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Putting trade and investment at the center of the G20
It might not have made the leading global headlines but, three weeks ago, there was a significant new development in global governance of trade and foreign investment. In Beijing, China convened the first meeting of a new working group in the G20 to pursue initiatives in these areas: the G20 Trade and Investment Working Group (TIWG). Over two days, officials from G20 members and invited governments, along with the World Bank Group and other international organizations, discussed the future direction of trade and investment in the G20.
This is a promising step. There is no doubt that the G20 can have an impact in this area. The G20 accounts for three-quarters of world trade; half of global inward Foreign Direct Investment (FDI) and two-thirds of global outward FDI; and 80 percent of global output. Actions taken by the G20 also have a clear impact on developing countries outside the G20, with around 70 percent of non-G20 developing-country imports coming from the G20 countries, and around 80 percent of those countries’ exports directed to the G20. However, the G20 has yet to deliver its full potential on trade and investment.
In the wake of the financial crisis and the elevation of the G20 to a leaders-level forum, the group emphasized immediate post-crisis recovery, as well as such pressing issues as financial regulation and macroeconomic stability. Attention has since shifted to the need to restore growth in a still-weak global economy, defining the achievement of “strong, sustainable and balanced growth” as a key priority for the G20.
Despite efforts by different chairs of the G20 to raise the profile of trade and investment in this context, discussions have generally produced generic statements, such as the exhortation to complete the WTO Doha Round. The results of this approach have been mixed, to say the least. There have, however, been positive exceptions. In particular, the pledge on protectionism made at the G20 Summit in 2008 was followed by the decision to give some power to international organizations to monitor trade and investment policies by G20 members. The G20 has helped prevent a major surge in protectionism, which damaged growth prospects during previous times of economic crisis. Nevertheless, the protectionism focus has been a “defensive” act aimed at preserving existing openness, rather than looking in a more positive sense toward the ways that trade and investment policy actions can contribute to much-needed global growth.
The working mechanisms for trade and investment in the G20 have been partly responsible. Other issues in the G20 – notably the Framework Working Group, which oversees the growth agenda – have a clearer structure, defined targets, and mechanisms for monitoring and evaluation, backed by analytical input from international organizations. Reforming the way the G20 operates on trade and investment will present challenges, but the approach of the Chinese presidency has been that an enhanced structure is needed if the group seeks to exert its role of political leadership and policy direction in these areas.
Although discussions are continuing, the working group that met three weeks ago in Beijing covered a lot of ground, from the mechanics of discussing trade and investment in the G20, to the future of the multilateral trading system, to investment policy, to global value chains, to reducing trade costs. G20 members themselves drive the process, but the World Bank Group and other international organizations have an important role to play, providing independent analysis of potential policy options, as well as data and expertise to support monitoring and evaluation. For example, in the area of trade costs, we maintain a database along with UNESCAP that tracks the evolution of trade costs since 1990, as well as a number of indicators on logistics performance, trading across borders, temporary trade barriers, services trade restrictiveness and other determinants of trade costs. This wealth of information could have a valuable role in helping the G20 shape its action on trade costs.
The establishment of the Trade and Investment Working Group was a good first step in putting these policy areas at the center of the G20 agenda. We at the World Bank Group will be doing what we can to support this effort – and to ensure that it has the greatest possible impact on the global economy and the prospects of developing countries.
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New Bank report finds skills, infrastructure and business landscape key to achieve shared prosperity in Mauritius
The rise in income inequality combined with lagging shared prosperity indicators have adverse impacts on relative poverty in Mauritius, says a World Bank report launched on 18 February. The report, titled ‘Inclusiveness of Growth and Shared Prosperity’, analyses Mauritius’s growth pattern of the past decades as well as existing opportunities to accelerate progress toward achieving inclusive growth and shared prosperity.
“We believe Mauritius has what it takes to achieve its ambition of becoming a high income country with the implementation of the right set of reforms,” said Mark Lundell, World Bank Country Director for Mauritius, Mozambique, Madagascar, Seychelles, and Comoros. “Reaching high-income status will imply a careful review of the country’s economic model. This includes the ability to improve the labor force skills set, develop infrastructure, and further improve the business environment to attract FDI and generate domestic investment.”
The nature of the economic changes of the 2000s associated with the deterioration of the traditional primary sectors led to an increase in income inequality, which impacted negatively on shared-prosperity indicators in the country. Furthermore, incomes of the bottom 40 percentile of the population deteriorated in relative terms. The report concludes that economic growth and declining inequality are equally important for the reduction and possible eradication of poverty in Mauritius.
“Inclusiveness of growth remains the main challenge for the current growth pattern in Mauritius,” said Victor Sulla, World Bank Senior Economist and main author. “Micro-simulation analysis suggests that reducing and eventually eradicating poverty in Mauritius will depend on a two-fold combination of policies: first, lower unemployment and increased productivity, and second, improved targeting and efficiency in social protection.”
Policies designed to upgrade infrastructure, support research and development and innovation, advance public-sector efficiency, and further improve business environment are deemed key to boost productivity. The report suggests that the labor market needs to foster flexibility and reward higher productivity. Besides, skills mismatch grew by 30 percent during the years 2000s, signaling an urgent need for policies to support high-tech and services-oriented sectors. Educational reforms are therefore needed to provide people with the appropriate and relevant skills needed in today’s Mauritius.
The report further suggests the need for public-sector reforms to improve accountability at all levels and improve planning, procurement, and management processes across the system. Efficient country-level monitoring and evaluation systems could be developed to further support evidence-based policymaking. Reforms in public enterprises also have the potential to create fiscal space for productive spending.
» Download: Mauritius: Inclusiveness of Growth and Shared Prosperity (PDF, 8.07 MB)
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Africa far from sustainable energy for all, but showing signs of progress
Energy underpins every aspect of economic development. The world acknowledged that by adopting a dedicated UN Sustainable Development Goal (SDG 7) that aims to ensure access to affordable, reliable, modern and sustainable energy for all by 2030. Africa lies at the heart of that objective.
Although it has long been the least electrified continent, Africa is showing signs of significant change. At the continent’s annual Energy Indaba event, the World Bank shared the most recent evidence of Africa’s progress towards SDG7 and stimulated a discussion about Africa’s prospects for meeting the new global targets.
As of 2012, about 35% of Africans had access to electricity, up from 32% in 2010, according to the “Progress Toward Sustainable Energy: Global Tracking Framework 2015” report. In fact, in as many as 19 African countries less than one in five people had access to electricity in 2012.
Some countries are making meaningful progress. Ethiopia, Nigeria and South Africa were among the fastest moving countries globally in terms of expanding electrification from 2010-2012. Countries like Mali, Rwanda and the Democratic Republic of Congo expanded electrification more rapidly than their own populations are growing, and bold targets and electrification programs have been adopted in countries like Kenya and Rwanda.
Yet overall expansion of electrification in Africa has barely kept pace with population growth in the same period, in sharp contrast to South Asia where electrification grew four times as fast as population. In order to reach SDG7, Africa will need to electrify over 60 million people each year, more than double its current performance of 24 million.
“What this shows is that universal access by 2030 may not be achievable using conventional approaches, yet still remains within reach as long as we focus on providing basic – but meaningful – forms of access,” said Aaron Leopold, Global Energy Advocate with Practical Action. “The evidence shows that many of the human development impacts of electrification are achievable with relatively modest amounts of electricity consumption.”
Depending on the tier or service package provided, the cost of reaching universal access to energy can vary from US$1 billion a year for a simple solar lighting and phone charging solution to $37 billion a year for high-end, round-the-clock grid electricity; an intermediate tier that supports a number of basic appliances would run to $8 billion per year. So countries must also determine what level of access makes sense to try and achieve by 2030, and how that could differ for urban, peri-urban and rural areas.
In contrast, Africa has barely advanced on clean cooking in recent years. The absolute number of Africans cooking with solid fuels such as firewood and dung actually increased from 708 million to 747 million, showing that expansion of access to clean cooking fuels did not keep up with the overall growth in population. In fact, Africa will need to ensure that 71 million people each year gain access to clean cooking fuels, which is more than 14 times its most recent performance.
“Unlike electricity, expanding access to clean cooking does not appear to have been such a priority for policy-makers,” said Anita Marangoly George, Senior Director of the World Bank’s Energy and Extractives Global Practice. “This is worrisome given the heavy health burden carried by women and children inhaling smoke from traditional cooking practices.”
Africa’s reliance on traditional uses of biomass – both by households and enterprises – is one of the reasons why it derives as much as 70% of its energy consumption from renewable sources; more than any other continent in the world. And even though Africa is only beginning to tap its vast hydro, geothermal, wind and solar resources, it already gets 9% of its energy – and 21% of its electricity – from these modern renewables, putting it ahead of Asia in this regard.
The inefficiency of traditional uses of biomass also explains why Africa comes out as one of the most energy intensive regions of the world, despite its very low levels of per capita energy consumption. In fact, Africa needs twice as much energy as Europe to produce a single dollar of GDP. Yet progress is not insignificant, annual energy savings made from 2010-2012, are equivalent to what Ethiopia uses each year. About half of these savings were made by South Africa alone, and greatest advances on energy efficiency came from the transportation sector.
In fact, an estimated $50-80 billion is required each year to reach all of the Sustainable Energy for All (SE4All) objectives in Africa. And private investment is crucial to making that happen. By far the largest price tag is for renewable energy investments at $36 billion a year. Energy efficiency would cost about $12 billion a year and the remainder for energy access.
“What we need is for stakeholders – governments, civil society, energy suppliers and consumers – to work towards achieving sustainable energy for all,” said Anita Marangoly George. “Ending energy poverty by 2030 is something that we can achieve.”
The SE4All Global Tracking Framework is produced jointly by the World Bank’s Energy and Extractives Global Practice, the World Bank’s Energy Sector Management Assistance Program (ESMAP) and the International Energy Agency, and is supported by 20 other partner organizations and agencies.
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Break the chain of desperation that leads to emergencies and humanitarian disasters, IFAD President tells development leaders in Rome
Against a backdrop of new reports that show the number of refugees entering Europe has continued to skyrocket, senior government officials attending the final day of the International Fund for Agricultural Development’s 39th Governing Council, renewed their commitment to invest in smallholder agriculture and reduce poverty in developing countries.
Recognizing that rural development plays a fundamental role in stabilizing communities and reducing migration and conflict, IFAD President Kanayo F. Nwanze told leaders that “by working together to deliver on the Sustainable Development Goals (SDGs) – starting with zero poverty and zero hunger – we can break the chain of desperation” that leads to emergencies and humanitarian disaster.
Urgent calls for action in support of increased investment in smallholder agricultural to ensure food security, climate change adaptation, equitable prosperity and ultimately to remove the root causes that lead to conflict and migration, were shared throughout the two-day conference, held annually in Rome for senior government officials representing IFAD’s 176 member states.
Sergio Mattarella, the President of the Italian Republic, pledged that Italy will continue to play a key role in the eradication of hunger and poverty – conditions he described as “insidious”.
Mattarella brought attention to the increasing number of refugees fleeing the conflict in Syria and called on leaders of all nations to get involved. “Saving human lives and reaching out to those fleeing war or misery is a moral duty, a duty for any society that defines itself as free, democratic and truly respectful of human rights,” he said.
Dr Mohamed Ibrahim, globally recognized entrepreneur and founder of the Mo Ibrahim Foundation, delivered this year’s IFAD Lecture. Ibrahim took African governments to task for not living up to their commitments to invest in agriculture and rural development. He said it is essential that they create opportunities for young people in agriculture so that they are able to resist the dangerous call of extremism.
“No jobs, no hope,” he said, adding that Africa has more hungry, malnourished people than anywhere else in the world. “We are by far the least productive region in the agriculture sector but because we have more uncultivated, arable land than anywhere else, it presents opportunities.”
A private-sector panel which included Sunny Verghese, Cofounder and Group CEO of Olam International, highlighted the need for bold initiatives to better link smallholder farmers to markets. Panel participants emphasized that everyone – government, the private sector, financing institutions such as IFAD, small- and medium-sized enterprises and smallholders farmers – have a role to play.
A second panel discussion, facilitated IFAD Associate Vice President Périn Saint Ange, focussed on innovative agricultural solutions to many of the global challenges discussed over the two days, including IFAD investments in farming technologies, approaches to empower women and youth, and the use of new technology to enhance rural development project design and management.
In a one-on-one conversation ahead of the panel, Dr Ismahane Elouafi, Director General of the International Centre for Biosaline Agriculture, said that the world is at a crossroad in terms of its overuse of natural resources, and that the Middle East and North Africa region already has some of the highest water scarcity in the world.
“Climate change impacts the poor and marginalized most of all,” she said. “We have huge challenges ahead, and we need to act now.”
Among the outcomes from the Farmers’ Forum, a two-day meeting held in conjunction with IFAD’s Governing Council, organizers announced a plan to make the platform for dialogue more inclusive, inviting pastoralists and livestock breeders to take part, and more decentralized creating stronger links to smallholders and family farmers on the ground.
IFAD invests in rural people, empowering them to reduce poverty, increase food security, improve nutrition and strengthen resilience. Since 1978, we have provided US$17.6 billion in grants and low-interest loans to projects that have reached about 459 million people. IFAD is an international financial institution and a specialized United Nations agency based in Rome – the UN’s food and agriculture hub.
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Better enforcement of anticorruption laws needed to clean up business in Mozambique
Minimal enforcement of anti-corruption laws coupled with the private sector’s lack of exposure to international anti-corruption norms allows corruption to thrive in Mozambique’s business sector, according to a new study from Transparency International and its chapter in Mozambique, the Center for Public Integrity.
The new report, which will help set a Business Integrity Country Agenda (BICA) for Mozambique, is part of an effort by the Centre for Public Integrity and Transparency International to reduce corruption in Mozambique’s private sector. The initiative comprises an assessment of business integrity in the country, resulting in the BICA Assessment Report and then translation of the assessment’s key findings into a working agenda for reform.
“The only way we can clean up the business environment is through collective action,” said Adriano Nuvunga, the Director of the Centre for Public Integrity. “This new programme will be used for the first time ever in Mozambique. It is based on the idea that the government, the business sector and civil society working together can be far more effective in promoting business integrity than actions by individuals or stakeholder groups acting alone.”
In the public sector, the results show that Mozambique has signed and ratified the main international and regional anti-corruption conventions: the United Nations Convention Against Corruption (UNCAC), the African Union Convention on Preventing and Combating Corruption and the Southern Africa Development Community (SADC) Protocol Against Corruption, and has made a considerable effort to incorporate these instruments into its legal framework.
But enforcement is problematic because of a low capacity to implement anti-corruption laws and poor incentives to promote clean business dealings. Public sector thematic areas related to business integrity cover issues such as bribing public officials, commercial bribery, money laundering, economic competition, accounting and audit, undue influence, public tendering, and tax administration. In most of these areas the country has a legal framework in line with international standards.
Unlike the public sector, in the business sector in Mozambique local enterprises do not have the same exposure, stimulus and ability to adopt policies and practices in line with international standards. Some factors that have played a role in fostering poor standards of business integrity, include the concentration of exports and the few opportunities for linkages with multinationals and megaprojects in a few enterprises; a weak market with limited business-to-business relations; and weak enforcement of integrity standards in the public sector in Mozambique.
In this context, relatively few companies operate in an environment that creates positive incentives for good management standards and the promotion of business integrity. However, there is growing awareness that corruption harms business. In this regard, business associations are adopting business integrity codes of conduct, although still with low adherence by companies. Moreover in August 2015, in the context of the dialogue between the government and private sector, both parties agreed to include anti-corruption measures in the set of actions to be implemented by the business sector, which includes responsibility for monitoring and reporting on the progress by the latter.
Historically, civil society in Mozambique has played the role of oversight and watchdog in relation to the public sector. The research found that civil society – together with the media – is a key player in promoting business ethics. It can be instrumental to preventing, reducing and responding to corruption in the business sector providing broad societal checks and balances.
The assessment is based on evidence gathered from multiple sources: legislation, official documents, studies, primary data, stakeholders and interviews with experts. The process included the selection of a National Advisory Group (NAG), comprising representatives of all the stakeholder groups and donors, who were responsible for validating the research findings and presenting recommendations on collective action.
» Download: Business Integrity Country Agenda (BICA) Assessment Report: Mozambique | Executive summary (PDF, 6.85 MB)
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1st Meeting of the Continental Free Trade Area Negotiating Forum (CFTA-NF)
The 1st Meeting of the Continental Free Trade Area Negotiating Forum is scheduled to take place from Monday 22 to Saturday 27 February 2016 at the AU Headquarters in Addis-Ababa, Ethiopia.
The main objective of the meeting is to consider all the post launch preparatory issues and essential process issues and technical documents that will enable the efficient conduct of the negotiations. Specifically, the Meeting will undertake the following:
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Discuss studies that have been conducted on the establishment of the CFTA;
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Identify capacity needs for the CFTA negotiations;
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Consider and adopt the Rules of Procedure for the CFTA Negotiating Forum;
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Consider technical issues to advance the preparations for the negotiations;
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Consider the establishment of various Technical Working Groups in specific areas
The meeting shall be attended by all the Member States of the African Union. The meeting will also be attended by Trade Officials from the following RECs and institutions; AMU (Arab Maghreb Union), CEN-SAD, COMESA, EAC, ECCAS, ECOWAS, IGAD, SADC, UNECA (United Nations Economic Commission for Africa) and the AfDB (African Development Bank).
The meeting will be preceded by a two-day capacity building and information sharing workshop (22-23 February 2016) where the AUC will introduce a capacity needs assessment and share findings and conclusions from a select number of studies that have been conducted on the establishment of the CFTA.
Background
The 25th Ordinary Session of the Assembly of Heads of State and Government of the African Union which was held in Johannesburg, South Africa in June 2015 launched the negotiations for the establishment of the Continental Free Trade Area (CFTA). The launch of the negotiations marked a major milestone in the implementation of the Summit decision to establish a continental free trade area by 2017. The objective of the CFTA negotiations is to conclude a comprehensive and mutually beneficial trade agreement among the Member States of the African Union.
In launching the CFTA negotiations, the Summit adopted the following documents; The objectives and principles of Negotiating the CFTA; The indicative Roadmap for the Negotiation and establishment of the CFTA; The Terms of Reference for the CFTA Negotiating Forum (CFTA-NF); The institutional arrangements for the CFTA negotiations; and The Declaration on the Launch of the negotiations for the establishment of the CFTA. The Roadmap identifies phases in the negotiations for the CFTA, the post launch preparatory phase, the negotiations phase, finalisation of the CFTA Agreement and launch of the Continental Free Trade Area and the domestication of the CFTA agreement by Member States.
The CFTA Negotiating Forum was established by the Assembly and is composed of Officials from the African Union Member States and Regional Economic Communities that are recognised by the African Union. It has the responsibility of conducting trade negotiations at the technical level and it reports to the Committee of Senior Trade Officials on its negotiation activities. The CFTA Negotiating Forum also has the responsibility of preparing quarterly reports on progress made in the negotiations highlighting areas requiring higher level intervention to the Committee of Senior Officials, Ministers of Trade, the High Level African Trade Committee and the Assembly.
The Continental Free Trade Area is an Agenda 2063 flagship project of the African Union.
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Kenya eyes crude exports in 2017 via trucks and railway
Kenya is considering moving its crude oil to Mombasa by road and railway as President Uhuru Kenyatta’s administration races to hit export markets before the General Election set for August next year.
The Energy ministry has offered Rift Valley Railways (RVR) the contract to move the oil over a distance of more than 800km, from Eldoret to the Kipevu-based Kenya Petroleum Refineries (KPR) from as early as February next year.
By choosing trucks and train, Mr Kenyatta’s administration appears determined to sidestep bureaucracy involved in constructing a joint pipeline with Uganda in an effort to beat its tight timelines.
“We are quite ambitious but we know we will be able to pull this off in the next 12-16-month window,” said the head of Presidential Delivery Unit Nzioka Waita.
“And as we speak, work has been done to improve the road network from Lokichar to Lodwar and from Lodwar to Kapenguria to increase the shoulder size to allow trucks which carry crude oil to convey it to Kitale and subsequently to Eldoret,” Mr Nzioka said in a presentation made during the Governors’ Summit last week.
The upgrade of the 213km road from Lokichar to Kitale has been top of the government’s agenda as it looks to facilitate the quick transport of crude to an export terminal in Mombasa.
Kenyan officials also appear to be keen on sidestepping the long process of constructing a joint crude oil refinery under discussion with Rwanda, South Sudan and Uganda.
The joint projects were supposed to be built in public-private partnership model.
South Sudan is embroiled in civil strife since 2013 while Uganda has in recent months been preoccupied with political campaigns that culminated into Thursday’s election.
Uganda, which aims to start crude production by 2018, recently signed an agreement with Tanzania to explore the possibility of building a crude oil pipeline between the two countries.
Although Uganda had agreed to the Kenyan route, it said Nairobi had to guarantee security for the pipeline, along with financing and cheaper fees than alternatives.
Settling for a route through Tanzania could slow some projects in Kenya, which are planned to run alongside the pipeline on the land corridor in the North of the country to Lamu, where Kenya wants to build a new port to serve the region.
“We are now trying to refurbish Kipevu plant – which has only been bringing petroleum in – to take petroleum out,” said Mr Nzioka.
“At the Kipevu plant, they’ll do what they call first line refinery and then take that into the export market.”
British firm Tullow Oil Plc, working jointly with Africa Oil Corporation, have discovered an approximately one billion barrels of crude oil in the South Lokichar basin.
The prospects for export have appeared bleak lately as crude prices tumble in the global market.
The crude oil prices have dropped from $73 per barrel at the beginning of last year to a ten-year low of $27 this year. Tullow has since indicated its plan to roll out production next year.
The firm has also dismissed concern over low prices saying it can export at prices as low as $25 per barrel.
Mr Nzioka however said Kenya has not pulled out of its regional commitment.
He said: “We are looking at all options of whether to move this oil through our regional engagement with the government of Uganda or to move on our own even as we look at building the pipeline from Hoima, Lokichar though to Lamu.”
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DG Azevêdo: WTO can help Senegal achieve its development goals
WTO Director-General Roberto Azevêdo ended his official trip to West Africa on 18 February 2016 with a visit to Dakar, Senegal. He met with President Macky Sall to discuss how the WTO can help the country achieve its development objectives. He also met with the Minister of Trade, Informal Sector, Consumption, Promotion of Local Products and SMEs, Alioune Sarr, and a number of other high-level government representatives.
During his visit to Senegal, the Director-General also held meetings with the Ministry of Economy and Finance and Planning and the Ministry of Foreign Affairs, students at the Groupe École Supérieure de Commerce de Dakar, as well as the singer, musician and former minister Youssou Ndour. In addition, the Director-General spoke at the Cheick Anta Diop University about Senegal’s participation in the global trading system, the results of the WTO's recent Nairobi Ministerial Conference, and the future work of the organization.
The Director-General’s full speech is available below.
Cheick Anta Diop University, Dakar, Senegal
Remarks by Director-General Roberto Azevêdo
It is a great pleasure to be here in Senegal – especially as this is my first visit to the country.
I am also very pleased to address you today at this prestigious institution that was awarded a Chair under the WTO Chairs Programme. This programme aims to enhance knowledge and understanding of the international trading system among academics and decision-makers in developing countries. The Cheikh Anta Diop University is one of the few institutions in the world to have been selected to participate in this programme.
This is my first time back in Africa since the WTO’s successful Ministerial Conference in Nairobi two months ago.
The Conference put a spotlight on Africa.
In Nairobi, WTO Members adopted decisions that will support the growth and development of Senegal, Africa and the world.
Following on from this success, we must ensure that Africa remains in the spotlight. We need to deliver other agreements that support your development objectives.
I would like to formally thank the Government of Senegal for its support throughout the process leading up to the Nairobi Conference.
Senegal is one of the founding Members of the WTO, and acceded to the General Agreement on Tariffs and Trade, the WTO’s predecessor, in 1963.
For more than 50 years, the country has participated actively and constructively in the multilateral trading system.
Senegal works alongside other least developed country – or LDC – Members of the WTO to help define the work programme and tackle the specific obstacles faced by LDCs.
The LDCs form a powerful group within the WTO and their development is an absolute priority for the Organization.
This level of priority is clear from the flexibilities and special provisions included in WTO Agreements and Decisions.
And it is also clear from the substantive support that is available to LDCs to help them strengthen their trading capacity.
I would like to build on this to further your integration into the trading system.
And I think that the results obtained in Nairobi show that this commitment is shared by the entire Membership.
Nairobi outcomes
Let me explain in a bit more detail what was delivered in Nairobi.
The Nairobi Package contains a set of Ministerial Decisions on agriculture and issues concerning LDCs.
Regarding agriculture, the decision on export competition is particularly important. It is the most significant reform in international trade rules on agriculture since the creation of the WTO.
It will eliminate agricultural export subsidies and ensure that Members do not resort to such measures in the future.
Eliminating subsidies is, in fact, one element of the UN’s new Sustainable Development Goals – and we delivered the decision barely three months after the goals were agreed!
It will certainly have a positive impact in terms of improving the global trading environment by tackling the enormous trade-distorting potential of these subsidies.
Farmers in the developing world should not have to compete with the treasuries of developed countries.
The decision will help to level out the playing field in agriculture markets, to the benefit of developing countries and LDCs. And this is very significant for Senegal, where agricultural products account for more than 30% of exports.
The decision will also help to limit similar distorting effects associated with export credits, State trading enterprises, and food aid.
Members also undertook to negotiate steps to improve food security and to develop a Special Safeguard Mechanism to help deal with import surges of food products, which can harm domestic food production.
So it is important that we follow up on these commitments.
And as I mentioned before, an important package of decisions was adopted to support the integration of LDCs into the global economy.
These decisions most notably include significant provisions on preferential rules of origin for goods from LDCs and preferential treatment for LDC services providers.
Significant steps were also taken regarding cotton, so as to open up foreign markets for the most vulnerable producers and end cotton export subsidies.
In short, these decisions will provide LDCs with additional opportunities to export their goods and services to developed and developing countries.
In Nairobi, Members also launched the second phase of the Enhanced Integrated Framework, a programme focused exclusively on LDC capacity-building.
I think it is therefore fair to say that Nairobi delivered successful outcomes – outcomes that significantly boost growth and development.
Other achievements
These results build on our successful Ministerial Conference in Bali, where Members delivered a number of important outcomes, including the Trade Facilitation Agreement.
This Agreement will make a real difference on the ground. It aims to streamline, standardize and simplify border processes around the world, thereby cutting trade costs.
It is estimated that this will boost global trade by $1 trillion a year – with almost three-quarters of this increase accruing to developing economies.
Those that make the biggest reforms will likely reap the biggest gains.
It is encouraging to see that Senegal views trade facilitation as a priority and that it has made significant reforms in this area. Since 2006, import and export times have almost halved. This is a significant achievement. Senegal is also striving to improve its business environment and is moving up in the international rankings.
According to the World Bank’s Doing Business report 2013-2014, Senegal was one of the economies that had most improved their business climate, a trend that continued in 2015.
The Trade Facilitation Agreement will do much to help Senegal in its efforts. It will help cut trade costs, speeding up the flow of goods and improving the country’s ability to trade, both regionally and globally.
A recent WTO report noted that full implementation of the Agreement could reduce trade costs by an average of 14.5%, which would favour diversification. The report also found that the Agreement would help LDCs to increase the number of new products exported by as much as 35%, and increase their access to foreign markets by 60%.
But in order to benefit from the Agreement, it must first be ratified. Many African countries have already taken this step and I would encourage Senegal to do the same. The Agreement does not impose a rigid programme of reforms – on the contrary, it gives you the flexibility to implement its provisions according to your specific needs and capacities, and provides practical support to help with implementation.
On all these issues, the WTO is here to help. If more information or support is needed then we stand ready to help and will do all we can.
Post-Nairobi
So, in my view, our experiences in recent years show that the WTO is capable of delivering concrete outcomes. We are becoming accustomed to success.
However, we must also recognize that the WTO’s slow progress over many years has left its mark, with many countries entering into other trade initiatives, such as regional or bilateral agreements.
Senegal itself is party to a number of initiatives of this type, such as the Economic Community of West African States (ECOWAS). And this is certainly very positive. Steps taken to improve trade and integration at regional level can be very important for trade promotion, and yet effective global trade cooperation remains essential.
Cooperating in the field of trade will enable us to function well at all levels. Topics such as fisheries subsidies – fisheries being vital for Senegal’s economy – can only be addressed effectively at multilateral level, via the WTO.
We must therefore continue delivering outcomes at that level.
In Nairobi, Ministers started a frank conversation on the future of the Organization – and on how it can do more, and faster.
But there is currently no consensus on how to move forward.
All Members do, however, want to deliver on outstanding Doha issues, such as agriculture (particularly domestic subsidies) and market access for industrial goods and services, but they do not agree on precisely how these issues should be tackled.
What’s more, some Members would like to start discussing issues that do not form part of the Doha Agenda.
This conversation has already begun, in Geneva and in capitals all over the world.
And despite some differences, there are significant commonalities. For example, there is a strong desire to maintain development at the centre of our efforts. It is also clear that Members want to continue making positive efforts to better integrate LDCs into trading flows.
So I think we need to build on these common elements – and learn from our recent successes – in order to make as full a contribution as we can. This conversation is an opportunity to make sure that the future work of the WTO delivers for you.
We can take actions that will help you deliver on your development goals, by diversifying the economy and encouraging more businesses to trade.
Small and medium-sized enterprises are an important part of your countries’ economies, and we can take further steps to help them integrate into trading flows.
These are just a few examples. The point is that you have an opportunity to shape the future of global trade discussions in your interests. I want to help you seize that opportunity.
Conclusion
The challenge we face is by no means small.
The WTO has delivered important results for Senegal. Now we need to follow our agreements through and implement them in full.
We are entering a potentially very exciting period as regards the world trading agenda. And Senegal’s voice in this debate will, of course, continue to be as important as always.
I would be interested to hear your views today and I count on your participation in the weeks and months to come.
Thank you.
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Elusive global growth outlook requires urgent policy response
Achieving strong growth in the global economy remains elusive, with only a modest recovery in advanced economies and slower activity in emerging markets, according to the OECD’s latest Interim Economic Outlook.
The world economy is likely to expand no faster in 2016 than in 2015, its slowest pace in five years. Trade and investment are weak. Sluggish demand is leading to low inflation and inadequate wage and employment growth.
The downgrade in the global outlook since the previous Economic Outlook in November 2015 is broadly based, spread across both advanced and major emerging economies, with the largest impacts expected in the United States, the euro area and economies reliant on commodity exports, like Brazil and Canada.
Financial instability risks are substantial, as demonstrated by recent falls in equity and bond prices worldwide, and increasing vulnerability of some emerging economies to volatile capital flows and the effects of high domestic debt.
“Global growth prospects have practically flat-lined, recent data have disappointed and indicators point to slower growth in major economies, despite the boost from low oil prices and low interest rates,” said OECD Chief Economist Catherine L. Mann. “Given the significant downside risks posed by financial sector volatility and emerging market debt, a stronger collective policy approach is urgently needed, focusing on a greater use of fiscal and pro-growth structural policies, to strengthen growth and reduce financial risks.”
The OECD projects that the global economy will grow by 3 percent this year and 3.3 percent in 2017, which is well below long-run averages of around 3¾ percent. This is also lower than would be expected during a recovery phase for advanced economies, and given the pace of growth that could be achieved by emerging economies in convergence mode.
The US will grow by 2 percent this year and by 2.2 percent in 2017, while the UK is projected to grow at 2.1 percent in 2016 and 2 percent in 2017. Canadian growth is projected at 1.4 percent this year and 2.2 percent in 2017, while Japan is projected to grow by 0.8 percent in 2016 and 0.6 percent in 2017.
The euro area is projected to grow at a 1.4 percent rate in 2016 and a 1.7 percent pace in 2017. Germany is forecast to grow by 1.3 percent in 2016 and 1.7 percent in 2017, France by 1.2 percent in 2016 and 1.5 percent in 2017, while Italy will see a 1 percent rate in 2016 and 1.4 percent rate in 2017.
With China expected to continue rebalancing its economy from manufacturing to services, growth is forecast at 6.5 percent in 2016 and 6.2 percent in 2017. India will continue to grow robustly, by 7.4 percent in 2016 and 7.3 percent in 2017. By contrast, Brazil’s economy is experiencing a deep recession and is expected to shrink by 4 percent this year and only to begin to emerge from the downturn next year.
The OECD says monetary policies should remain highly accommodative in advanced economies, until inflation has shown clear signs of moving durably towards official targets. In emerging market economies, monetary support should be provided where possible, taking into account inflation developments and capital market responses.
The Outlook suggests that a stronger fiscal policy response, combined with renewed structural reforms, is needed to support growth and provide a more favourable environment for productivity-enhancing innovation and change, particularly in Europe.
“With governments in many countries currently able to borrow for long periods at very low interest rates, there is room for fiscal expansion to strengthen demand in a manner consistent with fiscal sustainability,” Ms Mann said. “The focus should be on policies with strong short-run benefits and that also contribute to long-term growth. A commitment to raising public investment would boost demand and help support future growth,” Ms Mann said.
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tralac’s Daily News selection
The selection: Thursday, 18 February 2016
Important trade and regional integration policy pointers:
From the African Union’s Trade and Industry department: the 1st meeting of the CFTA Negotiating Forum will be held from 22-27 February in Addis Ababa
From the AfDB - two EOIs:
Intra-African investment and regional financial integration
The African Development Bank has unveiled a landmark initiative (The High 5s, within the context of the Bank’s Ten-Year Strategy) to accelerate Africa's development over the next 10 years. Under this initiative, the High-Five priority areas of focus in Africa - to light up and power Africa, feed Africa, integrate Africa, industrialize Africa, and improve the quality of life for the people of Africa - form a blueprint for African countries to embark on a course of sustainable transformation. The objective of this assignment is to assist the Task Manager and the team on the intra-African investment and regional financial integration initiatives: participate in the drafting of the Approach to Regional Financial and Investment Integration in the SADC region; participate in the drafting of the joint Regional Integration Policy Paper on Regional Financial Integration in North Africa; participate in the drafting of the joint Regional Integration Policy Paper on Regional Financial Integration in Central Africa.
ECOWAS: developing a common policy on migration
As part of the efforts at deepening integration, in 1979 ECOWAS ratified the Protocol on Free Movement of Persons and subsequently waived visa requirements and adopted a common passport to enhance movement of community citizens. In spite of the progress that ECOWAS have made in the area of migration, the Community still faces a number of challenges, including the pursuit of conflicting objectives by member states and weak implementation of the Protocol on Free Movement, especially the rights of residence and establishment – due in part to the absence of strong regulatory framework on migration. The ECOWAS Commission has recognised that a key way of overcoming these obstacles is the drafting of a common policy on migration. The objective of this assignment is to deliver technical assistance to the ECOWAS Commission that will contribute to achieving the following:
South Africa: African trade and regional integration update by Minister Patel (ANC)
To support jobs through regional integration, we are focusing on markets on the continent. Last year for the first time other African countries became our single biggest regional market, overtaking Asia. We exported R303bn worth of goods to other African countries. These supported roughly 250 000 South African jobs. For example, half of the trucks we export, go to the rest of Africa and 60% of fruit juice exports is to our own continent. We will now work on deeper regional integration by private and public sector co-investment in other parts of the continent and support for a big infrastructure push in the continent, covering key projects such as the North South corridor that links the continent by road and rail; the big water and energy projects such as the Lesotho Highlands Water Project and working on Grand Inga with the DRC.
Namibia to address WTO in bid to save livestock industry (New Era)
Namibia is to send a high-powered delegation from all sectors of the livestock and meat industry to Geneva to present its case before the Sanitary and Phyto-Sanitary (SPS) Committee of the World Trade Organisation from March 16 to 17, in a bid to oppose soon-to-be-announced livestock import restrictions by South Africa. It is expected that South Africa will adopt the new restrictions before the end of February, after which the regulations will be implemented six months later. Namibia is now preparing to address the SPS Committee to acquire some breathing space before the implementation and to activate its own Master Plan after the Livestock Producers Association of Namibia and the Namibian Agricultural Union last week officially requested President Hage Geingob to intervene and save the industry.
Botswana, South Africa, Zimbabwe: development of the animal feed to poultry value chain (UNU-WIDER)
The cross-country investments being made by large poultry companies in the region indicate that a degree of regional integration is being fostered by firms in the region, largely in the absence of agreements between neighbouring states and in spite of barriers to trade that have been put in place. However, the predominance of large firms in the value chain also raises important questions about the strategies lead firms are pursuing, including vertical integration and agreements, and the implications for the development of local and regional agro-processing capabilities. Two important aspects of industrialization in the poultry value chain—upgrading of feed and breeds, and co-ordinated investments across the region—have been led by large firms. [The authors: Phumzile Ncube, Simon Roberts, Tatenda Zengeni]
Egypt: Prime for investment, COMESA countries must be more than export market (Daily News)
Exchange between Egypt and COMESA countries in 2014 amounted to about $2.7bn. Egyptian exported goods worth over $2bn including plastic products, ceramics, and electrical appliances. Egypt also imported tea, coffee, copper, and livestock worth about $700m from COMESA member countries in 2014. Egyptian exports to COMESA countries accounted for about 8% of its total exports in 2014. Although the percentage is not large, it is expected to increase in the upcoming years, especially as COMESA markets absorb significant proportions of Egyptian exports. For instance, COMESA markets receive about 25% of Egypt’s exports of ceramic products, 10% of plastic products, 35% of sugar production, 20% of fruit and vegetable exports, 25% of cement and paper exports, 18% of dairy exports, and 15% of medicine and glass exports. Various engineering products have an export percentage that ranges from 8% to 25%. These are impressive proportions that must be preserved and increased.
Related: Egyptian banks unconcerned with Africa (Daily News), Egyptian tech companies to expand in Africa to develop governmental services (Daily News)
UK seeks to revive Kenya exports with Sh74bn kitty (Business Daily)
Britain has set up a Sh74 billion fund to provide credit lines to local firms that buy goods from the European state in a bid to revive its dwindling exports to Kenya. The UK’s Trade envoy to Kenya, Lord Clive Hollick - who is expected in the country on Wednesday for a three-day visit - is set to unveil the fund that also provides cover against risks incurred by British firms while exporting goods to Kenya. In recent years, the country has been losing out to China, India and Japan with official data showing the value of imports from the UK to Kenya dipping to Sh40.1 billion in the first 11 months of last year, compared to Sh41.3 billion a year earlier and Sh45.7 billion in 2013.
Nigeria: These charts show the decline of investor confidence in Africa’s largest economy (Quartz)
The Capital Importation report tracks the total inflow of capital into the country under three main investment types: Foreign direct investment , portfolio investment and other investments, including currency deposits and loans. In 2015, total capital imported into Nigeria stood at $9.6bn, the lowest recorded total since 2011. It represents a 53% drop from the $20.7bn recorded in 2014.
Committee on Technical Barriers to Trade: 2015 annual review (WTO)
The WTO Committee on Technical Barriers to Trade (the Committee) will conduct its Twenty-First Annual Review of the Implementation and Operation of the WTO Agreement on Technical Barriers to Trade (the TBT Agreement) under Article 15.3 at its next meeting on 9-10 March 2016. This document contains information on developments in the Committee relating to the implementation and operation of the TBT Agreement from 1 January to 31 December 2015.
Extract: In terms of the Committee's review of measures, during the year, notifications decreased by 12% compared to the previous year (to a total of 1,989 notifications). Nevertheless, the trend since 2015 has been an upward one driven increasingly by developing Members. In 2015, developing Members continued to submit significantly more new notifications than developed Members - also the number of notifications from LDCs increased during the year. In total, 86 specific trade concerns were discussed in 2015, the second highest number since 1995. [Download]
German development cooperation with SADC: newsletter
Highlight: 13 April, Johannesburg - launch of Southern African Business Forum Working Groups to improve cooperation between private sector and SADC to accelerate Regional Economic Integration around selected topics and barriers to trade. Johannesburg
Five proposals for SADC health innovations (SAIIA)
Social cohesion in Eastern Africa (UNECA)
The report examines social cohesion using data from a wide variety of sources, including national statistics institutes and international organisations. But it also investigates qualitative data, including opinion surveys and questionnaires to gain a deeper appreciation of the perspectives of citizens in the region. This results in some surprising findings.
Extract: This final point merits some further discussion. Regional solutions to the problems associated with a lack of social cohesion will be constrained by the availability of resources at the regional level. Presently, for instance, the annual budget of the EAC Secretariat, at around $140 million, is miniscule compared to the scale of challenges and the size of the regional economy (approximately $134 billion in 2014). Thus far, despite all the good work, it is probably fair to say that regional organizations such as the EAC do not impact directly enough on the lives of their citizens. At least, that seems to be people’s perceptions at present. A recent opinion poll carried out by Afrobarometer (2015) revealed that less than one in five of the citizens in Burundi, Kenya or the United Republic of Tanzania enthusiastically felt that the regional body was having a positive impact on their lives. [Download]
Financing mechanism top agenda of next EAC summit (New Times)
“Top on the agenda is the consideration of reports by the EAC Council of Ministers on: the negotiations on the admission of the Republic of South Sudan into the Community; sustainable financing mechanisms for the EAC; and the EAC Institutional Review,” reads an EAC statement. For the past few years, EAC leaders have been mulling how to find the best sustainable financing mechanisms for bloc’s activities. A directive by the Summit in November 2013 tasked the Council, the bloc’s policy organ, to present a report on alternative financing mechanisms, including the option of one per cent of imports from outside EAC, as one of the ways the bloc could reduce overreliance on donor aid. “The ministers for finance are going to meet early next week and they will advise accordingly on what would be a final solution,” said Innocent Safari, the permanent secretary at the Ministry of East African Community Affairs.
Demand for iron ore levelled off in 2015 (UNCTAD)
The UNCTAD Iron Ore Market Report 2015, covering developments in the iron ore market in 2014 and providing an overview for 2015–2016, shows that slowing growth in worldwide steel production meant that the market for iron ore, the primary raw material of steel, entered a new phase with slower growth, lower prices and squeezed margins for mining companies. The report notes that world crude steel production in 2015 reached an estimated 1,763 million tonnes, a decrease of 2.9%, while the iron ore production reached 1,948 million tonnes, down 6% on 2014. The effect on the iron ore market was that, after a long period of rapid growth, demand levelled off and prices returned to levels not seen since 2002. The price of iron ore began 2015 at $71.26 per dry metric tonne but fell 39% by the end of the year. A reorientation of China’s economic strategy brought growth in the use of steel almost to a halt, and signs of demand picking up in other parts of the world were not enough to offset China's slowdown.
The change in demand for debt: the new landscape in low-income countries (IMF)
Sovereign bonds issued by low-income countries amounted to $4bn in 2013 and to $8bn in 2014, thanks in part to issuances by Côte d’Ivoire, Ethiopia, Ghana, Kenya, Senegal, Vietnam, and Zambia. In 2015, with weaker global conditions and falling commodity prices, the number of issuances declined and those who issued new bonds had to pay significantly higher yields.
Ghana: National commodity exchange will be a game-changer (Asoko Insight)
US-ASEAN: Sunnylands Declaration (White House)
Narendra Modi’s Rs8 trillion Make-in-India haul masks challenges to come (Livemint)
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New report on Social Cohesion in Eastern Africa
Poverty, inequality, migration and political unrest have all threatened social cohesion in Eastern Africa, as well as many other threats. Yet the region has proved remarkably resilient to these challenges, finds a new report launched the Economic Commission for Africa.
The report examines social cohesion using data from a wide variety of sources, including national statistics institutes and international organisations. But it also investigates qualitative data, including opinion surveys and questionnaires to gain a deeper appreciation of the perspectives of citizens in the region.
This results in some surprising findings. For example, the official estimate of how many people are living in poverty is different in many countries from the number of people who view themselves to be living in poverty. Understanding perceptions, the report argues, is essential for understanding the state of social cohesion.
The enormous economic and social progress made in Eastern Africa over the last 10 to 15 years is discussed in the report, as well as a number of rising challenges. These include some of the fastest rates of urbanisation in the world, high levels of gender-based violence in some countries and alcohol abuse in certain regions.
A regional approach needs to be taken to many of these issues, argues an author of the report, Ms Emelang Leteane, ECA Social Affairs Officer, speaking at the 20th Intergovernmental Committee of Experts meeting in Nairobi. “Some threats to social cohesion do not respect national borders. These threats demand a regional response,” said Ms Leteane.
The report makes other recommendations as well, including the creation of a fund managed by the East African Community that would be used to reduce spatial inequalities and strengthen social cohesion in the region.
Social Cohesion in Eastern Africa
Executive summary
This report provides an overview of the state of social cohesion in Eastern Africa.[1] The term “social cohesion” is used to refer to a situation where a group of people interact in a way that advances the interests of all those involved. They act as a community. It is a multidimensional concept involving a number of elements, including trust, equity, beliefs, acceptance of diversity, perceptions of fairness and respect. Accordingly, this report does not purport to provide a comprehensive assessment of the state of social cohesion in Eastern Africa. Instead, using a combination of qualitative and quantitative data from a wide range of sources, the report presents a broad “social audit” of the state of social cohesion and development in the region.
The primary finding is that social cohesion in Eastern Africa has shown resilience in the face of numerous challenges since the beginning of the twenty-first century. Nearly all countries have notably improved their Human Development Index since 1990, with some countries achieving particularly rapid progress in education and health indicators. The report also shows that there has been promising improvements in poverty reduction, with Ethiopia, Uganda and Rwanda achieving the fastest progress.
Despite this positive picture, the report highlights a number of outstanding challenges for social cohesion. An estimated 237 million people from East African are still living in poverty. Beyond open conflict in South Sudan and Somalia, parts of the region are still afflicted by low-intensity conflicts and social disorder. The capacity of law and order institutions to manage such tensions is often stretched. A number of communities in the region are still faced with sporadic humanitarian crises while others remain vulnerable to natural disasters. The report also highlights both the weak performance of the labour market and rising inequality as significant threats to greater social cohesion.
Demographic pressures are putting a strain on scarce resources, which further tests cohesion. While it is one of the least urbanized regions in the world, Eastern Africa is also one of the fastest urbanizing. The resulting social pressures are leading to some worrying trends. For instance, levels of substance abuse are high. Alcohol abuse is nearly double the African average in five countries across the region. In six countries for which there is data, between one third and one half of all women report that they have suffered gender-based violence.
Persistent problems in the efficiency of service delivery can compound social malaise, undermining the quality of education and health provision. These inefficiencies convey a perception that governments could do more. For instance, in a recent Afrobarometer poll (Afrobarometer, 2015) (Burundi, Kenya, Madagascar, Uganda and the United Republic of Tanzania), a majority of the respondents felt that their government’s efforts to improve the living standards of the poor, create jobs and reduce inequality were insufficient.
Despite these threats to social cohesion, there are many signs of resilience. Trust provides a foundation for building cohesive societies, and some countries in the region display exceptionally high levels of trust. Contrary to popular perception, our social audit also reveals notable resilience to divisions along ethnic, religious and cultural lines. For example, the United Republic of Tanzania has attempted to overcome these differences by adopting Kiswahili as a national language. Rwanda has improved service delivery through the rolling out of Imihigo – a home-grown governance arrangement based on a traditional form of performance contract.
The report concludes by observing that while there is a lot of information available pertinent to the state of social development and cohesion, much of it is currently scattered. Monitoring both qualitative and quantitative indicators more closely (perhaps through a regular regional report under the aegis of bodies such as the East African Community or the Intergovernmental Authority on Development) is recommended. The forthcoming African Social Development Index by the Economic Commission for Africa (ECA), which has a particular focus on sub-national inequities, is an example of a useful tool for monitoring cohesion.
Finally, the report shows how a lack of social cohesion can rapidly endanger regional stability. Yet the focus of most regional integration programmes in Eastern Africa has been the advancement of physical and economic integration, with trade and market access being high in the priority list. Because of the trans-frontier nature of many social problems, increasingly the challenges need to be tackled at the regional level. In this context, the report argues in favour of establishing a “regional solidarity fund” to tackle social inequalities and inequities head-on.
Over the past decade and a half, Eastern Africa has emphatically demonstrated that it is capable of achieving great things in terms of improving some dimensions of social cohesion. It now needs to extend that progress to other areas to create a more cohesive and prosperous future.
[1] The Eastern Africa region is defined as including 14 countries: Burundi, the Comoros, the Democratic Republic of the Congo, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Rwanda, Seychelles, Somalia, South Sudan, Uganda and United Republic of Tanzania.
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Financing mechanism top agenda of next EAC summit
The forthcoming 17th Ordinary East African Community (EAC) Heads of State Summit, scheduled February 29 in Arusha, Tanzania, will discuss the best sustainable financing mechanism for the bloc, among other things.
The summit will be preceded by a weeklong meeting of the EAC Council of Ministers that will take place at the EAC Headquarters in Arusha from February 22.
“Top on the agenda is the consideration of reports by the EAC Council of Ministers on: the negotiations on the admission of the Republic of South Sudan into the Community; sustainable financing mechanisms for the EAC; and the EAC Institutional Review,” reads an EAC statement.
For the past few years, EAC leaders have been mulling how to find the best sustainable financing mechanisms for bloc’s activities.
A directive by the Summit in November 2013 tasked the Council, the bloc’s policy organ, to present a report on alternative financing mechanisms, including the option of one per cent of imports from outside EAC, as one of the ways the bloc could reduce overreliance on donor aid.
“The ministers for finance are going to meet early next week and they will advise accordingly on what would be a final solution,” said Innocent Safari, the permanent secretary at the Ministry of East African Community Affairs.
Partner states seem to have taken too long to agree on a sustainable financing mechanism for the bloc.
Under the 2014/15 Budget passed by the East African Legislative Assembly (EALA), for example, out of the total budget of $124 million, partner states contributed $41.9 million, while $73.2 million came from donors.
Imposing a one per cent levy on all imports to the region would generate $310 million for the Community every year. This amounts to nearly three times the annual bloc’s budget and, as such solve for good, the irksome cash crunch often experienced by the EAC Secretariat.
EALA’s Dr James Ndahiro, an economist, in a past interview with The New Times, said a financing model whereby each partner state contributes one percent of its import revenue is the best option.
The 17th summit will also consider Council reports on: the Model, Structure and Action Plan of the EAC Political Federation; Implementation of the Framework for Harmonised EAC Roaming Charges.
Modalities for promotion of motor vehicle assembly in the region and reduction of the importation of used vehicles from outside the Community; and the promotion of the textile and leather industries in the region, and stopping importation of used clothes, shoes and other leather products from outside the region.
South Sudan, Somalia bid
South Sudan’s bid to join the Community suffered a setback following the mid December 2013 new break out of a civil war pitting forces loyal to previously sacked – and now reinstated – Vice-President Riek Machar against those supporting President Salva Kiir Mayardit.
The country seceded from Sudan in 2011 but the ensuing political unrest between government forces and Machar’s rebellion dampened its restoration.
Kiir has recently appointed Machar as vice president in a move to restore peace and resolve the country’s deepening economic crisis but it remains to be seen whether the lull will be sustainable.
After it became the world’s newest country almost five years ago, South Sudan’s public debt reportedly skyrocketed from zero to $4.2 billion.
Apart from South Sudan, the Summit is also expected to deliberate on a report by the Council on the verification exercise for the admission of the Republic of Somalia into the EAC.
The troubled Horn of Africa nation submitted its request in 2012 but it continues to be bogged down by the war against the al-Qaeda-linked al-Shabaab terrorists.
To become an EAC member, an applicant country’s government must – among other things – adopt policies that harmonise economically and politically with those of the bloc’s partner states.
Bloc’s e-Passport
While in Arusha, the EAC Heads of State are also expected to launch the new International East African e-Passport (electronic passport), yet another significant milestone towards achieving the integration agenda, during their meeting.
EAC’s senior official in-charge of communication, Owora Richard Othieno, disclosed that people in the region will from March be able to access the e-Passports that will help ease their movement in the trading bloc.
The e-Passport was scheduled for launch last November but it was postponed to allow more time to airbrush pending issues on the document.
Among others, the EAC Institutional Review is critical especially as the Council in April 2009 directed the Secretariat to undertake a comprehensive study and propose institutional reforms to boost efficiency in executing an expanded mandate.
Meanwhile, Tanzania’s President John Magufuli is scheduled to hand over the EAC chair to another leader who will be decided by the Heads of State.
It was supposed to be Burundi’s Pierre Nkurunziza’s turn to take over Chair but the latter has reportedly turned it down for the time being.
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Ministers agree on fast-tracking Central Corridor railway line project
Infrastructure projects undertaken by the Central Corridor states, including the railway line, will be fast-tracked, ministers for infrastructure from Rwanda, Tanzania and Burundi resolved over the weekend.
The ministers have subsequently approved the plan to fast-track the Dar es Salaam-Isaka-Kigali/Keza-Musongati railway project along the corridor, Rwanda’s Minister for Infrastructure James Musoni has said.
Musoni added that the partner states also signed an agreement as commitment to meet construction, operation and maintenance requirements.
This was during an Inter-State ministerial meeting to discuss ways on how to implement the projects in Mwanza, Tanzania last week.
The meeting was also attended by Prof Makame M. Mbararwa, Tanzania’s Minister for Works, Transport and Communications, and Jean Bosco Ntunzwenimana, Burundi’s Minister for Transport, Public Works and Equipment.
Musoni, who led the Rwandan delegation, said the partner states also agreed to adopt a common legal framework and operational manual to allow seamless operations.
They will also set up an implementation unit under the Central Corridor Transit Transport Facilitation Agency to oversee the project.
The Central Corridor member states have for almost 10 years been working to improve the route to make it more competitive in the region. The railway line is one of the key projects member states are banking on to help reduce the cost of doing business along the corridor.
Experts say railway transport is the only way partner states can significantly reduce transport costs and make the corridor attractive to the private sector.
The main line, from Dar es Salaam to Isaka, is already in place. So far, the Central Corridor member states and development partners, including the World Bank and African Development Bank, have committed to rehabilitate the existing railway line. They are also working on the Dar es Salaam-Isaka-Musoganti project.
The ICM followed the 10th Executive Board Meeting of the Central Corridor were the Board Memebers (Permanent Secretaries of the Ministries incharge of Transport and representatives from Private Sectors) surveyed the Routes from Bujumhura, Kigali and Dar es Salaam and got a chance to visit Isaka Dry Port in Isaka Kahama before sat for the Board Meeting. Previously, Isaka Dry Port had been operating as a Dry Port for Central Corridor Countries where Cargo were moved by Train to Isaka and the shifted to Trucks.
The Central Corridor Secretariat also Donated two Landcruisers to Tanzania Police Forces for patrolling along the Central Corridor. This will help to increase Security along the Route on Tanzania Side.
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Twenty-first annual review of the implementation and operation of the WTO Agreement on Technical Barriers to Trade
The WTO Committee on Technical Barriers to Trade will conduct its Twenty First Annual Review of the Implementation and Operation of the WTO Agreement on Technical Barriers to Trade (the TBT Agreement) under Article 15.3 at its next meeting on 9-10 March 2016. This document contains information on developments in the Committee relating to the implementation and operation of the TBT Agreement from 1 January to 31 December 2015.
In 2015, the Committee completed its Seventh Triennial Review. The Report includes a set of recommendations covering, among other things: good regulatory practices, regulatory cooperation between Members, conformity assessment procedures, standards and transparency. The reports also sets out a work programme of thematic sessions aimed at strengthening information exchange in the various cross-cutting areas covered by the TBT Agreement.
In terms of the Committee’s review of measures, during the year, notifications decreased by 12% compared to the previous year (to a total of 1,989 notifications). Nevertheless, the trend since 2015 has been an upward one driven increasingly by developing Members.
In 2015, developing Members continued to submit significantly more new notifications than developed Members – also the number of notifications from LDCs increased during the year.
In total, 86 specific trade concerns (STCs) were discussed in 2015, the second highest number since 1995. A much lower proportion of these, however, were notified to the Committee: only 49% of the STCs discussed had been notified (well below the long-run average of 68%).
On technical assistance (TA), the Secretariat delivered 18 TA events specifically targeted to the TBT Agreement and an additional 19 TBT modules were delivered as part of various other WTO TA activities.
Finally, ad hoc observer status was granted to the African Organization for Standardisation (ARSO) and the Intergovernmental Authority on Development (IGAD).
Review of TBT Measures
Notifications of technical regulations and conformity assessment procedures
Trends in new notifications and follow-up (addenda, corrigenda, revision)
In 2015, Members submitted 1,438 new notifications of technical regulations and conformity assessment procedures. In addition, 27 revisions, 476 addenda and 47 corrigenda to notifications were also submitted (Chart 1). In total, 1,988 TBT notifications were submitted in 2015 by 73 Members. While 2014 marked the year with most notifications in a single year since 1995, the number of notifications decreased by 12% in 2015. Nevertheless, 2015 was still the year with the fourth most notifications overall since 1995. Since 2007, Members have submitted more than 1,000 new notifications annually with that figure increasing to 1,500 since 2012. Since the entry into force of the Agreement and up to 31 December 2015, a total 25,390 notifications have been submitted by 128 Members. The number of notifying Members increased by 2 in 2015 as Suriname and Yemen notified for the first time.
Over the last decade there has been a marked growth in the use of addenda and corrigenda, with a record 675 notified in 2014. In 2015, this number decreased to 523 notified addenda and corrigenda. The US (1,200), Brazil (533), Ecuador (529), Colombia (323) and the EU (307) have notified the most addenda and corrigenda since 1995.
The overall relation between new notifications, addenda and corrigenda, and revisions is illustrated in Chart 2. The Committee adopted a recommendation on “Coherent Use of Notification Formats” in 2014 which provides Members with guidance on when to use different formats. It is recommended that Members use: new notifications “to notify the draft text of a proposed technical regulation or conformity assessment procedure”; addenda “to notify additional information related to a notification or the text of a notified measure”; corrigenda “to correct minor administrative or clerical errors (which do not entail any changes to the meaning of the content)”; and revisions “to indicate that the notified measure has been substantially re-drafted prior to adoption or entry into force.”
While the number of revisions has also grown, this format is used infrequently. China (31), Brazil (20), Canada (16), South Africa (14) the Dominican Republic (10) and Korea (9) have notified most revisions since 1995.
Members’ engagement in notifications
2014 showed a new trend indicating more notifications from Members that had been historically less active. This partly continued in 2015 as observed over the period 1995-2014 In 2015, for example, the US again led by numbers of new notifications (283) followed by Ecuador (126) (Member which notified most in 2014) and Brazil (115). China was more active in 2015 than in 2014, submitting 106 notifications compared to 49 in 2014. Uganda submitted 100 notifications in 2015.
Three consecutive years of significant notification activity has placed Ecuador (126 in 2015; 420 in 2014; 103 in 2013) among the ten Members that have notified most measures over the period of 1995-2015. Korea has dropped out of the “top ten” category following Japan with a total number of 765 notifications in 2015.
Focusing on the four Members with most notifications over the last ten years since 2006, there was a significant growth in notifications of all types from the US (190%) between 2006-2015. Meanwhile, there was a gradual growth in notifications from the EU (130%), Brazil (123%), and China (60%), notwithstanding a spike in notifications from China in 2008-2009.
The overall usage of notification formats differs between Members. The number of noftification submitted between 2006-2015 indicates the different notification preferences of Members. For instance, while the US submitted most addenda and corrigenda (1056), China submitted most new notifications (996). Yet, the addenda or corrigenda format has been used little by China with a total of 29 notifications over the last decade.
Notifications by region and development status
The growth in notifications since 2005 has been driven by increasing engagement of developing Members. This trend continued in 2015 as developing Members submitted significantly more new notifications in 2015 than developed Members. Yet, the share of new notifications from developing Members declined to 69% of the total compared to 80% in the previous year. Least-developed country Members (LDCs) continued to notify less frequently, but in 2015 notifications from this group slightly increased due to Uganda’s high level of notification activity.
The number of new notifications submitted by Members grouped by region shows that more than half the new notifications in 2015 were submitted by Members from Middle East and Asian regions (Chart 9). Compared to the previous year, Members in the South and Central America and Caribbean region decreased their level of new notifications in 2015 due, in particular, to fewer notifications from Ecuador. Growth in the number of new notifications submitted by Members in the Middle East region is one driver of the overall increase in new notifications since 2009. While the share of notifications of the Middle East region has again decreased since its peak in 2013 (489), reports indicate the increasing engagement of Asia, catching up with the Middle East region, both holding a share of 26% in 2015.
Online submission of notifications (TBT NSS)
In 2015, a total of 1,034 notifications were submitted through the online TBT NSS by 26 Members representing 52% of the annual notification volume. Online submission has facilitated the submission and processing of notifications, leading to more rapid circulation and increasing the time available to Members to submit comments on notifications of interest. The Secretariat continued to prioritize processing of notifications received through the TBT NSS during 2015.
Stated objectives of notifications
Amongst the 1,438 new notifications received in 2015, the objective of protection of human health or safety was predominately cited by Members, followed by: prevention of deceptive practices and consumer protection; quality requirements; and protection of the environment. The increasing prominence of the objective of quality requirements is no longer consistent with the overall trend since 1995 that places the protection of the environment as third most common objective. The section “other” summarizes a range of objectives including cost saving and increasing productivity, national security and not specified as these objectives have all together been mentioned only four times.
Specific Trade Concerns (STCs)
Since its first meeting, Members have used the TBT Committee as a forum to discuss trade issues related to technical regulations, conformity assessment procedures and standards, prepared, adopted and applied by other Members. These discussions are referred to as “specific trade concerns” (STCs) and relate either to proposed measures, or to measures currently in force. TBT Committee meetings afford Members the opportunity to review STCs in a multilateral setting, to seek further information and clarification on the measures in question, and to work towards mutually acceptable solutions.
Trends in STCs
In 2015, 37 new STCs were raised, which is ten less than in the previous year. In addition, 49 previously raised STCs were discussed during the year, the second highest number in any given year since 1995. (Annex B contains a full list; Annex C provides details on new STCs raised in 2015). Overall, 86 STCs were discussed in 2015, second only to 2012.
The total number of STCs discussed annually has grown significantly between 2006 and 2015 (from 63 to 161). This upward trend has meant that the Committee has used an increased amount of meeting time discussing STCs (only around 21 STCs were discussed per meeting in 2006 while that figure was 54 in 2015). Overall, 2015 marks the year when the most STCs (both new and previously raised) have been discussed since 1995.
Members’ engagement in STCs
The Members that most frequently raised STCs in 2015 were the US, Canada and the EU, following the general trend since 1995. The number of previous concerns indicates the overall number of times a Member has re-raised concerns. Thus, a concern can be re-raised three times per year, in the March, June and/or November meetings. In 2015, the EU and the US both raised most new and previous concerns with 82 each. Some Members were more active in raising previous concerns, for instance, Mexico reverted to 33 previously raised STCs but raised only 1 new STC.
Members subject to STCs
Between the years 1995-2015, measures of the EU, China and the US have been most frequently subject to concerns raised by other Members. In 2015, China and the EU were subject to the highest number of STCs. This marks a change compared to the previous year in which Ecuador (11) and Russia (6) were subject to a significant number of STCs. 2015 therefore picks up the trend of previous years.
STCs by region and development status
Members from the Asia and the North American regions raise most STCs, whereas Members from South and Central America and the Caribbean region as well as Europe have been most often subject to STCs. In 2015, Members in Asia were subject to 17 STCs, the most of any regional group. Members from Africa, Commonwealth of Independent States (CIS) and Middle East regions are less frequently subject to and active in raising STCs. Historically, North America, Europe and Asia have been most active in raising STCs, while Asia is most often subject to STCs.
Since 1995, developed Members have raised the majority of STCs. This is also valid for 2015. Since 1995, as well as in 2015, developing Members were more frequently subject to STCs. No measures of LDC Members have been subject to STCs.
Types of concerns raised in STCs
In 2015 the most frequently invoked concerns by Members in their statements in the Committee were those relating to transparency, slightly different from the long term trend. Issues relating to further information or clarification about the measure at issue and to the avoidance of unnecessary barriers to trade were also frequent, as were concerns about the rationale for measures, the use of relevant international standards as well as issues of discrimination.
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Alternative dispute resolution mechanism should be made accessible to all
The Acting Deputy Director-General of Consumer and Corporate Regulation at the Department of Trade and Industry (the dti), Mr MacDonald Netshitenzhe says Alternative Dispute Resolution mechanism should be made accessible to communities across the country.
Netshitenzhe was addressing delegates who attended a seminar aimed at promoting a culture of resolving commercial disputes through the Alternative Dispute Resolution (ADR). The seminar was hosted by the Companies Tribunal at the Gallagher Convention Centre in Midrand on 17 February.
“As policy makers in South Africa we are grappling with the challenge of promoting equitable, inclusive and sustainable economic growth. One of the ways of achieving such economic growth is through the creation of a fair regulatory environment that enables the development of investment, trade and enterprise in an equitable and sustainable manner,” said Netshitenzhe.
He added that the main purpose of the Companies Act of 2008 was to promote the development of the South African economy by encouraging entrepreneurship and enterprise efficiency, creating flexibility and simplicity in the formation and maintenance of companies, as well as encouraging transparency and high standards of corporate governance.
“The Companies Tribunal was established in terms of the Companies Act as a way of encouraging high standards in corporate governance by promoting ethical business practices. But taking into consideration the country’s history it was also established to ensure that redress mechanisms are made available to ordinary citizens and to reduce the cost of doing business by providing an informal, speedy and cost effective mechanism of resolving company disputes. It is important that all of the country’s citizens have access to this mechanism. It is critical that we make it easy for ordinary people across the country to access it and benefit from it,” emphasised Netshitenzhe.
Section 166 of the Companies Act of 2008 provides for the resolution of disputes by the Companies Tribunal through alternative dispute resolution, that is mediation, conciliation and arbitration.
The establishment of the Companies Tribunal as a forum for Alternative Dispute Resolution (ADR) is guided by section 34 of the Constitution of the Republic of South Africa, 1996, which guarantees everyone the right to have any dispute resolved by the application of the law decided in a fair public hearing before a court or, where appropriate, another independent Tribunal or forum.
Netshitenzhe called upon the business community and members of the public to utilise the ADR services which are provided at no costs to the parties.
The use of ADR is important in the commercial environment as it helps to preserve business relations that are key to the management, operation and sustainability of businesses and thus safeguard jobs that may otherwise be lost when businesses fails to resolve their disputes.
“The use of ADR contributes to economic growth as it provides investors with confidence that disputes will be resolved speedily and cost effectively and not negatively impact on productivity. Mediation, conciliation and arbitration can be used, not only as a dispute resolution mechanism, but as a management tool to promote good corporate governance by managing risk particularly financial and reputational risk associated with litigation,” stressed Netshitenzhe.
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Minister Ebrahim Patel: Debate of the State of the Nation Address
Remarks by Minister of Economic Development, Ebrahim Patel in the Debate of the State of the Nation Address, 17 February 2016
The State of the Nation Address and yesterday’s debate rightly focused on the state of the economy.
The new global economic context impacts deeply on South Africa.
It requires that we step up efforts with the private sector and with organised labour to create jobs, reduce fractious, conflictual relationships and build a deeper partnership.
We need to do this with greater urgency because we are confronted with big headwinds that can slow progress to our goals:
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the deepest and most devastating drought in many generations
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a global economy that is volatile, with lower growth, countries in recession and less demand for our platinum, iron-ore and gold.
Fellow South Africans, even with these headwinds and the real challenges we face, the past year has seen real concrete progress. The economy created 712 000 new jobs in 12 months, in tough, difficult conditions.
We should not and will not succumb to a narrative of anger, despair, hopelessness and blame.
There was a lot of that yesterday from sections of the Opposition. They make good prophets of doom and gloom at a time when we need collective leadership and closing of ranks as South Africans. It is the ANC that is seeking to unite South Africans, talking to business leaders and trade unionists, stepping up actions to deal with challenges.
We are not a people who curse against the darkness; instead, we light a lamp, roll up our sleeves and get to work – to create hope and optimism.
South Africans want a steady navigation through stormy times, a nation acting as one.
I want to use this opportunity to give some facts so that we can
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see what more we can do together
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address the structural problems in the economy
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weather the global and local storms.
We need to create more jobs through: infrastructure, industrialisation, innovation, investment, inclusion and integration and work more effectively through the institution-building and implementation.
This is how we implement the NDP and the nine-point plan announced last year.
Infrastructure
To create jobs through infrastructure, we invested R290 billion as a nation for the past calendar year – more than R1 billion every working day.
The money helped us to
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build 160 new schools
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provide new higher education housing accommodation for an additional 3 100 students
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start construction on three new technical college campuses and two new universities
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build about 100 000 new houses
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connect 265 000 homes to electricity – that is more than 1 000 houses connected every day to the grid, from Monday to Friday, 52 weeks a year. That is delivery.
The R1 billion a day enabled us to
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erect more than 300 kms of transmission lines to bring power closer to the people
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connect 1 700 Megawatts of energy to the grid, almost equal to a new Koeberg power station.
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Complete ten renewable energy plants, generating clean, green energy.
We switched on one unit of the Medupi power station that brought more energy to the grid than the electricity use of residents of two big cities combined – Nelson Mandela Bay and Mangaung.
The R1 billion a day helped us to
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improve or repair more than 24 000 kms of roads and start to develop a modern urban public transport system
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install solar water heaters, bringing the total to date to more than half a million units
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build 100 kms of water pipelines that can convey billions of litres of water a week to communities and businesses
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Expand and modernise port capacity across the country’s coastline
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Build 29 new medical clinics and open one new hospital
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Support new fibre-optic cables and free wifi hotspots
Behind these numbers are South Africans whose lives were improved.
The R1 billion a day supported more than 200 000 workers now employed on the public infrastructure programme, as engineers, metal workers, plumbers, electricians, bricklayers, road-builders and construction workers.
The investment helped millions of citizens in townships and suburbs to experience change in their lives.
Thobekile Maziwa is a young learner from Lusikisiki who moved last year from a mud school to a new school with a computer lab, library and laboratory and whose life can be better through the power of education. It is not a headline in a newspaper but it transforms lives.
Matlakala Monageng from Soweto and Hickson Thulare from Burgersfort had no electricity and used paraffin for many years previously but were connected to the electricity-grid in the past ten weeks. They join four million South Africans living in more than a million homes who over the past five years were connected to electricity for the first time, bringing power, light and heat to our people. This is a remarkable achievement.
The new TVET campuses being built in the Waterberg, Umfolozi and the Bhambanana areas will help with our focus on technical education. It will provide access to the many more students matriculating from high school. A further nine campuses will be built and we are now in the procurement stage with these.
The past year saw a further rollout of new public transport in key cities, through the bus rapid transport system. More urban areas are providing free wifi hotspots where South Africans can connect to the Internet for work, for study and for recreation.
Ntsetse-lelo Mbhalati is a 22 year old UNISA student in Tshwane who is studying Security Management. She uses the free wifi of the city’s A Re Yeng transport system. Tshwane is now leading our efforts with 717 active wifi hotspots that are free to residents.
We want to scale up infrastructure further so that more of our people benefit. We are not happy with the pace of new project approvals so we want to speed up action in the state. I want to highlight three steps we will take:
First. We will fast-track twenty infrastructure projects identified by Cabinet two weeks ago and work hard to bring a number of these to construction, including:
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the Clanwilliam and Mzimvubu dams
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the new N2 Wildcoast highway from East London to eThekwini that will cut travel time by up to three hours
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a large water pipeline to the Lephalale/Waterberg area
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the N3 De Beers pass for traffic on South Africa’s busiest road from Durban to Joburg and
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28 additional renewable energy plants.
We have done work on design of these projects, making good progress on establishing the technical specifications and engineering requirements, securing part-funding, approving environmental assessments and inviting contractors to bid for the projects.
Now we want to get them construction ready within the next 6 to 15 months, so that shovels can hit ground and workers can go onto site.
Some of these projects will be catalytic.
The Mzimvubu Dam can change the economic development of the E Cape and bring development to an area condemned as a labour reserve under apartheid.
The water pipeline to Lephalale can create the conditions for our first post-apartheid city to develop in the north.
Second. We will identify further opportunities for private sector and multilateral funding and partnerships. These include an announcement on new solar plants, wind farms and a new coal-fired power station. The private sector has proposed that we issue an Infrastructure Bond.
We have submitted and will monitor progress with our first application for $250 million funding to the BRICS New Development Bank, mainly for cheaper finance for transmission lines to connect future solar and wind energy to the national grid.
Third. We will crack down on cable and metal theft from trains, electricity sub-stations and communities.
I am pleased to say that parliament late last year passed the Criminal Matters Amendment Act in record time, with support from all political parties.
We will now implement the law, which create a special category of offence for theft from public infrastructure, with tougher bail conditions, minimum jail sentences when you are found guilty, sentences of up to 30 years for theft from essential facilities and fines of up to R100 million for companies who collude with thieves and greater onus on the accused to explain where they obtained copper cables and scrap metal.
Industrialisation, investment and innovation
To create jobs, we have focused on industrialisation, investment and innovation to strengthen the economy.
Instead of a number, let me start with a person, Patience Majola, a 25-year old young black engineer who works in the paint-shop at Toyota in Durban. She is part of a team that produces minibus taxis – taxis we imported previously.
In the past 12 months, 10 200 new minibus taxis were assembled locally, creating jobs for 700 workers.
This is how we respond to the need of unemployed citizens for jobs, in 100s of industrial, agricultural, infrastructure and tourism projects.
As a result of localisation policies, more than 200 additional buses were made for the new urban transport system in 2015. One large bus manufacturer Busmark, is now almost wholly-owned by a black industrialist, Pat Nodada. I think it is worth noting that bus factories contracted with a township enterprise owned by group of young previously-unemployed persons in Mohlakeng to refurbish bus seats and windows. This is what development is and we need to do more of it.
None of this is by accident, they are the result of strong partnerships between government and investors, us listening to the needs of industrialists.
To create and save jobs through investment, the IDC committed R14 billion of its capital in 2015 to South African and continental projects with private sector investors which included footwear factories, food-processing, wire and cable manufacturing, film-making and many others.
Even as we dip into our own savings, we need to attract more capital to South Africa. Eleven weeks ago, we signed multi-billion rand agreements for potential new investment and funding during the state visit by the Chinese President.
One notable project is to build a new large auto assembly plant that could produce more than 50 000 cars, trucks and sports vehicles a year. If we can get this project approved through a full feasibility study, it can create thousands of jobs for unemployed South Africans.
To support jobs through innovation, government is co-investing in a number of South African innovations, helping them to get to market.
One example: South African technology that combines x-ray and ultrasound in one machine to detect breast cancer among women, a world-first which if it passes the next testing stage, will improve access for women in South Africa to testing, bring down medical costs and potentially tap into a big global market where we can export our technologies.
This is how we create jobs, addressing the challenges of the unemployed.
But the new headwinds and storms that we face mean we need to do more.
I want to point to a few interventions we are implementing.
First, to support industries in distress:
We are working with the steel industry to stabilise production and reduce job losses through tariff measures, new investment commitments to improve competitiveness and a drive to deepen partnerships on the shopfloor. This is important because steel-making is the foundation of industrialisation.
We are setting up a new R5 billion Fund supported by the UIF to assist companies affected by the global and local slowdown.
Second to attract new investment:
We are implementing the one-stop shop for investors announced in SONA, through InvestSA.
We are supporting greater localisation of the auto supply-chain and will undertake the feasibility study on a new auto plant by Chinese investors.
We are identifying projects for consideration by the Joint Fund with the IDC and the China Construction Bank and the teams are now meeting every two weeks.
Third, to improve competitiveness, job-creation and transformation:
We will finalise and impose substantial penalties for price-fixing in the steel industry, so that we build more competitive, dynamic businesses.
We will support labour-intensive sectors of the economy more strongly, including agro-processing, clothing and textiles and tourism so that we create more jobs.
We are implementing the R23 billion black industrialist programme announced last year to widen the base of manufacturing and drive transformation.
Integration
To support jobs through regional integration, we are focusing on markets on the continent. Last year for the first time other African countries became our single biggest regional market, overtaking Asia.
We exported R 303 billion worth of goods to other African countries.
These supported roughly 250 000 South African jobs.
For example, half of the trucks we export, go to the rest of Africa and 60% of fruit juice exports is to our own continent.
We will now work on deeper regional integration by private and public sector co-investment in other parts of the continent and support for a big infrastructure push in the continent, covering key projects such as the North South corridor that links the continent by road and rail; the big water and energy projects such as the Lesotho Highlands Water Project and working on Grand Inga with the DRC.
Inclusion
Through job creation, we seek to address social and economic inclusion, The most significant pressure we face is to increase the number of South Africans who have jobs and to address income inequalities.
Last year in the SONA debate, I advised Honourable Members that there were 15,3 million people employed in South Africa. There are now 15,8 million people employed.
If we take the figures for a full 12 months, it shows 712 000 more jobs were created in the economy.
Most of the new jobs came from agriculture, the construction industry and business services.
The province with the strongest employment creation over the 12 months was Gauteng with 191 000 more jobs, followed by KwaZulu Natal and Limpopo.
Employment for the year as a whole grew by 4,7 percent, significantly outperforming GDP growth.
But there are challenges: too many of our people remain unemployed. And last year, while the economy created almost three quarter of a million new jobs, the number of work-seekers grew by almost a million, increasing the ranks of eight million South Africans who are ready to work but are unemployed.
This is our challenge. This is what we need to address as we upscale our efforts on economic growth and make it more inclusive.
Yes, we made real progress on jobs and yes, we maintained growth last year when others have gone into recession. But we need to do even better, in even tougher circumstances than what we have faced.
To promote greater levels of inclusion:
First we are completing the measures to increase support for SMEs.
Second we will promote youth entrepreneurship and youth jobs through a regulation to require national infrastructure projects to employ up to 60% of new staff from young professionals and young workers.
We set aside loan-funding of R4,5 billion for youth empowered businesses.
Third to support rural and agricultural inclusion, we have prepared a first package of support just short of a billion rand, to farmers affected by the drought.
Fourth we will act against corruption and collusion in the economy.
Last year government announced we were considering criminal sanctions for collusion and price-fixing. We commissioned legal and technical work to ensure this could be implemented properly. We will now introduce measures shortly to make it a criminal offence in any industry to collude and fix-prices. It will send a message to everyone that we mean business on stamping out corruption and collusion. We must build competitive strengths through innovation, not through sitting in rooms somewhere fixing tenders, prices and contracts.
Institutions and implementation
Our work on the six ‘I’s of infrastructure, industrialisation, investment, inclusion, innovation and integration are dependent on two other ‘I’s, namely effective institutions and effective implementation.
We look forward to building strong partnerships with the two engines of our economy: the private sector entrepreneurs and workers.
For business managers, trade unions, government officials and shareholders, we must get to the uncomfortable issues.
If we all simply see the solutions coming from what others must do, we will not weather the economic storms very well.
It is clear we need a broader social compact that addresses issues of wages, job security, investment, industrial stability and dealing with inequalities in the society. Some in the debate yesterday referred to an Economic Indaba. We are now engaging through an indaba with business leaders and trade unionists.
The challenge to business and labour is to achieve inclusive growth through actions at the workplaces that addresses these areas.
These involve tough issues that we must frankly discuss:
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How to combine rising wages with better economic performance
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Trade-offs between wage levels and job security for companies and industries in distress so we can save jobs
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Real action on skills development so we can prepare workers for the challenges of the global economy.
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Unlocking private sector investment so that money moves from bank accounts to real economy activity
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Partnerships to build dynamic companies that produce quality goods and services at competitive prices; and ensure equitable sharing of the wealth created.
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This includes reopening the conversation on executive pay in the private and public sectors.
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Reducing workplace conflict and the need to resort to strikes or lockouts through deeper effective partnerships.
Government too will need to act decisively against corruption that diverts resources but also skews decision-making.
For state-owned companies, we will need to strengthen governance, restore their balance sheets and enhance operational management.
We will act against public entities who do not pay small suppliers on time and deepen our partnerships with the private sector and labour.
State capacity will need to be sharpened with trained qualified staff in key positions. Cabinet has agreed that the PICC develops a dashboard of projects to be speeded up, with reports to Cabinet every six weeks.
To address perceptions of waste in the public sector, we need to introduce new measures, reprioritise spending, direct resources to growth and job-enhancing actions and ensure that the costs of adjustment does not fall either on the poor or through cutting infrastructure investment.
Conclusion
In conclusion, Honourable Members and fellow South Africans.
These are difficult times, yet much has been achieved. With partnerships, we can do more. Indeed, we must do more if we are to turn the economy around.
We have many centres of excellence in the private sector, examples of strategic thinking by labour and business leaders, a caring government and a resilient people.
We need to be bold, rebuild social cohesion and address issues of public confidence. We need to focus relentlessly on our key areas: infrastructure, industrialisation, innovation, investment, inclusion and integration as well as institution-building and implementation.
We are ready with fresh ideas based on our experience, the strong positive lessons from successes as well as where we made mistakes. We have concrete plans and above all actions in order to stimulate inclusive growth, job creation and reduction in inequalities.
We call on South Africans to join us – to partner with your government, to create jobs, to strengthen the economy, to improve lives.
Thank you.
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Agricultural biotechnologies: Giving voice to family farmers’ needs and concerns
Debate and sharing of knowledge at FAO-hosted symposium
FAO is committed to bring the debate on agricultural biotechnologies to regions and family farmers from around the world to improve knowledge, build trust and achieve some level of consensus, the UN agency’s Director-General José Graziano da Silva said on 17 February.
He was speaking at the closure of an international symposium on agricultural biotechnologies hosted by FAO, which debated the potential of new biotechnologies, “low-tech and high-tech” to benefit family farmers, especially those in developing countries.
“Responding to the urgent and diverse challenges of the 21st century will require a combination of responses,” Graziano said. “No one single tool, technology or approach will provide a complete solution.
“We have unlocked the door to discuss and analyse how agroecology and biotechnology can live together and be used as complementary options. This is an outstanding achievement,” Graziano da Silva told symposium participants. “It opens a window of opportunity for the development of new technologies that could make agricultural sectors more sustainable in the future. We also agreed that tools and approaches must be useful and accessible for all farmers.”
“Now FAO has to move forward. We intend to bring the debate to a regional perspective. We want to hear from farmers of all regions about their needs and concerns,” he said.
“I have also taken note of concerns regarding intellectual property rights and patents,” he said. “This is also a key issue for FAO, these concerns are legitimate.” The Director-General announced that the issue will be discussed at FAO’s upcoming regional conferences.
Wide range of participants
About 500 scientists, representatives of government, civil society, the private sector, academia, farmers’ associations and cooperatives took part in the symposium discussing agricultural biotechnologies much broader than genetically modified organisms.
Agricultural biotechnologies encompass an array of techniques that can result in yield increases, better nutritional qualities, and improved productivities of crops, livestock, fish and trees, benefitting family farmers while helping to transform food systems so that they require fewer inputs and have much less negative environmental impacts.
These include for example fermentation processes, bio-fertilizers, artificial insemination, the production of vaccines, disease diagnostics, the development of bio-pesticides and the use of molecular markers in developing new varieties and breeds.
The agenda included a high-level ministerial segment and a special webinar interactive session involving students from several universities from around the world.
During the symposium the FAO Director-General also met a civil society delegation to hear some of their priorities and concerns on the topic of agricultural biotechnologies.
The symposium forms part of FAO’s efforts to promote international dialogues and exchanges of information on sustainable development. In 2014 the agency organized an international symposium on agroecology and also helped launch the Global Alliance on Climate Smart Agriculture. In January this year it released a new edition of “Save and Grow in Practice” FAO’s model for ecosystem-based agriculture.
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The change in demand for debt: The new landscape in low-income countries
Many low-income developing countries have joined the group of Eurobond issuers across the globe – in sub-Saharan Africa (for example, Senegal, Zambia, and Ghana), Asia (for example, Mongolia) and elsewhere, raising over US$21 billion cumulatively over the past decade. Tapping these markets provides a new source of funds, but also exposes borrowers to shifts in investor sentiment and rising global interest rates.
We examined the experience of low-income developing countries with capital inflows in the last decade and a half in a recent report. We found that capital inflows have increased sharply since 2004, in two distinct waves: a first surge from 2.1 percent of GDP in 2004 to 6.9 percent in 2007, and, after a temporary dip during the global financial crisis, a strong rebound, reaching 6.3 percent of GDP in 2012 (Chart 1).
The steady increase in private capital inflows in the 2000s – together with improved growth prospects and domestic economic conditions – highlights a key shift in the financing from official sources to international capital markets for this group of countries. Private capital flows in 2012 were larger than either aid or remittance inflows, which amounted to 3.5 and 5.2 percent of GDP respectively.
The composition of inflows has also been changing over time: while inflows consisted primarily of foreign direct investment in the early 2000s, the post-global crisis period has seen an acceleration in portfolio debt and equity inflows, as well as other inflows to the non-official sector, such as cross-border bank lending. A handful of countries have driven the uptick in these inflows. These represent the fast-growing frontier economies that have, in the main, opened their capital account at a faster pace than other low-income countries. Many are now as open as emerging markets, and receive inflows comparable to the levels attracted by emerging markets (Chart 2).
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Sovereign bonds issued by low-income countries amounted to US$4 billion in 2013 and to US$8 billion in 2014, thanks in part to issuances by Côte d’Ivoire, Ethiopia, Ghana, Kenya, Senegal, Vietnam, and Zambia. In 2015, with weaker global conditions and falling commodity prices, the number of issuances declined and those who issued new bonds had to pay significantly higher yields.
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A sizeable increase in cross-border bank syndicated loans boosted the rise in other inflows, particularly after the crisis. These loans amounted to more than US$73 billion over the period 2000-2014, and for some countries, were large in relation to the size of GDP.
The pluses and minuses of capital inflows
Capital inflows are an important source of external funding for developing countries that can stimulate investment and promote financial deepening in many countries. And, as our report documents, the recent increase in capital inflows (other than foreign direct investment) to many low-income countries has been associated with a rise in public investment. However, higher capital inflows have also funded higher public consumption.
Specifically, in several other countries that recently issued sovereign bonds, including Ghana, Mongolia, Vietnam, and Zambia – on average – portfolio debt issuances have coincided not only with increases in public investment but also public consumption. In this context, one cautionary note is that if countries do not use inflows productively to increase economic potential, they will face a significant future debt service burden that will weigh on income levels.
Moreover, we have to keep in mind that increased financial integration makes countries more exposed to shocks from outside their borders, as discussed in a previous post. Capital inflows can be volatile and susceptible to changes in global conditions – such as swings in commodity prices and exchange rates. There are currently three main external risks to the scale of capital inflows: the gradual increase in global interest rates, the retreat in commodity prices, and the rebalancing of the Chinese economy.
And, both the levels and costs (for example bond spreads) of capital flows are responsive to global economic and financial conditions. The market turbulence that followed the announcement made by the Federal Reserve in May 2013 about the possibility of tapering its bond purchases sooner than previously expected reverberated not only on exchange rates and bond prices in emerging markets, but also on sovereign bond spreads in frontier economies (Chart 3).
However, domestic economic factors matter as well – for example, as our analysis shows that the price of new external funding tends to rise with higher current account and fiscal deficits, higher public debt, and lower foreign reserves.
Our analysis of recent economic developments and prospects in low-income and developing countries highlights a few policy messages for countries:
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First, domestic economic policies do matter. The level and terms at which countries receive external financing responds to both external and domestic economic conditions. This includes solid fiscal and external balances, sustainable debt levels and strong foreign reserves.
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As a corollary however, this also means that countries where domestic economic policy management has been weak or is slipping are likely to experience a sharp retrenchment in terms of access and/or pricing of external financing. This may require significant changes to fiscal policies and investment plans.
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Last but not least, countries need to recognize the double-edged nature of capital inflows when considering the pace and sequencing of their efforts to liberalize their capital accounts. Also, countries need to make effective use of the external private financing to increase economic potential through productive investment, while building economic resilience to handle additional financial volatility and associated risks. This underscores the importance of maintaining strong economic policies and building public debt management capacity.
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Prime for investment, COMESA countries must be more than export market
Egypt’s African offices will maximise benefit of storage areas for Egyptian exports, making them serve as starting points for the distribution
Egyptian investors are seeking further inlets into the markets of neighbouring African countries under the parameters established by the framework of the Common Market for Eastern and Southern Africa (COMESA).
To this end, Plenipotentiary Trade Minister of the Egyptian Commercial Services (ECS) Ali Al-Leithy said that Egypt will inaugurate new representational offices in five African countries in 2016 to better promote its national products in African markets, especially COMESA member states.
Al-Leithy recommended that the Egyptian government and investors change the way they perceive Africa as only a market for exports since it offers great potential for investment as well. The government aims for an increased presence in African markets as a supplement loses it has faced in Arab countries, who have been negatively impacted by recent political events.
What is the volume of trade exchange between Egypt and COMESA countries in 2014 and what is the target for 2016?
Exchange between Egypt and COMESA countries in 2014 amounted to about $2.7bn. Egyptian exported goods worth over $2bn including plastic products, ceramics, and electrical appliances. Egypt also imported tea, coffee, copper, and livestock worth about $700m from COMESA member countries in 2014.
Egyptian exports to COMESA countries accounted for about 8% of its total exports in 2014. Although the percentage is not large, it is expected to increase in the upcoming years, especially as COMESA markets absorb significant proportions of Egyptian exports.
For instance, COMESA markets receive about 25% of Egypt’s exports of ceramic products, 10% of plastic products, 35% of sugar production, 20% of fruit and vegetable exports, 25% of cement and paper exports, 18% of dairy exports, and 15% of medicine and glass exports. Various engineering products have an export percentage that ranges from 8% to 25%. These are impressive proportions that must be preserved and increased.
What are the main countries that cooperate with Egypt in Africa?
A large part of Egypt’s trade with African countries is with COMESA markets, particularly Sudan, Ethiopia, Kenya, and Zambia. In 2013, Egypt’s exports to the three trade blocs – COMESA, South African Development Community (SADC), and the East African Community (EAC) – amounted to $2.7bn, while it imported goods worth $810m from all 25 African countries over that year.
Collaboration among the African blocs will open the doors for Egyptian exports, especially as the SADC countries of Angola, Namibia, Mozambique, and Botswana, import goods worth over $50bn every year.
Currently, Egypt has little penetration into those markets. The country mainly imports machinery, equipment, vehicles, and electric appliances.
What are obstacles that hinder increasing trade with African countries?
There are several barriers to increase trade with African countries. We do not have data on those markets. This will be the main task of the new Egyptian Commercial Services offices stationed in these areas.
Logistical constraints, which relate to the lack of reliable trade and transport routes, also hinder cooperation. But we are pursuing a solution. In light of the Ministry of Industry and Trade’s focus to maximise the benefit from global companies like the French Bollere manage a number of African ports so as to facilitate exporting to the markets, especially the west coast countries.
A number of logistical centres will be established to solve the problems issues related to the lacking representatives and agents in Africa and promote Egyptian products. These centres will include storage and exhibitions areas to display samples for direct sale.
How do you see the African market?
It is wrong to look at the African market exclusively as an export market. This traditional view has now changed. The state tends to focus more on industrial and development projects in African countries to reach common gains. In addition, we work to increase the participation of Egyptian companies in infrastructure projects.
Some Egyptian companies aim to work with countries in the African bloc to take advantage of lower production costs and proximity to other African markets. There is a number of successful models of Egyptian investments in African countries. The number of Egyptian investment projects in Ethiopia stands at approximately 140 projects, whether financed entirely by Egyptian capital, or through Ethiopian-Egyptian joint investment projects. These projects are estimated at nearly $1bn.
There are also successful Egyptian investments in Zambia in the industrial sector as well as contracting and construction.
Why is COMESA disabled on most Egyptian exports to Africa?
On the contrary, the agreement is 100% activated. Egyptian exports to Africa’s COMESA countries increased to $2bn in 2014 compared to $50m in 1998, which is when Egypt joined the COMESA agreement. Bilateral trade volume between COMESA’s nineteen countries has been steadily growing and increased from $8bn in 2004 to $22bn in 2014.
Meanwhile, there are 14 member states that applied for full exemption from all import duties from other member states through the free trade zone of COMESA. Egypt, Eritrea, and Uganda apply 80% exemptions on customs duties according to the principle of reciprocity. Egypt and Ethiopia share a customs reduction of 10%. Swaziland and the Democratic Republic of Congo do not apply any customs cuts since they heavily rely on the income generated from tariffs.
Egyptian exports have benefited from the structure of imports of the member states of COMESA, where these countries seek importing high-quality Egyptian products such as food, medicine, engineering industries, home appliances, building materials, aluminum, iron and steel, and leather products. These markets have also been a good source of many low duty-free products for Egypt since most COMESA countries rely on exporting raw materials for key commodities such as copper, tobacco, coffee, tea, raw leather, meat, and sesame.
How many offices does ECS aim to open in the upcoming period?
We will open five new offices in Côte d’Ivoire, Ghana, Uganda, Tanzania, and Djibouti. This will raise the number of ECS representative offices in Africa to 11, including those in Ethiopia, South Africa, Zambia, Nigeria, and Senegal.
This is part of the Ministry of Industry and Trade’s strategy to focus on African markets and benefit from preferential trade agreements. Our offices in Africa will work to maximise the benefit from the establishment of storage areas for Egyptian exports and make this a starting point for the distribution of our products to neighbouring countries and to enter into partnerships with international and African companies operating in fields of business process services. These fields include those of transport and logistics to promote trade. We will also intensify trade missions, promotions, and specialised exhibitions of Egyptian products, especially electrical appliances, chemicals, pharmaceuticals, food products, and construction materials.
What is your evaluation of the African bloc agreement and why have we not seen any concrete steps following the signing of the agreement last June in Sharm El-Sheikh?
The agreement is very important for Egypt and Africa. It is an important step on the road to achieve African integration and reach an African free-trade zone and customs union. However, it is not limited to the promotion of trade relations between COMESA countries since there are other objectives of the bloc of equal importance. This includes cooperation in planning and implementing infrastructure projects especially in the construction of roads, railways, ports, airports, and power projects.
It will also contribute to the establishment of the bloc and strengthening coordination between member states to serve their interests in the multilateral trade negotiations. Moreover, it will improve the investment climate by adapting applicable investment incentives and bring ruling governments together.
The integration of the three main African blocs into a single economic entity is a new step in Africa, where the 26 countries of the bloc account for 48% of the member states of the African Union. The total GDP of the bloc is over 60% of the total GDP of Africa. It also accounts for about 57% of the total population of the continent. Intra-regional trade between member states has increased from $30.6bn in 2004 to $102.6bn in 2014. This indicates the volume of trade doubled more than three times in the span of 10 years, which reflects great potential for further cooperation. The agreement must also be ratified by parliaments of the member states prior to its implementation.
What are the obstacles facing the activation of that agreement?
There are no technical obstacles to activating the agreement but there are general challenges such as the low-quality infrastructure and high cost of freight. Once the agreement comes into force, 60% of the items and terms will be immediately written. This ratio should reach 85% between five to eight years. The remaining 15% will be agreed upon through consultations among member states.
There are a number of technical issues that are still under discussion and negotiation between parties privy to the agreement, including rules of origin. There should be positive results about unifying rules of origin of the three blocs in the first phase of the regional integration, which is currently being discussed. The agreement suggested applying a regulation that stipulates that 35% of components must be of local origin. Mechanisms to resolve disputes and arbitration settlement as well as the issue of free economic migration are still ongoing topics of consultation.
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