (2010-2015), COLEACP managed 1,600 projects similar to the ones described in Kenya and Madagascar. 14,281 men and women were directly trained by COLEACP through 1,068 training sessions across 50 countries. In total, the capacities of more than a million farmers, workers and civil servants were strengthened. More information at http://www.coleacp.org
SUPPORTING PRODUCERS AND EXPORTERS
The challenge for COLEACP is to address a common subject (food safety, sustainability) over a very diverse range of conditions (small vs. large companies; different commodities; different countries; different players, different needs). It requires an approach that is sufficiently structured to allow a central team in Brussels to implement a programme of capacity building in several countries, while at the same time being sufficiently flexible to accommodate the considerable variation between and within them. The PIP2 programme opted for an approach that works on three distinct leverage points:
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Identifying the barriers and opportunities;
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Lowering the barriers and creating opportunities: improving conditions for market access by challenging and/or ameliorating the regulatory or commercial requirements; and
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Helping suppliers to overcome the barriers and seize the opportunities: direct capacity building of ACP producers and exporters towards compliance with regulations and standards.
Identifying the barriers and opportunities
COLEACP retains close contact with regulatory authorities, standard-setting bodies, retailers, research organizations, and suppliers. This allows COLEACP to keep abreast of current developments, monitor trends in market requirements, and engage with decision-makers. It puts COLEACP in a better position to advocate for the interest of ACP suppliers. It also allows COLEACP to be in a position to help ACP suppliers prepare and be ready for new market requirements that are in the pipeline. A concrete example of this is the monitoring of pesticide maximum residue limits (MRLs) set by the European Union. If it seems likely that a pest control product will be withdrawn or an MRL will be reduced to the limit of detection, COLEACP begins field trials two or three years ahead of time to identify alternative products or to provide data for setting an appropriate MRL in order to ensure that producers are not disadvantaged.
Lowering the barriers – Some examples
The regulations and standards set by markets can create barriers for suppliers, but they can also create opportunities. Through engagement with key stakeholders (retailers, standard-setting bodies, regulators, donors), COLEACP advocates on behalf of the sector to ensure that any new demands they are generating will benefit and not disadvantage ACP suppliers. This has become a critical role, as ACP suppliers themselves often have little influence or voice in the standard-setting process.
In the case of private standards, for example, COLEACP publicises and raises awareness of any negative impacts experienced by ACP suppliers. The content and modus operandi of standards tend to be designed for a “European” context, and they are often poorly adapted to the agronomic and socio-economic conditions of tropical production. COLEACP engages with the main standardsetting bodies to ensure they are aware of and address any problems that put ACP suppliers at a disadvantage. COLEACPP is also actively involved in initiatives to make private standards more locally appropriate and to facilitate wherever possible the direct participation of ACP stakeholders.
COLEACP also advocates on the issue of buyer practices both with buyers themselves (retailers) and at an EU policy level. Ensuring fair practices along the supply chain is critical in ensuring that ACP exporters can access and benefit from participation in high-end international markets.
COLEACP also has an R&D team to address specific technical barriers. This includes identification of emerging problems (e.g. new pests, soil degradation), and the sharing of this information with key stakeholders, such as donors and researchers, so necessary resources may be mobilised to address them. The R&D team also implements an internal research programme. A major focus is on the availability of crop protection products. Most tropical horticultural crops are “minor markets” for suppliers because total volumes and acreages are small; as a result there is a general shortage of crop protection products, something also exacerbated by changes in EU regulations. COLEACP identifies critical areas where growers lack effective and affordable methods of pest management, conducts field trials, and works with national authorities, research organizations, and crop protection product companies to obtain MRL extrapolations and import tolerances and to identify alternative products.
Helping suppliers overcome the barriers
Food Safety: To ensure that food is safe, traceable, and compliant with regulations and standards, COLEACP adopts the “field to fork” philosophy of the new EU regulatory framework. An approach has been developed to manage risk and promote good practice along the supply chain, from field to point-of-sale or shipment (production/transport/packaging/export). This means helping companies/exporters establish and maintain durable risk management systems for food safety, traceability, in-house training, and integrated pest management (IPM).
Sustainability: Global retailers are putting in place an array of initiatives in the sustainability arena. They have established codes of conduct, set up industry-wide stakeholder platforms, and adopted and complied with numerous different sustainability standards. These include social responsibility, ethical trade, and environmental protection (water, soil, waste, etc.). COLEACP is investing in sustainability, recognising its importance for ACP fruit and vegetables suppliers, as well as the potential development opportunities it presents. For many ACP countries and companies, social and environmental requirements are a new phenomenon and they lack the knowledge and skills to meet them. COLEACP support therefore now includes help to suppliers to meet specific sustainability standards. However, the ACP industry also needs assistance to address the sustainability agenda at a more fundamental level, in particular to ensure that the smaller and weaker economic players – including smallholders – are able to benefit from rather than being disadvantaged by these emerging trends.
COLEACP support to producers, exporters, and others involved in the supply of fresh fruit and vegetables, is addressed at two levels:
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Ensuring that technologies and technical recommendations are available to enable supply chain operators to produce safely and sustainably; and
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Ensuring they possess the knowledge (know-how) and skills necessary to apply them.
Ensuring that technologies and technical recommendations are available to enable supply chain operators to produce safely and sustainably
In recognition of the importance of pesticide residue limits in maintaining access to international markets, COLEACP puts considerable emphasis on the safe and effective use of pesticides. Growers need access to safe, effective and cost-effective technologies to control pests and diseases, and essential pesticides need to be available locally and registered for use. Recommendations also need to be developed for the use of these pesticides under local conditions. Finally, producers need to know what pesticides are permitted on crops for different markets, and have the necessary information to use them correctly so that they avoid exceeding permitted levels of pesticide residues.
The COLEACP R&D team support local registration of pesticides, and in addition conduct field trials to establish recommendations for use under local conditions. COLEACP has also worked with researchers, agronomists and IPM specialists to develop a series of 40 crop protocols and good practice guides for the main ACP horticultural crops. These good practice guides provide plans which, if followed, ensure that produce comply with regulations and MRLs for both the European Union and CODEX (for local markets). With an increasing emphasis on sustainability, COLEACP is now expanding its technical support and recommendations to also cover good practice in the management of waste, water, and soils.
Ensuring they possess the knowledge (know-how) and skills necessary to apply them
COLEACP receives requests for capacity building from producers, producer groups, and companies, to help establish management systems that ensure safe and sustainable production. Support is delivered through training, accompanied by coaching from local experts to help put the training into practice. This support is delivered over a timescale that fits in with the company’s capacity to invest and implement, and follows a stepwise approach:
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STEP 1: Following an application for support from a company, a COLEACP consultant conducts a needs assessment and identifies weak points (from field to point of shipment). A project action plan and budget is then developed with company staff;
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STEP 2: Company staff establishes and implements food safety, training, IMP, and traceability systems, as well as sustainable practices, with training, backup, and support from COLEACP experts. The company takes the lead in implementing the action plan, which promotes ownership and ensures that the systems are “internalised”; and
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STEP 3: Validation of the systems: COLEACP provides consultants for blank audits to assess implementation and compliance with regulations. Many companies then opt for certification against a private standard.
To deliver this support to companies, COLEACP has developed a comprehensive training system. This includes standardised training modules (complete with training tools and publications) targeting different players in the supply chain from company managing directors to food safety managers, farm managers, packhouse workers, field workers, drivers, outgrower managers, and smallholders. They cover topics such as safe use of pesticides, hygiene, IPM, traceability, HACCP, and sustainable production. The same modules and standardised training courses are used in all countries and by all COLEACP trainers to ensure consistency.
Traceability tools have also been developed. Traceability is a linchpin and essential for companies to establish and maintain safe and sustainable systems. The COLEACP traceability tools can be customised according to company resources and circumstances, and vary from simple, paper-based systems to comprehensive software and barcoding.
To avoid the risk of exporters shifting production away from smallholder outgrowers to company farms, COLEACP puts considerable emphasis on building capacity within companies to train and support smallholder outgrowers. By developing and implementing training for their smallholders, it is easier (and affordable) for companies to continue sourcing from them, and for the latter to maintain their foothold in the supply chain. Similar support is given to extension workers in projects and NGOs working with smallholder groups.
DEVELOPING LOCAL SERVICES
COLEACP aims to deliver training and technical assistance in ACP countries using local expertise. However, at the outset COLEACP found that in many countries it was necessary to fly in costly European consultants; local, affordable, up-to-date expertise in specialised areas such as food safety was simply not available. This put ACP suppliers at a disadvantage, but also endangered the sustainability of COLEACP programme impact. In the same way that support to companies is designed to be “internalised”, for sustainability it is also important to ensure that export industries have access to high-quality and affordable local services that will support them over the long-term.
In each beneficiary country, COLEACP consults with national stakeholders to identify the needs for capacity building of key players and to develop the wide range of services (public and private) that are needed. These include:
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Local experts (including private consultants) to train and advise on food safety, pesticide use, IPM, HACCP, Good Agricultural Practices, Fair Trade, organic production, social responsibility, ethical trade, environmental protection, among others;
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Local/regional certification bodies;
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Universities, agricultural colleges and training centres;
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Pesticide registration systems compatible with EU requirements; and
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Accredited laboratories for pesticide residue analysis.
In the same way that support is provided to companies, service providers can request capacity building from COLEACP. This is available to both public and private sector service providers, and to individuals as well as companies and organizations. The range of support provided is very wide, and every application is considered on a case-by-case basis; support is customised according to the needs of the recipient.
Capacity building is provided through a mixture of COLEACP technical and “train the trainer” courses; international training courses; study tours, and short-term resident experts such as pesticide chemists, IMP specialists, and regulatory affairs specialists. On-the-job training is also widely used, whereby local service providers shadow experienced consultants and trainers during field missions. Much of the training leads to recognised qualifications such as HACCP, BASIS, ISO 9000:2000, and Lead Auditor.
Once COLEACP has trained local service providers, it then uses them under contract to deliver COLEACP support. This approach has been cited as a model of good practice for capacity building. It ensures that the capacity building is embedded and sustainable, as well as establishing working relationships between companies and local service providers.
In addition to support for local service providers, COLEACP puts considerable emphasis on capacity building of professional associations (e.g. producer or exporter associations) and public-private stakeholder platforms. Having strong associations and stakeholder platforms is increasingly essential to meet new challenges (regulations, standards, taxes, pest outbreaks, etc.). Many of these challenges need a multi-stakeholder response, and strong forums for dialogue and advocacy. COLEACP supports industry associations in many countries, and in several has facilitated the creation of national stakeholder platforms involving, for example, exporter associations, grower representatives, service providers, and Ministries of Health, Agriculture, and Trade. When functioning well, they provide a forum for dialogue that allows stakeholders to address shared problems, conduct joint actions, and lobby and advocate on behalf of the industry.
STRENGTHENING NATIONAL FOOD SAFETY SYSTEMS
Protecting consumer health is a constant concern for ACP States. With this in mind, they define the policies and requirements to be followed by the operators at each stage in the supply chain. The EU Official Feed and Food Controls Regulation came into force in 2006, covering both locally-produced and imported goods. This requires third countries that export to the European Union to adapt their sanitary and phytosanitary (SPS) related regulatory, supervisory and monitoring systems. Since March 2010, COLEACP has managed EDES, in collaboration with a consortium of European organizations specialising in food safety. EDES was instituted at the request the ACP Group of States and is funded by the European Union to support the sustainability of ACP exports.
EDES aims to use risk analysis to strengthen food safety systems for export products in compliance with regional, international and European SPS standards. To this end, EDES helps ACP States to strengthen their national (or in some cases regional) policies in the area of food safety in order to ensure exports meet the standards in force in importing countries, as well as to consumer demands. This is with a view to encouraging growth in traceable and certified production for local, regional and international markets.
EDES plays a role in risk analysis at all three levels (risk assessment, risk management and risk communication). It begins by targeting one or more sectors that are considered important by the country concerned, which presents food safety risks, and whose production is dependent on small-scale growers. The aim is to enable the identification of critical control points and monitoring requirements at each stage of the supply chain.
EDES actions focus more specifically on: food safety governance, official controls, good corporate practices, laboratories, risk assessment, and risk communication. The development and reinforcement of national food safety systems for export crops is also recognised to benefit production for domestic consumption. The ultimate objective is to guarantee food safety for all consumers in the ACP and the European Union.
THE TRAINING SYSTEM
COLEACP has developed a training system that is coordinated by a central training team, and implemented primarily through local experts and service providers. The scope of the training covers a wide range of topics in the area of food safety and sustainability.
The training itself is backed by documents and training tools including course modules, training guides, training aids for company workers and smallholder, among others. There is also an e-learning platform for distance learning. These materials and the courses themselves are revised and updated, and new modules developed, according to needs and new market demands.
The COLEACP training system follows a cascade approach. It starts with the capacity building of local service providers which includes technical training in specific topics, training on the COLEACP course content (to ensure that this is consistent), and finally training in pedagogical skills. As well as having the required technical background, all local service providers must attend, and complete successfully, a COLEACP Training of Trainers course before they can deliver training for COLEACP programmes. Local service providers are then hired to deliver training and support to companies and other stakeholders. Following the cascade approach, support to a company begins with general information and awareness raising sessions for company directors. Without the buy-in of senior management, a programme of support to a company is unlikely to be successful; the necessary human and financial resources are unlikely to be mobilised. This is followed by specialist training for middle management notably food safety, packhouse, farm/production, and outgrower managers. Again this includes not only technical course content, but also training in pedagogical skills. Technical training at each level is accompanied by dedicated “train the trainer” courses to improve communication and training skills and ensure that company staff are better able to deliver training in the future. In this way COLEACP aims to create a sustainable in-company training system rather than to simply impart knowledge or skills. Following training, middle managers deliver training to staff under their responsibility (packhouse managers to packhouse workers, farm managers to their spray teams and field workers, and so on).
At each stage, COLEACP provides coaching and backup to help trainees cascade the training to the next level. This cascade approach described here for a company is applied in the same way to other situations and organizations, from professional associations to government extension services.
CASE STUDIES
Upgrading Value Chains: The Case of Kenyan French Beans
In 2009, 34,997 tonnes of French beans were exported from Kenya to the European Union. This made an important contribution to the national and rural economies, and to jobs. Beans are grown mainly by smallholder farmers. According to a study by SNV in 2012, an estimated 50,000 farmers may be involved in the horticultural export sector as a whole, mainly involving households with under two acres. Participation in exports makes an important contribution to household food security, with a typical farmer making an average profit of US$750 (Ksh.60000) a year from French beans. The industry also employs large numbers of people in commercial farms and packhouses, of whom an estimated 60% are women.
Over the past decades, Kenya developed a thriving and successful horticultural export industry, supplying quality produce to high-value global supply chains. However, between 2008 and 2012, there was an increase in the number of interceptions of Kenyan beans at EU border controls due to pesticide MRL exceedances. In January 2013, Kenyan beans were listed as “highrisk” under Regulation EC 669/2009, and subject to increased testing on EU entry at a level of 10%. PIP monitored the impact of this over the coming months, and found worrying trends. It caused a substantial decline in export volumes and income, alongside a significant increase in costs. It also began to squeeze an export sector that was already suffering in a challenging economic climate, affecting some of the most vulnerable stakeholders including the (predominantly female) packhouse and farm labourers, and smallholder farmers.
Various factors contributed to the problem including the setting of EU MRLs for the main pesticides at LoD; the lack of accessible or available alternatives in the face of increasing pest pressure and more stringent quarantine controls; breakdowns in traceability and supply chain management due to EU buyer practices; and declining profits that were leading to supply-chain instability and poaching of produce. The complexity of the issue meant that addressing it had no simple solutions. It required the involvement of multiple stakeholders, and a combined effort to tackle problems along the supply chain, from field to export.
Once the controls were imposed, Kenyan authorities responded proactively to the crisis. Public and private sector stakeholders came together to form a consortium to develop and oversee a coordinated and cohesive national MRL action plan. The European Union required evidence of improved practices and procedures in the supply chain, as well as in public sector inspection services and pesticide residue monitoring. PIP joined other national and donor initiatives (including its sister EDES programme) to support this effort by providing:
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Intensive training of producers and exporters in Good Agricultural Practice, crop protection, IPM, safe and effective use of pesticides, and traceability, among others
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Development of targeted teaching aids and information bulletins
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Coaching of 37 individual export companies to raise awareness of the problem, its impact, and remedial measures
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“Training trainers” for 60 government extension officers
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Training of 40 officers from the government inspection service
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Field trials to validate or challenge EU MRLs, and to identify alternative products
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Support for the national pesticide residue monitoring system, and quality control
The EU authorities monitored and audited the public and private sector actions. They recognised the considerable progress made and, in July 2015, Kenyan beans were de-listed.
Upgrading Value Chains: The example of litchi in Madagascar
Madagascar is the third largest producer of litchi. Around 100,000 tonnes are harvested per year, of which 20% is exported fresh to the European Union. The sector is of considerable importance to the national economy and as a generator of rural income and jobs. An estimated 30,000 families are involved in production, with a further 3,000 people working as collectors and transporters. However, harvesting and export take place over a short period in November and December, and the very seasonal nature of production and trade leads to some inherent problems and inefficiencies. Up to 50% of production is wasted, and prices received by producers can halve or double from one day to the next, discouraging investment. Despite its overall success, there are significant opportunities to improve and grow the sector.
Intermediaries (collectors and brokers) sell to export companies, most of whom (32) are members of the association “Groupement des Exportateurs de Litchis” (GEL). COLEACP worked with GEL and export companies from 2006 onwards to put in place the food safety systems needed to access EU markets but, during the 2010 Berlin international trade fair (Fruit Logistica), GEL asked for additional help. Sulphur residues were being detected in export consignments, which exceeded the permitted levels for EU markets. This could potentially result in a restriction or ban on exports. Sulphur is applied as a post-harvest treatment and excessive residues can be caused by a number of factors including maturity of the fruit, transport delays, inadequate or poorly maintained equipment, improper application methods, poor storage, and lack of alternative disease control options.
Once COLEACP began to work with GEL, it became clear that addressing the sulphur problem was complex and required the involvement of diverse players from public and private sectors, higher education, and civil society. Through a multi-stakeholder effort, a programme of support was put in place to develop solutions over the short- and long-term:
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In partnership with GEL: organization of the sector through development of a supply-chain self-assessment guide; improved sulphur application practices by informing, training, and coaching operators; research implemented to find alternatives to sulphur; GRASP (GLOBALG.A.P. social audit) national interpretation sector guidelines developed;
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With 24 export companies: practices, procedures and produce aligned with EU regulations and private standards through quality management systems; paper and IT-based traceability systems; training of company staff in risk management, internal audit, HACCP, hygiene and traceability; and installing internal company training systems;
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With the Ecole Supérieure des Sciences Agronomiques de l’Université d’Antananarivo (ESSA) and the Centre Technique Horticole de Tamatave (CTHT): course content aligned with industry needs; improved teaching skills; experts coached to deliver PIP support;
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With service providers: 25 experts from ten consultancy companies trained to support the sector over the short- and long-term in topics critical to the sector; and
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With EDES, improved public sector systems and procedures for inspection and control.
COLEACP contributed to the reorganization and “professionalization” of the sector leading to an increase in confidence among EU buyers, adoption of Good Agricultural Practices, improved social practices, and a decline in MRL exceedances.