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The CFTA: Moving towards an African “mega-regional” agreement?
This article suggests key insights to strategically advance the Continental FTA negotiations. The CFTA will bring together 54 African countries with a combined population of more than one billion people and a combined gross domestic product of more than US $3.4 trillion.
The establishment of the African Continental Free Trade Area (CFTA) is gaining speed. At last year’s African Union Summit, participants agreed to get the CFTA agreement in place by 2017, and to immediately initiate negotiations on the liberalisation of trade in goods and services. A first round of these negotiations is expected to take place in February 2016, and the preparatory process is now intensifying.[1]
Continental integration has figured high on the African agenda ever since African countries gained political independence, but the CFTA initiative is the latest and perhaps the most ambitious of intra-African trade initiatives. It may be considered “the” African “megaregional” trade agreement, even if the economic and trade weight of the participants cannot be compared to those of other mega-regionals currently in the making, i.e. the Trans-Pacific Partnership (TPP), the Regional Comprehensive Economic Partnership (RCEP)[2] and the Trans-Atlantic Trade and Investment (TTIP) agreement.
Once fully implemented, the CFTA agreement would offer African countries considerable benefits. According to most estimates, the opening of the regional market to African goods and services will increase intra-African trade significantly. The UN Economic Commission for Africa (UNECA), for instance, estimates that the removal of tariff barriers for intra-African trade could raise their share in total African trade from 10.2 percent to 15.5 percent in 10 years[3], and the gains would be greater if informal traders are better integrated into formal trade channels.
Challenges and opportunities of the CFTA
The path towards an accelerated pan-African economic integration presents formidable political, economic, legal, and functional challenges. High on the list of these challenges is the conflicting disciplines of the different Regional Economic Communities (RECs) already in place. Most African countries are parties to more than one REC, and convergence between different RECs should be made compatible with the goals and timelines set for the CFTA. Also, consideration should be given to the fact that most RECs have missed the 2014 deadline to establish FTAs and this in itself calls for an adjustment in their calendar and plan of action, thus affecting on the CFTA timeline itself.
Moving decidedly towards the CFTA agreement would also require harmonising the multitude and varied trade commitments undertaken by practically all African countries at the multilateral, regional, and bilateral levels. Most African countries are bound by their WTO commitments, and many have entered into or are negotiating comprehensive trade agreements with outside countries, such as the Economic Partnership Agreements (EPAs) with the EU. In addition, most African countries are beneficiaries of unilateral trade preferences granted by developed, developing, and emerging economies. Thus, a key strategic consideration for African countries would be to ensure that existing trade arrangements act as “building blocks” of the CFTA, and do not impede progress to fulfil its objectives or make them more difficult to achieve.
Another important consideration would be to design a CFTA that is comprehensive enough to cover all issues that make modern trade agreements economically meaningful, while keeping the scope of the agreement within the boundaries of African needs and concerns. The CFTA framework should include disciplines in a large number of areas, from market access for goods and services to investment disciplines, intellectual property, unfair trade practices, dispute settlement, and institutional issues, among others.
Last but not least, the negotiating process itself should be carefully organised. Regional and international organisations, working closely with the AUC, could play an important role in assisting African negotiators to move the CFTA process forward, and they can do it efficiently by cooperating among themselves, and coordinating their different contributions to the CFTA negotiations.
Sequencing and pacing the negotiations
As indicated, African countries have recognised eight RECs as “building blocks” for the CFTA.[4] This includes, in particular, the dedicated efforts of three RECs, namely COMESAEAC-SADC, to establish the Tripartite Free Trade Area (TFTA). The TFTA is a collective representing nearly 60 percent of Africa’s population and aggregate output, and although negotiators missed the deadline to conclude their work by early 2015, agreements have been reached on a number of areas.
Other RECs are also lagging behind their own schedules. Thus, consideration should be given to a more realistic approach regarding the “building block” function that they are called to perform. A possibility would be for the RECs to focus on issues that do not belong strictly to a CFTA agreement – such as macroeconomic stability and supporting the establishment of regional value chains – and let the dismantling of trade barriers to goods and services be dealt with at the CFTA level. Indeed, to fulfil the ambitious deadlines set for the CFTA, consideration should be given to undertake immediately some continentwide negotiations on a number of areas, i.e. trade in services, building on progress (or lack thereof) achieved at the RECs level, but not waiting until they complete their own objectives in these areas.
It would also be very important to make trade agreements with outside partners “compatible” with the CFTA. As regional trade agreements among African countries support the growth of intra-African trade, the preferential treatment granted to Africa by many developed and developing economies support African export growth to the outside world. The trade preferences granted by the EU, the US, China, India, and Japan benefit the bulk of Africa exports. Their impact on LDCs’ exports, for example, is undeniable: more than 70 percent of their exports go to these five destinations.
In addition to unilateral preferences, African countries are negotiating reciprocal, although asymmetrical, trade agreements with the EU and other countries. With regard to these “reciprocal” agreements, CFTA compatibility is to be sought by making current rights and/or obligations under these agreements the starting point of CFTA market access and rulemaking negotiations by, for instance, granting to intra-African trade the same degree of market access currently granted to outside partners.
African countries may need to re-think the relationship between RECs and the CFTA and move towards a clearer division of labour between them. They may consider launching continental-wide negotiations on the issues to be included in the CFTA agreement, “building” on progress achieved so far in some RECs and particularly on the important achievements of the TFTA. They also need to carefully balance the future CFTA agreement and the current trade arrangements with countries outside the region.
Technical support to the CFTA negotiations
Finally, serious consideration should be given to the organisation of the CFTA negotiating process itself. There can be no doubt about the complexities associated with negotiating an agreement among 54 participating countries with unequal negotiating capabilities, unequal manpower, and unequal knowhow on the issues to be included in the CFTA agreement, as well as differences in productive and competitive strengths.
The African Union Commission (AUC) has played, and is expected to continue to play, a major role in the inception, organisation, and implementation of the CFTA. Therefore, it is clear that the AUC, as the top pan-African intergovernmental body, must continue to play its part in the creation of the CFTA and follow-up implementation of the agreement. However, it is important that further support is sought from other development-friendly and Africa-attuned intergovernmental organisations.
What is required at this stage is a combination of analysis and the provision in an orderly and systematic manner of information on the national and regional rules; and how these rules bind African participants through their national laws and regulations or their regional and international commitments in all the areas included in the negotiations.
In this context, consideration should be given to involve some key organisations like the UN Economic Commission for Africa (UNECA) and UN Conference on Trade and Development which under the direction of the AUC, could establish a joint technical mechanism to support the CFTA negotiations. The mechanism could be open to the participation of other regional and international organisations interested in contributing to the negotiating process and, eventually, to the implementation of the agreement.
Conclusion
Summing up, a regional understanding on any of the issues to be included in the CFTA framework when considered individually would represent a major challenge to African negotiators; taken together the issues may look almost unsurmountable. Harmonising those issues and the regional and external trade commitments would be particularly complex.
Time is of the essence, though. The international trading arrangement may change drastically if the on-going negotiations on the “mega-regional” agreements come to fruition, as African countries may see diluted many of their existent trade preferences and trade relations. To counter this possibility, it is imperative for Africa not to be left behind and to instead move ahead with its own ambitious, continental-wide “mega-regional” trade agreement, the CFTA.
Miguel Rodríguez Mendoza is an International consultant based in Geneva, with many years of experience in dealing with international and regional trade negotiations, including trade disputes between WTO members.
This article is published under Bridges Africa, Volume 5 - Number 1, by the ICTSD.
[1] The African Development Bank hosted a two-day Expert Group Meeting on February 2-3, 2016, in Abidjan, Côte d’Ivoire. The two-day meeting was expected to produce preliminary outlines for the CFTA agreement, as well as a detailed plan and timeline for the development of a full draft agreement. This meeting was part of a series of preparatory activities for the formal launch of the CFTA negotiations, under the guidance of the AU.
[2] The Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement (FTA) between the ten member states of the Association of Southeast Asian Nations (ASEAN) (Brunei, Burma, Myanmar, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, Vietnam) and the six states with which ASEAN has existing FTAs (Australia, China, India, Japan, South Korea, and New Zealand). RCEP negotiations were formally launched in November 2012 at the ASEAN Summit in Cambodia. RCEP is viewed as an alternative to the TPP trade agreement, which includes the United States but excludes China.
[3] Mevel and Karingi, 2012
[4] These eight RECs are: African Economic Community (AEC): the Arab Maghreb Union (AMU), the Common Market for Eastern and Southern Africa (COMESA), the Community of Sahara-Sahel States (CEN-SAD), the East African Community (EAC), the Economic Community of Central African States (ECCAS), the Intergovernmental Authority on Development (IGAD), the Economic Community of West African States (ECOWAS), and the Southern African Development Community (SADC).
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East African countries could lose out on TFTA benefits from June
The East African region is likely to face stiff competition from Southern Africa countries after members of three trade blocs that merged last year agreed to disregard sensitive products in order to ensure fair competition.
The 26-member states forming the Tripartite Free Trade Area have agreed that 80 per cent of tariff lines will be liberalised upon implementation of the agreement in June and the remaining 20 per cent will be negotiated over five to eight years.
TFTA brings together members of the East African Community, the Common Market for Southern and Eastern Africa and the South Africa Development Community.
This is a reversal of the earlier agreement of having restrictions on the entry of the sensitive goods until 2017 to allow industries to adjust to the competition expected from cheaper products. This effectively opens the door for stiff competition for EAC goods from South Africa and Egyptian exports.
Among the products earlier listed for protection were sugar, maize, cement, wheat, rice, textiles, milk and cream, meslin grain and flour, cane and beet sugar, khangas, kikois, kitenges, second-hand clothes, beverages, spirits, plastics, electronic equipment and paper materials. All these will be subject to duty and quota restrictions.
“With an agreement to liberalise up to 80 per cent of the goods to other countries, each country or trading bloc like EAC will agree on what goods to liberalise and which ones not to,” said Mark Ogot, senior assistant director at Kenya’s Ministry of East African Affairs, Commerce and Tourism and a tripartite expert, adding that the goods that will not be liberalised will be imported into the countries under strict quota and duty provisions.
“For EAC countries, sensitive goods like sugar, maize, cement will not be liberalised although they will not be treated as sensitive goods as before. The other TFTA countries will also provide a list of their goods that will not be liberalised.”
According to Vimal Shah, chairman of the Kenya Private Sector Alliance, the main challenge will occur when countries repackage goods like sugar, electronic equipment and paper from other countries, and export them into the region as their own goods when they do not meet the rules of origin threshold. The goods are then sold at a cheaper price at the expense of locally manufactured goods.
“Liberalisation of trade in all the goods in the FTA agreement is necessary and unavoidable since duty and quota-free movement of goods is always a key aspect of any FTA,” said Mr Shah.
“It is important to have a competition policy in the TFTA for fair competition that is mutually beneficial to business. EAC partner states have a competition policy but implementation has been slow due to limited awareness of its importance.”
“The real advantages should be broader, including an improved business environment, more foreign direct investment, enhanced economic development in general, and, most importantly, bringing impetus to the realisation of the continental free trade area,” said Mr Shah.
The TFTA aims to liberalise 100 per cent of tariff lines, taking into account the usual general, specific and security exceptions. s and subject to reciprocity.
Competition policies
At the time of the TFTA launch, not all tripartite countries had finalised their tariff offers. The Third Tripartite Council of Ministers meeting held in Sharm-el-Sheikh in Egypt has given countries until June this year to finalise their offers.
The World Trade Organisation does not have any policies on competition. However, through its principles of non-discrimination, monopoly, national treatment and others as enshrined in the multilateral agreements on trade, competition is indirectly covered.
So far, EAC partner states have agreed to liberalise 63 per cent of their tariff lines to the other TFTA partners and 37 per cent of tariff lines are to be liberalised and further negotiated.
On rules of origin, members have agreed that where rules are common (including wholly originating), 35 per cent ex-works costs (distribution and logistics) should be retained as an interim option. If enacted, such a move would mean that products on which the value-added criterion of 35 per cent ex-works cost applies could gain duty-free regional market access.
“The agreement is also on product- specific rules of origin,” noted Mr Ogot.
Rules of origin clarify which goods are considered to have originated in a given state; whether they have been wholly produced in that state, or whether a process of substantial transformation of materials, imported from outside that state, has been undertaken.
Although the provisions of the tripartite agreement favour a single value-added rule as in the EAC and Comesa regional agreements, negotiations are now moving from a percentage-based approach towards a product-specific approach, which will involve defining specific rules for numerous product categories.
However the TFTA members are yet to agree on trade remedies and dispute settlement. TFTA Agreement provides for the application of anti-dumping measures.
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AfDB launches first Africa Visa Openness Index ahead of Africa CEO Forum
The African Development Bank has launched the first Africa Visa Openness Index, which shows how Africa remains largely closed off to African travellers. On average Africans need visas to travel to 55% of other African countries, can get visas on arrival in only 25% of other countries and don’t need a visa to travel to just 20% of other countries on the continent.
The findings of the Visa Openness Index, which has been developed in partnership with McKinsey & Company and the World Economic Forum (WEF) Global Agenda Council on Africa, will be presented and discussed at the Africa CEO Forum in Abidjan on 21-22 March 2016.
“Opening up a country’s visa regime is a quick-win on development that remains untapped,” says Moono Mupotola, Director of NEPAD, Regional Integration and Trade at the African Development Bank. “Visa openness promotes talent mobility and business opportunities. Africa’s leaders and policymakers have a key role to play in helping Africans to move freely in support of Agenda 2063’s call to abolish visa requirements for all Africans by 2018.”
The report highlights regional and geographical differences. Currently, 75% of countries in the top 20 most visa-open countries on the continent are in West Africa or East Africa. Only one country in the top 20 is in North Africa and there are none in the top 20 from Central Africa. The report also shows that Africa’s Middle Income Countries have low visa-openness scores overall, while the continent’s smaller, landlocked and island states are more open.
“When we started this work, only 5 African countries offered liberal access to all Africans; this number has grown to 13 over the past three years. We are making progress, but need to accelerate the pace,” says Acha Leke, Director of McKinsey & Company and member of the WEF Global Agenda Council on Africa.
African countries stand to gain from promoting more visa-free regional blocs and pushing for greater reciprocity, as well as from introducing more visa on arrival policies for Africans. At country level, Seychelles is ranked number one in Africa for its visa openness policy, offering visa-free access for all Africans. Mauritius and Rwanda, who are in the top 10 most visa-open countries, have adopted open visa policies for visitors from other African countries and have seen a big impact on tourism, investment and economic competitiveness as a result.
Follow up events on promoting greater visa openness in Africa will be held during the WEF Africa Summit in Kigali and the African Development Bank Annual Meetings in Lusaka.
About
Visa openness is about facilitating free movement of people. It is about getting more people mobile, to carry out their business easily, spontaneously, quickly, with minimum cost. That applies whether you are a businessman or woman, a student or researcher, a cross-border trader or entrepreneur, reuniting with friends and family or just traveling to visit the sights.
Visa openness is a vital step forward towards a more integrated Africa. There are huge potential gains to be had for countries and regions across Africa in having more visa-open policies for other Africans. That holds true whether it is to help plug skills gaps in the labour market, promote entrepreneurship, diversify the economy, add value to services, or whether it is to attract investment and boost competitiveness.
The Africa Visa Openness Index measures how open African countries are when it comes to visas by looking at what they ask of citizens from other countries in Africa when they travel. It aims to show at a glance which countries are facilitating travel for citizens of other countries and how: whether they allow people to travel to their country without a visa, if travellers can get a visa on arrival in the country or if visitors need to get a visa before they travel.
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South Africa’s exports performance: Any role for structural factors?
Despite substantive depreciation of the rand after the global financial crisis, South Africa’s export performance has been very weak. In a group of 20 emerging market peers, South Africa’s real effective exchange rate (REER) witnessed one of the longest and largest exchange rate depreciation spells in recent years, with its real effective exchange rate (REER) weakening by around 25 percent during January 2011-July 2014.
Notwithstanding the fall in relative prices, South African exports have grown at a very slow pace (about 4 percent) over this period. In relative terms, South Africa’s exports growth has averaged about 82 percent of its trading partners’ imports growth during 2011-14 – one of the lowest proportions among peers, with its share of global exports falling by nearly 15 percent. Sluggish exports combined with relatively inelastic imports – partly related to large infrastructure projects – have resulted in the widening of the current account deficit to levels close to 6 percent of GDP (from about 2 percent of GDP in the beginning of the aforementioned period).
Several explanations have been put forward to explain the insensitivity of South African exports to real exchange rate depreciation. Edwards and Garlick (2008) find that South African exports are constrained by infrastructure deficiencies. The South African Reserve Bank (SARB) argues that weaker external demand, softer commodity prices, prolonged industrial action, and logistical and energy constraints have played a major role on this issue. Other plausible explanations include the “survival of the cheapest” – large capital inflows and the concomitant real exchange rate appreciation in until 2010 may have eroded the competitiveness of South African exporting firms, forcing some of them out of business. High margins in product markets and wages in labor markets have resulted in uncompetitive domestic costs of production, eroding external competitiveness (Saint-Paul, 1997; Cuñat and Melitz, 2012).
In this paper we explore an alternative route – the supply-side story. Over the past few years, constraints to the production function of South African exporting companies, such as lower energy availability and strikes, have seriously hurt output. These binding structural constraints may be one of the reasons behind South Africa’s poor exports performance.
The innovation of the paper resides on the use of firm-level data to gauge the impact of structural factors on external sector performance. Traditional attempts to estimate the sensitivity of exports to exchange rate movements do not control for characteristics of individual firms or specific industries. We examine the responsiveness of export transactions to REER movements and external demand growth across companies operating in key sub-sectors of the South African economy. We assess how a set of proxies for structural constraints – more specifically, electricity gaps, labor-market regulation, and product-market rigidities – has affected firms’ export performance since 2010. Using a panel regression framework with firm-level data permits us to isolate the impact of structural constraints at the most “micro” level, while controlling for macroeconomic conditions common to all firms at each point in time.
Our results suggest that electricity bottlenecks, limited competition in product markets, and binding rigidities in labor markets have reduced the responsiveness of South African exporting firms to exchange rate depreciation during the post-global financial crisis years. We also find that small and medium enterprises (SMEs), which export mostly manufacturing goods to Sub-Saharan Africa (SSA), are more responsive to exchange rate changes. Our findings suggest that structural reforms are macro-critical and have hindered external adjustment in South Africa.
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Regional integration arrangements in Africa: Is a large membership the way forward?
Regional integration and cooperation is the way ahead in Africa, but the latest initiatives such as the TFTA and CFTA will face substantial challenges. Integrating in small groups, while abandoning the linear model of integration, should be the most fruitful approach.
Last year saw the launch of the Tripartite Free Trade Area (TFTA) between 26 countries accounting for over half of Africa’s GDP and with 632 million consumers, 56 percent of its continental population. A continental FTA (CFTA) is also to be launched in, or around, 2017. The first CFTA negotiating forum is set to take place later on this month. Phase I of the TFTA suggests modest efforts at integration as it is built on the principles of variable geometry eschewing a more ambitious “single undertaking” and the acquis (go forward but not backwards) with modest tariff reductions on the table, a list (rather than an economy-wide criterion) for rules of origin, and trade remedies to address dumping and import surges. The agenda for phase II is to be decided but should include services and harmonisation of rules on competition policy.
The TFTA is expected to be ratified by at least half of the members within a year, at which point it will come to life.[1] Is the attempt at rationalising the multiple Regional Integration Agreements (RIAs) across the continent a milestone towards greater cooperation in Africa? Drawing on observations and analysis of the recent experience, I argue that, in spite of the unfavorable geography making it difficult to deal with the high costs of heterogeneity, integration initiatives in small member groups will produce the highest benefits.
Beyond the linear integration model: a third phase of African integration?
Following the founding of the Organization of African Unity in 1963, a first wave of RIAs took place along “Regional Economic Communities” (RECs) behind high tariff walls. These RECs were to be the ‘building blocks’ of the hoped-for African Union in the immediate post-colonial era. Now, they are central for implementing the New Partnership for Africa’s Development (NEPAD). In short, the RECs were and continue to be the glue that will cement African unity. The first wave failed not only for economic reasons, but also because the leaders of these young post-independence African states were reluctant to encourage the emergence of a supra-national authority necessary to deepen cooperation and to coordinate and manage the affairs of the hoped-for African Union. Great diversity within the RIAs translated into different interests that strengthened countries’ insistence on the “respect for the sovereignty and territorial integrity of each State and the inalienable right to independent existence” as written in the OAU charter of 1963. Commitment to pan-Africanism was weakened, leading to vagueness and a multitude of declared objectives in these RIAs that helped states gloss over the issues that divided them[2].
A second wave of RIAs took place after the Abuja Treaty of 1991 that created the African Economic Community (AEC). A look at the ten major RIAs started in the second wave of RIAs shows that only three have aimed for FTA status, all others aiming for deeper integration, moving along the linear model following a stepwise integration of goods, labor, and capital markets, and eventually monetary and fiscal integration. Goods market integration would start with an FTA, then move on to a Customs Union (CU) with a Common External Tariff (CET) and to a Common Market. Along this linear sequence, except for SACU, none have really reached full CU status as exceptions to the 4-5 CET tariff-band structure are long. For example, the ECOWAS CET includes an “exceptions list” of about 300 products eligible for exemption from the new tariffs, a list that includes 200 products from the former Nigerian Import Ban list[3].
The disappointing trade performance of this model of integration has been widely discussed. Among others, estimates of the volume of intra-regional trade in African RIAs suggest that trade is on average 40 percent less than potential trade. Further results also seems to indicate that trade costs among partners have fallen less rapidly than trade costs with outside partners[4]. This persisting thickness of borders not only reflects the geography of African trade, the low trade complementarity across partners, poor logistics, and border delays, but also the neglect of services in the African linear integration model which is no longer adapted to 21st century trade.
So far negotiations for the TFTA and CFTA are following this model of linear integration that neglects the fact that 21st century production is increasingly taking the form of trade in tasks (i.e. services) as opposed to trade in products. In this new environment, services play an input function through space (transport, telecommunications) and time (financial services) as well as direct inputs into economic activity as they generate knowledge and human capital. Recent developments in the study of global value chains by the OECD show that services may account for more than 50 percent of exports when measured in value added. Because services do not meet customs for registration, and regulations are, at best, imperfectly captured, services – except for labor and foreign direct investment (FDI) flows – are not directly observed crossing borders. Measures of the restrictiveness of trade in services are only very approximate, though estimates of trade costs for mode I (cross-border services trade) and mode II (movement of consumers) could be two to three times higher than trade costs for trade in goods when measured by the same approach (the ‘gravity trade model’).
Breaking away from the linear model of integration by emphasising trade facilitation measures at the border that have full support of the business community is a first step now under way. However, even in the case of the EAC Common Market, there has been little progress at removing restrictions for professional services, telecommunications, and transport either unilaterally or on a regional basis. Likewise, progress with liberalisation of services through harmonisation and mutual recognition has been slow where opting for ‘mutual equivalence’, the route that was followed by the EU Services Directive might have worked better as this approach is less demanding on trust than mutual recognition or harmonisation.
Challenges ahead: breaking small markets while dealing with heterogeneity
In 2013, all of Africa’s gross domestic product (GDP) at purchasing power parity (PPP) was less than Germany’s and the median GDP size of African countries was US$12.3 billion, about 10 percent of the size of the canton of Zurich. Reaping the benefits of economies of scale and of diluted monopoly power suggests RIAs with large memberships like the TFTA and the CFTA. But a large membership also implies more heterogeneity and greater sources of potential conflicts (more ethnic groups; large and small countries; and landlocked and coastal states belonging in the same regional group) with higher political costs in the provision of public goods. In large membership groups, integration is shallow because it is difficult to reach agreement and it is likely that the interests of the more powerful members that are naturally less open to the outside world will carry the day. Take ECOWAS where Liberia and Nigeria are both members. Adopting the CET took close to ten years of negotiations as Nigeria insisted on a 5-band CET (0-35 percent) while UEMOA and others were in favor of a 4-band CET (0-20 percent). For Liberia, the move to the CET could double the average tariff and raise the current costs of living of rural and urban households by 6 percent and 3 percent respectively with temporary special protection measures only envisaged for products currently above their respective band, but no consideration has been given for tariffs below their respective band[5]. The costs of integration to a customs union for small countries in a large membership group with large partners are likely to be high.
This experience poses a challenge for the 26 member TFTA because 21st century regionalism is no longer about an exchange of market access at the expense of non-members but about implementing reforms that will attract foreign direct investment (FDI) which brings to the region the service activities necessary to participate in the outsourcing of production. In this new environment, where trade is trade in tasks and involves increasingly an exchange of intermediate goods, protection (or exchange of market access) amounts to depriving oneself from participating in global outsourcing. Not only is the deep integration necessary to attract FDI likely to be hard to carry out in a large membership, but there is also the risk that protection towards non-members could remain high.
Deep integration requires some delegation of authority to a supra-national level. This is easier to carry out under small membership. The 5-member EAC which started implementing in 2010 a Common Market in capital, goods, and services, uses a scorecard approach to measure progress (violations of the protocol's provisions in services are made public on the EAC website, which is far more informative on progress at integration than websites for other African RTAs). The EAC is also promoting competition in telecommunication by banning roaming charges within the region and issues single tourist visas for Northern corridor countries (Rwanda, Kenya and Uganda). The EAC is the only RIA where the ratio of actual to potential intra-regional trade rose following integration.
Breaking the curse of small markets favors the large group approach to exploit economies of scale but cooperation associated with public goods like a common currency, a common judicial and legal framework, appropriate regulatory policies also bring benefits. For the Franc zone members, sharing a common currency is associated with more intense bilateral trade attributable to less volatility in bilateral exchange rates. Thus SACU, the UEMOA, and CEMAC have benefitted from deep integration albeit with the costs of institutional development covered by the colonisers and the EAC is moving in that direction. On the other hand, larger memberships like the TFTA with more heterogeneous populations ace higher political costs in the provision of public goods. The European experience shows that the trade-off between economies of scale and heterogeneity of preferences can only be partially addressed through decentralisation at different layers of administration[5].
In Africa, regional spillovers are important as transport and communications infrastructure are under-provided, but the ethno-linguistic diversity across “artificial” borders indicates strong differences in policy preferences that will continue to hinder the future supply of public goods through the adoption of common regional policies in large groupings. Common decision-making internalises the spillovers but it moves the common policy away from its preferred national policy (i.e. a loss of national sovereignty). By analogy with the experience of the EU, are initiatives like the TFTA and the CFTA a start of institutional and political cooperation along intergovernmental lines where regional institutions pursue the economic interests of domestic constituencies? Or, more optimistically, as hoped for by the African Union (AU), is this a start along functionalist lines where supranational institutions and agents develop an autonomous role leading to further integration?
Jaime de Melo is Emeritus professor at the University of Geneva and scientific director at the Fondation pour les études et recherches sur le développement international (Ferdi).
This article is published under Bridges Africa, Volume 5 - Number 1, by the ICTSD.
[1] Luke, David and Zodwa Mabuza (2015) “The Tripartite Free Trade Area Agreement: A Milestone for Africa’s Regional integration process” Bridges Africa vol 4(6) http://www.ictsd.org/bridges-news/bridges-africa/news/the-tripartite-free-trade-area-agreement-a-milestone-for-africa%E2%80%99s
[2] Melo, Jaime de (2014) “The Tripartite FTA: Is it the Way to Deepen Integration in Africa?” http://www.brookings.edu/blogs/africa-in-focus/posts/2014/11/04-tripartite-free-trade-area-integration-africa-de-melo
[3] Melo, Jaime de and Anne Laski (2015) “Will West Africa’s Common External Tariff Protect Consumers?” http://www.theigc.org/blog/will-west-africas-common-external-tariff-protect-consumers/
[4] Melo, Jaime de and Yvonne Tsikata (2015) “Regional Integration in Africa: Challenges and Prospects”, http://www.ferdi.fr/en/publication/p93-regional-integration-africa-challenges-and-prospects
[5] Spoalore, Enrico “The Political Economy of European Integration”, http://sites.tufts.edu/enricospolaore/files/2012/08/The-Political-Economy-of-European-Integration.pdf
Investing in resilience and development in Lake Chad
A new action plan aims to empower Lake Chad communities to adapt to the urgent development challenges exacerbated by climate change, and to consolidate Lake Chad’s contribution to regional food security
Zakaharia May derives his livelihood from the fertile land at the edge of Lake Chad. He used to be a fisherman, but has recently switched to farming because of many pressures on social and environmental systems required for food and water security in the region. He is just one of the millions of people in the region grappling with acute poverty, insecurity, and the devastating impacts of climate variability and uncertainty.
As Lake Chad communities face urgent development challenges that are exacerbated by the future impact of climate change on the lake, the Lake Chad Basin Commission (LCBC) developed a new Action Plan that will assist people living around the Lake in Chad, Cameroon, Niger, and Nigeria. The Plan outlines engagements that will empower local communities to build resilience to climate change and increase regional development in the area. It focuses on securing livelihoods of communities living around the lake, increasing the lake’s role in regional food security and addressing acute poverty in the area.
The Lake Chad Development and Climate Resilience Action Plan (LCDAP) was developed by the Lake Chad Basin Commission (LCBC) and its six member states; Cameroon, Central African Republic, Chad, Libya, Niger and Nigeria, with support from the World Bank and French Development Agency. The plan is part of the World Bank’s $16 billion Africa Climate Business Plan, which was recently presented at the COP21 conference in Paris.
“With the little resources we have in the region, we have been working towards ameliorating the situation, but the situation has become graver now,” said Sanusi Imran Abdullahi, executive secretary of the commission. “The serious implications of climate change, the serious implications of terrorism, and of course the fall in the oil revenues the countries are getting make it imperative on us to request the support of the international community.”
The plan reflects the LCBC and countries’ shared belief in a need to support the existing capacities of the lake’s communities to adapt to and thrive in the highly-variable environment. The objective of the LCDAP is to turn Lake Chad into a pole of regional rural development by sustainably improving:
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the living conditions of the populations settled on the lake’s banks and islands, and
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the resilience of the lake’s socio-ecosystem, which faces strong demographic growth, high hydrological variability, and climate uncertainty.
Building on LCBC’s water charter and other national and regional strategic planning documents, the LCDAP proposes a total of seven priority themes grouping 173 activities. The percentages indicated below reflect the preliminary planned allocation of the total investment, estimated to be $1 billion (€916 million).
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Priority Theme #1: Supporting producers and their value chains (13%)
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Priority Theme #2: Securing access to natural resources and managing conflicts (8%)
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Priority Theme #3: Improving living conditions through public investments (27%)
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Priority Theme #4: Facilitating Transport and Trade (38%)
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Priority Theme #5: Preserving the environmental capital of the Lake and its basin (4%)
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Priority Theme #6: Better managing the water resources of the basin (5%)
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Priority Theme #7: Disseminating information, improving knowledge, and monitoring of the environment (5%)
The majority of investments (53%) would go toward the immediate lake area, including its islands and banks, and the rest to the lake’s hinterlands where its commercial relations take place (36%) and its conventional basin (11%). The LCBC, its member states, and local governments and civil society organizations would be responsible for the implementation of the plan.
Both the Lake Chad Development and Climate Resilience Action Plan and a similar plan for the Niger Basin were developed with support from the World Bank’s Cooperation in International Waters in Africa (CIWA) program, which supports riparian governments in Sub-Saharan Africa to unlock the potential for sustainable and inclusive growth, climate resilience, and poverty reduction by addressing constraints to cooperative management and development of international waters.
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El Niño set to have a devastating impact on southern Africa’s harvests and food security
Over the coming year, humanitarian partners should prepare for food insecurity levels and food insecure population numbers in southern Africa to be at their highest levels since the 2002-2003 food crisis, the United Nations agriculture agency warned today, citing an ‘intense’ drought as the main cause.
Southern Africa is currently in the grip of a drought that has expanded and strengthened since the earliest stages of the 2015-2016 agricultural season, driven by one of the strongest El Niño events of the last 50 years, the UN Food and Agriculture Organization (FAO) said on 12 February 2016 in a joint statement with the World Food Programme (WFP), Famine Early Warning Systems Network (FEWS NET), and the European Commission’s Joint Research Centre (JRC).
Across large swathes of Zimbabwe, Malawi, Zambia, South Africa, Mozambique, Botswana, and Madagascar, the current rainfall season has so far been the driest in the last 35 years. Agricultural areas in northern Namibia and southern Angola have also experienced high levels of water deficit.
Much of the southern African sub-region has consequently experienced significant delays in planting and very poor conditions for early crop development and pasture re-growth. In many areas, planting has not been possible due to 30 to 50 day delays in the onset of seasonal rains resulting in widespread crop failure, according to the agencies.
Although there has been some relief since mid-January in certain areas, the agencies warn that the window of opportunity for the successful planting of crops under rain-fed conditions is nearly closed. Even assuming normal rainfall for the remainder of the season, cropwater balance models indicate poor performance of maize over a widespread area.
Seasonal forecasts from a variety of sources are unanimous in predicting a continuation of below-average rainfall and above-average temperatures across most of the region for the remainder of the growing season, says the statement.
The combination of a poor 2014-2015 season, an extremely dry early season (October to December) and forecasts for continuing hot and drier-than-average conditions through mid-2016, suggest a scenario of extensive, regional-scale crop failure.
Drought emergencies have been declared in most of South Africa’s provinces as well as in Zimbabwe and Lesotho. Water authorities in Botswana, Swaziland, South Africa and Namibia are limiting water usage because of low water levels. Power outages have been occurring in Zambia and Zimbabwe as water levels at the Kariba Dam have become much lower than usual.
While it is too early to provide detailed estimates of the population likely to be food-insecure in 2016-2017, FAO and its partners say it is expected that the population in need of emergency food assistance and livelihood recovery support will increase significantly. Additional assistance will be required to help food-insecure households manage an extended 2016 lean season.
In the short term, the agencies recommend: continued close monitoring of the season to inform decision-making on programming and targeting; immediate additional assistance to help currently food-insecure households; updating of contingency plans, intensification of advocacy and resource mobilization to address the impact of an extended post-2016 harvest lean season; and increased awareness-raising of the need for a regional approach to address the effects of drought that are becoming more frequent and intense.
Joint statement by FAO, EC-JRC, FEWS NET and WFP
FAO - Food and Agriculture Organization of the United Nations; FEWS NET - Famine Early Warning Systems Network; JRC - European Commission’s Joint Research Centre; WFP - World Food Programme
Southern Africa is currently in the grip of an intense drought that has expanded and strengthened since the earliest stages of the 2015-2016 agricultural season, driven by one of the strongest El Niño events of the last 50 years.
Across large swathes of Zimbabwe, Malawi, Zambia, South Africa, Mozambique, Botswana, and Madagascar, the current rainfall season has so far been the driest in the last 35 years. Agricultural areas in northern Namibia and southern Angola have also experienced high levels of water deficit.
Much of the southern African sub-region has consequently experienced significant delays in planting and very poor conditions for early crop development and pasture re-growth. In many areas, planting has not been possible due to 30 to 50 day delays in the onset of seasonal rains resulting in widespread crop failure.
Although there has been some relief since mid-January in certain areas, the window of opportunity for the successful planting of crops under rain-fed conditions is nearly closed. Even assuming normal rainfall for the remainder of the season, cropwater balance models indicate poor performance of maize over a widespread area.
Seasonal forecasts from a variety of sources[1] are unanimous in predicting a continuation of below-average rainfall and above-average temperatures across most of the region for the remainder of the growing season.
The combination of a poor 2014-2015 season, an extremely dry early season (October to December) and forecasts for continuing hot and drier-than-average conditions through mid-2016, suggest a scenario of extensive, regional-scale crop failure.
South Africa has issued a final forecast of maize production for the coming harvest of 7.4 million tonnes, a drop of 25 percent from the already poor production levels of last season and 36 percent below the previous five-year average.
These conditions follow a 2014-2015 agricultural season that was similarly characterized by hot, dry conditions and a 23 percent drop in regional cereal production.
This drop has increased the region’s vulnerability due to the depletion of regional cereal stocks and higher-than-average food prices, and has substantially increased food insecurity. Even before the current crisis began, the number of food-insecure people in the region (not including South Africa), already stood at 14 million[2], according to the South African Development Community (SADC).
As of early February, FEWS NET estimates that, of this total, at least 2.5 million people are in Crisis (IPC Phase 3) and require urgent humanitarian assistance to protect livelihoods and household food consumption.
The numbers of the food insecure population are now increasing due to the current drought and high market prices (maize prices in South Africa and Malawi were at record highs in January).
Drought emergencies have been declared in most of South Africa’s provinces as well as in Zimbabwe and Lesotho. Water authorities in Botswana, Swaziland, South Africa and Namibia are limiting water usage because of low water levels. Power outages have been occurring in Zambia and Zimbabwe as water levels at the Kariba Dam have become much lower than usual.
While it is too early to provide detailed estimates of the population likely to be food-insecure in 2016-2017, it is expected that the population in need of emergency food assistance and livelihood recovery support will increase significantly. Additional assistance will be required to help food-insecure households manage an extended 2016 lean season.
In the short term, the following actions are required:
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continued close monitoring of the season to inform decision-making on programming and targeting;
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immediate additional assistance to help currently food-insecure households;
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updating of contingency plans, intensification of advocacy and resource mobilization to address the impact of an extended post-2016 harvest lean season;
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increased awareness-raising of the need for a regional approach to address the effects of drought that are becoming more frequent and intense.
Over the coming year, humanitarian partners should prepare themselves for food insecurity levels and food insecure population numbers in southern Africa to be at their highest levels since the 2002-2003 food crisis.
This statement reflects a shared view of current conditions and the likely evolution of the situation in southern Africa by major actors involved in global food security monitoring and early warning. Further details can be obtained from the following reports:
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FAO Global Information and Early Warning System (GIEWS) Special Alert for Southern Africa
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European Commission’s in-house science service, Joint Research Centre - El Niño report
[1] ECMWF: European Centre for Medium Weather Forecasts. CPC: Climate Prediction Centre. UKMet: United Kingdom Meteorological Office. IRI: International Research Institute for Climate and Society
[2] See page 5 of the Southern Africa Food & Nutrition Security Update, November 2015 for official SADC numbers at the start of the season. Not including South Africa, the 14 million includes 7.6 million in currently drought affected countries, plus 6.6 million in DRC (where conflict, not drought is the driver of food insecurity) and 0.4 million in Tanzania, which is not drought-affected during El Niño. South Africa is excluded as its figures are not directly comparable.
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Thinking beyond the resource boom: African countries must avoid procrastination
The resource sector has entered into a new phase. Prolonged downswings in commodity prices, fuelled by (i) the double effect of slower demand from emerging markets like China and excess supply resulting from massive investments during boom years; (ii) the difficulty of developed markets to regain momentum and (iii) the tightening of financial markets are all threatening to turn what was not so long ago seen as tailwinds into headwinds, with even stronger swirls for some.
Short-term outlooks do not seem to look brighter. The World Bank’s Commodities Market Outlook predicts a further 10% decline in metals in 2016. It is difficult to predict what will happen to the price of oil, as Iran comes back onto the market, as geopolitical tensions continue to escalate and as big producers fail to agree on how to tackle the supply glut. All these laid to bare the structural weaknesses of resource-rich African countries. The current situation also exposed the financial and cost soundness of mining companies, including the major ones.
What impacts?
Of course, not all countries have been impacted to the same extent. Net oil exporters and countries heavily reliant on mineral revenue exports are now under acute pressure from deteriorating terms of trade. Net oil importers and countries less dependent on minerals were luckier. Mining companies have also been hard hit. Uncertainty and shrinking confidence about a quick recovery on the demand side led many to put greenfield projects on hold. At the same time, weak prices have left many with fewer cash flows as earnings were absorbed by debt repayments and servicing. Further, many are probably paying the price for having gorged on cheap debts during the China-led minerals boom.
Beyond the boom: no time to waste
In Africa, the status quo of exporting raw materials and jobs is not an option anymore. It is critical that countries refocus their attention on the sustainability of growth. Now is the time for countries to carefully craft diversification strategies, both within and outside the extractive sector. While posing severe challenges, the current situation is also a unique opportunity to durably move away from the current economic structures and to create more resilient economic structures.
Furthermore, the future prospects of the African continent, underpinned by a rising middle class that is expected to drive the future demand for consumables and by the need to address the lingering sheer deficits in infrastructure, energy and construction, will no doubt create opportunities to channel part of the demand for certain commodities closer to home. The African market is significant in aggregate terms, and the demographic dividend is likely to grow that market further. However, its potential is challenged by thick borders and fragmented of markets, estimated to add up 75% to the price of goods, inflating the cost of business and lowering firms productivity by about 40%.
Therefore, better planning, and without delay, is an absolute necessity if countries want to avoid a remake of the economic disaster of the 1980s. Here the key strategy is to create, build and consolidate linkages. This includes:
(i) Fostering productive linkages, both upstream, with a strong emphasis on sustainable local content to stimulate the use of local factors of production, and downstream, when it is feasible and possibility to do so. In the short to medium term, Africa should not miss out on the low hanging fruits, such the beneficiation of low-value minerals, given the growing demand likely to arise from the construction, urbanisation and infrastructure booms. Dangote’s success story in the cement sector illustrates this. It is also important to build bridges between the extractive sector and other economic sectors, such as with the agriculture or services sectors. Dubai is a testimony of what can be achieved if strategic choices are made.
Exploring to the best spatial linkages, such as a better use or better sharing of resource infrastructures so as to unlock the potential of other economic sectors. Poor infrastructures are said to skim off at least 2% of Africa’s growth every year. Here, it is not only important to emphasise the critical importance of multi-purpose, multi-usage and multi-modal infrastructures. Countries also have to move from benefit sharing to benefit enhancement to create greater synergies with other economic activities by attracting growth poles and clusters to generate spillovers to the economy. This has enormous network effects to stimulate trade and investment flows, essential for broader economic diversification. The region of Mato Grosso in Brazil, for example, illustrates how mineral corridors can trigger large agro-industrial development. In Mozambique, the Nacala corridor has this potential and must be further enhanced.
Strong linkages must be accompanied by a set of enablers, such as a conducive business environment, scaling up the level of skills and competencies, addressing chronic barriers to productivity, investment and competitiveness, the availability of energy and other infrastructure and having a flexible labour market among others.
(ii) Furthermore, countries need strong and sustainable fiscal buffers, such as fiscal rules like in Chile to counterbalance commodity price volatility; the creation of savings funds such as sovereign wealth funds; and sufficient foreign exchange reserves. The current crisis has severely weakened the fiscal balance from resource-rich countries and with limited buffers, countries have no choice but to cut capital spending on essentials and adjust monetary and exchange rate policies to relieve pressures on the public finances and the currency. In 2015, countries such as South Africa, Ghana, Zambia, Angola and Nigeria have all seen an inevitable depreciation of their currencies.
Finally, to remain relevant, governments can’t and won’t make it alone. It is important to underscore the importance of developing strategic partnerships with the mining industry and other private sector actors, as well as with research institutions. But most importantly, while government’s role is to give policy directions, the key to creating industries and jobs lie with businesses. Governments and businesses must understand and support each other if the mining sector is to be a real vector of change.
The views expressed here are those of the author and not necessarily those of ECDPM.
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Which are the top think tanks on the continent? Plus insights about the thinking business in Africa
The number of think tanks per country doesn’t necessarily stack up with economic heft, growth rates, or demographic size in Africa.
A Kenyan think tank, the Kenya Institute of Policy Research and Analysis (KIPPRA) has been ranked as the top think tank in sub-Saharan Africa, according to a new report released last week.
The rankings reveal some interesting insights about the business of thinking in Africa.
The 2015 Global Go To Think Tank Index Report, published by the Lauder Institute at the University of Pennsylvania, lists think tanks according to their influence, output and impact; this is the report’s ninth year of publication.
Think tanks – organisations that carry out research, analysis and engagement to shape public policy, and advise governments and the public on domestic and international issues – are a key player in contemporary governance, but their influence has been waning in recent years, as the combined impact of social media, the internet, globalization and political dampens their impact.
Still, there are some clever institutions expertly riding the winds of change, and have been able to adapt and maintain their relevance in an increasingly competitive environment.
In the Africa rankings, Kenya’s Institute of Policy Research and Analysis (KIPPRA) came out tops; followed by IMANI Centre for Policy and Education from Ghana, Senegal’s Council for the Development of Social Science Research in Africa and Botswana’s Institute for Development Policy Analysis come in second, third and fourth places respectively.
South African institutions made up the next four places: the African Centre for the Constructive Resolution of Disputes; the South Africa Institute of International Affairs, the Africa Institute of South Africa and Centre for Conflict Resolution.
Leading Egyptian institution Al-Ahram Centre for Political and Strategic Studies was ranked under the Middle East and North Africa section.
In the overall global rankings, Brookings Institution of the US, Chatham House of Britain and the US-based Carnegie Endowment for International Peace are ranked as the top three think tanks in the world.
Out of the total of the world’s 6,846 think tanks the index covered, 634 are from Africa, making up 9.2% of the total. That’s an undersized performance for a continent that makes up more 15% of the world’s population.
Globally, the US leads with the number of think tanks, with 1,835 organisations included in the rankings.
Still, it is interesting that out of the 634 African think tanks, South Africa leads in the number of organisations overall (86 think tanks), followed by Kenya (53), Nigeria (48), Egypt (35), Ghana (37), Uganda (28) and Zimbabwe (26).
That listing suggests a few interesting things about the business of thinking in Africa. First, the it doesn’t stack up with economic heft, growth rates, or demographic size in Africa.
Mirrors geopolitical influence
Rather, it roughly mirrors geopolitical influence in Africa, and suggests that a think tank ecosystem requires some level of political openness, and private sector competition, to thrive. If your economy is dominated by the state, and your politics constrained, there isn’t much room for numerous organisations to do research, advocate, and lobby for particular issues.
Bring a regional hub also helps – several of the think tanks in South Africa, Nigeria and Kenya serve the southern, western and eastern African regions respectively.
Furthermore, the top countries in number of think tanks are all former British colonies/ Anglophone, which might suggest that the global domination of English (including on the internet) offers a bigger market of ideas, disadvantaging the French and Lusophone institutions in Africa.
Think tanks first emerged in the post-World War II era in Europe and America, when the demands of a new information and technological age, and increasing complexity of policy issues fuelled the demand for concise and timely policy analysis.
Cold War tensions, too, meant that each side wanted research and evidence to further their ideological agendas. It meant that by the 1970s and 80s, think tanks had become indispensible advisers to presidents, prime ministers, members of parliament and congress and as the saying goes all they had to do was “research it, write it and policy makers would beat a path to their door”.
But the past decade or so has put new pressures on the think tank model of organising the knowledge society. First, funding is a fundamental challenge – with the rise of professional philanthropy, donors have been chanelling their support to short term, high impact, project specific funding. This change has forced think tanks to change their fundraising strategies so they can raise the resources needed to cover their core operations.
Golden donors gone
“The days of a small a group of ‘golden donors’ who provide large, multi-year institutional grants are gone,” says the report.
Secondly, as the vanguard of ideas on political and economic reform, think tanks are often the first victim of the growing ‘NGO pushback’; the subtle authoritarianism that is becoming common in many places in Africa and the world, as governments try to maintain a hold on power in the face of its technology-mediated diffusion.
This often involves the use of legal and extra legal means to limit the number, role and influence of think tanks, such as caps on foreign funding, and even arbitrary arrests and detentions.
And third, the rise of the internet, social media, smartphones and cable news networks means that we are in an information-rich environment, and think tanks have to compete to be heard, and for their message to reach the right people.
Kill the PDF
One quick win for think tanks would probably be banning the PDF, that much-loved format by scholars everywhere – a recent report by the World Bank revealed that nearly one-third of their PDF reports had never been downloaded.
Another 40% of their reports had been downloaded fewer than 100 times. Only 13% had seen more than 250 downloads in their lifetimes.
It means that there have to be new and more relevant ways of reaching the intended audience, such as social media chats, Twitterthons, info-graphics, videos and podcasts, instead of pages upon pages of PDF documents. There are probably only a handful of smartphone users in the world, who would download a PDF on their device.
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African Union to launch the African Economic Platform with governments, private sector and higher education sector
The African Economic Platform will be launched in Port-Louis, Mauritius, on 14-16 April 2016. Announced by the AU Commission Chairperson, Dr. Nkosazana Dlamini Zuma, during the just-concluded 26th AU Summit of Heads of State and Government, the African Economic Platform will contribute to fast track African economic transformation toward the realisation of Africa’s Agenda 2063.
The participants expected to attend this first African Economic Platform will come from the public sector, led by Heads of State and Government; the African private sector, led by captains of commerce and industry; and the African higher education sector. This is a strategic approach by the African Union to bring together these three sectors to engage in discussions on cooperation and collaboration deemed to be critical for the continent’s growth and tangible economic transformation.
“The ultimate aim of the African Economic Platform (AEP) is to catalyze economic transformation on the continent by seeking solutions to, among other things, unregistered trade through informal cross-border exchanges, by promoting economic integration and greater intra-African trade, skills development and capacity building,” the AU Commission Chairperson said when making the announcement. She added that the Platform will also tackle environmental and policy limitations, and seek to increase Africa’s share of global trade.
Although trends in intra-African trade point toward progress, trade within Africa remains very low in proportion to total global trade. The share of intra-African imports was only 0.25 percent of world imports in 2015, while intra-African exports represent 0.26 percent of world exports. Research has indicated that intra-African trade comprises less than 15 percent of total African trade annually, highlighting the need for enhancing intra-African trade.
Describing why it is important to bring together these three sectors, Dr. Dlamini Zuma said: “The private sector, because of the role it can, and should, play in investment, industrialisation and intra-African trade; the higher education sector because of the significance of skills development, research and innovation; and government to ensure that policy, fiscal and macro-economic environments are conducive to the transformation of African economies, towards the Africa We Want in 2063.”
Agenda 2063 is a clarion call to all segments of African society to work together to build a prosperous and united Africa at peace with itself. It encapsulates continental aspirations for growth and prosperity, including aspirations for a prosperous Africa centered on inclusive growth and sustainable development.
The Agenda 2063 aspiration on inclusive growth in Africa envisions a prosperous continent with the means and resources to drive its own development. The African Economic Platform will propel economic growth on the continent and increase Africa’s share of world trade, thereby improving the livelihoods of ordinary people.
This platform, expected to be an annual event, results from extensive consultations with AU Member States and an outcome of a 2014 Ministerial retreat of the AU Executive Council.
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tralac’s Daily News selection
The selection: Friday, 12 February 2016
Yesterday, two presidential speeches:
South Africa: President Zuma's State of the Nation address
China announced investments of $50bn of which South Africa will receive $10bn for infrastructure, industrialisation and skills development. On North-South cooperation, we continued our engagements with the European Union as a bloc which is our largest trading partner and foreign investor. Over 2000 EU companies operate within South Africa creating over three hundred and fifty thousand jobs. South Africa’s relations with the USA and Canada continue to strengthen, especially in the areas of economy, health, education, energy, water, safety and security, capacity building and the empowerment of women. The renewal and expansion of the African Growth and Opportunity Act provides a platform for the enhancement of industrialisation and regional integration. All outstanding issues around AGOA are being attended to.
Kenya: President Kenyatta's closing remarks to the Governors Summit (Office of the President)
The Summit also agreed on the adoption of a policy of austerity aimed at releasing more resources from recurrent expenditure to development. In this context, the National and County Governments committed to achieve a 50 percent reduction in travel and allowance expenditure across all government organs. In addition, the Summit agreed to commission an analysis of the functions of both levels of Government, to eliminate duplication and wastage.
Mbeki Panel to meet with US officials on illicit financial outflows from Africa (UNECA)
During his visit (16-19 February), the Chair of the Panel and his delegation will be holding consultations and undertaking advocacy with various stakeholders in the United States, including: the United States government entities relevant to addressing IFF from Africa, the International Monetary Fund and World Bank officials, as well as the international Diplomatic Corps. He will also be speaking to the Economic and Social Council of the United Nations, as well as African Ambassadors to the UN. Subsequently, Mr Mbeki will also hold meetings with representatives of the civil society, private sector and academia.
Rwanda: Seven ministers in Senate over trade imbalance (New Times)
The government will put efforts in increasing value addition of export crops and utilise resources on the ground to maximise profitability in order to turn around trade deficit that has slumped heavily. Trade deficit for the third quarter of 2015 was at $338.95 million, 45% higher than the deficit of $233.98 million for the corresponding quarter in 2014, according to reports from the National Institute of Statistics of Rwanda. The government has mainly faulted external factors for the slump, with ministers telling Senate yesterday that global financial crisis; regional political instability; shortage of volumes and value of export products are responsible for the imbalanced trade deficit.
Spurring global growth via a new Trade Facilitation Agreement (World Bank)
Buoying the spirits of those who hailed the broad support for TFA at December’s ministerial conference of the World Trade Organization in Nairobi, 68 countries have already ratified the agreement. The number of county-by-country ratifications is fast approaching the total of 107 required for the TFA to go into effect. [The author: Klaus Tilmes]
Understanding India’s export predicament (Livemint)
India’s commodity exports fell by 18.4 percentage points year-on-year during April-December 2015. In percentage terms, this is the worst fall in export values since 2001, and around 5 percentage points more than the previous high of 13.8 percentage points in April-December 2009. It might be tempting to put the entire blame for the fall in exports on the sluggish global economic scenario. However, it is also a fact that India’s performance on the external trade front has been found wanting even during better times. Here are some facts which can help understand India’s export predicament during the post-reform period.
Namibia, EU ready to sign EPA (New Era)
"We have finalised negotiations and are ready to sign sometime this year,” said Ambassador Raúl Fuentes Milani, Head of the EU Delegation to Namibia, adding that the cooperation, once officially announced, would “open a new page in economic relations.” "The EU and Namibia, together with other SADC countries, have been negotiating the EPA since 2007, and although initialised, Namibia is one of the countries that have not signed the EPA citing differences on key issues of export taxes, safeguarding measures on agricultural products and rules of origin. The idea is to change the current situation, based on un-bilateral concessions by the EU, into a bilateral understanding,” said Milani on the new direction of the EPA.
Mauritius: electronic certificate of origin workshop (Government of Mauritius)
The Mauritius Revenue Authority launched on 9 February 2016 a three-day workshop on SADC electronic certificate of origin implemented with the initial processing of the EUR 1 Movement Certificate in the context of ongoing Customs Reform and Modernisation Programme at the MRA. The Chairperson of the MRA Board, Mr Sateeaved Seebaluck, emphasised that the economic success of Mauritius is becoming more and more contingent upon the success of SADC, COMESA and the African continent as a whole. According to Mr Seebaluck, the automation of the SADC Certificate of Origin has been successfully implemented by the MRA and that all certificates of origin issued by the MRA are automated, namely in respect of EUR 1, IOC, Turkey Mauritius PTA and Pakistan Mauritius PTA.
Egypt: Brace for a devaluation of the Egyptian pound, say economists (Ahram Online)
Egypt will allow a sharp devaluation of its currency in the first half of this year as it has run out of options in the midst of an escalating foreign currency shortage crisis that has slowed economic activity, according to bankers and economists surveyed by Ahram Online. Since the January 2011 mass uprising that overthrew Hosni Mubarak, the Central Bank of Egypt has propped up the Egyptian pound, which was officially traded at 5.8 pounds to the US dollar at the time. Today, the Egyptian pound is changing hands at 8.7 to the US dollar on the black market according to traders surveyed by Reuters on Tuesday, compared to an official rate of 7.73.
MENA Economic Brief: The economic effects of war and peace (World Bank)
Growth in the Middle East and North Africa is revised downward to 2.6% in 2015 and the short term prospects remain “cautiously pessimistic”, according to the latest issue of the Quarterly Economic Brief for MENA. The report examines the different ways in which civil wars affect the economies of the region, including the important channel of forced displacement, which has become a crisis. It also explores how economic fortunes will turn around if there is peace.
South Africa: Daimler unit to expand from SA base (Business Day)
German motor company Daimler has made SA the regional base for its new global truck and bus strategy — a decision expected to bring significant business to Mercedes-Benz SA (MBSA) and eventually new investment to its East London assembly plant. MBSA’s Daimler Trucks and Buses arm was already responsible for the local market and for Namibia, Botswana, Swaziland and Lesotho. Daimler’s global board member for trucks and buses, Wolfgang Bernhard, said on Thursday these countries had been joined by Mozambique, Zimbabwe, Zambia and Malawi. Until now, the newcomers had been serviced mainly from Germany, but also from Japan, where one of Daimler’s brands, Fuso, is based.
Other SA trade news: Strained trade conditions (SACCI), @martinslabber: Bilateral trade between South Africa and the Philippines up by 36% to US$222 million in 2015, Spazas are pulling in the shoppers (City Press)
Kenya: Thousands of jobs at stake as new team moves in to reform Mombasa port (The Standard)
The ripple effects of the drastic changes at the Kenya Ports Authority (KPA) continued to be felt in Mombasa yesterday. It emerged that at least 90 senior and middle level managers would be investigated for a series of crimes. There was panic at the port after the 7,500 workers learnt that some of the managers would be investigated over insider trading, manipulation of information systems and graft. Others are being investigated for malpractice in procurement and tenders including the concession to operate the Second Container Terminal and implementation of two vessel tracking systems.
Transport CS James Macharia orders safety review of RVR operations (Daily Nation)
Uganda: Kagina warns Chinese firms on road delays (Daily Monitor)
Uganda National Roads Authority executive director Allen Kagina has vowed to revoke contracts awarded to some Chinese companies undertaking roads construction in the country over delays to complete works. While on a one-day visit to Agago, Pader, Kitgum and Lamwo districts on Wednesday, Ms Kagina said some Chinese contractors were reluctant on beating deadlines since they lack certain equipment and have unregistered engineers.
Kenyan firm expects more Chinese airlines in Africa to boost trade (Shanghai Daily)
Kenya's Astral Aviation CEO Sanjeev Gadhia told Xinhua in Nairobi that currently only two Chinese airlines fly to Africa. In 2015, Astral signed an agreement with China Southern Airlines. Under the agreement, Astral will transport Chinese goods that arrive in Nairobi from China Southern Airlines to the rest of East and Central African states. "Our role is to provide last mile logistics to Chinese goods headed to the hinterland countries such as Rwanda, Burundi and South Sudan," he said. Astral has also signed an agreement with the Chinese Customs whereby Astral airlines will be allowed to consolidate Kenyan bound cargo in Guangzhou.
WB ranks Kenya last in agricultural markets survey (Business Daily)
Kenya has been ranked last in sub-Saharan Africa in regulation of agricultural markets in a survey by the World Bank. A requirement that agricultural exporters pay annual licence fees pushed up the prices of Kenyan products in the global market hurting the country’s competitiveness and ranking in the survey, said the WB. Globally, Kenya ranked only ahead of Myanmar and Sri Lanka in the survey of 40 countries.
South Africa: Policy brief on the 2015/16 drought (BFAP)
This report evaluates the impact of the current drought on the South African economy, on commercial and smallholder producers, and on consumers. Whilst the impact of the drought on current prices in undeniable, the effect of the depreciation in the value of the Rand also remains undisputed. It not only shifts the level of the import and export parity price band, but also impacts on every stage of the food value chain. [The human cost of the hottest year on record (UNISDR)]
Financing rural structural transformation in the Least Developed Countries (UNCTAD)
The performance of the agricultural sector in LDCs is unsatisfactory. Agricultural labour productivity in LDCs between 2011 and 2013 was 19 per cent of that in other developing countries and just 1.8 per cent of that in developed countries. Given the concentration of the labour force in agriculture in LDCs, this broader productivity gap is the major cause of poverty in these countries and of the income divergence between LDCs and these other country groups. The total food trade deficit of LDCs has widened dramatically, from $2 billion in 1995–1997 to $21.8 billion in 2011–2013.
African states pledge co-operation to combat wildlife crimes (Coastweek)
Jaindi Kisero: 'We have abandoned domestic manufacturers' (Business Daily)
West Africa Trade & Export Finance Conference 2016: highlights (The Insider)
US officials warn of chaos in DRC if President Kabila declines to surrender power (The East African)
Brazilian states promote construction of Transoceanic Railroad (MacauHub)
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World Humanitarian Summit must be ‘turning point’ in cooperation to tackle crises – UN chief
World leaders must come together in 2016 to renew their commitments to humanity and unite to prevent and end crisis and reduce vulnerability, United Nations Secretary-General Ban Ki-moon said on 9 February 2016, telling UN Member States that the World Humanitarian Summit will provide an opportunity for “concrete steps towards ending the suffering experienced by billions of people today.”
“We need to show the millions of people living in conflict – with chronic needs and constant fear – the solidarity that they deserve and expect,” the Secretary-General said at the launch of his report, One Humanity: Shared responsibility, for the first-ever World Humanitarian Summit, set for 23 and 24 May in Istanbul, Turkey.
“The urgency of these challenges and the scale of the suffering mean we must accept our shared responsibilities and act decisively, with compassion and resolve,” he added.
Briefing Member States at UN Headquarters in New York on Tuesday morning, Mr. Ban underscored that the report outlines five core responsibilities for action – an ‘Agenda for Humanity’ – that all stakeholders should accept and act upon.
Specifically, the report urges leaders to assume their responsibility to prevent and end conflict; calls on States to affirm their responsibility to uphold the norms that safeguard humanity; appeals to States to leave no one behind and reach those who are furthest behind; underscores the responsibility to change people's lives by moving from delivering aid to ending need; and calls for investment in humanity, including enhancing local capacities, reducing risk and building effective and inclusive institutions, especially in fragile contexts.
“Today’s complex challenges cross borders and surpass the capacity of any single country or institution to cope,” the Secretary-General emphasized. “We need to restore trust in our global world order and in the capacities of our national and regional institutions to confront these challenges effectively,” he said.
Mr. Ban also stressed that the upcoming Summit is an opportune moment for world leaders to implement commitments endorsed this past year, including the Sendai Framework for Disaster Risk Reduction, the Addis Ababa Action Agenda, the 2030 Agenda for Sustainable Development, and the recent Paris Agreement on climate change.
“We must ensure no-one in conflict, no-one in chronic poverty, and no-one living with the risk of natural hazards and rising sea levels is left behind,” said the UN chief, adding that : “Our aspirations are ambitious, but the urgency of the crises and the needs and expectations of hundreds of millions of people mean we must put this Agenda for Humanity into action.”
Also speaking at the briefing on Tuesday, UN General Assembly President Mogens Lykketoft urged Member States to “get behind the Secretary-General’s vision” to deliver real commitments.
“At its core, his report is an urgent plea to political and others leaders to summon the courage to reverse the current slide – a slide that is undermining everything this Organization stands for; everything that we as fathers, mothers, sisters and brothers should care for,” Mr. Lykketoft said.
“It is a desperate plea to reassert the basic codes and norms that collectively, we agreed to abide by, to protect the world’s most vulnerable people – international humanitarian law; international human rights law and international refugee law,” he added.
Noting that efforts thus far have been “far from adequate,” Mr. Lykketoft also stressed that the situation facing some 60 million displaced people and some 125 million people in need of humanitarian assistance continues to demand urgent attention.
“Istanbul is our first major opportunity since the 2030 Agenda was agreed to give true meaning to the principle of leaving no one behind and to devise more credible, equitable and sustainable responses to global humanitarian crises,” he said.
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BFAP Policy Brief on the 2015/16 drought
This report evaluates the impact of the current drought on the South African economy, on commercial and smallholder producers, and on consumers. Whilst the impact of the drought on current prices in undeniable, the effect of the depreciation in the value of the Rand also remains undisputed. It not only shifts the level of the import and export parity price band, but also impacts on every stage of the food value chain.
Reduced domestic production induces significant changes in trade volumes to meet domestic demand, even when it implies substantial price increases. As the most basic food staple that was hardest hit by the severe drought conditions, significant quantities of maize will have to be imported in 2016. The Crop Estimates Committee (CEC) of the Department of Agriculture, Forestry and Fisheries released the preliminary area estimates for summer crops on 27 January 2106. Contrary to 2015, when the maize crop was planted well within the optimal window, a substantial share of the 2016 maize area was only planted in January. This high share of risky late plantings, combined with an earlier than usual production forecast, raises concern that the prediction of a 7.4 million ton maize crop may be optimistic. Consequently this report illustrates 2 scenarios: the baseline, based on the official production forecast from the CEC of 7.4 million tons of maize, and a second scenario that assumes reduced yields on the preliminary area estimate presented by the CEC, reducing the total maize crop to 6.6 million tons.
In addition to domestic demand, many deficit regions across Southern Africa, such as Swaziland, Lesotho, Namibia, Botswana and southern Mozambique are dependent on South African maize. The drought conditions experienced in South Africa have been far reaching in the continent and initial production forecasts across Southern Africa have been reduced from recent norms. The fact that Zambia’s crop has also been affected by the drought raises further concerns for the regional maize balance.
South Africa is expected to import 856 000 tons of white maize and 1.9 million tons of yellow maize under the CEC baseline scenario at a cost of R11.5 billion. Imports will increase to 1.2 million tons and 2.2 million tons respectively under the alternative scenario, at a cost R14.5 billion. There are ample supplies of yellow maize in the world market and the local shortfalls will comfortably be met by imports. However, Mexico’s ability to provide the entire domestic shortfall of white maize remains uncertain. South Africa may need to look elsewhere towards the end of the season, with the US the most likely alternative. Current GM regulations would however have to be altered for US imports to occur. Opening the US market will reduce maize meal prices and provide a more certain source of white maize imports to the South African market to ensure availability.
As South Africa is normally an exporter of maize the total import volumes expected in 2016 are unprecedented. To ensure that imports occur timeously and efficiently, infrastructural capacity needs to be considered. The total loading capacity within the 4 ports currently used for grain trade (Durban, Cape Town, Port Elizabeth and East London), is sufficient for the additional import requirements, but continued cooperation between industry and government is essential for imports to occur timeously.
The effect of the drought is also clear in grazing conditions and the impact on extensive livestock industries that depend on grazing has been catastrophic. Beef production tends to increase in dry periods as producers cull due to poor or insufficient grazing and high feed costs. Intensive producers of pork and poultry however have little flexibility in their feeding systems so that production declines only marginally in the short term. While the weaker exchange rate helps, the increase in feed grain prices is greater than the increase in meat prices, impacting negatively on profit margins.
Coming as it did after an already below-average production season in 2015, the combination of the drought and the weaker exchange rate has already impacted severely on agricultural commodity prices in South Africa. Whilst the Agricultural GDP remains above the 3 year average and net farm income declines only marginally under the crop estimates scenario, a reduced yield scenario results in significant deterioration, as prices remain relatively unchanged at import parity levels, whilst production volumes decline. In addition, reduced production volumes will impact on South Africa’s trade balance. Sectors such as maize and sugar, which would normally contribute to the sector’s positive trade balance, will shift to a negative net trade position in 2016.
From a farm business perspective the current drought will not only affect the current production season, but might also have long term financial and debt implications for farm businesses. Furthermore, poor rural households continue to be dependent on household agricultural production. More than 1.2 million individuals will be affected by the current drought, which will inevitably have a significant impact on maize yields and would give rise to food insecurity. Hence, supporting the primary agricultural sector to overcome the short term effects is critical to ensure that long-term agricultural production, growth and food security is not compromised.
Agriculture has been identified as a sector to expand in the National Development Plan, with intensive, export orientated industries in particular identified as key in creating jobs within the rural economy. Ambitious job creation targets will require investment in irrigation infrastructure and consequently, the response to the current drought must continue to foster an enabling environment where investment can flourish. At the same time, the cost of basic food staples is a key consideration in responding to the current drought. Based on January 2016’s preliminary retail prices, the cost of the staple basket increased by approximately 19% from January 2015 to the corresponding month in 2016 and a further increase of 10% in quarter 1 of 2016 is expected.
In the longer term it is a return to surplus production that will be most effective in reducing the cost of food staples and curbing food price inflation. Despite further depreciation in the Rand to beyond R17 to the US dollar in 2017, a return to surplus production will imply a decline of more than 30% in domestic white maize prices. In the longer term, a favourable food price inflation Outlook will depend on a vibrant and sustainable agricultural sector and hence the short term response to the severity of the current drought should prioritise the ability of producers to stay in business, enabling them to contribute to the recovery when weather conditions improve.
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Spurring global growth via a new Trade Facilitation Agreement
As the global economy struggles to emerge from its chronic slow-growth stall, policymakers are increasingly focused on an energetic opportunity to help jump-start economic growth: the adoption of the landmark Trade Facilitation Agreement (TFA) that is now nearing ratification and implementation.
By helping reduce trade costs and by helping enhance customs and border agency cooperation, a recent WTO report has found, the successful implementation of the TFA’s provisions could boost developing-country exports by between $170 billion and $730 billion per year. The OECD has calculated that the implementation of the TFA could reduce worldwide trade costs by between 12.5 percent and 17.5 percent.
Buoying the spirits of those who hailed the broad support for TFA at December’s ministerial conference of the World Trade Organization (WTO) in Nairobi, 68 countries have already ratified the agreement. The number of county-by-country ratifications is fast approaching the total of 107 required for the TFA to go into effect. Adopted in December 2013 at the WTO’s conference in Bali, the TFA is the WTO’s first-ever multilateral accord, having won approval from all 162 WTO member nations. The agreement contains provisions for expediting the movement, release and clearance of goods traveling across borders. It also sets out measures to promote cooperation among customs and border authorities on customs compliance issues.A recent seminar at the World Bank Group – convened by the Trade Facilitation Support Program (TFSP) of the Trade and Competitiveness Global Practice (T&C) – explored the provisions of the TFA and learned of the increasingly active role of the private sector in supporting the TFA’s enactment. Awareness and momentum are building as a new coalition of private-sector firms – the Global Alliance for Trade Facilitation – mobilizes business support for TFA’s effort to speed and strengthen cross-border commerce. As the seminar heard from Norm Schenk, who serves as the chairman of the International Chamber of Commerce’s (ICC) Commission on Customs and Trade Facilitation, members of the alliance plan to meet in Washington this week to explore strategies for promoting the TFA’s adoption.
As a mechanism for business engagement in the TFA process, the Geneva-based coalition was launched as a platform for public-private cooperation to advance the implementation of key provisions of the TFA, said Schenk, who in addition to his ICC role is the vice president of global customs policy and public affairs for the express delivery firm UPS. Organizations supporting the alliance include the ICC, the World Economic Forum and the Center for International Private Enterprise. The alliance also seeks synergies with the work of such international bodies as the World Customs Organization, the WTO and United Nations Conference on Trade and Development (UNCTAD).
The alliance aims to build a broader understanding of the benefits of trade facilitation; establish multi-stakeholder dialogues on trade; mobilize public-private partnerships by engaging local businesses and associations; provide technical and financial assistance in support of capacity-building; and pursue benchmarking and evaluation based on established business metrics.
Launched by T&C in 2014, the TFSP now offers support to almost 50 countries that have committed to implementing reforms to align with the TFA. By helping developing countries implement trade facilitation reforms, the TFSP aims to stimulate increased cross-border trade and investment, thus spurring job creation in the economies of all trading nations. As the TFSP’s leader, Bill Gain, told the seminar, the program is central to the WBG’s support for implementation of the TFA, complementing the WBG’s broader efforts on trade facilitation. Total WBG support for trade facilitation – including both “hard” and “soft” infrastructure – is currently more than $7 billion.The TFSP has worked with client countries that are focused on such priorities as setting up or strengthening national trade facilitation committees; conducting legal analyses of gaps in the way their national regulations would comply with the TFA; strengthening specific measures like advance rulings, post-clearance audits and simplified procedures for expedited shipments; and implementing national “trade portals.” The TFSP is supported by seven donor partners: the European Union, the United Kingdom, Norway, Switzerland, Australia, Canada and the United States.
As the TFA advances toward adoption, T&C and the TFSP are committed to helping client countries anticipate how to implement its provisions, and are eager to continue a wide-ranging dialogue with the Global Alliance for Trade Facilitation. Three ideas of where we could focus our collaboration include:
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Data, analytics and diagnostics. Through the TFSP, we have conducted detailed assessments of the gaps that need to be addressed for the full implementation of the TFA in 41 countries, based not just on reviews of legislation but on operational assessments of what is required. The Global Alliance, through its private-sector focus, could be in a strong position to complement this with data gathered by private-sector operators on trade facilitation performance at the country level. That could help analyze the problems that need to be faced, and it could also support the continuing monitoring of reform.
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Supporting reforms to implement the TFA at the country level. Diagnostics and analytics are the first step. The real challenge is implementing lasting reform at the country level. We could work with the Global Alliance to pilot collaboration at the country level, building on our respective strengths, to support reform.
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Improving global collaboration and advocacy on the TFA. The World Bank Group, along with the WTO and a number of other international organizations, was a founding member of the “Annex D” group of organizations supporting the implementation of the TFA. The informal group collaborates on assistance at the country level, disseminates information about experiences in implementing TFA reforms, and advocates for effective implementation. Working with the Alliance on this global agenda related to the TFA could help strengthen our respective efforts.
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Rethinking development strategies after the financial crisis: Country studies and international comparisons
The recent economic trends and the challenges posed by the global crisis reinforce the importance of implementing strategies for development as opposed to leaving the economy to market forces.
Countries need a strategic compass for long-run economic development, either explicitly or implicitly. Among other ingredients, this comprises macroeconomic policies, sectoral policies (including the financial sector, trade and industrial policies), institution building in key areas and development-friendly global governance. Within a chosen medium- or even long-term strategy, governments need more policy space to adjust to the specific (and evolving) social, historical and institutional context.
The experience of Asia shows that rather than implementing narrow and rigid general guidelines, experimental approaches – which require policy space – are a recipe for success. Furthermore, the slow-growth periods endured by several countries (the “lost decades”) allowed inferring which policies should be avoided.
The authors of this publication share the notion that developing countries can and should learn more from each other, as well as from their own past experience. It is important to look at comparisons between developing countries, including both success and failure stories.
In this second volume, four countries are selected based upon the role that they play in the developing world and the current discourses on development: Brazil, Chile, China and India. To a certain extent, they all represent development success stories, at least for a considerable spell of time. Brazil, China and India account for a large proportion of the world population and their corresponding regional GDP. The continental size of these economies plays a role in their development conditions, particularly regarding their domestic markets. By contrast, Chile is a special case as a small country that is among the most developed in Latin America and often considered a role model, yet it remains many miles off the levels achieved by the first generation of Asian tigers, especially regarding its industrial development.
» See also: Volume I: Making the Case for Policy Space (PDF, 2.06 MB)
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MENA Quarterly Economic Brief, January 2016: The economic effects of war and peace
Growth in the Middle East and North Africa (MENA) is revised downward to 2.6 % in 2015 and the short term prospects remain “cautiously pessimistic”, according to the latest issue of the Quarterly Economic Brief for MENA (QEB).
The report examines the different ways in which civil wars affect the economies of the region, including the important channel of forced displacement, which has become a crisis. It also explores how economic fortunes will turn around if there is peace.
Economic consequences of the wars
Restoring Libya’s infrastructure will cost an estimated $200 billion over the next ten years. The damage to the capital stock in Syria as of mid-2014 is estimated between $70-80 billion. Syria’s neighboring countries (Turkey, Lebanon, Jordan, Iraq, and Egypt) have borne the brunt of the economic impact of the war. The cost to the five countries is close to $35 billion in output, measured in 2007 prices, equivalent to Syria’s GDP in 2007.
A preliminary World Bank-led assessment of damage in six cities in Syria (Aleppo, Dar'a, Hama, Homs, Idlib, and Latakia), showed an estimate of $3.6-4.5 billion as of end 2014. As of end of 2014, damage to the housing sector in Syria accounted for more than 65 percent; restoring the energy sector in the six cities will require between $ 648 and $791 million; damages to the health sector infrastructure was estimated to be between $203 and $248 million; damages to education sector infrastructure was estimated to be between $101 and $123 million.
Continued conflict and violence have reversed years of educational attainments in Syria, Yemen, Iraq and Libya and created inequality in educational opportunities. More than half (50.8%) of all school-age children in Syria were prevented from attending school during 2014-2015. In Yemen, the number of poor people has increased from 12 million prior to war to more than 20 million people – 80 % of population after the war.
Countries bordering conflict zones (Turkey, Lebanon, Jordan, Egypt), many of them already in fragile situations, are facing tremendous budgetary pressure. World Bank estimates that the influx of more than 630,000 Syrian refugees have cost Jordan over US $2.5 billion a year. This amounts to 6% of GDP and one-fourth of government’s annual revenues.
Economic effects of the peace
Can the economic damage from the civil wars be reversed?
An end to the civil wars in MENA will improve macroeconomic indicators through restoring security, increase in investment, and reconstruction activity. Social indicators will also improve as public resources that were used for military expenses could be shifted to education and health. But the pace and pattern of economic recovery in the short term is typically not smooth, as post-conflict countries inherit a weak economy, damaged physical, human and social capital, widespread poverty and high unemployment particularly among youth.
A peace settlement in Syria, Iraq, Libya and Yemen could lead to a swift rebound in oil output and exports allowing them to increase fiscal space, improve current account imbalances, increase foreign reserves, and boost economic growth in the medium term.
Being the least democratic region in the world, MENA could benefit from transitioning peacefully to democracy. According to the report, if transitions in MENA countries occurred in 2015, the growth rate of per capita GDP would reach 7.78 percent in 2020 compared to 3.3% in the absence of a transition to democracy.
The Economic Effects of War and Peace in MENA
Key Messages
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Along with slowing global activity, growth in the Middle East and North Africa (MENA) is revised downward to 2.6 percent in 2015 and the short term prospects remain “cautiously pessimistic”.
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The main reasons of the slowdown are continued civil wars, terrorist attacks, and low oil prices. Moreover, the recent Saudi-Iran confrontation could increase military spending particularly in those countries that are directly involved and their allies. It could also increase geopolitical risks, affecting investment, tourism, and trade in an already fragile region
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Oil prices are likely to remain low, trading below $30 a barrel in January 2016, about one third of the level needed to balance government budgets in MENA oil exporters.
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MENA’s oil importers are facing either the spillover effects of the civil wars and conflicts in the region or the insecurity caused by terrorist attacks (or both), outweighing the benefits of cheap oil.
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At oil prices around $30-35 p/b this year, MENA oil exporters are losing fiscal revenues. Saudi Arabia will lose another $55 billion in 2016 addition to $110 billion loss in 2015. Without expenditure cuts, it will exhaust its reserves by the end of the decade.
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Most oil exporters have been eyeing fuel subsidy reform to bring their spending under control. Saudi Arabia raised gasoline prices by 50 percent on January 1, 2016 (to $0.24 per liter).
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Growth in war torn countries – Syria, Yemen, Libya and Iraq – is not expected to rebound soon, unless there is a peace settlement.
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Syria and Iraq are estimated to have seen per capita income in constant terms decline by 23 percent and 28 percent relative to the levels that would have been achieved had the war not broken out.
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Syria’s neighboring countries (Turkey, Lebanon, Jordan, Iraq, and Egypt) have borne the brunt of the economic impact of the war. The cost to the five countries is close to $35 billion in output, measured in 2007 prices, equivalent to Syria’s GDP in 2007.
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In Lebanon only, real GDP growth is estimated to have dropped by 2.9 percentage points each year during 2012-14, pushing more than 170,000 Lebanese into poverty and doubling the unemployment rate to above 20 percent, most of them unskilled youth.
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The World Bank estimates the cost of hosting Syrian refugees in Jordan at about $2.5 billion a year, equivalent to 6 percent of GDP and one-fourth of government’s annual revenues.
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Standards of living of neighboring countries have been severely impacted due to the war in Syria. In Lebanon, per capita average income declined by an estimated 1.1 percent and by 1.5 percent in Turkey, Egypt, and Jordan relative to levels that could have been achieved if it weren’t for the war.
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The World Bank estimates that as of mid-2014 the damage to the capital stock in Syria amounted to $ 70-80 billion. Restoring Libya’s infrastructure will cost an estimated $200 billion over the next ten years.
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Humanitarian needs in Yemen are about $1.6 billion – and rising. Reconstruction needs for Yemen have not yet been estimated due to the ongoing conflict.
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A preliminary World Bank-led assessment of damage in six cities in Syria showed an estimate of $3.6-4.5 billion as of end 2014. The report focused on damage in Aleppo, Dar'a, Hama, Homs, Idlib, and Latakia, over seven sectors – housing, health, education, energy, water and sanitation, transport and agriculture.
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As of end of 2014, damage to the housing sector in Syria accounted for more than 65 percent; restoring the energy sector in the six cities will require between $648 and $791 million; damages to the health sector infrastructure was estimated to be between $203 and $248 million; damages to education sector infrastructure was estimated to be between $101 and $123 million.
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Damages to human capital are irreversible. According United Nations figures, more than 13 million children are out of school in Syria, Yemen, Iraq and Libya. Continued conflict and violence have reversed years of educational attainments.
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Unemployment is high among refugees, especially women and those who do work often work in the informal sector with no protection. About 92 percent of Syrian refugees in Lebanon have no work contract and more than half of them work on a seasonal, weekly or daily basis at low wages.
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Before the war, more than half of Yemen’s population lived in extreme poverty (below US$ 1.90 a day) and more than half of the youth were unemployed. These numbers have been increasing significantly after the war and more than 20 million people – 80 percent of Yemenis – are now considered poor.
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A peace settlement in Syria, Iraq, Libya and Yemen could lead to a swift rebound in oil output and exports allowing them to increase fiscal space, improve current account imbalances, increase foreign reserves, and boost economic growth in the medium term.
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In the event that conflicts subside in the region, a peaceful transition to democracy will increase economic growth by encouraging investment, schooling, economic reforms, public-good provision, and reducing social unrest. The World Bank estimates that, if, hypothetically, transitions in MENA countries occurred in 2015, the growth rate of per capita GDP would reach 7.78 percent in 2020 compared to 3.33 percent in the absence of a transition to democracy.
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Improving food security and agricultural productivity: A priority for Burkina Faso
For several years now, life has been a constant struggle for much of Burkina Faso’s rural agrarian population. A severe drought in 2011 scorched what were already arid lands. Crops withered under the Saharan sun, yielding poor harvests and leaving meager food stocks for villagers and their animals.
Since conflict erupted in neighboring Mali, the Burkinabe people living along the border have also had to confront an influx of Malian refugees, sharing and rationing the few resources they have. Many have had to resort to living off food aid.
According to the 2015 Global Hunger Index, Burkina Faso ranked 87th out of 104 countries in terms of levels of hunger, with 20.7% of its population being undernourished. Weak food production systems, a capricious climate, and significant poverty have created a vicious cycle for Burkina’s farmers that is seriously jeopardizing the country’s food security.
So how can Burkina’s poor producers break out of this cycle when they lack the means to purchase high yielding drought resistant agricultural inputs, or vaccinations for their poultry?
One of the solutions is a matching grant system implemented by the World Bank’s Agricultural Productivity and Food Security Project (better known by the French name Projet d’amélioration de la productivité agricole et de la sécurité alimentaire or PAPSA) that helps smallholder farmers share the cost with the project. Under the supervision of the regional Chamber of Agriculture, local community leaders, and local authorities, male and female farmers are invited to contribute their share of the costs through community works such as the preparation of lowlands for rice farming. This includes clearing the land of rocks, turning over the soil, organizing the plots, and constructing water retention systems. Those who have contributed the most to community works are provided cleared plots of land, technical expertise, training, improved seed varieties, and fertilizer for their rice crops.
The project observed that female farmers were the group that participated the most in these community works, thus more than 45% of the prepared lowlands have been distributed to women. For these female farmers, this system has completely changed their lives.
“In our culture, it is difficult for women to possess land. Thanks to the project, I now have my own plot of land from which last year I produced four bags of paddy rice. I distributed one bag to my neighbors, I sold the second bag to pay the school fees of my children, and the other two bags are to feed my family and contribute our share to the community savings to purchase inputs for the next planting season,” explains Alizèta Kabore, a smallholder farmer from Bissiga, in Burkina’s Central Plateau region.
Financed by the World Bank, the Agricultural Productivity and Food Security Project is giving hope back to farmers and increasing productivity. Men and women are going back to tending their fields, and have begun to reap the benefits of this new system. Project support for rain fed lowland rice production has helped clear 7,820 hectares of land for rice production providing 30,000 producers with income, 45% of which are women. In 2014, rice production in Burkina Faso saw a significant boost in the form of an additional 15,000 tons of rice. Thanks to new techniques and better inputs, farmers are learning how to retain more water in their fields and how to fertilize them.
Similar results were observed in poultry, cattle, and pork farms. Techniques such as artificial inseminations are boosting cattle reproduction rates, and the construction of 459 modern chicken coops is reducing poultry mortality. In addition, 54% of local poultry are now vaccinated again Newcastle disease. While poultry and beef makeup Burkina’s main meat staples, pork production this past year brought in an estimated 26 million FCFA.
However an increase in food production is only half the battle. Solutions are also needed to address farmers’ access to credit, surplus storage, and market distribution. Access to credit remains a big challenge for rural farmers as financial institutions are usually reluctant to finance smallholders farmers due to the lack of collateral and the high risk related to agricultural production.
To improve smallholders’ farmers’ access to rural credit, the project has promoted the warehouse receipt system also known as warrantage. An inventory credit system, warrantage allows farmers to use their harvests as collateral to obtain credit.
“Under the project, a farmer will generally deliver his or her harvest to a local warehouse, whose access is held jointly by a microfinance institution and a farmer’s association, usually in the form of two pad locks. Upon delivery of the harvest, the farmer receives credit which he or she uses to buy essential inputs for the next planting season, pay children’s school fees, or invest in other revenue generating activities,” explains Elisée Ouedraogo, Senior Agricultural Economist at the World Bank Office in Burkina Faso.
The credit advance generally covers a period of several months and allows the farmer to stock their harvest until food stocks run low and they can ask for higher prices. At the end of the credit period, farmers can sell their harvests, repay their credit and use the difference to buy seeds, fertilizer, small pumps and other inputs which help to increase yield and production. Part of the harvest may also be kept by farmers for his or her own consumption. Under the project, 222 warrantage schemes have been promoted and 4,700 tons of grain stored, allowing smallholders farmers to mobilize the equivalent of $700,000 in credit from microfinance institutions.
The Agricultural Productivity and Food Security Project will close in 2018, signaling its long term support for reinforcing Burkina’s agricultural and livestock value chains. With more food products available in rural markets, Burkina Faso can significantly reduce risks of food insecurity and improve its economy. Given that the country’s economy is primarily based on the rural sector, which employs 86% of the labor force (National Population Census, 2006), a productivity-led growth in the agricultural sector is the key to new employment opportunities, higher incomes, and a brighter future.
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Financing rural structural transformation in the Least Developed Countries
In its latest policy brief, UNCTAD discusses key policy measures and instruments that the least developed countries and their development partners can mobilize to widen the financing of rural economic activities.
For the least developed countries (LDCs) to reach the Sustainable Development Goals, their rural economies will have to undergo structural transformation, given that most of their population lives in rural areas and agriculture is a main contributor to their economy.
To this end, UNCTAD proposes that LDCs engage in the poverty-oriented structural transformation, or POST, of rural areas. It should encompass the upgrading of agriculture, the diversification of rural economic activities and the strengthening of synergies between both. A major obstacle is the dearth and inadequacy of financing for rural economic activities.
Introduction
More than ever, rural economic transformation will be central to the development of LDCs as they work towards the Sustainable Development Goals. These Goals signal both the need and the opportunity for a new approach to development policies, given the gap between the progress required by 2030 and that of recent decades. The focus on rural transformation is imperative for several reasons.
First, more than two thirds of their total population live in rural areas. This pattern is not expected to change substantially by 2030. Rural population growth will continue to be much faster, and the rural share of the population will remain much higher than in other developing countries throughout the achievement period of the Sustainable Development Goals (2015-2030).
Second, agriculture plays a crucial role in all LDC economies, accounting for 60 per cent of total employment and 25 per cent of value added. In many of them, it also represents a major source of export revenues.
Third, shortfalls in human development targeted by the Sustainable Development Goals are much greater in rural areas of LDCs. The proportion of people living below the national poverty line in these areas is generally about twice as great as in urban areas. Typically, rural people in LDCs are 50 per cent more likely than their urban counterparts not to have access to sanitation or to attend secondary school, twice as likely not to have access to electricity or to attend primary school, and more than four times as likely not to have access to clean water.
The performance of the agricultural sector in LDCs is unsatisfactory. Agricultural labour productivity in LDCs between 2011 and 2013 was 19 per cent of that in other developing countries and just 1.8 per cent of that in developed countries. Given the concentration of the labour force in agriculture in LDCs, this broader productivity gap is the major cause of poverty in these countries and of the income divergence between LDCs and these other country groups. The total food trade deficit of LDCs has widened dramatically, from $2 billion in 1995-1997 to $21.8 billion in 2011-2013.
Key points
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Microfinance in rural areas of LDCs is hampered by high interest rates and short maturities, which can be countered by interest subsidies and in-kind microgrants.
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Official development assistance and development banks can be used to finance the public investment required to fill infrastructure gaps, so that LDCs can reach the Sustainable Development Goals.
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Information and communications technology provides opportunities to broaden the reach of financial services to rural areas.
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Financial literacy and better management of collateral and risks will help finance rural structural transformation in LDCs.
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tralac’s Daily News selection
The selection: Thursday, 11 February 2016
Tomorrow, in Luanda: the 6th Ordinary Summit of ICGLR Heads of State and Government will take place
In April: the first substantive CFTA trade-negotiating forum will take place
Featured tweet, @ECA_Lopes: Africa employs more than 100,000 expatriates at a cost of $4 bn/year to offset the annual migration by its skilled professionals
Profiled new postings: The African Union 2016 Handbook: English version, French version, tralac's Weekly Newsletter, Presidential Infrastructure Champion Initiative: 2015 Annual Report, Alternative Mining Indaba: communiqué, AIDF Africa Summit 2016: highlights
Book announcement: ‘Made in Africa - learning to compete in industry’ (Brookings)
Over the past forty years, industry and business interests have moved increasingly from the developed to the developing world, yet Africa’s share of global manufacturing has fallen from about 3% in 1970 to less than 2% in 2014. Industry is important to low-income countries. It is good for economic growth, job creation, and poverty reduction. ’Made in Africa: learning to compete in industry’, outlines a new strategy to help Africa gets its fair share of the global market. Case studies and econometric and qualitative research from Africa, as well as emerging Asia, help the reader understand what drives firm-level competitiveness in low-income countries. The results: while traditional concerns such as infrastructure, skills, and regulations are important, they alone will not be sufficient for Africa to industrialize. The region’s growing resource abundance also presents a challenge, and industrialization strategies will need to adapt.
Majority of Kenyans prefer to buy locally made goods, survey shows (Business Daily)
The January GeoPoll survey on spending habits and perceptions of the economy in Kenya, Nigeria and South Africa found that 58% of respondents in Kenya prefer locally made products as opposed to 17% who prefer imported goods, with the remainder saying they have no preference.
Namibia set to be a beef hub in southern Africa (StarAfrica)
Namibia is set to become the beef hub in southern Africa and beyond once the construction of a meat processing plant and feed lot at the Kavango Cattle Ranch is complete, Dr Michael Humavindu said on Wednesday. Humavindu, the deputy permanent secretary in the Ministry of Industrialisation, Trade and SME Development the construction of the facility in Kavango region, will be completed within two years. The beef processing plant will be built in the 200 000 hectares government cattle ranch, and would make Namibia one of the biggest distribution hubs for beef in the Southern African region, said the government official.
Tanzania: Govt set to abolish nuisance taxes imposed on businesses (IPPMedia)
The Finance and Planning Minister Dr Philip Mpango yesterday announced government plans to abolish nuisance taxes imposed on various businesses to unleash the potential of Small and Medium Enterprises. He, however, did not go into specific on which taxes in particular will be abolished but the minister cited the cashew-nut sub sector, saying that he has been informed by a legislator from cashew-nut growing area that there are 27 taxes charged on the crop.
India: Companies must explore Africa for producing pulses, oilseed: government (Economic Times)
"Can we think of a dispensation where Indian companies can consider investing in Africa for growing pulses and oilseeds, which are in short supply in India. Similarly, African businesses can think of engaging mutually beneficial collaborators in India," Agriculture Minister Radha Mohan Singh said at the India-Africa Agribusiness Forum organised by industry body Ficci. India attaches great importance to private sector participation in agriculture and agri-business. There is an impressive presence of private sector, including large business groups in food processing, logistics, supply chains including cold chains, he said.
Ethiopia: Textile industry sustainability, competitiveness under discussion
Opening the conference, Ethiopian Textile Industry Development Institute Director General Sileshi Lemma said: " The Ethiopian cotton, textile and garment sector is one of the key manufacturing industries which is prioritized by the government and is the most anticipated to considerably contribute to the success of GTP II generating about one billion USD export earning by the end of the plan period." The conference will help raise awareness on the importance of social and environmental standards , drawing attention to key sustainability challenges within the Ethiopian textile and garment industry and provide inspiration for practical action. [Related: ILO project on Ethiopia's garment and textile industry]
Kenya to enhance compliance of horticulture exports (Daily Nation)
The Kenyan horticultural sector is developing a digital system that will allow products that do not meet standards to be recalled anywhere along the value chain. The proposed technology based National Produce Traceability System is meant to build confidence on the Kenyan produce sold in the European markets by pre-empting regulatory action as producers take responsibility of failing to comply.
Trade crisis: Maersk warns 'abnormal' conditions in the global economy are much worse than 2008 (IBT)
Group chief executive Nils Andersen said the crude prices crisis and the slowdown in container freight rates pointed to a "massive deterioration" of the business, as Maersk has seen its share price halved over the last 10 months. Andersen said the company, which owns 600 ships, has suffered from a sharp decline in imports to west Africa, Brazil, Russia and Europe, which contributed to generate "abnormal" trading conditions over the last 12 months. [Dani Rodrik: 'The trade numbers game' (Project Syndicate)]
African Trade Policy Centre launches Third Cycle (UNECA)
The Steering Committee overseeing the activities of the African Trade Policy Centre, under its third programme cycle (ATPC III, 2016-19), met in Abidjan to review the outcomes of ATPC II; approve the Centre’s work programme and budget for 2016; and formally launch ATPC III. The Steering Committee approved the Centre’s 2016 work programme and budget with a number of recommendations, including more targeted support at the regional level and a focused resource mobilization strategy.
East African ICE updates: Time for collective leadership in Eastern Africa, Addressing inequality is indispensable for better economic outcomes
Federal President Joachim Gauck: speech to the Parliament of ECOWAS
Your own African solutions are also primarily needed here. But Germans and Europeans will stand by your side in all areas where you assume responsibility for your countries’ development and where you demonstrate the will to uphold democracy, the rule of law and human rights. The Economic Community of West African States will also have to play its part in security in the region in the future. The brutal attacks of recent weeks have shown us once again that the fight against terrorism and violence remains a pressing task. The plague of organised crime must be overcome. Piracy in the Gulf of Guinea, arms trafficking and the drugs trade weaken the entire region. Your Community has already played a role in combating these problems. The establishment of a standby force would be a further important step.
Business talks (Deutsche Welle): On Tuesday the German president attended a meeting of German and Nigerian entrepreneurs in Lagos. He urged Nigeria to dismantle trade barriers and to increase legal protection and transparency for investors in the country, where about 100 German companies are present. "The interest of the German economy is there," he said.
German support to the ECOWAS Commission (ECOWAS)
Trade and Customs: In this field of action, we implement the project “Promoting West Africa Trade Integration” , with additional funding from the European Union. Our support targets the capacities of the ECOWAS Commission to design and implement its trade policy and to promote trade within West Africa and between the region and the rest of the world. To enhance intraregional trade, we strengthen the ECOWAS Commission in promoting and improving the ECOWAS Trade Liberalisation Scheme. We also support the introduction of the Common External Tariff throughout the ECOWAS region by advising on legal changes and by offering training and workshops for customs administrations in ECOWAS Member States.
How to advance labour mobility in ECOWAS countries and Mauritania (ILO Africa)
Heads of public employment services, representatives of employers’ organizations and trade unions, and private recruitment agencies from ECOWAS Member States and Mauritania met in Dakar (9-10 February) to adopt an action plan for building capacity of institutions using Accueil-Emploi, an integrated database aimed at connecting job seekers with national and international employment offers. [Downloads available]
ILO, UNECA sign a new MoU to support labour statistics in Africa (ILO Africa)
Under the 2016-2019 Cooperation Agreement, the ILO and the UNECA will identify a core set of statistics to drive regular data collection, assess the current situation in African countries and associate other major stakeholders, including the African Union Commission and the African Development Bank. [Download the MOU]
DG Azevêdo kick-starts discussion on post-Nairobi work (WTO)
Director-General Roberto Azevêdo convened a meeting of all WTO members (10 February) to discuss the future work of the organization. It was the first meeting of the full membership since the WTO’s Ministerial Conference in Nairobi.[Prospects of reviving the WTO after Nairobi? (SAIIA)]
Five ways China's overseas investments are impacting African forests (Quartz Africa)
China’s investments in Africa have exploded in recent years, with outward foreign direct investment tock growing from $1bn in 2004 to more than $30bn in 2014. Investment in forests — particularly the timber sector — is no different. China’s overseas forest project investments grew from eight in 2007 to 84 in July of 2015. Today, Chinese forest investment can be found in 25 African countries. Yet in many cases this expanded investment has come at a cost to people and the planet. Five trends shine a light on the impact Chinese investments have had on Africa’s forests, and point to how both governments and companies should proceed in the future.
China's uphill battle against the ivory trade (The Diplomat)
Kenya hosts, today, a regional meeting on wildlife protection (Xinhua)
Zimbabwe: Illegal to reject rand, pula - govt (The Herald)
Zimbabwe: Leather exports drop by 95% (NewsDay)
Mozambique, UK unveil nutrition initiative (StarAfrica)
Kenyan Java House Africa triumphs against Ugandan Cafe Javas in crucial trademark court case (IPKenya)
COMESA-USA framework agreement for trade and investment: Sudan's input
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Presidential Infrastructure Champion Initiative (PICI) Report – 2015
Connecting Africa through Political Leadership
Foreword by His Excellency, President Jacob Zuma, President of the Republic of South Africa and PICI Chairperson
Over the past few years it has become apparent that infrastructure is vital to the sustainable development of our continent. The time is now to ensure that we reach our goal of a 7% growth rate per annum through the development of sufficient, solid infrastructure which spans across borders, regions and our continent.
It was for this very reason that, during the 23rd HSGOC meeting in Kampala, Uganda, on 24 July 2010, I proposed that African leaders should identify infrastructure projects of high developmental impact, and champion them. This proposal has since transformed into the PICI, which was endorsed and adopted by the AU Assembly in January 2011 in Addis Ababa, Ethiopia.
Africa is seeing a number of infrastructure-related trends emerging – infrastructure investment has quadrupled, exports have increased and its share in foreign direct investment continues to grow. However, we still face extreme economic inequality, compounded by factors such as climate change. For this reason, we need to build on the positive trends that are emerging. Key to this is regional integration and intra-Africa trade, which is facilitated through infrastructure development.
Through the PICI, regional and cross-border infrastructure will be developed to facilitate trade and investment. This initiative should ultimately unlock the economic potential of the continent and provide development opportunities for regions, countries and our people.
As the chairperson of this initiative, I have actively submitted regular progress reports on the PICI projects during the bi-annual HSGOC meetings at the AU Summits. I am delighted by the progress made by all the presidential champions on their respective projects. This certainly testifies to the firm commitment of Africa’s leadership to accelerating infrastructure development through political championing of specific high impact projects.
One of the PICI projects has been fully implemented, another is under construction and all the others are in different stages of implementation. We will continue to take these projects forward to full implementation. I believe that through the PICI, which could serve as the trailblazer for the broader PIDA and other regional and continental infrastructure projects, we are leading the charge in infrastructure development across the continent.
As endorsement of the success of the PICI, the Government of Kenya, under the leadership of His Excellency, President Uhuru Kenyatta, joined the PICI family earlier this year with its Lamu Port Southern Sudan-Ethiopia Transport (LAPSSET) Corridor Project. I welcome President Kenyatta on behalf of all my colleagues. The infrastructure gap in our continent remains large, but with the commitment of our presidential champions, the NEPAD Agency, AUC, RECs, member states, the AfDB, UNECA and the private sector, we will bridge this gap and unlock Africa’s potential.
Foreword by the Chief Executive Officer, NEPAD Agency, Dr Ibrahim Mayaki
Africa is a continent of opportunity and destination of choice with an unmatched resilience. Despite global economic challenges, the continent has been able to maintain an average GDP of over 5%. Poverty levels are falling, incomes are rising and education and health outcomes are improving. In 2014 Official Development Assistance (ODA) was estimated at USD55.2 billion, which is less than the official remittances of USD67.1 billion. Africa’s political governance has improved since 2000. Elections are increasingly becoming peaceful, and participation of women in political life has increased.
However, Africa’s greatest asset is its people. It is a young continent of over 1 billion people, with more than half of the population under eighteen years of age. It is projected that in 2030 the population will increase to 1.6 billion with about 300 million people classified as middle income.
One of Africa’s greatest challenges is regional infrastructure, and intra-Africa trade. In response to this need for infrastructure development, His Excellency, President Jacob Zuma of the Republic of South Africa, during the 23rd New Partnership for Africa’s Development (NEPAD Agency) Heads of State and Government Orientation Committee (HSGOC) meeting in Kampala, Uganda, on 24 July 2010, proposed that the implementation of regional and continental infrastructure projects be accelerated through political championing. The African Union (AU) leaders agreed with this proposal, and re-emphasised the importance of accelerating regional infrastructure development through committed political leadership, sponsorship and the championing of specific regional infrastructure projects. At this same AU Summit, the study for the Programme for Infrastructure Development for Africa (PIDA) was launched.
The 15th AU Summit adopted the recommendation of the 23rd NEPAD HSGOC meeting to establish the NEPAD High-Level Ad Hoc Subcommittee on Infrastructure comprising eight Heads of State and Government, with South Africa as chair. Other countries include Algeria, Benin, Egypt, Nigeria, Republic of Congo, Rwanda and Senegal. The Subcommittee was tasked with prioritising and consolidating infrastructure projects for high impact and results under this proposal. Consequently, during the 16th AU Summit in Addis Ababa, Ethiopia, on 30 January 2011, the Presidential Infrastructure Champion Initiative (PICI), together with its projects and champions, was endorsed and adopted by the AU Assembly.
At the AU Summit in January 2012, PIDA was endorsed by the AU Assembly as the continental framework for infrastructure development from 2012 to 2040. Although the PICI was adopted before PIDA, it is important to note that the PICI is not only a precursor to PIDA, but forms part of the overall PIDA. The success of the PICI will indeed give us assurance that PIDA will be successful and the PICI will also provide a template and learning experience for the implementation of the PIDA projects.
Tremendous progress has been achieved in implementing the PICI projects, and the initiative puts Africa on the right track towards unlocking its potential. The NEPAD Agency, acting as the secretariat and executing agency of the PICI and working closely with the country focal points of the respective states, the African Union Commission (AUC), the RECs, the African Development Bank (AfDB) and the United Nations Economic Commission for Africa (UNECA), continues to monitor the progress on the implementation of the PICI projects. Regular Technical Task Team (TTT) workshops are being held to monitor the progress of the projects and to provide a platform to share experiences in project implementation.
Today I am proud to say that one of these projects has been fully implemented, another is currently under construction, and all the others have progressed very well. I have no doubt that the NEPAD Agency, together with our partners and political champions will meet the infrastructure challenges of the continent.