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Food prices fall in November amid robust global inventories
Food security worsening in areas suffering from civil conflict and adverse weather conditions
Major food commodity prices fell in November, reversing about half their rise in the previous month, as the cost of internationally-traded staples, except for sugar, fell across the board.
The FAO Food Price Index averaged 156.7 points in November, down 1.6 percent from its revised October average, and 18 percent below its value a year earlier.
The FAO Cereal Price Index fell 2.3 percent, with coarse grain prices falling even more due to favourable harvests in the United States, the world's largest maize producer and exporter.
Vegetable oil prices fell 3.1 percent from October, aided by lower energy prices, and encouraging planting and production prospects for soy crops in South and North America.
FAO's Dairy Price Index also fell 2.9 percent amid thin volumes, suggesting that major importers have adequate stocks. Meat prices also fell, while sugar rose strongly for the third month in a row.
The FAO Food Price Index is a trade-weighted index tracking international market prices for five major food commodity groups.
Production forecast lowered, but global inventories remain large
FAO's Cereal Supply and Demand Brief, also released on 3 December 2015, slightly trimmed its forecast for world cereal production in 2015, which is now 2.527 billion tonnes, or 1.3 percent below the previous year's record. A lower forecast for maize production in China was the main reason for this month's downward revision.
Global cereal utilization is projected to grow by one percent in 2015/16, slower than in previous years, partly due to lower oil prices curbing industrial demand for biofuel crops. At 2.529 billion tonnes, demand will only require a modest drawdown from the world's currently large reserves.
As a result, the upcoming marketing season should be "generally comfortable", and world inventories by the close of season in 2016 will only be slightly below their record opening levels.
However, abnormal weather patterns associated with El Niño are expected to adversely impact cereal production in parts of Africa, Asia and Oceania, while several countries in Central America and the Caribbean, as well as in Asia, have already been affected. Dry weather in northern India also cut local cereal production in the 2015 season.
Conflict and adverse weather affect food security
Some 33 countries, including 26 in Africa, are in need of external assistance for food, due to drought, flooding and the needs of persons displaced by civil conflicts, according to FAO's new Crop Prospects and Food Situation, released on 3 December.
Food insecurity has worsened due to conflict, notably in Syria and Yemen, but also in countries such as Niger, Cameroon, Chad and the Democratic Republic of Congo that have taken in refugees from neighbouring countries.
The number of people in West Africa in a Phase 3 Crisis or above classification is forecast to rise from around 8 million people currently to more than 10.7 million between June and August 2016.
In East Africa, marked by a severe drought in Ethiopia as well as protracted conflicts, the number of people in need of humanitarian assistance is estimated at 17 million, 50 percent higher than a year ago.
The Southern Africa sub-region is also facing some strains as early seasonal dryness linked to El Niño is impacting cropping activities for 2016 cereal crops.
FAO now expects the 2015 regional output of coarse grains in Africa to drop by 12 percent to 67 million tonnes. Global coarse grain production for the year is projected to decline by 2 percent to 1.3 billion tonnes.
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tralac’s Daily News selection: 3 December 2015
The selection: Thursday, 3 December
Selected African trade and development conference alerts:
In Addis, in January 2016: 'Citizens’ Continental Conference', to be held on the margins of the AU Summit, 24-31 January
In Nairobi, next week: a CUTS conference on the theme 'Relevance of competition and regulatory reforms in pursuing SDGs in developing countries'
Launching, on Monday in Harare, Accra, Nairobi, Geneva: the 2015 Africa Capacity Report on the theme 'Capacity imperatives for domestic resource mobilization'
Today, in Luanda: Forum of SADC financial institutions
The Angolan capital, Luanda, will host this Thursday and Friday a forum of financial institutions of SADC member states to discuss the current situation and industrialisation in the sub-region. The forum will focus on the SADC Strategy of Industrialization and Working Plan, a statement from the SADC Financial and Development Resources Centre says.
PwC says Kenya firms pay less tax than their African peers (Business Daily)
Kenya is emerging as a tax-friendlier destination with businesses paying nearly 10% points less tax than the continental average and spending less time filing returns thanks to a technology-based tax system, according to a new PricewaterhouseCoopers report. The PwC data capturing tax payment trends for the one year to December 2014 shows a Kenyan company in total pays an average tax rate of 37.1%, using a mean 202 hours to comply with its taxes while making 30 payments. According to PwC, Kenya retains a competitive tax position in Africa with the continental average for the total tax deductions standing at 46.9%. Companies take 313 hours to prepare, file and pay their tax obligations on average in Africa. [Downloads]
Is Kenya ready for shift to tax havens? (Business Daily)
Kenya and other African countries have now established a technical group to discuss the recommendations contained in the BEPS Pack. The technical group will consider domestic legislative changes and provide recommendations to the Governments on tackling BEPS. However, it’s important to note that the OECD’s BEPS recommendations may not be applicable in all instances for Kenya given that its tax system and policy goals are different from any developed countries. However, the fact that we have large reliance on corporate income tax, particularly from multinationals, reflects the importance of handling transfer pricing and BEPS issues. Therefore, it is important for KRA to follow closely the development of the transfer pricing and BEPS issues to overcome the existing gap in our current tax legislation to maintain the basis of taxation, and reduce leakages in the collection.
EAC states adopt new measures to curb tax loss (The East African)
New reporting code for MNCs could save Africa $35b (The East African)
Kenya and South Africa tax deal takes effect in January (The Star)
India looks to amend tax pact with Mauritius to prevent tax evasion (Livemint)
India is in talks with Mauritius to amend the tax treaty between the countries to prevent its abuse for tax evasion, Akhilesh Ranjan, joint secretary in the income-tax department, said on Thursday. He did not rule out that India is seeking the right to levy capital gains tax. India has been trying to renegotiate the tax pact with Mauritius for the past few years to check so-called round tripping and other treaty abuses. Round tripping entails moving money out of one country into another, and getting it back under the garb of foreign capital.
Zimbabwe, South Africa trade war looms (Financial Gazette)
South Africa, Zimbabwe's major trading partner exporting over 70% of its products into the country, has lodged a formal complaint to government over import restrictions. The complaint by South Africa, presented to Industry and Commerce Minister Mike Bimha during a recent conference of SADC Ministers of Trade in Botswana to review the region's industrialisation policy, follows a raft of tax measures that have undermined competition by South African products on the local market. Bimha told a retailers conference in Harare last week that the South Africa trade minister had personally expressed his reservations against Zimbabwe's protectionist measures during the meeting in Botswana. He said he had defended the hikes. But he said it was "within South Africa's right to complain".
Uganda: Poor standards affecting exports to South Africa - envoy (Daily Monitor)
It isn’t lack of demand for Ugandan products that is making it difficult to penetrate South African market, but failure to meet international standards, the South African High Commissioner has said. “Phytosanitary standards are one of the reasons cited as to why some Uganda products have difficulty in finding access to markets in South Africa. It is, therefore, important to address these various challenges,” Maj Gen (Rtd) Kekoa Solly Mollo said. He made the revelation while announcing that South African companies registered in Uganda are to have a platform dubbed Forum for South African Businesses in Uganda. The forum, which comprises more than 70 South African companies that have presence in Uganda, will be launched in Kampala today.
India, China, SA raise stakes in trade battle with US, EU, Japan (Livemint)
At a closed-door meeting of select countries on Tuesday, trade envoys of India, China, and South Africa told WTO director general Roberto Azevedo that they will not accept the language proposed by the three facilitators as a basis for negotiating the draft ministerial declaration to be adopted at the WTO’s 10th ministerial meeting in Nairobi beginning on 15 December. The three countries presented detailed textual language to be inserted in the preamble and post-Nairobi work programme to reaffirm the continuation of DDA negotiations immediately after the Nairobi meeting.
Global Africa Investment Summit: speech by James Duddridge, Minister for Africa (FCO)
So as part of our implementation of our new spending review, I want a more strategic approach to Africa – including a reassessment of how we deliver and with whom. Much of Africa’s growth story comes from innovation – driven from the bottom up, by young people, by creativity and by entrepreneurial spirit. These are the relationships we want to build and invest in.
Aliko Dangote calls on African leaders to push EU-style freedom of movement and trade (IBT)
Although Africa's current landscape contains an array of regional integration agreements, Dangote outlined the issue that African businesses "create more jobs outside of Africa than in Africa", adding that to achieve growth the continent's nations need to "create jobs among ourselves".
IGAD-Djibouti: recommendations for improved border security management (IGAD)
The IGAD Security Sector Program held a research validation workshop with senior officials from different ministries and departments of the Government of Djibouti to review and analyze research findings and recommendations that was undertaken between September and December of 2014 on border security and management between Djibouti and Somaliland border given Djibouti’s unique geographical placement. The participants discussed effective and enhanced border management practices, frameworks and mechanisms that can be applied to the 58 Kilometre border that lies between Somaliland and Djibouti in the areas of counter terrorism, insurgencies, piracy, human trafficking, money laundering and other forms of trans-national organized crimes.
Breaking the metal ceiling: female entrepreneurs who succeed in male-dominated sectors (World Bank)
This paper uses a mixed methods approach to assess how women entrepreneurs in Uganda start (and strive) operating firms in male-dominated sectors, and what hinders other women from doing so. The study finds that women who cross over into male-dominated sectors make as much as men, and three times more than women who stay in female-dominated sectors.
Africa’s climate opportunity: adapting and thriving (AfDB)
Addressing Africa’s climate change challenges requires collaboration between a broad range of stakeholders, at COP21 and beyond. The recommendations in this section describe how African governments and the international community can ensure a successful climate change agreement at COP21 and a transition to green growth. [Download]
Sustainable transport and climate change: statement by MDBs (World Bank)
The MDB pledge is threefold: On climate finance: In autumn 2015, MDBs committed to significantly ramp up their climate financing for adaptation and mitigation. The World Bank, on that occasion, committed to increase its climate financing to potentially $29 billion annually. Transport will play a key role in the implementation of that commitment. On low-carbon transport solutions: The MDBs will increase their focus on low-carbon transport solutions and will continue to harmonize tools and metrics to assess transport-related GHG emissions. On adaptation: The MDBs will jointly develop a systematic approach to mainstream climate resilience in transport policies, plans and investments.
NEPAD/PIDA: New business approach of linking project preparation to financing approved (AfDB)
Stakeholders welcomed NEPAD-IPPF’s focus on regional and continental infrastructure projects. This, they agreed, was an area with a growing demand driven by deepening regional integration arrangements in Africa, and the need to link markets, enhance competitiveness and reduce the cost of doing business. Aboubakari Baba-Moussa, the AUC Director of Infrastructure and Energy, observed that while it was common to view regional projects as complex, “the aim should be to make them simpler through well-prepared projects”. According to him, regional projects are critical to Africa’s connectivity as well as in achieving Agenda 2063, the blueprint for Africa’s socio-economic transformation.
SA, China ink R94 billion worth of agreements (SANews)
Among the agreements that were signed on Wednesday was an action plan on the strengthening of the joint group between China and South Africa. This plan is set to accelerate bilateral cooperation in major projects such as locomotive procurement, investment in renewable energy and investment in industrial parks, as well as promotion of trade. In the private sector, Standard Bank and the Industrial and Commercial Bank of China signed an agreement worth R10bn over five years, which will focus on infrastructure and power. Investec and the Export-Import Bank of China signed a cooperation agreement to enhance trade and economic cooperation.
Industrial relocation windfall needs adequate preparations - don (Tanzania Daily News)
Former China Ambassador to Zambia, Zhou Yuxiao said the African governments needed to come up with the right policies to optimize the gains of the windfall from industrial relocation. He gave an example of some Railway Engineers who came from China for inspecting the railway line prior to rehabilitation but Tanzania imposed taxes on the equipment while Zambia waived them. This discourages those in authority on China side. “It is challenging,” said Amb Zhou, “strategies and policies for attracting capacity transfer and lager scale investment are still absent in many (African) countries.”
$8 billion Lagos-Kano rail tops agenda as Buhari meets Jinping (BusinessDay)
President Buhari had indicated to Xi Jinping at the New York meeting, that he wanted China to re-commence stalled rail projects under new terms that would see China providing nearly all the financing required. The statement added: “Of particular interest is the coastal railway project stretching for 1,402 kilometers linking Lagos in the West with Calabar in the East; a project that is expected to be financed with a $12 billion Chinese loan and which will create about 200,000 jobs”.
Zimbabwe, China ink 12 landmark deals (The Herald)
Achieving Zero Hunger: the critical role of investments in social protection and agriculture
As massive El Niño strengthens, UN emergency fund supports millions in affected countries (UN News Centre)
Integrity in development: AfDB and Hitachi conclude settlement agreement (AfDB)
Nigerian commission reduces MTN fine (Business Day)
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Achieving Zero Hunger: The critical role of investments in social protection and agriculture
The Food and Agriculture Organization of the United Nations (FAO), the International Fund for Agricultural Development (IFAD) and the World Food Programme (WFP) have prepared new estimates on the additional investments required for sustainably ending hunger by 2030, in line with the highest aspirations of the post-2015 sustainable development agenda and the draft Addis Ababa Accord, which clearly states that “Our goal is to end poverty and hunger”.
Despite progress in recent decades, including the near achievement of the Millennium Development Goal (MDG) target of halving the proportion of hungry people in the world by the end of 2015, about 795 million people – or around one in nine – still suffer from chronic undernourishment (dietary energy deficiency), or hunger.
The eradication of hunger by 2030 is a target of Goal 2 of the new Sustainable Development Goals to be approved in September 2015 at the 70th Session of the United Nations (UN) General Assembly. Ending hunger is also in line with the Zero Hunger Campaign promoted by the UN Secretary-General, and closely linked to the Sustainable Development Goal 1 target to eliminate poverty by 2030. Governments in various regions have responded to the call of the UN Secretary-General and have committed to eradicating hunger and poverty.
To achieve zero hunger by 2030, the international community needs to build upon approaches and options that have proven effective, and that ensure continuous access to food for the undernourished and improve livelihood opportunities for the poor and hungry. This report presents new estimates on investments required to eradicate poverty and hunger sustainably by 2030.
To estimate the additional investment requirements, we begin with reference to a “business-as-usual” scenario. In this scenario, around 650 million people will still suffer from hunger in 2030. We then estimate the investment requirements to sustainably eliminate poverty and hunger by 2030.
The report specifically considers how poverty and hunger can be eliminated through a combination of investment in social protection and targeted pro-poor investments in productive activities.
Estimates of the additional annual investment requirements in this report were originally prepared for the Third International Conference on Financing for Development, which took place from 13 to 16 July 2015, in Addis Ababa, Ethiopia, and revised for the UN Summit for the adoption of the post-2015 development agenda and the UN General Assembly Debate in September 2015.
Social protection
Extreme poverty, hunger and some types of undernutrition can be rapidly eliminated with adequate social protection to close the poverty gap between earned incomes and the poverty line. The poverty line has been defined as the income necessary to meet all basic needs, including enough food to avoid hunger.
As there has been some discussion over the sufficiency of poverty line income, for the purposes of this work a 40 percent band above the extreme poverty line income of US$1.25/day, in purchasing power parity (PPP) terms, is used. Hence, the estimated additional income required to lift the poor out of poverty is calculated on the basis of US$1.75 rather than US$1.25 PPP per day.
Accelerating pro-poor growth
Additional investments in productive activities are required to catalyse and sustain higher pro-poor growth of incomes and employment than in the “business-as-usual” scenario. To be pro-poor, investments in urban and rural areas, including in agriculture, should be targeted so that the poor earn enough to overcome poverty by 2030. Progressively, as the incomes of the poor increase because of earlier pro-poor investments, the need for social protection to close the poverty gap declines.
Consequently, the cost of implementing such an approach involves the additional requirements of both social protection and productive investments while recognizing the implications of the higher incomes generated. First, the average annual “gross poverty gap transfer (PGT)” from 2016 to 2030 – inclusive of a mark-up of 20 percent for administrative costs and leakages – is estimated. Second, the additional annual global investment requirements in productive activities are also estimated.
An average of US$265 billion per year during the period 2016–30 over and above the resources required for the “business-as-usual” scenario is estimated to be needed to fund the PGT for social protection and additional pro-poor investments to the raise earned incomes of the poor to the poverty line level by 2030. As the majority of the world’s poor live in rural areas, they will benefit from the bulk of this amount, estimated at US$181 billion annually. Initially, the poor are expected to mainly earn incomes from wage work and their meagre productive assets (such as land), but
are not expected to be able to invest much. To induce private investments, the additional investment required has to be adequately remunerated. Such remuneration is provided for in the calculations. However, as the poor save more, they are also able to invest more, and thus become more productive, and increase their earnings. Hence, public resource mobilization is key to both social protection and pro-poor investments in order to enable the poor to raise their earned incomes over the 15-year time period.
Both public and private investments can help to accelerate the poor’s transition from reliance on social protection transfers through additional earned income from productive investments. While private investors, notably farmers themselves, are, by far, the largest source of investment in rural areas, investment in public goods – such as rural transport and other infrastructure as well as productivity-enhancing research, development and extension – will be necessary.
To summarize, hunger and extreme poverty can be eliminated quickly with adequate investments in social protection. However, sustained and sustainable poverty and hunger elimination requires a combination of social protection and pro-poor investments, which will quickly take people out of hunger and extreme poverty, and progressively raise the poor’s earned incomes. Appropriate policies and coordinated programmes can ensure that the poor benefit from the growth and employment opportunities generated by the additional (public and private) investments.
However, low-income countries with higher incidences of poverty and hunger will find the resource requirements for such an approach beyond their means, and will need continuous external support until they can raise their domestic incomes and tax revenues sufficiently through growth and other policy reforms.
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PwC says Kenya firms pay less tax than their African peers
Kenya is emerging as a tax-friendlier destination with businesses paying nearly 10 percentage points less tax than the continental average and spending less time filing returns thanks to a technology-based tax system, according to a new PricewaterhouseCoopers report.
The PwC data capturing tax payment trends for the one year to December 2014 shows a Kenyan company in total pays an average tax rate of 37.1 per cent, using a mean 202 hours to comply with its taxes while making 30 payments.
According to PwC, Kenya retains a competitive tax position in Africa with the continental average for the total tax deductions standing at 46.9 per cent. Companies take 313 hours to prepare, file and pay their tax obligations on average in Africa.
“Electronic filing continues to have a significant impact in easing the burden of tax administration. Economies which have invested in online filing and payment infrastructure are reaping a digital dividend from these systems.
“Going forward we expect to see a more efficient and effective tax collection process as Kenya continues to harness technology in the tax practice,” said PwC Kenya tax leader Steve Okello.
The total tax rate measures the overall burden borne by a company as a percentage of its commercial profit, which includes corporate tax, labour taxes and other taxes such as municipal levies and fees.
Kenya can leverage on its relatively favourable tax regime to attract investment, mitigating against the higher cost of power and transport that have led to manufacturing companies relocating to other countries in the region.
The report titled Paying Taxes 2016 is based on company tax data for the one year to December 2014, and therefore does not yet capture the full impact of the electronic filling of tax returns through the I-Tax system that has simplified the process, according to PwC.
“The focus has moved from reducing tax rates for companies to embracing technology and relieving their compliance burden…. low-income economies (however) continue to face the biggest reform challenges,” says the PwC report.
The Kenya Revenue Authority (KRA) has pegged its hopes on the electronic tax system to capture a wider tax base – especially SMEs – which would increase tax revenues and reduce pressure on the taxman to increase taxes for both companies and individuals.
In October, KRA chairman Marsden Madoka said higher compliance by SMEs would raise collections to a minimum of Sh2.5 trillion in the next three years from Sh1.08 trillion in the last fiscal year that ended on June 30.
The KRA has a tax target of Sh1.36 trillion this financial year, although it missed the first quarter (July to September) target of Sh328 billion by Sh28 billion.
The taxman attributed the revenue shortfall to lower corporate taxes as companies posted lower earnings due to higher financing costs and a tough business environment as interest rates rose in the quarter.
In East Africa, Kenya is, however, ranked behind Uganda and Rwanda in terms of tax rate, with the companies in the two countries paying at 36.5 and 33 per cent respectively, while Tanzania’s rate is 43.9 per cent.
» Download the full report: Paying Taxes 2016 (PDF, 4.97 MB)
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Multilateral Development Banks join forces to support climate friendly transport in developing countries
Lagos, Nigeria, is the sixth largest city in the world. It is also the fastest growing and one of the most congested in the world. Commuting for Lagosians can be a serious challenge. Until recently, transport options to get to work were either small minibuses (the danfos) or larger minibuses (molues). Traffic was bad and transport expensive.
With funding from the World Bank and the Agence Française de Développement, the Lagos Metropolitan Transport Authority (LAMATA) designed and created the first bus-based mass transit system (BRT) in Africa. It aimed both to enhance transport efficiency in the city and to reduce transport emission. Successful beyond expectation, the BRT system has moved in the last five years of operations more than 400 million passengers. According to LAMATA, reduction in transport related greenhouse gas emissions was measured to be around 13% in project areas – due to the use of the buses and reduce trips of private cars. And a reduction of 20% in road accidents was also observed in those areas.
The transport-climate equation
Catering to an increasing demand for transport services is a challenge that both developed and developing countries face. At the same time, transport represents 23% of energy related CO2 emissions and is therefore a significant contributor to climate change. A further complication to the transport-climate equation is that transport systems that cannot withstand the emerging impacts of climate change will prove burdensome. They will impose high costs for maintenance and repair; limit community access to jobs, schools, and hospitals; and cause large economic losses. Ensuring the climate resilience of transport investments is also critical in allowing other sectors to quickly rebound after natural disasters and climate-related shocks.
The other side of the equation however, as illustrated by the Lagos BRT example, is that climate-friendly transport solutions are also those that serve the poorest and most vulnerable members of the community, because they are less expensive and often provide better access than other means. Women, for example, are less likely to own and use a car and more likely to use walk or use public transportation as their main mode of transport. By removing cars or minibuses from the roads, BRTs, metros and trains also improve road safety. And importantly, while today’s investments in sustainable transport will pay economic, social and climate dividends now and for future generations, the reverse is true: investments now in carbon-heavy transport will lock-in countries and cities on unsustainable development paths.
MDBs stand ready to support COP21 transport commitments
This message has not gone unheeded. Ahead of COP21, a significant number of governments are committing, through their Intended Nationally Determined Contributions, to invest further in climate-friendly transport. Benin, for example, has pledged as part of its INDC to improve traffic flow in large cities, to develop a river-lagoon transport system with navigable rivers, and to modernize and extend its rail infrastructure. Bangladesh has identified as potential mitigation action modal shift from road to rail, including through metro systems and bus rapid transport systems in urban areas. Bangladesh also mentioned reducing traffic congestion, including by building expressways and with public transport measures.
To support these commitments, the 8 Multilateral Development Banks have pledged» to increase financial and technical assistance to countries implementing sustainable transport solutions.
“The international community, MDBs and other transport stakeholders, must rally behind developing countries efforts to tackle the climate-friendly transport agenda.
The MDB pledge is threefold:
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Climate Finance: In autumn 2015, MDBs committed to significantly ramp up their climate financing for adaptation and mitigation. The World Bank, on that occasion, committed to increase its climate financing to potentially $29 billion annually. Transport will play a key role in the implementation of that commitment.
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Low-carbon Transport Solutions: The MDBs will increase their focus on low-carbon transport solutions and will continue to harmonize tools and metrics to assess transport-related GHG emissions.
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Adaptation: The MDBs will jointly develop a systematic approach to mainstream climate resilience in transport policies, plans and investments.
Transport Resilience – a new World Bank report
The MDBs, in their transport statement, emphasize the importance of improving the climate resilience of transport systems and commit to build awareness on the criticality of protecting transport services so that they can continue to deliver social and economic benefits under current and future climate change scenarios.
In its new publication entitled “Moving Towards Climate-Resilient Transport”, the World Bank notes that while countries are investing massively in transport infrastructure – estimated globally at $1.4 to $2.1 trillion per year – few developing countries have yet developed a systematic approach to mainstreaming the building of resilience in the transport sector.
The World Bank has been working with client countries to ensure that transport plans and investments are robust to current and future climate: for example in Morocco where the World Bank conducted a study on the adaptation of the Moroccan transport sector to climate change and evaluated the vulnerability of the road sections; or in Can Tho City, Vietnam, where it looked at the costs to transport from flooding.
The World Bank is now committed, in partnership with the MDBs and other key actors in the transport community, to scale up resources and expertise to clients to enable them to integrate climate change analysis into transport plans and investments and to thus enhance local and countrywide climate resilience.
» Moving Toward Climate-Resilient Transport: The World Bank’s Experience from Building Adaptation into Programs (PDF, 14.33 MB)
Joint Statement by the Multilateral Development Banks on Sustainable Transport and Climate Change
MDBs Join Forces to Ramp up Climate Action in Transport
We, the group of eight multilateral development banks (MDBs),[1] commit to supporting countries implementing sustainable transport solutions. We will do so by providing critically needed financial and technical support to assist countries in responding to rising aspirations for greater mobility and connectivity, in a sustainable way. This will include stimulating and supporting increased global climate action through transport.
We believe that climate change is a defining challenge of our time. Actions to reduce greenhouse gas (GHG) emissions and stabilize warming at 2 degree Celsius will fall short if they do not include the transport sector. Reversing the trend in emissions growth will require action on mitigation to decouple GDP growth from GHG emissions. Action is also needed to adapt transport systems to better withstand the impacts of climate change – access to safe and reliable transport services is woven into the fabric of economies and communities so natural disasters and other climate related service disruptions can have drastic consequences.
To date, over 160[2] Parties to the United Nations Framework Convention on Climate Change have expressed their intention to take enhanced action on climate mitigation and adaptation through national plans or Intended Nationally-determined Contributions (INDCs). Many INDCs highlight the need for investment in sustainable transport systems and services to support the transition towards low-carbon and climate-resilient growth.
At the United Nations Rio+20 Conference on Sustainable Development in 2012, our eight MDBs committed to invest in more sustainable transport in developing countries. We are on track to meet our pledge of $175 billion of loans and grants for more sustainable transport in developing countries by 2022 – with $65 billion committed so far. We have also developed common arrangements for measuring and monitoring our support for sustainable transport – with our third joint annual progress report published this week.[3]
Going forward, we recognize the need to integrate climate change considerations into transport planning, design and investment, and support action that embraces climate mitigation and adaptation with both public and private sector across all transport modes. We also expect to take part in the process of deciding on indicators to be used for tracking progress on the transport-relevant Sustainable Development Goals.
Climate Finance[4]
In 2015, the MDBs committed to significantly ramp up climate finance for adaptation and mitigation by 2020, and transport is expected to play a key role.[5]
With the aim to increase transparency of climate finance flows and to better coordinate and improve support to countries adapting to and mitigating climate change, the MDBs have developed a harmonized approach to track climate finance flows. Over 2011-14, when we began jointly tracking climate finance flows, we have delivered over US$100 billion in financing for climate action in developing and emerging countries.[6] This includes $19 billion for adaptation and mitigation in the transport sector.
Low-carbon Transport Solutions
We will accelerate our efforts to increase the sustainability of existing and new transport systems. There are significant opportunities to shift policies and investments through public transport system design, vehicle efficiency improvement, demand management, regional development policies, and land-use planning.
To improve transparency on the climate impacts of our investments, we have now agreed on joint principles for GHG accounting in transport, and will continue to work towards harmonizing our approaches for estimating GHG emissions.
More Action on Adaptation
We recognize the importance of improving the climate resilience of transport systems. We commit to building awareness of the need to protect transport services so that they can continue to deliver social and economic benefits under current and future climate change scenarios. We will work towards building a more systematic approach to mainstreaming climate resilience in transport policies, plans and investments through developing improved tools and methodologies, capacity building and project financing. To this end, we have been working with other international financial institutions to screen potential climate risks in our project pipelines.
The case for climate action has never been stronger. We are committed to work with the UN Secretary-General’s High-level Advisory Group on Sustainable Transport and the international community to continue making sustainable transport a priority sectoral focus for climate action.
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[1] African Development Bank, Asian Development Bank, CAF-Development Bank of Latin America, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank, Islamic Development Bank, and the World Bank.
[2] As of November 19, 2015. See http://unfccc.int/focus/indc_portal/items/8766.php
[3] See Progress Report (2014-15) of the MDB Working Group on Sustainable Transport.
[4] With respect to climate finance the MDBs referred to are African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank, and the World Bank Group.
[5] See Joint MDB statement on Climate Finance.
[6] See 2014 Joint Report on Multilateral Development Banks’ Climate Finance.
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tralac’s Daily News selection: 2 December 2015
The selection: Wednesday, 2 December
COMESA’s Policy Organs meetings begin
The 35th COMESA Policy organs meetings have begun in Lusaka and will run until 8 December 2015. The Committee on Administrative and Budgetary Matters was the first to meet and will run for two days, 1 and 2 December 2015. About 100 delegates representing government of all the 19 COMESA Member States and COMESA institutions are participating in the meetings that are taking place at the COMESA Secretariat. The other Policy Organs that will follow are the Inter-Governmental Committee and Council of Ministers.
China and the African regional economic communities: transforming multilateral cooperation (CCS)
This policy brief highlights an alternative platform through which cooperation could be fostered. African Regional Economic Communities increase the bargaining power of African states, without losing the instrumental capacity of implementing and monitoring policies effectively. China’s engagement with the RECs would not only nurture regional integration, but also enhance China’s co-operation with Africa as a whole.
Doubts over African trade corridor plans (SciDev)
Huge trade corridors crisscrossing Africa could cause "irrevocable" environmental damage without realising many of their supposed development benefits, say researchers. Centred on the construction of major roads or railways, these 'development corridors' have been touted primarily as a way to boost agricultural markets, mineral exports and economic integration. But an analysis of 33 planned or existing corridors in Sub-Saharan Africa found only five "promising" candidates that are likely to substantially increase farm production without serious side effects. In the study, another six were labelled "inadvisable" due to negligible agricultural benefits and high environmental costs, while the net benefits of the remaining 22 corridors were judged "marginal" by the team from James Cook University in Australia. [Download]
Related: The African Governance and Space project (AFRIGOS), Braai in the no-man’s land of Namibia and Zambia (New Political Geographies)
Priorities for small and vulnerable economies in the WTO: Nairobi and beyond (Commonwealth Secretariat)
Small, vulnerable economies are those WTO members that, in the period 1999 to 2004, had an average share of (a) world merchandise trade of no more than 0.16% or less, (b) world trade in non-agricultural products of no more than 0.1%, and (c) world trade in agricultural products of no more than 0.4%. In the Commonwealth, there are 31 small states, defined as sovereign countries usually with a population of 1.5 million people or fewer.
Ethiopia's manufacturing sector (AfDB)
The main objectives of this study are twofold: to provide a diagnostic and analytical assessment of the current status of the manufacturing sector in Ethiopia, and to contribute to the process of analysis and policy formulation by identifying binding factors, constraints, opportunities and strengths for the development of the sector in Ethiopia. The service sector continues to be the main engine of growth of the economy. Despite the strong policy emphasis on agriculture, its contribution to overall growth has not been commensurate with its share in GDP. The contribution of the manufacturing sector to growth, employment and exports has remained minimal. In addition, reflecting declining sectoral terms of trade, the manufacturing sector share of GDP (in current prices) has shrunk.
Manufacturing exports not only represent a relatively low percentage of total merchandise exports, but also the share has shown a declining trend in recent years. Ethiopia exports very few manufactured commodities compared with the Eastern African average and selected Asian countries, indicating both a low manufacturing production base and a lack of competitiveness of the sector. Ethiopia’s manufacturing export is one of the least diversified compared to its potential global competitors. Moreover, there has been comparatively little progress in diversifying the export mix. This slow change in the export dynamics may have been due to the low level of market and product innovation of entrepreneurs as reflected by the dominance of resource-based manufacturing exports. [Companion reports from the AfDB series can be accessed here]
Ethiopia: selected issues (IMF)
Ethiopia’s experience is a case in point for the complex interaction between inequality and growth. Unlike other rapidly growing economies, the country has not experienced a significant increase in inequality, as measured by the Gini coefficient, even as poverty reduction occurred at a rapid pace. The government’s development plans have had a strong focus on inclusive growth, together with an increase in pro-poor spending. Yet, structural transformation and poverty reduction may require the implementation of reforms that could lead to an increase in income disparities. This highlights the potential policy trade-offs between growth and inequality. The objective of this paper is twofold.
Botswana: Country Partnership Framework FY16-20 (World Bank)
The new CPF will guide the World Bank Group’s support to Botswana in addressing its national priorities of eradicating abject poverty, reducing inequality, and promoting job creation. The CPF is firmly anchored in the priorities identified by the WBG’s Systematic Country Diagnostics for Botswana and the government’s national development plans. Guided by these priorities and building on successful cooperation to date, the CPF proposes a strong program of technical and financial support focusing on private sector-led growth and jobs, strengthening human and physical assets, and effective resource management. [Download]
A dangerous divide: the state of inequality in Malawi (Oxfam)
This report examines the sharp rise in inequality in Malawi between 2004/5 and 2010/11, and models the link between poverty, inequality and growth from 2015 to 2020. It analyses inequality in Malawi across a number of dimensions, including education, health, wealth and income/ consumption, and also looks at how inequality is reinforced by corruption, gender inequity and an unequal distribution of political power. The authors warn that unless the government takes action, many more Malawians will live in poverty by 2020.
South Sudan: post-conflict recovery of the private sector (World Bank Blogs)
While the recent peace agreement will hopefully ensure more stability and security, efforts to foster an enabling business and regulatory environment need to be stepped up in order to gain tangible peace dividends. A conducive regulatory environment can be qualified as an external driver of private sector growth. A strategic enabler would be Public Private Dialogue. Stories abound of the private sector's resilience during the war. The South Sudan Business Forum didn’t seem to be affected, either. Working groups kept on going and the Chamber of Commerce, together with the South Sudan Business Union, created the Emergency Response Committee. However, the fiscal situation of the government and the struggling private sector are affecting the sustainability of SSBF.
Sudan: unilateral sanctions hit innocent harder than political elites, warns UN rights expert (UN News Centre)
Not so easy: Doing business in Nigeria (ThisDay)
To improve our dispute resolution mechanisms and increase our ease of doing business, there must be a concerted effort to improve on our justice delivery system, case management procedures in the various courts, modern court infrastructure in the courts and arbitration centres and furthermore there should be a limit to the challenge of arbitral awards in the courts which can be achieved by conducting an enlightenment campaign for judges on international arbitration and finally, there should be a focus on training in arbitration at the University and Law School.
Kenya: Treasury puts cargo stations control directive on hold (Business Daily)
The Kenya Ports Authority has retained the right to intervene and re-direct suspect cargo consignments to any private holding station despite a move by the Treasury to defer the implementation of the controversial directive aimed at curbing revenue leaks at such facilities.
UK logistics firm Atlas closes Kenya subsidiaries, shifts focus to Ethiopia (Daily Nation)
Sustainable value chains (GREAT Insights)
This issue of GREAT Insights brings a range of reflections and insights on these questions, related to current international dynamics, the various dimensions of sustainability and development of GVCs, the need for diversification and upgrading in resource-based developing economies and to foster regional integration. It also highlights some key considerations on the role of trade policy in general, the role of donors, and the EU in particular.
Global value chains and the exchange rate elasticity of exports (IMF)
Using a panel framework covering 46 countries over the period 1996-2012, we first find some suggestive evidence that the elasticity of real manufacturing exports to the Real Effective Exchange Rate has decreased over time. We then examine whether the formation of supply chains has affected this elasticity using different measures of GVC integration. Intuitively, as countries are more integrated in global production processes, a currency depreciation only improves competitiveness of a fraction of the value of final good exports. In line with this intuition, we find evidence that GVC participation reduces the REER elasticity of manufacturing exports by 22%, on average.
Addressing barriers to digital trade (E15 Initiative)
COP21 updates: Ban tells African leaders they have ‘enormous stake’ in success of climate conference (UN News Centre), AU introduces $20bn renewable energy plan (Bloomberg), Taking stock of evolutions in the trade and climate relationship (BioRes), What has climate to fear from trade? (BioRes), The TerrAfrica Partnership (World Bank)
Climate change and developing country interests: cases from the Zambezi River Basin (UNU-WIDER)
We consider the interplay of climate change impacts, global mitigation policies, and the interests of developing countries to 2050. Focusing on Malawi, Mozambique, and Zambia, we employ a structural approach to biophysical and economic modeling that incorporates climate uncertainty and allows for rigorous comparison of climate, biophysical, and economic outcomes across global mitigation regimes. We find that effective global mitigation policies generate two sources of benefit:
Sub-Saharan Africa: stocktaking of the housing sector (World Bank)
Africa faces a major housing crisis due to rapid urbanization and a growing slum population. New, targeted approaches to affordable housing are necessary if countries want to take advantage of the demographic shift to make cities inclusive, spur economic growth and expand job opportunities, according to a new report by the World Bank Group. The report, Stocktaking of the Housing Sector in Sub-Saharan Africa, projects that Africa could have as many as 1.2 billion urban dwellers by 2050 and 4.5 million new residents in informal settlements each year, most of whom cannot afford basic formal housing or access mortgage loans.
Amazing facts on Urban Africa from day one and two of Africities summit (M&G Africa)
BRICS bank set to issue first loans (Business Report)
SA in the queue as BRICS bank gears up to lend (Business Day)
Mozambique's Minister of Trade: 'Energy sector is the anchor for diversifying growth' (Club of Mozambique)
Cameroon: towards a new World Bank Group strategy
L’examen de la politique d’investissement de la République de Madagascar (UNCTAD)
Swaziland: Private Sector Competitiveness project update(World Bank)
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What has climate to fear from trade?
Climate is, in economic terms, an externality. The pursuit of conventional economic growth, particularly through production and energy processes, can cause incremental changes to the biosphere that are not directly willed. Moreover, even if these biosphere changes and impacts generate a cost, these are usually not felt or are perceived extremely weakly by the relevant economic actors in comparison to the benefits of economic action.
While new non-polluting production processes may well eventually be discovered, a change in global economic values reducing demand for energy and greenhouse gas (GHG)-intensive production of goods might occur, and consumer demand might become sensitive to GHG footprints of goods and services, it is nonetheless unrealistic to expect revolutionary changes for these factors in the short term.
Reducing GHG pollution and climate impacts is economically inefficient from the perspective of most individual economic actors. However, if legal obligations are created and enforced to bind on all relevant actors, then this problem should not exist. The “tragedy of the commons” will be avoided by the action of a superior power capable of constraining all those who consume the commons. No economic actors will welcome the cost imposition but at least the legal obligation will seem fair.
However, where some potential commercial rivals are outside the reach of those legal obligations, there will inevitably be “free riders” unless governments or other creators of the relevant legal obligations act in coordination. The great majority of legal obligations are imposed and enforced at the level of national or regional governments. Economic activities between, rather than within, these national or regional units constitute international trade itself governed at the multilateral level by the WTO. Thus economic actors fearful of free riders undercutting their competitive position by avoiding costs imposed on the “home team” will look carefully at relevant WTO rules. If free riding on climate costs is not prevented by those rules, expect trouble.
And this is not only a question of competitiveness. The world’s atmosphere is a single unit even if its governments are not, so measures that simply have the effect of moving emissions from one government’s jurisdiction to another – a process often described as carbon leakage – are ultimately pointless, whatever they do to the terms of trade.
The carbon leakage problem
The UN Framework Convention on Climate Change (UNFCCC) represents the major multilateral forum for international coordination of climate policies giving rise to legal obligations. However, it is in principle weaker than the WTO, its members are arguably less united about its objectives, it is often perceived as unfair in its approach to cost comparability, has little enforcement capability, and has failed to have much practical impact. Many economic and climate observers also saw the withdrawal of the EU from its climate-driven attempts to impose common levels of cost in international aviation at the 2013 International Civil Aviation Organization (ICAO) Council as a significant indication that trade objectives will beat climate ones in the push and pull of international policymaking.
So from the perspective of many climate – and business – stakeholders, the edifice of global control over GHG emissions can only stand if there is a system preventing international imports escaping from national cost impositions to reduce emissions, and allowing exporters to remove those costs where they compete against those who do not have to bear them. Logically, in the absence of a strong UNFCCC, the guardian of that system could only be the WTO.
Is competitiveness really so important?
Plenty of stakeholders strongly object to the idea that serious government action to reduce GHG emissions will just not happen without firm safeguards against changes in business competitiveness. The first objection often raised is that changes to a company’s international competitiveness from domestic climate actions and their costs are a myth. There is a background of constant changes to absolute and relative costs of many different key factors of production and the naturally varying factors of geography, history, skill levels, and intellectual property. Few if any accredited and peer-reviewed examples can be found of changes in cost created by climate action clearly affecting the location or quantum of production of relevant goods and services. But this point tends to be met by responses that have raw political force.
First, representatives of companies and industries can say they understand the true reasons for their locational and production decisions better than anyone else. Second, even if few examples of company closures due to relocations can be found at current levels of cost associated with regulation, the increases in prices which the climate community says are needed could change the position entirely. Third, it stands to reason that increasing costs to any extent at all when competitiveness is balanced on a knife-edge risks tipping the situation into a loss, with consequences that cannot be recovered.
The second objection looks at the position from the perspective of national competitiveness. Even if it is true that certain companies will be adversely affected, the impact on national prosperity as a whole will be lost in the constant noise of changes, growth, and decline in comparative advantage. Moreover, if the impact is that high carbon industries will be removed, surely that should be accepted as a desirable outcome, and one which may make the national economy more fit for an inevitable low carbon global future. The problem here is the iron law of politics that makes the complaints of the incumbents who would lose out ring louder than support from less powerful or not fully-formed potential beneficiaries.
The third objection is that the history of social progress is one of government imposition of costs on business. Petty considerations of commercial or national advantage forgone have not been enough to prevent action in other fields, so there is no reason why they should be decisive in the face of the global emergency of climate change. Unfortunately, the reason that the economic consequences of these changes were eventually set aside was the political demand from voters and the changing moral environment, which grew strong enough to overcome the economic interests in the status quo; something that has not yet sufficiently manifested itself in the climate context yet for whatever reason.
Common but differentiated responsibilities
One major challenge to the carbon leakage and competitiveness approach is that the UNFCCC was founded on the principle of common but differentiated responsibilities (CBDR). By signing the UNFCCC the developed world accepted it would bear costs over developing countries, tipping international competitiveness in their favour. Even under forthcoming changes to the CBDR system to graduate the difference between developed and developing countries, the principle of a tilted playing field remains, and is highly sensitive. Other features of the UNFCCC founding documents and political landscape suggest that developed countries have no business trying to manipulate or avoid normal world trade rules to protect themselves from this economic consequence, and must take into consideration the impacts on international trade of their climate mitigation “response measures,” even if these are alterations in underlying demand rather than specific alterations to the terms of trade. Whatever the logic of these arguments, developed country businesses tend, particularly since the global financial downturn of 2008, to reject them or limit them severely, and most developed country politicians have not been willing to defend them in the face of national economic concerns. And so while the climate community may treat the initial competitiveness arguments from business and their responses to the counter-arguments with disdain or disbelief, many also recognise these as a fact of national political life, and understand that some way has to be found to deal with them.
Levelling up
It is generally accepted that there are three broad paths available to achieve a “levelling up,” in other words, ensuring that no third party accrues economic benefits by not taking substantive climate action. These are reducing the national costs of climate change action; globalising the costs of climate change action; and adding or reducing costs of particular flows of goods and services at the border to accord with the treatment of those goods and services in the target market. Reducing the national costs has been the most popular approach so far. Industries regarded as “trade exposed” in an environment where key international competitors have no obvious climate costs are granted some form of exception from the application of costs under national climate policies, typically by exempting them from the cost of purchase of national or regional emissions permits. But immediately potential WTO warning signs begin to flash. Derogations from national regimes purely to increase the competitiveness of national industries in international trade are prima facie illegal. The calculation of the “appropriate” level of climate cost coverage in other countries and the compensatory costs, exemptions, or subsidies for different industries and products is likely to be extremely complex and contentious. However there are some examples of rough-justice calculations of thresholds, costs, and benefits used in the EU Emissions Trading Scheme (ETS) and in other spheres, such as tax determinations, that could offer precedents.
The second path is international coordination of the application of climate costs. In essence, this is the approach of the UNFCCC, with the important proviso that the CBDR principle ensures that coordination does not have to mean harmonisation. Costs introduced in pursuit of UNFCCC obligations are a long way from harmonisation, in particular, the progress towards an international carbon market with global pricing for emissions reductions has stalled and perhaps for a very long time. Smaller groups of countries, coming together outside the UNFCCC framework to harmonise prices and treat imports from and exports to non-club members on a common basis, are obviously a second best option but again this lights up WTO warning signs. In the absence of clearly justified exemptions in international trade legislation, it is an obvious instance of departure from the most-favoured nation principle, and without the protection of conformity to a UN-administered, multilaterally agreed regime it could look anomalous in trade law terms. In principle, the coordination could happen voluntarily within international trade associations or business groups rather than between governments; but the patchy and constrained public interest motivation that usually characterises businesses, and the difficulty of within-industry sanctions to ensure comprehensive coverage and enforcement systems even at the national level, are problems in principle for confidence in business action.
Adding or reducing costs at the border through border adjustment measures (BAMs) is the third path and now discussed increasingly frequently. Nevertheless, there are obvious difficulties in choosing and justifying the precise cost level, particularly for products with complex supply chains. Moreover, any form of special taxes or their equivalent on imports and exemptions for exports, once again lights up warning indicators. There appears to be ambiguity about the WTO status of taxes imposed on energy content. From the perspective of the climate community, therefore, all three ways of levelling the playing field look difficult and potentially dangerous in WTO terms.
Environmental goods and services
Another trade-related approach is the favouring of environmentally friendly goods and services against high carbon alternatives. Suspicions that definitions of “environmentally friendly” are being rigged to favour domestic industries can, however, quickly arise. The recent plurilateral initiative towards an Environmental Goods Agreement (EGA) involves 17 WTO members, counting the 28-nation EU as one, and may lead to effective action on tariff reduction. But for serious inroads to be made into the conventional economic superiority of high carbon, the notion of “environmentally friendly” has to be extended to include goods and service whose production processes and supply chain are low carbon compared to some alternatives. This pitches climate objectives against the conventional WTO concept of “like products,” since high carbon and low carbon production processes generally leave no impact on the final product itself, and at present have only niche effect on consumer preferences.
Sanctions
The third, most contentious, approach involves trade sanctions against countries failing to take adequate or appropriate domestic measures against GHG emissions. Merely skimming the surface of a complex and highly charged subject, it is safe to say that the justification of trade sanctions proposed for whatever reason, tends to be problematic. But provisions for trade sanctions do exist under multilateral environmental agreements. The most frequently cited example being the Montreal Protocol on ozone-depleting substances, whose mixture of financial aid and trade sanctions is believed to be responsible for its success, and frequently leads the climate community to question why similar approaches cannot be made to work for GHG emissions.
The most important reason for the difference is that the parties to the Montreal Protocol agreed specifically on a regime with a trade component and the parties to the UNFCCC did not. Indeed the careful protection, within the latter, of the existing trade regime and its norms has already been noted. However, from the climate community perspective, it is arguable that a climate regime without effective sanctions has proved not to work. While the world hopes that a bottom-up system can emerge from the pivotal Conference of the Parties (COP) in Paris, France, and create a good peer-reviewed system for the delivery of independent national emissions reduction targets, very few believe that acceptable global targets will be met as a consequence in the immediate future. Perhaps the world may have to come back to sanctions at some stage in the future.
What needs to change, at least ideally?
On the basis of a wholly non-professional understanding of WTO instruments and jurisprudence, the following issues certainly seem to need to be seriously debated. First, the ambiguities in the WTO General Agreement on Tariffs and Trade (GATT) Article XX need to be removed – specifically the words “unjustifiable” and “arbitrary” in the chapeau – and the place of global climate protection assured in clause (b)’s “necessary to protect human, animal and plant life and health” and clause (g)’s “relating to the conservation of exhaustible natural resources.” Second, the inclusion of the atmosphere in the definition of the conservation of exhaustible natural resources needs to be seriously debated. Next, subsidies and procurement practices commensurate with the promotion of domestic low carbon energy sources and production processes should be specifically authorised as a policy option. The principle of most-favoured nation treatment should also allow a derogation for distinctions based on evidence and defensible differences in national control of GHG emissions, taking into account historic responsibilities and capabilities. Finally, specific provision should be made to ensure that smartly-designed BAMs are treated as legitimate national tax measures, applicable to imports as well as domestic production.
However, even if the arguments in favour of these changes are accepted, there is at present no politically realistic prospectus for comprehensive amendment of global trade legislation or a revised approach to trade in international climate policy. More indirect approaches, via declarations, guidelines, or the development of jurisprudence, are more likely to work, even at the expense of long processes and uncertain outcomes when the urgency of climate action is mounting.
Henry Derwent is a Senior Advisor, Climate Strategies. Derwent is also the Co-convener of the E15Initiative Expert Group on Measures to Address Climate Change and the Trade System
More details on the ideas outlined in this article can be found in a longer research piece published by the E15Initiative: What has climate to fear from trade? Implemented jointly by ICTSD and the World Economic Forum, the E15Initiative convenes world-class experts and institutions to generate strategic analysis and recommendations for government, business, and civil society geared towards strengthening the global trade and investment system for sustainable development.
This article is published under BioRes, Volume 9 - Number 10, by the ICTSD.
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Ban tells African leaders they have ‘enormous stake’ in success of climate conference
At a gathering of African leaders at the United Nations climate change conference (COP21), UN Secretary-General Ban Ki-moon stressed that their continent has an enormous stake in the success of the global event which aims to reach a new universal climate agreement to limit the rise of global temperature.
“Africa is particularly vulnerable to the effects of climate change,” Mr. Ban told top government officials at a High-level meeting at the Paris-Le Bourget site of the conference, in the north-east of the French capital.
“Much of its economy depends on a climate-sensitive natural resource base, including rain-fed subsistence agriculture. Disruptions in food or water supplies pose serious risks not only for your economies but also for political stability, particularly in fragile states,” he continued.
Noting that COP21 “got off to a good start yesterday,” the UN chief said the leaders’ personal engagement and ownership will be essential in producing the “ambitious agreement that Africa’s people and the entire world need.”
“Already, your leadership has helped make 2015 a year of opportunity,” he told them. “Many of you were present in Ethiopia in July for the adoption of the Addis Ababa Action Agenda on Financing for Development. Many of you were part of the historic gathering in New York in September for the adoption of the 2030 Agenda for Sustainable Development and the 17 SDGs.”
These agendas aim to wipe out poverty, fight inequality and tackle climate change over the next 15 years.
“Now, here in Paris, governments have the opportunity to secure a global climate change agreement that can pave the way towards a safer, healthier, more prosperous and sustainable future,” Mr. Ban insisted.
He reminded leaders that sustainable energy offers huge economic opportunities: “With the plummeting price of solar and other renewables, many African countries are moving quickly to embrace a greener pathway that still enables them to meet growing energy demand.”
Despite “strong momentum” towards a meaningful agreement, Mr. Ban said key political issues remain unresolved.
“There is a lot of work to do here in Paris, and the stakes are very high, especially for the most vulnerable people and countries,” he underlined. “Science tells us we have only a few years left before the window could close on our ability to prevent severe, pervasive and irreversible climate impacts.”
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Priorities for Small and Vulnerable Economies in the WTO: Nairobi and Beyond
Since the establishment of the World Trade Organization (WTO) more than 20 years ago, small and vulnerable economies (SVEs)* have sought to gain special recognition and treatment within the multilateral trading system due to their unique characteristics. It is beyond question that structural and systemic constraints based on a host of internal and exogenous factors including geography, market size and structure, demography, and climate change, make SVEs distinct among WTO members.
The purpose of this issue of Commonwealth Trade Hot Topics is to contribute to the discussion on the adjustment of SVEs to the multilateral system, and present approaches to be considered on the road to the Nairobi WTO Ministerial Conference in December 2015 and beyond.
In 2001, the Doha Ministerial Declaration established a Work Programme for Small Economies, under the auspices of the General Council, ‘to frame responses to the trade related issues identified for the fuller integration of SVEs into the multilateral trading system, and not to create a sub-category of WTO members.’ The Ministerial Declaration at Hong Kong in 2005 reaffirmed the need to ‘adopt specific measures that would facilitate their [small economies’] further integration into the multilateral trading system, without creating a sub-category of WTO members.’
A number of ad hoc and discipline specific flexibilities have been negotiated and agreed in keeping with the mandate of the 4th Ministerial Conference in Doha in 2001. Notwithstanding the expansion of flexibilities, SVEs continue to face challenges in the expansion and deepening of their exports into global value chains. When considered as a group, they have been the slowest to return to trend growth in the post-crisis period and now confront a myriad of challenges, including deteriorating fiscal and current account positions as well as elevated levels of external debt. While domestic policy interventions are critical elements within the policy toolbox required to respond to these challenges, the multilateral system can play a more meaningful role in this effort by moving beyond ad hoc and issue specific responses to systemic and cross-cutting solutions for SVEs.
The 10th WTO Ministerial Conference (MC10) in Nairobi, Kenya, offers an opportunity for SVEs to present concrete suggestions on how the multilateral trading system can provide a tailored response of a systemic nature that would support the beneficial integration of SVEs into the world economy.
It is undeniable that SVEs suffer from a combination of inherited and inherent characteristics that impede their ability to integrate into the global economy. A compelling body of empirical evidence has emerged that supports the proposition that they confront peculiar structural limitations, including: high production costs; small internal markets; a narrow range of export products and services; small and highly specialised labour markets; high transportation costs; and physical isolation from external markets. Moreover, high fixed costs of private sector activities imply cost disadvantages and a more concentrated market structure that is less competitive. In the public sector, these cost structures result in higher transactional costs and reduced service volumes. While it is accepted that international trade can assist in overcoming rigidities related to scale, the ultimate impact of international trade on SVEs is limited.
Given their cost structures, SVEs have traditionally relied on exports from sectors where the export price includes market or institutional quasi rents. These have usually taken the shape of high remunerative prices for commodities benefiting from non-reciprocal preferences, particularly in the European market. Reforms to the European Union import regime for commodities, including bananas and sugar, have led to the erosion of the trade preferences enjoyed by many African, Caribbean and Pacific (ACP) SVEs. These changes in the external environment led by the enforcement of multilateral rules have resulted in severe economic displacement and painful adjustments in many SVEs – particularly those mono-crop microstates that benefited from non-reciprocal preferences. Indeed, no other group of developing countries, including least developed countries (LDCs), has been obliged to undertake such wide-ranging adjustments during the past two decades.
* Small, vulnerable economies (SVEs) are those WTO members that, in the period 1999 to 2004, had an average share of (a) world merchandise trade of no more than 0.16 per cent or less, (b) world trade in non-agricultural products of no more than 0.1 per cent, and (c) world trade in agricultural products of no more than 0.4 per cent. In the Commonwealth, there are 31 small states, defined as sovereign countries usually with a population of 1.5 million people or fewer.
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Inclusive and sustainable industrialization key driver of Agenda 2030, say participants at UNIDO General Conference
Inclusive and sustainable industrial development lies at the core of UNIDO’s mandate, it is one of the main drivers for sustainable development and will be crucial for achieving the 2030 Agenda for Sustainable Development.
“With the Sustainable Development Goals (SDGs), UNIDO can support countries moving towards higher degrees of economic, social and environmental sustainability. This enhanced role is recognized by Member States, the broader United Nations System, the private sector and all stakeholders. Inclusive and sustainable industrial development is more relevant than ever,” said LI Yong, UNIDO Director General, in his opening speech at the sixteenth session of UNIDO’s General Conference, taking place this week in the Vienna International Centre (VIC) in the Austrian capital.
The week-long event focuses on sustainable industrialization for shared prosperity. Special attention will be given to the criticality of Sustainable Development Goal 9, which focuses on building resilient infrastructure, promoting inclusive and sustainable industrialization, and fostering innovation.
The opening session was attended by government officials and representatives of all UNIDO Member States, as well as Austrian President, Heinz Fischer. A highlight of the Conference will be a keynote speech delivered later in the day by Nobel Prize winner in economics, Joseph Stiglitz.
Conference participants agreed that UNIDO has a central role to play in implementing the 2030 Agenda. The thematic priorities of UNIDO fully reflect the three inter-related dimensions of sustainable development – economic, social and environmental – and equip the Organization well to deliver on the Sustainable Development Goals to eradicate poverty, create jobs, combat environmental degradation and promote sustainable economic growth.
Participants further highlighted the longstanding efforts by UNIDO through its services in tackling the root causes of migration by supporting job creation.
It was also noted that the new generation of UNIDO technical cooperation projects aims to effectively trigger an industrialization process with tangible results and larger developmental impacts.
UNIDO’s new Programme for Country Partnership, exemplifies UNIDO’s quest for innovative, high-impact solutions to accelerate the implementation of Goal 9. After less than a year of implementation, the new approach has achieved concrete results and proved to be a successful strategy to attract investments to realize broad and sustainable industrial development.
The Programme was initiated on a pilot basis in Ethiopia and Senegal. Peru has been chosen as the next country where UNIDO’s Programme for Country Partnership will be implemented.
UNIDO has also forged many new partnerships with major international private sector companies such as Heineken, DNV Business Assurance, Royal Philips, Dell International, the Volvo Group, Illy caffé, AEON Reality, and Yamaha Motor Co., Ltd, among others.
Speaking about the UN Climate Change conference in Paris, Director General Li said that UNIDO would present its “new policy direction with regard to climate resilient industrialization and an integrated and ‘nexus’ approach to greenhouse gas emissions and resource depletion in the context of the 2030 Development Agenda”.
“The fight against climate change is one of the most important goals of the new agenda for development,” said Li.
In 2016, UNIDO will mark its 50th anniversary. “Since its creation almost fifty years ago, UNIDO has always stood by developing countries with technical cooperation and policy advisory services to support them in their efforts to eradicate poverty and create wealth for their citizens,” said Director General Li.
UNIDO has always recognized the diverse needs of its Member States. Least Developed Countries (LDCs) have been the priority for UNIDO’s work in the development cooperation arena. “Through industry, LDCs can lift themselves out of poverty,” said Li. “At the same time, as LDCs successfully develop to graduate to Middle Income Country status, UNIDO is fully engaged and committed in their continuing development efforts to eliminate, for good, the persistent and expanding pockets of poverty within their economies.”
UNIDO also offers its development support to Small Island Developing States. Referring to the newest UNIDO Member State, Li said, “I am particularly happy to acknowledge the accession of the Marshall Islands to UNIDO.”
New open data platform adds further transparency to UNIDO’s inclusive and sustainable industrialization work
A new platform launched this week by the United Nations Industrial Development Organization (UNIDO) as part of its transparency initiative provides details on all ongoing programmes and projects.
The Open Data Platform was officially presented at the 16th session of the UNIDO General Conference taking place in Vienna this week.
UNIDO’s Transparency Initiative which aims for “more transparency for all stakeholders allows for better monitoring and reporting on results” was launched by the Director General of UNIDO in May.
The Open Data Platform displays an interactive world map with details on UNIDO’s ongoing programmes and projects in various countries and regions. It includes outcomes and outputs, timelines, financial information, information on gender equality, and project documents, as well as country statistics and donor information.
The Open Data Platform has been designed to display information and documents directly from UNIDO’s Enterprise Resource Planning (ERP) system, which supports the project- and knowledge-management processes.
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Brics bank set to issue first loans
The $50 billion New Development Bank (NDB) – or Brics bank – should issue its first loans by April next year, said its first president, Kundapur Kamath.
One loan would be issued for each of the five countries that make up the Brics forum – Brazil, Russia, India, China and South Africa – which established the bank.
Kamath also raised the intriguing possibility that the NDB might not seek a Triple A rating on capital markets because this would require it to hold large reserves rather than lending more money for development.
Kamath, who was appointed in May to head the bank, was speaking on Tuesday at the Department of International Relations and Co-operation during a visit to South Africa to consult bankers and officials about establishing the bank.
The NDB was created to fill gaps left by existing international financial institutions and development banks such as the World Bank and International Monetary Fund.
These banks seek Triple A ratings by adopting conservative lending policies and so can lend at lower interest rates. Less conservative policies would drive up interest rates.
But Kamath said that the main problem for developing and emerging economies was not interest rates, but currency exchange rate fluctuations. The NDB aimed to overcome these by issuing loans in the currencies of each of the Brics member countries, rather than in US dollars or euros.
Some diplomats expressed scepticism about this strategy, suggesting that SA’s volatile rand, for instance, would impose unacceptable risks to other Brics currencies.
But Kamath said that the rand was only volatile relative to external currencies such as the US dollar. It was not volatile relative to the Russian rouble for example. And borrowing in the currencies of other Brics countries should help stabilise the rand.
Kamath also said, contrary to speculation, South African banker Lesley Maasdorp, who is one of the vice-presidents of the NDB, would not head the bank’s African regional office in South Africa, the African Regional Centre. Instead it would be headed by a Chinese national.
The African Regional Centre would be set up within months, he said.
Kamath said some critics had asked why the world needed yet another development bank. He said it had been calculated that there was a global demand for one trillion dollars of infrastructure so the $100 billion capital which the NDB would eventually rise to would only provide one tenth of that.
Kamath said the critical difference between the NDB and existing development banks would be speed.
First of all, the bank was being set up in record time. He had only taken up his position in July and the bank would start recruiting staff this month.
In the meantime it would second officials to process the first loans. The NDB would also aim to be fast in disbursing loans, without undue delays for appraising loan applications or imposing conditions.
Kamath said the South African Reserve Bank, private South African bankers and the Johannesburg Securities Exchange have all assured him that local capital markets were deep enough to sustain the NDB and that there was no danger of it crowding out other borrowers.
The same was true of the other two Brics economies he had assessed so far – China and India.
Kamath said the first loans would go to the five Brics member countries. Other African countries would only be able to access NDB loans by joining the bank. But membership would be opened to other countries soon.
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Doubts over African trade corridor plans
Huge trade corridors crisscrossing Africa could cause “irrevocable” environmental damage without realising many of their supposed development benefits, say researchers.
Centred on the construction of major roads or railways, these ‘development corridors’ have been touted primarily as a way to boost agricultural markets, mineral exports and economic integration. But an analysis of 33 planned or existing corridors in Sub-Saharan Africa found only five “promising” candidates that are likely to substantially increase farm production without serious side effects.
In the study, another six were labelled “inadvisable” due to negligible agricultural benefits and high environmental costs, while the net benefits of the remaining 22 corridors were judged “marginal” by the team from James Cook University in Australia.
“Africa has the potential to leapfrog into a more sustainable, inclusive and green form of development”
Andrea Athanas, African Wildlife Foundation
The corridors are predicted to together extend for more than 53,000 kilometres and are likely to threaten more than 2,000 protected areas, according to the authors. They say the worst offenders should be cancelled and others should only go ahead in combination with strict mitigation strategies.
“From an environmental perspective, this is the biggest thing that’s ever happened in Africa’s history,” says environmental scientist and lead author William Laurance. “Roads change everything. They change the economic dynamics, they change the social dynamics, they change the environmental dynamics and they’re pretty much irrevocable.”
The study, published in Current Biology on 25 November, assessed each corridor’s overall impact by comparing its potential to boost agricultural profits with its conservation value. This was calculated by combining population density figures with an environmental assessment based on habitat, biodiversity, ability to absorb carbon and the presence of endangered species.
The authors concede that lucrative mining projects are the driving influence behind many corridors. But Laurence says these were not considered in the analysis because extractive industries rarely share their rewards among citizens and so often contribute little to a country’s development.
However, the paper’s assumption that better transport will bring agricultural improvements that will alleviate food security may be flawed, says Wolfgang Zeller, a researcher at the University of Edinburgh in the United Kingdom.
Zeller, who starts a five-year research project on African transport corridors in January, says much of the expansion in the continent’s agricultural market has been in cash crops – essentially an extractive industry. “There is reason to be even more sceptical than the authors about the benefits of corridors for wider society in Africa,” he says.
The paper says development corridors should include wildlife protection measures such as land-use restrictions and environmental offsets. But Laurance says even the best mitigation strategies can be like “treating cancer with band aids” and so he would prefer to see at least a third of the planned corridors cancelled.
Calls for a moratorium on development corridors are unlikely to succeed though, says Andrea Athanas, an African Wildlife Foundation programme design manager focusing on Tanzania’s Southern Agricultural Growth Corridor.
“Africa has the potential to leapfrog into a more sustainable, inclusive and green form of development,” she says. “In the places that matter the most, we need to make sure the development coming in is synced up with both conservation imperatives and communities.”
This article was originally published on SciDev.Net. Read the original article.
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Taking stock of evolutions in the trade and climate relationship
What are the links between trade and climate change? How has the relationship between these two policy areas changed over the years?
Parties to the UN Framework Convention on Climate Change (UNFCCC) have kicked off their annual negotiations, this time in Paris, France. Countries have agreed to hammer out a new climate regime by the time the meeting closes, geared to take over upon expiry of the current Kyoto Protocol at the end of the decade, and capable of keeping the planet below a two degree Celsius rise from pre-industrial levels. Momentum building up to the talks from the international community, business, and civil society has been strong. However, while this might augur well for a positive result, delegates from nearly 200 nations still have a lot of work to undertake in the next fortnight to deliver a “Paris agreement.” In particular, negotiators must navigate a complex draft text with various options for each part of deal, which will cover areas such as mitigation, adaptation and loss and damage, finance, technology development and transfer, among others.
In contrast to the Kyoto Protocol, which only mandates emissions-cuts from a pre-defined list of developed countries, UNFCCC parties agreed in 2011 in Durban, South Africa that the new deal would be universally applicable. At last year’s meeting in Lima, Peru, parties confirmed this shift, calling on all countries to outline at least a mitigation component in their “intended nationally determined contribution” (INDC). Governments had earlier said that these self-defined INDCs should form the basis of the agreement. These developments have necessarily sparked new dynamics, tensions, and questions within the UNFCCC negotiating corridors, as well as reflection on how to translate the principles of the 1992 Convention into new climate governance arrangements. Many others in the international community, too, are waiting to see what Paris might deliver and whether it will be enough to tackle the climate challenge at hand. A recent UNFCCC review of the aggregate contribution made by the INDCs to date – which mostly target cuts for the 2020-2030 period – finds that global emissions would remain between 11-22 percent higher in 2030 compared to 2010 levels.
The remainder of this article looks at key ways the UN climate talks have evolved since the world’s last effort to secure a global climate pact in 2009 in Copenhagen, Denmark, with an emphasis on the trade-relevant parts. It also provides some insights on the intersections between the multilateral trade and climate regimes and where trade policy might be used to help the world shift towards a low-carbon future.
What has changed since 2009?
Conversations among stakeholders have noticeably evolved since the UNFCCC gathering in the Danish capital. For several years following that meeting, a lot of effort was dedicated to getting the multilateral climate process up to speed again, which meant that negotiators were to some extent distracted from the main task of getting down to solving the problem posed by high-carbon growth models. There was a real loss of faith in the UN process that ultimately needed some time to fix.
The current phase of the talks now seems actually more focused on delivering mitigation action and with more of a sense of urgency. The shift from the former parallel tracks known as the Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG-KP) set up in 2005 and the“Ad Hoc Working Group on Long-term Cooperative Action under the Convention (AWG-LCA)” established in 2008 to one consolidated Ad Hoc Working Group on the Durban Platform for Enhanced Action (ADP) in 2011 with a clear mandate to develop an agreement with legal force under the Convention applicable to all parties by this December has made the multilateral negotiations somewhat clearer and more targeted.
Another evolution in the last six years has been around carbon pricing. Prior to Copenhagen many experts had called for a “global price on carbon” as the best response to climate change by capturing the external costs wrought by emissions that are not necessarily directly factored into the production and consumption costs. After 2009 the concept of a global carbon price went somewhat out of fashion as it was simply out of reach. In parallel the climate community increasingly started to talk about and design other possible mitigation policy options. Interestingly the carbon pricing concept is now back in vogue, although this time it is being seen in a broader context of a range of necessary policies and no longer as the only solution. There has also been a move away from an idea of a universal carbon price, in favour of a reality in which we will see differentiated prices between countries and regions, and in this sense the idea clearly has matured. A report from the World Bank, for example, finds that existing carbon prices in various schemes range from less than US$1 per tonne of carbon dioxide equivalent (CO2e) emitted under Mexico or Poland’s carbon tax through to US$130 per tonne of CO2e for Sweden’s carbon tax.
When it comes to competitiveness concerns, often raised in relation to carbon pricing, these would not be fully addressed by differentiated carbon pricing. However, there is research indicating that even a low price is capable of inducing behavioural change, and would thus to some extent help alleged competitiveness distortions. And after all, a low carbon price is likely to be preferred over no carbon price, also for competitiveness reasons. The private sector too is now more involved in this latest resurgence of interest in carbon pricing with many companies either integrating carbon costs into their business model, using shadow carbon prices, or joining calls for a greater uptake of such policies.
Overall, compared to a few years ago, it seems as if there is a greater economy-wide mobilisation towards working on solving the climate challenge. Many, of course, still question whether the multilateral system is really going to deliver an effective agreement. There is a recognition too now that action through the UN alone is not enough. This has manifested in the interesting launch of the “Lima-Paris Action Agenda” designed to account for climate contributions made by non-state entities, many of whom are key economic actors, and therefore helping to build a bridge between commercial and climate concerns. Whereas this is clearly a positive development, questions remain with respect to accounting, and accountability. How to ensure that the same pledge will not be counted more than once, indicating a stronger mitigation effort than what is actually planned? And how to hold actors, in particular non-state players, accountable to their pledges? Answers given by the UNFCCC so far are not convincing.
Whither climate and global economic, trade governance?
A growing body of literature is attempting to understand the economic impacts and consequences of climate change. A new report from the OECD, for example, finds that a temperature rise of four degrees Celsius above pre-industrial levels could hurt GDP between 2-10 percent by the end of the century relative to a no-damage baseline scenario. Despite this important connection the links between trade – a key driver of the global economy – and the UN climate regime to date have been fairly limited. Article 3 of Convention does refer to the need to cooperate to promote a supportive and open international economic system that would lead to the sustainable economic growth and development of all parties. The same paragraph also stipulates that measures taken to tackle climate change, including “unilateral efforts” at the domestic level, should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade. However, although this article is often referred to in a general sense, few specific conceptual discussions have been had on its full implications from a systemic perspective.
There are nonetheless a few pockets within the talks where more specific trade topics might be usefully fitted into the climate action agenda. Negotiations have been ongoing over the years under the UNFCCC’s subsidiary bodies – charged with implementing and providing scientific and technological advice for the current climate regime – on addressing the impact of the implementation of “response measures” or the actions parties take to tackle climate change.
Article 4.8 of the Convention specifies that parties should give full consideration to necessary actions required to meet the needs of developing countries arising from the adverse effects of climate change and/or the impact of the implementation of response measures. Article 2.3 of the Kyoto Protocol, meanwhile, specifies that when meeting emissions reduction targets parties should strive to minimise any adverse effects, including on international trade, as well as social, environmental, and economic impacts on other parties and particularly developing nations.
Talks on response measures within the UNFCCC have proved tricky. A mandate for a two-year forum designed to discuss various issues expired in 2013 and parties have since been in the process of trying to figure out how to address response measures moving forward. Although the topic could see some progress in Paris, the concept remains quite controversial, for various historic reasons such as the perception that this is a platform to compensate economies highly dependent on fossil-fuel exports from losing out too much.
In an ideal world some sort of new response measures platform could be used for reviewing climate policies and their impact on various key areas of economic activity, particularly in context of a climate architecture with universal action on the one hand, driven by self-determined domestic policies on the other hand. Since the response measures forum so far has been unable to address these issues in a holistic manner, much due to its inherently thorny nature, perhaps such an exercise might be usefully transposed into a review of the INDCs that many parties have now signalled could be an important part of the Paris deal.
Another trade and climate link that has gained attention over the years is around carbon markets. By putting a price on carbon, and with increasing use by jurisdictions around the world, these can help to reduce competitiveness concerns stemming from different levels of mitigation ambition. Talks on establishing global norms for market-based and non-market based mechanisms – which would in theory cover international emissions trading – have nevertheless proved slow in the UNFCCC’s subsidiary bodies.
The current draft text for the new post-2020 regime contains a few proposals on this front but overall a number of experts agree that the spread of carbon markets will likely occur regardless of the UNFCCC process. The Paris deal could provide a useful “hook” with agreement on certain standards to establish comparability, avoid double counting, and have some sort of standard for international transfers to make sure a tonne is a tonne no matter where it is abated, but without having to resolve the whole design issue around a global carbon market.
“International bunker fuels,” the emissions from fuel used for international aviation and maritime transport, are another area of intersection between trade and climate change. While the Kyoto Protocol addresses this issue in Article 2.2 suggesting that developed countries shall pursue limitation or reduction of emissions of greenhouse gas emissions from aviation and marine bunker fuels, working through International Civil Aviation Organization (ICAO) and the International Maritime Organization (IMO) respectively, the issue has not really been taken up as much in the climate talks.
Yet this is an area in the trade-climate intersection where efforts need to be scaled up. In fact this is the most direct impact on climate change from trade, and if trade is to be sustainable, emissions from aviation and shipping, both projected to grow, need to be curbed through international cooperation. A step-by-step approach may be envisaged, such as addressing emissions from shipping in distinct geographic regions, thereby both boosting abatement efforts while also paving the way for multilateral solutions.[1]
A new regime, a new relationship?
Clearly the emerging dynamics of the new climate regime might be a game changer for some of the ways governments cooperate internationally around climate change. With a planned universal regime, the world is looking at a much broader climate mitigation effort than seen before, alongside a bottom-up approach whereby countries will use very different instruments and means to achieve their mitigation pledges. This could have implications for trade in terms of how these different policies and measures influence relative prices, demand and supply, and therefore for trade flows. For the trade policymaking community, the significance of Paris will take some time to digest, but it is likely that the range of new climate policies may test the limits of existing trade rules not the least as some countries start scaling up the use of subsidies and other support schemes to clean energy. Some of these support programmes remain in the “grey zone” with regard to international trade rules and careful policy design is needed for optimal outcomes for both climate and trade. It should not be excluded that trade rules may need to be revisited, or at least clarified, to ensure that they are fully supportive of effective global climate action.
Another issue in this context is that of embedded carbon. The volumes of carbon embedded in goods and services that are being traded globally are increasing and today account for almost as much as one quarter of global emissions. This fact will need to be acknowledged and addressed if we are to be successful in curbing emissions. A first step would be to develop better accounting practices, which should be used in parallel with the current system which is based on territorial emissions, to inform policymaking. Second, there is a need to develop policy instruments for abatement purposes. Much can be done by domestic, consumption-related policies such as regulatory standards, labelling, and information campaigns, rather than direct trade policies. Even the former, however, would indirectly affect trade flows. Again, there may be a role for the trade community in recognising embedded carbon in trade and revisiting the concept of “like” products, thereby being able to treat imports differently depending on the level of embedded carbon.
The relationship between the trade and climate communities has also evolved in time. A few years ago the link was rather expert driven and debated at an academic level. Today there is a more proactive approach to trade and climate change policymaking among decision makers. For example, the WTO’s Committee on Trade and Environment (CTE) has discussed the potential trade impacts of carbon footprinting, while regional trade agreements are including cooperative language around “low carbon development” and specific chapters on energy trade.
In June 2013, moreover, US President Barack Obama made an explicit link between trade in clean energy goods and climate efforts through his executive “Climate Action Plan.” As part of a list of international efforts to address climate change, Obama signalled the US would work with trading partners in the WTO towards global free trade in environmental goods, including for clean energy technologies. A group of 17 WTO members are now in the process of negotiating a tariff liberalising “Environmental Goods Agreement (EGA)” and have explicitly indicated that this could be a contribution to the environmental protection agenda including efforts under the UNFCCC to combat climate change and transition to a green economy.
Institutionally, however, the two regimes continue to remain relatively distinct. This may not be a bad thing given the different memberships and mandates between the UN and the WTO. But it is important that the UN system takes the lead for helping governments to address market failures and to internalise environmental costs, so that trade is able to contribute to sustainable growth and development, rather than to exacerbate distortions. In addition, the UN system could draw on some of the good lessons – and there have been some – from the trade system. The WTO’s Trade Policy Review Mechanism (TPRM) provides one multilateral model for the type of oversight that could be applied to the INDCs. In addition, the trade world has seen a diversification in recent years of alternative avenues for cooperation through regional and “plurilateral” agreements – involving sub-set groups of interested WTO members – which could potentially inspire actors in the climate arena. Conversely, the WTO could draw on expertise around climate technologies in the UNFCCC’s Technology Mechanism, which might eventually need to see governments explore ways to have a better connection between the trade and climate communities in this area specifically.
Harnessing trade for a low carbon future
Overall, if deployed correctly, trade can be used as a tool to support climate action and the right alignment of policies remains much more important than the potential tensions or friction. International trade could in particular help to scale up the deployment of environmentally-friendly goods and technologies by lowering tariffs, non-tariff barriers to trade, and smoothing the delivery of environmental services between different countries. This includes products related to clean energy, energy efficiency for mitigation purposes, and possibly even those relevant to adaptation. On this front, the WTO members participating in the EGA have held a series of talks since launching in July 2014 with the aim of identifying precisely which products will be eligible for tariff cuts. Several climate-relevant items, particularly those relevant to clean energy, are reportedly in the mix.
Moreover, while EGA participants have indicated that the deal will initially focus on removing tariffs on products, a number of experts agree that this moderate first step would be significant as a framework for continued effort. In the long term, it would be necessary for the EGA to move beyond tariffs to take on areas such as non-tariff barriers (NTBs) and environmental services trade, as well as broadening its membership to more developing countries. As an “open plurilateral,” the tariff cuts in the EGA will be applied to the full WTO membership on a “most-favoured nation” basis, which means that there are benefits already for those that haven’t joined. As a full member, however, developing countries would be able to play a role in any eventual review of the EGA list of goods and they could benefit in economic terms from gains from trade such as a better integration in global value chains, economies of scale, and specialisation. In addition, the global climate benefits of the deal would be larger if more countries joined, as this would further drive down the costs and enhance the access to and uptake of climate friendly technologies such as clean energy.
A potential systemic implication of the EGA is that it could help reduce the fear of trade rules as a threat to climate action and instead help stakeholders see it as something useful that can be part of the solutions the world sorely needs. Furthermore, within the context of a newly adopted 2030 Agenda for Sustainable Development that calls for more integrated and coherent policymaking, a successful EGA would be a demonstration that trade negotiators can balance both environmental and commercial concerns.
Trade can also play an important role in adaptation and economic diversification given that climate change will affect the productive capacities of countries. The issue of embedded carbon also needs to be given further consideration. In an ideal world, in the not too far distant future, countries with abundant access to clean energy could step up the production of energy intensive goods and export to other countries. This would be a way of using trade to produce goods in the most energy efficient and low carbon manner. Given that an increasing number of developing nations are plugging into clean energy – and in some cases leapfrogging the high-emitting energy infrastructure found in developed countries – such an approach could be turned to a comparative advantage as part of a sustainable growth model. While much work still needs to be done in this area, Paris will demand significant attention from the global community as a whole, and much more efforts ahead on ensuring its successful implementation within the context of an interconnected and increasingly fragile world.
Ingrid Jegou is Senior Programme Manager of the Global Platform on Climate Change, Trade and Sustainable Energy at the International Centre for Trade and Sustainable Development (ICTSD).
This article is published under BioRes, Volume 9 - Number 10, by the ICTSD.
[1] See for example Thomas L. Brewer’s recent proposal for a club-type partnership to tackle black carbon (soot) pollution from maritime shipping in the Arctic region. Brewer, Thomas L, (2015). Arctic Black Carbon from Shipping: A Club Approach to Climate and-Trade Governance. Issue Paper No. 4, Global Economic Policy and Institutions Series. ICTSD, Geneva, Switzerland.
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13th African Regional Meeting: Introduction of the Director-General’s Report
Introduction of the Director-General’s report entitled “Towards inclusive and sustainable growth in Africa through Decent Work”, presented by Mr Aeneas C. Chuma, ILO Assistant Director-General and Regional Director for Africa
It is my pleasure and honour to introduce to you the report prepared by the ILO Director-General for the 13th African Regional Meeting.
In [Monday]’s opening address the Director-General touched upon the principal elements of the first part of his report, published under the heading “prospects and challenges to achieve sustainable development in Africa”. I will therefore focus my presentation on the report’s second part, which consists of the final review of the Decent Work Agenda in Africa (2007-15).
What is the origin of this Agenda? In June 1999, on the occasion of the 87th International Labour Conference, former ILO Director-General Juan Somavia presented the concept of Decent Work to the tripartite constituency. As any new idea, the notion of Decent Work was initially greeted with a good deal of scepticism, but quickly gained recognition and broad support throughout the world. Today, the term “Decent Work” has become an integral part of the global vocabulary, and is as such solidly anchored in global agreements, including the recentlyadopted Sustainable Development Goals.
Already in 1999 it was evident to everyone that the global goal of Decent Work could be achieved only through concrete action at the national level. This led in October 2000 to the decision by the ILO to launch Decent Work Pilot Programmes in eight countries – two of which were African: Morocco and Ghana – as a testing ground for what was to become, six years later, the Decent Work Country Programmes. Such programmes are now operational in ILO Member States in Africa.
So in 2006, we had a well-established universal concept of Decent Work, and we were moving towards the first generation of Decent Work Country Programmes – but we had nothing equivalent at the regional level. To fill this gap, the 2006 ILO Regional Meetings in Asia-Pacific and the Americas adopted regional Decent Work Decades, covering the period 2006 to 2015. The Africa region met one year later, here in Addis Ababa, for the 11th African Regional Meeting, and adopted the Decent Work Agenda in Africa 2007 to 2015. The target year of 2015 was maintained in all instances to align the programmes with the completion dates of the Millennium Development Goals and of ILO’s Strategic Policy Framework – but the African programme no longer covered a decade, hence the expression “agenda”.
The regional Decent Work Agenda had two principal objectives:
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To adapt the global Decent Work concept to the realties prevailing in different parts of the world;
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To provide a conceptual framework for the formulation of Decent Work Country Programmes in those regions.
Amongst the three regional frameworks, the Africa agenda was certainly the most ambitious, with not less than 17 targets that needed to be achieved not later than 2015 by the great majority, if not all, African nations within nine years.
So, where do we stand today?
The Director-General’s report provides a detailed account of the achievements and shortcomings under each of the 17 targets, and gives numerous concrete country examples. In the interest of time, I will not go into a great amount of detail, but rather attempt to paint a broader picture of the evolution of the world of work in Africa since 2007.
Nine years ago, we had to struggle to make employment a distinct goal of national policies. Today, job creation is at the centre of national policies everywhere. Nine years ago, social protection was available only to a small minority of workers in the formal economy. Today, more and more African countries adopt policies that extend a minimum of social protection to all, including the most vulnerable.
Africa has made tremendous progress in advancing and extending social dialogue and tripartism, while the ratification of ILO’s fundamental principles and rights is almost universal on the continent. This has translated into effective programmes to progressively eliminate child labour as well as forced labour. Most African countries have made progress in domesticating labour standards to improve workers’ protection. A vibrant domestic private sector drives the continent’s steady economic growth, creating jobs for millions of youths. The average GDP per capita in sub-Saharan Africa now stands at over 3,300 US$, 28 of 54 Africa’s nations are classified as middle or high income, and in many of those we witness the emergence of an African middle class. In other words: many of the Decent Work Agenda targets are being achieved.
Yet, while acknowledging these positive trends, the Director General’s report reminds us that several targets lag behind: youth unemployment remains high on the continent, the informal economy continues expanding, inequality keeps growing, and the implementation of labour standards has not kept pace with their ratification. Social protection coverage, although improving, is still far from being universal; in several African countries, social dialogue suffers from the fragmentation and insufficient representativity of social partner organizations, and many African governments still lack the institutional capacity to implement commitments and enforce legislation.
Moreover, new challenges affect our continent: the Decent Work Agenda in Africa included a target relating to HIV/AIDS at the work place – but could, of course, not predict the catastrophic Ebola outbreak last year. The Agenda included a target on “job creation for conflict prevention and reconstruction”, but did not address the wider spectrum of state fragility, which we will discuss in a side event tomorrow. Thirdly, the Agenda looked at migration only from a continental perspective, not anticipating the current mass emigration of young Africans to wealthier continents. And, finally, the Decent Work Agenda in Africa was formulated at a time when terrorism was a distant threat to Africa. Now, terrorist attacks have become an almost daily occurrence. Boko Haram assaults communities in Nigeria and neighbouring countries, Al-Shabab destabilizes the Horn of Africa, Al Qaida threatens North Africa and the Sahel, and all three movements are loosely united through their connections with the so-called Islamic State.
Despite these challenges and threats we have much reason to look towards the future with hope and optimism. It is not just the record economic growth, the youthfulness of our peoples and the wealth of natural resources that we possess; Africa has embarked upon a structural transformation which promises to develop the continent into an economic giant of the future. Ethiopia, our host country, is determined to become “a carbon-neutral, middleincome manufacturing hub by 2025”. Other countries will undoubtedly follow her lead.
For many decades African governments have deplored the fact that the continent exports unprocessed raw material and primary agricultural commodities while importing finished goods from elsewhere. Today more and more industries are relocating to Africa, taking advantage of a plentiful youthful workforce, the availability of natural resources, the proximity of major consumer markets and continuous improvements in infrastructure and communications. The Africa of tomorrow will export garments rather than cotton, cables rather than copper, vehicles instead of iron ore, coffee instead of coffee beans. The continent’s structural transformation will create massive job opportunities and greatly expand the country’s fiscal space to finance social programmes.
For this to happen the Director-General’s report has identified a number of critical factors which facilitated the implementation of the DWAA, such as:
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National ownership of, and commitment to, the development process;
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The domestic funding of the development process in addition to ODA and FDI;
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The establishment of multi-stakeholder alliances and comprehensive partnerships in support of Decent Work;
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A focus on large-scale, long-term interventions rather than ad-hoc projects;
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The acceleration of regional integration across the continent.
Several of these points remind us that the ILO cannot achieve the objectives of the Decent Work Agenda alone. We need first and foremost to build on our solid partnership with the African Union; I humbly propose that the conclusions of the 13th Regional Meeting be closely aligned with the AU Declaration and Plan of Action on Employment, Poverty Eradication and Inclusive Development.
Secondly, we must take advantage of the Addis Ababa Agenda for Action (adopted this July) and the 2030 Sustainable Development Goals, which both have recognized Decent Work as a key driver of development. (Green jobs?)
Thirdly, we must engage the entire United Nations Development System around the objective of Decent Work, because this is a goal to which each and every UN agency can contribute.
And finally, we must develop a new generation of African Decent Work Country Programmes, as a series of programmes which are entirely owned by our national constituents and are, therefore, to a large extent, financed from domestic sources. This should also include the formulation of sub-regional Decent Work Programmes which the African region has pioneered.
Let me conclude by citing Her Excellency Ellen Johnson Sirleaf, President of the Republic of Liberia, when she addressed the International Labour Conference in 2006: “Decent work is one of the democratic demands of people everywhere. The Decent Work Agenda is an agenda for development that provides a sustainable route out of poverty”.
Honourable Chair,
With these few words, I commend to you and the tripartite constituency of the ILO, the Director-General’s Report to the 13th African Regional Meeting for your kind consideration.
Thank you for your attention.
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UNIDO forum focuses on partnerships as a way to move Sustainable Development Goal 9 into action
The fourth Inclusive and Sustainable Industrial Development Forum that ended on 1 December 2015 in Vienna focused on ways the United Nations Industrial Development Organization (UNIDO) can contribute to advancing industry, infrastructure and innovation in the context of Sustainable Development Goal 9.
The two-day event highlighted the achievements of UNIDO’s new Programme for Country Partnership, which is being piloted in Ethiopia and Senegal, and will be expected to be extended to a few other countries in Asia and Latin America.
Over 300 participants also discussed multi-stakeholder partnerships for creating linkages and synergies between infrastructure investment, industrial development and investment in innovation
The discussion at the forum focused, among other topics, on the United Nations’ new 2030 Agenda for Sustainable Development, which has at its core a set of seventeen universal, ambitious and inter-related 17 Sustainable Development Goals, or SDGs. These SDGs include, as Goal 9, a call to build resilient infrastructure, promote inclusive and sustainable industrialization, and foster innovation.
LI Yong, UNIDO’s Director General, said that “by adopting this goal, the world has affirmed the importance of industrialization.”
Speakers at the event stressed that UNIDO considers partnerships, in particular its Programme for Country Partnership, as the way forward to achieving SDG 9 and the rest of the 2030 Agenda for Sustainable Development.
“The Programme for Country Partnership model, with its ability to unlock and upscale investment for inclusive and sustainable industrialization, has relevance for many SDGs. For example, our partnership approach can facilitate agro-industry for sustainable agriculture in SDG 2, the economic growth of SDG 8, the poverty eradication of SDG 1 and so on,” said Director General Li.
UNIDO is now moving forward with a gradual expansion of the Programme for Country Partnership pilot countries, with Peru as the next country where it will be implemented.
Piero Ghezzi Solis, Minister of Production of Peru, who participated in the forum, said: “The Government of Peru is currently implementing a set of strategies to drive the forces of economic growth. They will fit well with UNIDO's Programme for Country Partnership model. Our country is pleased to be the first in Latin America to implement this approach.”
In 2017, UNIDO will conduct a mid-term review of the Programme for Country Partnership and begin incorporating it into current technical cooperation programmes.
Background Document
SDG 9: Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation
The international community has recently adopted the new 2030 Agenda for Sustainable Development. Of the 17 Sustainable Development Goals (SDGs) that comprise this agenda, SDG 9 calls for a renewed approach towards promoting industry, innovation and infrastructure.
It should come as no surprise that the 2030 Agenda contains a reference to inclusive and sustainable industrialization. History bears testimony that no single country has reached a high stage of economic and social development without first having developed an advanced industrial sector. Industry is therefore at the anchor of SDG 9: it requires critical infrastructure and paves the way for innovation in a country’s development.
Moving away from a high reliance on agriculture and natural resource extraction to industrial activities can unleash dynamic forces that generate employment and income, and facilitate international trade. In fact, the share of manufacturing value-added created in developing countries has almost doubled in the past 20 years, from 18 per cent in 1992 to 35 per cent in 2012. Inclusive and sustainable industrialization is a novel and important approach to building industry. Making industrialization inclusive widens the share of those who can partake in its benefits – in other words, inclusive industry raises the prosperity of all, including the vulnerable – whereas making industry sustainable means putting environmental concerns at the forefront of the industrialization process. UNIDO is committed to making inclusive and sustainable industrialization a reality. In December 2013, UNIDO’s Member States came together to adopt the Lima Declaration, renewing the Organization’s commitment to promoting industry and providing it with a mandate to pursue inclusive and sustainable industrial development (ISID).
This paper outlines industry’s link to infrastructure and to innovation, and concludes with UNIDO’s proposal for achieving the ambitious and urgent task that SDG 9 sets before the international community.
Given that channeling infrastructure and innovation towards inclusive and sustainable industrialization is a goal that no single entity can manage to fulfill by itself, partnerships are the way forward to meet the ambitious and urgent targets of SDG 9. Partnerships are themselves a form of innovation, and they enable the successful financing and execution of targeted industrial infrastructure projects, such as industrial parks, which can advance ISID.
UNIDO’s PCP approach harmonizes the interrelations among industry, infrastructure, and innovation. Partnerships are forged and resources mobilized in a coordinated manner, ensuring synergies as far as possible between all national programmes that contribute to inclusive and sustainable industrialization. In so doing, the PCP helps overcome key challenges facing the international community as it strives to fulfill the vital aims of SDG 9 and the 2030 Sustainable Development Agenda.
Related News
New and adapted financing sources will bolster Africa’s growing transport demand
“Innovative financing to meet Africa’s growing infrastructure demand” was the topic discussed during a plenary session on Day 2 of the African Development Bank (AfDB) Transport Forum, on Friday, November 27 in Abidjan. Panelists shared experience on AfDB Group financial products as well as innovative ways of structuring transactions to finance the continent’s development needs.
The four panelists concurred that adapting new financing sources will efficiently help bridge Africa’s infrastructure gap.
Opuiyo Oforikuma of ARM-Harith Infrastructure Investment Limited, Nigeria, covered government policies in his presentation. Building on international experience, he argued that the continent needs public private partnerships with massive involvement of the private sector. For him, “Capital markets, infrastructure bonds, pension funds, risk profile and private equity can effectively drive projects. But government policies should be clear and the contributions of end users should also count.”
He noted that more challenges remain in providing appropriate transport infrastructure in rural areas. To date, multinationals have done good work in Africa, he said. “If a government raises capital for transport infrastructure, it should use it for the purpose. We need to take new steps and do things differently through joint efforts. Everyone has a role to play: policy-makers, the private sector, as well as civil society organizations,” Oforikuma said.
Japan International Cooperation Agency (JICA) representative in Côte d’Ivoire, Eiro Yonezaki, presented his organization’s operations in West Africa, with specific examples in Côte d’Ivoire, Ghana, Burkina Faso and Togo, where corridors were developed. He also highlighted JICA’s intervention through the private sector development and capacity building.
Asked to shed light on the African Development Bank Group’s recent innovative financing, Chief Financial Analyst, Kwaku Richard Ofori-Mante explained that African Development Fund Partial Risk Guarantee (PRG) and Partial Credit Guarantee (PCG) have been introduced under ADF 12th and 13th replenishments, respectively. These instruments are designed to leverage resources from the private sector and other co-financiers for ADF countries, and offer a four-fold leverage factor to a country’s performance based allocation (PBA) utilized to support a guarantee transaction. “They are structured as leveraged instruments that consume only a fraction of a country’s PBA,” he said.
Ofori-Mante said the Bank offers an attractive and diversified menu of financial product options that allows borrowers to tailor their financing requirements to their circumstances. He also noted that the institution’s financial products include loans (those denominated in local currency, and syndicated loans), lines of credit (including for trade finance), guarantees, equity and quasi-equity, trade finance, and risk management products. “In addition, the Bank provides technical assistance to its clients through grant funds. The diversity of the Bank’s financial products allow for innovate ways of structuring transactions to finance the continent’s development needs.”
To what extent does AfDB look into Islamic finance as innovative source of finance? Ofori-Mante observed that the Bank Group is constantly in discussions with sister institutions, particularly the Islamic Development Bank, on how best the Bank’s Partial Credit Guarantee instruments can be structured to complement a sukuk issuance or other forms of Islamic financing structures.
Neil Valentine of the European Investment Bank, for his part, shared perspectives on risks, regulations and mechanisms to help governments, as well as procurement policies, which he says should be harmonized. He also highlighted instruments and policies to attract institutional investors.
Participants said the various presentations have provided a wealth of relevant information and knowledge on the Bank’s leading role alongside other international development institutions in supporting African countries.
Africa’s infrastructure deficit is estimate at US $90 billion yearly for the next decade, including transport which accounts for 41% of its current investments.
tralac’s Daily News selection: 1 December 2015
The selection: Tuesday, 1 December
Selected trade and development conference updates:
In Dakar: Building Africa’s negotiating capacity for improved terms of engagement with the rest of the world (UNECA)
In Addis: AERC December Biannual Research Workshop
In Vienna: UNIDO's General Conference
Concluding today: Fourth ISID Forum
The fourth ISID Forum aims to address how UNIDO can contribute to advancing industry, infrastructure and innovation in the context of Sustainable Development Goal 9. It will highlight the achievements of UNIDO’s new Programme for Country Partnership, which is being piloted in Ethiopia and Senegal, and is expected to be extended to a number of other countries in Asia and Latin America.
Measuring the Information Society Report (ITU)
In Africa only one country, Mauritius, has an IDI value above the global average of 5.03, while three others (Seychelles, South Africa and Cape Verde) exceed the average value for developing countries of 4.12. Altogether, 29 out of 37 African countries rank in the bottom quarter of the 2015 IDI, including the 11 countries with the lowest rankings of all, illustrating the importance of addressing the digital divide between Africa and other regions. The average rise in IDI values in Africa between 2010 and 2015 was 0.65, lower than that in other regions in nominal terms, but from a lower base and therefore higher in proportion to the benchmark set in 2010. The most significant improvement was achieved by Ghana, which increased its IDI value by 1.92 points and rose 21 places in the global rankings. Other substantial improvements in the rankings were achieved by Lesotho, Cape Verde and Mali. [Downloads]
Eastern Africa’s manufacturing sector: promoting technology, innovation, productivity and linkages (AfDB)
These country reports were prepared as part of a regional assessment of the manufacturing sector in Eastern Africa covering seven countries – Burundi, Ethiopia, Kenya, Rwanda, Seychelles, Tanzania and Uganda – commissioned by the African Development Bank and the East African Regional Resource Centre.
Uganda country report: The report shows that policy reforms and other initiatives in Uganda since the 1990s have led to commendable strides in macroeconomic stability and economic growth. The structure of the economy has changed, with agriculture's contribution to gross domestic product (GDP) declining from about 70% in 1980, to 29% in 2000, and 23% in 2011. In contrast, the share of the services sector is large and growing, with its contribution to GDP rising from 48% in 2000 to over 51% in 2011. The contribution of the industrial sector to GDP has fluctuated between 23% and 27% over the last decade, while that of manufacturing averaged only about 7%.
Tanzania country report: Tanzania's manufacturing sector is relatively small: its share in GDP is about 10%, and employment is on the order of 600,000, less than 5% of the total labour force. The sector has a narrow range of products which are mainly low value-added basic goods, consisting mainly of limited processing of agricultural or resource raw materials. Food and beverage products constitute about 50% of total MVA, followed by nonmetallic mineral products (11%), tobacco (7%) and textiles (5%). Automobile & motorcycle assembly has been established recently. The private sector dominates (91%) manufacturing as the 56 SOEs constitute 8% of the total manufacturing enterprises. 97% of manufacturing entities are micro enterprises with less than 10 employees; most of these operate in the informal sector. While the manufacturing sector in Tanzania has developed little over the long run – today, the sector contributes less to GDP than it did in the 1970s – there has been a turnaround in performance in the past decade, with manufacturing growing at a pace of 8.6% per annum in real terms. Manufacturing exports have grown strongly at about 31% per annum over the period 2000 to 2010.
Seychelles country report: The Seychelles economy has opened up considerably in the last decade, transitioning from state intervention to market-based economic policies. In terms of structure of the economy, the services sector has a dominant and growing share while industry and manufacturing have declined substantially since 2000, with manufacturing's share falling from almost 20% to about 8%. The agricultural sector is very small. Seychelles' Manufacturing Value Added per capita, which used to be the highest in Africa, has significantly declined in the last ten years and is now below the MVA per capita of countries such as Mauritius or South Africa (but still well above the regional average).
India’s manufacturing sector growth hits 25-month low in November (Livemint), Chinese manufacturing sinks to three-year low (DW)
Used goods: Regional efforts are the way out (New Times)
On Wednesday November 25, 2015 The New Times carried a brain-pricking headline about used leather products. It quotes Trade and Industry Minister, Francois Kanimba announcing hefty tax increment as a means of curbing the dumping of used leather products into the Rwanda. This commendable initiative by Rwanda needs to be scaled to regional level, to reap the benefits of a larger common effort, as well as larger investment opportunity for prospective investors in the leather industry. The EAC is affected by the dumping and damping of used goods and counterfeits as a region. Consequently, we have become net exporters of jobs, since we provide a market for the countries that produce these used and counterfeit products. Once the initiative is taken by the EAC, it should be approached at two levels, namely taxation and policy/regulation.
Lesotho – where to? (tralac)
Manufacturing and in particular the textiles and clothing sector is the main contributor to the growth of Lesotho’s formal GDP, but this sector is stagnating in the face of competition from low-cost Asian producers and rising labour costs. Access to the US market under the Africa Growth and Opportunity Act means that Lesotho is vulnerable to increased competitive pressures from Asia and the United States of America. Mining, the fastest growing sector in Lesotho, is the one bright spot in Lesotho’s economy, and water is an important renewable asset as the export of water to South Africa contributes about 3% of GDP. Tourism is important for economic diversification but, again, there are problems with productivity as well as infrastructural constraints. [The author: Ron Sandrey, Download]
South Africa: October 2015 trade statistics (SARS)
The R21.39bn deficit for October 2015 is due to exports of R86.35bn and imports of R107.74bn. Exports decreased from September 2015 to October 2015 by R5.49bn (6.0%) and imports increased from September 2015 to October 2015 by R14.64bn (15.7%). Africa trade surplus: R16 502 million - a 16.8% decrease in comparison to the R19 843 million surplus recorded in September 2015. Trade statistics with the BLNS for October 2015 recorded a trade surplus of R9.83bn. The surplus is a result of exports of R12.69bn and imports of R2.86bn.
Rand tanks as trade deficit widens (Business Day)
SA trade balance disappoints; ZAR nervous (Standard Bank Research Portal)
No more Angolan Kwanza in Namibia (The Namibian)
The Bank of Namibia and Banco Nacional de Angola have temporarily suspended the Currency Conversion Agreement as from 2 December 2015. The suspension will run for the next 19 days to allow the two banks to prepare mechanisms for a new CCA, BoN Govenor Ipumbu Shiimi said during a media briefing on Monday. He explained that the new mechanism will not see further exchange of Angola Kwanzas in Namibia but will see the exchange of the Namibia Dollar in Santa Clara.
Standard Bank to pay $32.6m over Tanzania bribery scandal (The Guardian)
A former unit of South Africa’s Standard Bank based in London has agreed to pay $32.6m (£21.7m) in fines and repayments of bribes and profits following an alleged bribery scandal in Tanzania. The high court in London heard how the bank’s division had agreed to the payments in exchange for the Serious Fraud Office offering it the UK’s first deferred prosecution agreement if conditions are met.
TRA chief Bade axed in Magufuli tax crackdown (The Citizen)
Tanzania Revenue Authority Commissioner General Rished Bade was sent home [Friday] as President John Magufuli cracked the whip on tax evasion which is believed to cost the government billions of shillings every year. Mr Bade was suspended alongside five other top TRA officials, including his deputy Lusekelo Mwaseba, as the state ordered investigations into Sh80 billion in tax revenue that could not be accounted for by the taxman. The Sh80 billion was tax due from the importation of some 349 containers whose whereabouts could not however be explained by the suspended TRA officials during a surprise visit to the Dar es Salaam port yesterday by Prime Minister Majaliwa Kassim.
COP21 updates: Development Banks vow to mobilize collective resources to confront climate change (World Bank), India unveils global solar alliance of 120 countries at Paris climate summit (The Guardian), $248m pledged to GEF climate fund for most vulnerable countries (Global Environment Facility)
A call for action and the way forward for reform in Francophone Africa (World Bank Blogs)
The call was made by 200 high-level delegates from 20 countries: decision-makers and practitioners from both the public sector and professional accounting organizations, and representatives from multilateral development organizations and civil society. Going forward, a partnership committee was set up to monitor the implementation of the call both at regional and country levels and report back at 2016 conference. In particular, member countries of West African Economic and Monetary Union (WAEMU) and Economic Community of Central African States (CEMAC) adopted in 2009 and 2011, respectively, a series of directives to improve and modernize public financial management. The call urged countries to accelerate the implementation of these directives, especially:
Evolving monetary policy frameworks in low-income and other developing countries (IMF)
The country case studies (which include Kenya, Ghana, Rwanda, Uganda) are complemented by analyses of common issues faced by countries in currency unions in the CFA franc zone, selected resource rich countries, and advanced economies and emerging markets during their modernization process of monetary policy regimes. Finally, the background paper also contains a discussion on the benefits of effective communication in conducting monetary policy.
Beira and Zambezia Development Corridors: government identifies four major projects (Club of Mozambique)
Speaking in Beira, at the opening of the International Investors Conference of the Development Corridors in Sofala and Zambezia, Carlos Mesquita revealed that the projects identified will have a major impact on employment opportunities for Mozambicans. Mesquita explained that the projects will be financed by the World Bank, and predicted that they come into action early next year, as feasibility studies are already at an advanced stage. He said that despite the satisfactory results of recent years the Beira and Zambezia corridors need to overcome challenges related to production and productivity in order to attract traffic and exploit the already-installed capacity.
Spanning Africa's Infrastructure Gap: how development capital is transforming Africa's project build-out (ECN, Baker & McKenzie)
The report contains detailed analysis of the $US93bn in commitments made by thirteen of the largest development capital institutions across 22 African countries between 2009 and 2014. Over 67% of DFI-funding approvals analysed were provided by four institutions: The World Bank and related bodies, Development Bank of Southern Africa, African Development Bank, and Agence Française de Développement and related entities. [Download]
Paving the road ahead: China-Africa co-operation in the infrastructure sector (CCS)
Namibia: Competition Act under review (Namibia Economist)
Egypt: developing a national e-commerce strategy (UNCTAD)
Sudan: establishing trade facilitation priorities in the context of the WTO Trade Facilitation Agreement (UNCTAD)
Illovo looks to Africa to replace lost EU sugar sales (Agrimoney)
South Africa elected to International Maritime Organisation council (GCIS)
Mombasa port cargo traffic up 10% (Business Daily)
US Senate confirms Gayle Smith as the new head of USAID
China’s Renminbi approved by IMF as a main world currency (New York Times)
Why rich countries better not haste end of Doha Round (Borderlex)
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Related News
Eastern Africa’s manufacturing sector: Promoting technology, innovation, productivity and linkages
The following reports were prepared as part of a regional assessment of the manufacturing sector in Eastern Africa commissioned by the East Africa Resource Center (EARC) of the African Development Bank. The study assesses the current status of the manufacturing sector of seven countries – Burundi, Ethiopia, Kenya, Rwanda, Seychelles, Tanzania and Uganda – with the aim of providing recommendations towards strengthening the sector’s role in structural economic transformation and promoting inclusive growth across the region.
Kenya country report
This study assesses the status of the manufacturing sector in Kenya; identifies binding factors, constraints, opportunities and strengths for the development of the sector; draws lessons from the experience of South Korea (and other East Asian countries) that managed to successfully transform their manufacturing sectors into highly productive and competitive sectors, with high value added generation and makes recommendations including reforms, policies and strategies to strengthen the role of manufacturing as a dynamic force of economic development and transformation in Kenya.
The study finds that over the last decade, the share of the manufacturing sector to GDP has been rather stagnant at about 11%. In both absolute and per capita terms, manufacturing value added has been on the increase: The level of industrialization in Kenya as measured by manufacturing value added (MVA) per capita is about USD 79, representing about 26%, 9%, 6% and 1% of the level of that of Vietnam, South Africa, China and Korea respectively. Also, the share of manufactures in merchandise exports for Kenya (32% in 2012) is far lower than in those countries (more than 95% in Vietnam, China and Korea). Among the Kenyan manufacturing subsectors that have achieved the largest increase in output over the last decade are tobacco and tobacco products, refined petroleum products, non-metallic mineral products, and manufacture of transport equipment. Textiles, wood and wood products, rubber and rubber products meanwhile have shown a declining trend.
Manufacturing sector productivity (measured by labour productivity) has been on an increase while unit labour cost has remained generally constant but high at about 35% of value added. The level of competitiveness (measured by Revealed Comparative Advantage, RCA) of Kenyan manufactures in general has been declining; the sector has never been globally competitive over the last decade. Although Kenya has shown some improvements in the Competitive Industrial Performance (CIP) index, her CIP score remains much lower than that of the benchmark countries of China, Chile, India, Indonesia, Malaysia, Philippines, Republic of Korea, South Africa, Thailand, Turkey and Vietnam.
On the binding factors, constraints, opportunities and strengths for the development of the sector, the study finds that in general Kenya’s business environment lacks competitiveness, as shown by its rank number 106 out of 144 economies in the Global Competitiveness Report 2012-2013. The country’s general strengths are innovative capacity, high quality education, well developed financial markets and a relatively efficient labour market. Key challenges are identified as poor health, low life expectancy and insecurity.
Specific strengths for manufacturing sector in Kenya include: availability of well trained and skilled labour; availability of some raw materials especially in food and beverages sector; strong private sector industry associations providing leadership in the sector and strong Public-Private Partnerships (PPP). Constraints in the sector include: expensive and unreliable power supply, and poorly developed infrastructure in general; limited access to finance especially for small-scale processing companies; limited value addition and product transformation; resource based production patterns using low technology; high cost of labour; relatively low productivity compared to emerging economies; and a high number of burdensome regulations and multiple regulatory institutions with overlapping mandates leading to high administrative costs.
Opportunities for the sector include: high domestic demand in all manufactured goods; high demand in EAC Partner State countries and the regional market for most manufactures; high demand in developed countries for processed foods and beverages; and the current industrial policy measures to support development of the manufacturing sector. Threats for the sector include: stiff competition from imported counterfeits and sub-standard products; climate change and global warming may pose a challenge to the availability of raw materials; the proposed trading arrangement between the EAC and the EU (the Economic Partnership Agreement), which is likely to increase competition for Kenyan products by European manufacturers that are far more competitive; and the general liberalization at the multilateral level (WTO) which erodes the current preference margins in countries where Kenya has preferential market access.
On lessons of experience from benchmark countries, the study finds that Kenya has a lot to learn in: stepping up measures to harnessing technology, innovation, productivity, and linkages including promoting linkages between industry and universities, polytechnic institutes and other training institutions, and on leveraging FDI. Kenya also needs to learn as regards improving the business enabling environment including the development and improvement of the regulatory environment in: the transport infrastructure sector; energy; communications; and financial services. The country also can learn as regards incentive schemes for the manufacturing sector, particularly in enhancing the utilization of such schemes. Finally, Kenya also needs to put in place strategies to enhance the benefits it can reap from regional integration particularly in the context of the EAC and COMESA.
» Kenya Country Report (PDF, 11.29 MB)
Rwanda country report
A key objective of Rwanda’s Vision 2020 is to transform the country into a middle income economy by improving its competitiveness while ensuring unity, shared growth and development. The majority of Rwanda’s workforce is employed in the private sector, which places private sector-led growth at the center of the country’s aspirations. The government has championed reforms to improve the business regulatory environment for the private sector development including manufacturing growth.
As a result of these reforms, manufacturing value-added increased by a factor of 3.5 to USD 421.3 million in 2012 compared to 2000 with the manufacturing exports growing by over 250% between 2009 and 2012. The share of manufacturing in GDP however declined over the period 2000 to 2012. The industrial sector has seen its share in GDP rise from 13.6% to 15.9%, primarily as a result of a buoyant construction sector but manufacturing’s share slid from 7.0% of GDP in 2000 to 5.9% in 2012.
Diversification of the Rwandan manufacturing sector is relatively low. Output is generated in seven subsectors: food; beverages and tobacco; textiles and clothing; wood, paper and printing; chemicals, rubber and plastics; non-metallic minerals; and furniture and others. Resource-based products dominate manufacturing output with food, beverages, and tobacco products accounting for more than 70% of total manufacturing output in 2012. All seven segments listed above saw their output rise from 2000 to 2012. By far the strongest rise occurred in food output, which increased by a factor of about 6.5 and nearly doubled its share in total manufacturing from 23.25% in 2000 to 43.79% in 2012.
Total manufacturing exports have increased significantly from 2001 to 2012, rising nearly tenfold. The biggest increase occurred from 2009 to 2012, when exports rose by more than 250%. Overall however exports remain small since most manufacturers produce for the domestic market.
In terms of competitiveness, over the period of 2001 to 2011, labour productivity (MVA / Employee) has remained relatively unchanged: it was 3,857 USD in 2001 and about the same at 3,750 USD in 2011. Rwanda’s labour productivity is low compared to a selection of industrialised countries and to the Eastern African average.
The revealed comparative advantage (RCA) of Rwanda’s manufacturing sector shows an overall comparative disadvantage. At 0.47 Rwanda’s RCA score lies behind that of Uganda (0.83), Burundi (0.71) and Kenya (0.59) in 2012, but above that of Tanzania (0.41) and Ethiopia (0.17). The level of diversification of the manufacturing sector has improved from 2001 to 2012 with both the product concentration ratio and the Herfindahl-Hirschman Index (HHI) decreasing during this period.
The enabling environment for private sector development and, as such, for manufacturing has improved significantly in Rwanda since 2001. Institutions have been streamlined and restructured to ensure better provision of public services and support to investors. Most prominently the Rwanda Development Board (RDB) unites all necessary services for investors under one roof. As a result of reform efforts Rwanda has made impressive progress in improving its business climate. Its position in the World Bank’s Doing Business ranking has improved from 148 in 2008 to 32 in 2014, making it the second best reformer worldwide since 2005.
Key to the success of government interventions, notably to improve the business climate, has been good governance, which has led to peace and stability. The rule of law has been strengthened and the GoR has introduced a zero tolerance approach to corruption. These factors contributed significantly to making the country attractive to investors.
Despite the GoR’s efforts, foreign direct investment (FDI) inflows have remained relatively low in Rwanda, despite recent increases. The country’s small, relatively isolated geographic position make Rwanda less attractive to FDI. Furthermore, infrastructure gaps, in particular energy and transport, the same as costly trade logistics and a skills gap also mean that given a scarce amount of contestable FDI, Rwanda has problems of attracting the amount of FDI needed to meet its development targets.
The overall policy framework is exhaustive and spells out numerous measures supporting the manufacturing sector. Key policy documents are the Economic Development and Poverty Reduction Strategy 2 (EDPRS 2), and the Private Sector Development Strategy (PSDS), which both stretch from 2013 to 2018. Further relevant policies include the National Industrial Policy (NIP) which is most directly targeted at manufacturing but whose current role in policy making is unclear, and the National Export Strategy (NES) which is currently being reviewed.
Access to finance also remains problematic as manufacturers complain about high interest rates and onerous collateral requirements as key constraints. A skills gap in particular in technical qualifications and lacking domestic knowledge transfer also hamper the development of the sector.
Trade logistics are costly in Rwanda, especially in terms of inland transport costs which also result from the country’s landlocked situation. The government has undertaken numerous measures to improve the country’s performance notably by establishing one stop border posts and improving the country’s transport infrastructure.
» Rwanda Country Report (PDF, 12.72 MB)
Ethiopia country report
Ethiopia has registered solid economic growth since 2003/04, but growth slowed down in 2011/12 due to weak performance of the agriculture and industrial sectors. This growth has led to a reduction in income poverty and improvements in other social indicators. However, the country’s growth acceleration in recent years has not been associated with diversification and structural change. In particular, the performance of the manufacturing sector has not been satisfactory.
The main objectives of this study are twofold: to provide a diagnostic and analytical assessment of the current status of the manufacturing sector in Ethiopia, and to contribute to the process of analysis and policy formulation by identifying binding factors, constraints, opportunities and strengths for the development of the sector in Ethiopia.
The service sector continues to be the main engine of growth of the economy. Despite the strong policy emphasis on agriculture, its contribution to overall growth has not been commensurate with its share in GDP. The contribution of the manufacturing sector to growth, employment and exports has remained minimal. In addition, reflecting declining sectoral terms of trade, the manufacturing sector share of GDP (in current prices) has shrunk.
Manufacturing exports not only represent a relatively low percentage of total merchandise exports, but also the share has shown a declining trend in recent years. Ethiopia exports very few manufactured commodities compared with the Eastern African average and selected Asian countries, indicating both a low manufacturing production base and a lack of competitiveness of the sector. Ethiopia’s manufacturing export is one of the least diversified compared to its potential global competitors. Moreover, there has been comparatively little progress in diversifying the export mix. This slow change in the export dynamics may have been due to the low level of market and product innovation of entrepreneurs as reflected by the dominance of resource-based manufacturing exports.
The manufacturing sector – both private and public segments – depends largely on imported raw materials. The use of local inputs declined in recent years, indicating that manufacturing industries have become increasingly dependent on imported inputs. The implications of sourcing inputs from abroad are complex. While the quality of products tends to improve in firms that are able to access foreign inputs, upstream linkages within the economy are weakened and firms are vulnerable to world price fluctuations. The evidence suggests that greater ability to source inputs internationally favourably impacts on a firm’s ability to sell internationally.
There are a host of factors that constrain the competitiveness of the manufacturing sector. Ethiopia is lagging behind its neighbours with respect to ICT, both in terms of the level of coverage and the quality of services. Fixed and mobile telephone subscribers per 100 people, an indicator of the telecommunication infrastructure, have been among the lowest compared with other African counties. Discussions with stakeholders also indicate that high cost and poor quality of communication services are some of the key constraints facing manufacturing industries in reaching regional and international markets, importing inputs, delivering services, etc. This negatively affects the competitiveness of the manufacturing industries.
Inefficient logistics have also been identified as a severe problem facing the manufacturing sector. Ethiopia ranks poorly in the World Bank’s Logistics Performance Index (LPI). In particular, tracking and tracing, international shipments, infrastructure, customs and logistic competence services are not only poor but also have shown no improvement over time. High logistics costs reduce the competitiveness of Ethiopian goods and services in regional and global markets and also raise the price of imported goods and services to domestic consumers. In particular, high transportation cost has been reported as severe problem hindering the performance of local manufacturing industries and this retards integration of industries with regional and global markets.
» Ethiopia Country Report (PDF, 15.27 MB)
Uganda country report
Expanding manufacturing production is recognized as an essential determinant of growth, the world-over. The empirical literature shows that production and export of manufactures have been a leading factor in all successful and catching-up developing countries. The manufacturing sector has a high potential for the following: enhanced economies of scale and factor productivity due to technological upgrading; deeper, more dynamic, and stronger forward and backward linkages not only within the sector itself (upstream and downstream activities), but also with other sectors; and greater diversification into a variety of economic activities. These create opportunities for employment creation and income generation.
Using a comprehensive set of data and indices, this report provides a situational assessment of the manufacturing sector in Uganda by identifying opportunities for, and binding impediments to, the development of the manufacturing sector, and ultimately recommends actions necessary to strengthen and enhance its development.
Uganda, which is rich in natural resources that offer downstream manufacturing opportunities, has undertaken sweeping policy reforms and initiatives since the 1990s. These are spelled out in various government policy documents and strategic plans. Specifically, Uganda Vision 2040 (Republic of Uganda 2013) envisages a transformed Ugandan society from a predominantly peasant and a low-income country to a competitive upper-middleincome country within 30 years. In this regard, industrial sector development in Uganda occupies a central position in the government’s Vision. Specifically, the objective of the National Industrial Policy (Republic of Uganda 2008) is to build a modern, competitive, and dynamic industrial sector that is fully integrated into domestic, regional, and global economies. Key strategic priorities in the 5-year National Industrial Sector Strategic Plan are to exploit and develop natural resource-based industries; promote agro-processing for value addition in niche markets; and support engineering for capital goods, agricultural implements, construction materials, and fabrication operations.
The report shows that policy reforms and other initiatives in Uganda since the 1990s have led to commendable strides in macroeconomic stability and economic growth. The structure of the economy has changed, with agriculture’s contribution to gross domestic product (GDP) declining from about 70% in 1980, to 29% in 2000, and 23% in 2011. In contrast, the share of the services sector is large and growing, with its contribution to GDP rising from 48% in 2000 to over 51% in 2011. The contribution of the industrial sector to GDP has þuctuated between 23% and 27% over the last decade, while that of manufacturing averaged only about 7%. Recent studies have attributed such industrial sector performance to foreign direct investment (FDI) inþows into the sector amounting to 45% of the FDI that came into Uganda between 1991 and 2009, a third of which (about US$2.9 billion) was absorbed into the country’s manufacturing sector. Despite growth and performance experienced in the country’s industrial sector, however, the number of people employed in the agricultural sector remains substantial, accounting for about 70% of national employment; the country’s exports largely remain unprocessed primary products. This should be a major concern, given that agricultural practices in Uganda remain overwhelmingly subsistence-focused, providing little impetus for stimulating the growth of value added manufacturing.
Moreover, manufacturing in Uganda consists predominantly of laststage (end-product) assembly and raw materials processing, a high share of which is food processing. Both of these are low value added activities. Industrial growth in Uganda has been largely driven by growth in construction services rather than investment in machinery and equipment, which is essential for industrial sector expansion and future economic growth.
The expansion of manufacturing activities in Uganda continues to be hampered by a number of obstacles. These include weak institutional support; limited access to affordable credit, particularly the absence of financial infrastructure to support micro, small, and medium enterprises (MSMEs); inadequate entrepreneurship and managerial skills; costly, unreliable, and inadequate physical infrastructure, particularly quality transport, energy, and communication infrastructure; lack of serviced industrial parks across the country; unreliable supply of inputs; low level of technology and a lack of indigenous capability for technology and innovations mastery, which adversely impacts on productivity in manufacturing; and a dearth in technical/technological skills, reflected in a shortage of scientists, engineers, and mid-level technicians specially trained for adoption, adaptation, and diffusion of innovative technologies in the country.
» Uganda Country Report (PDF, 2.38 MB)
Tanzania country report
It is widely acknowledged that a competitive and private sector-led manufacturing sector plays a key role in socioeconomic transformation and development. The limited role that manufacturing currently plays in Tanzania is therefore a potential source of concern for policy makers and their development partners alike. At the same time, the manufacturing sector has seen rapid growth over the past decade and carries a great opportunity for Tanzania to achieve inclusive growth if it can achieve its development objectives in the sector.
Against this background, the purpose of the present report is to identify binding constraints, opportunities and strengths for the development of the manufacturing sector in Tanzania and provide recommendations for policy reform and manufacturing development strategy.
Tanzania’s manufacturing sector is relatively small: its share in GDP is about 10%, and employment is on the order of 600,000, less than 5% of the total labour force. The sector has a narrow range of products which are mainly lowvalue-added basic goods, consisting mainly of limited processing of agricultural or resource raw materials. Food and beverage products constitute about 50% of total MVA, followed by nonmetallic mineral products (11%), tobacco (7%) and textiles (5%). Automobile & motorcycle assembly has been established recently. The private sector dominates (91%) manufacturing as the 56 SOEs constitute 8% of the total manufacturing enterprises. 97% of manufacturing entities are micro enterprises with less than 10 employees; most of these operate in the informal sector. Geographically, manufacturing is concentrated in Dar es Salaam (over 50%) and other major towns such as Arusha and Mwanza.
While the manufacturing sector in Tanzania has developed little over the long run – today, the sector contributes less to GDP than it did in the 1970s – there has been a turnaround in performance in the past decade, with manufacturing growing at a pace of 8.6% per annum in real terms. Manufacturing exports have grown strongly at about 31% per annum over the period 2000 to 2010. However, there is little penetration to export markets in Europe and North America due to high standards requirements. The regional (Africa) and Asian markets are the main export destinations.
Since the mid-2000’s, Tanzania has risen in UNIDOS’s Competitive Industrial Performance (CIP) rankings, moving up fourteen places th th to 106 out of 133 countries in 2010 from 120 in 2005, and narrowing the gap between it and the region’s leader, Kenya. Measured by the revealed comparative advantage (RCA), another competitiveness indicator, Tanzania’s manufacturing sector has had a consistent comparative disadvantage compared with world competition.
However, with regard to potential competitiveness, Tanzania’s position appears to be much stronger: First, unit labour costs are relatively low, with prospects of growing cost advantage in relation to East Asia. Labour market efficiency is also recognized as one of Tanzania’s strengths. Second, Tanzania has vast gas, mineral and agricultural raw materials which can be used as manufacturing inputs at competitive prices.
In addition, Tanzania’s supply side competitiveness potential has to be seen in combination with a number of opportunities stemming from the demand side: In terms of future opportunities, Tanzanian demand growth, to the tune of 18% or nearly USD 4.4 billion annually, provides excellent scope for local manufacturers to increase production. Moreover, neighbouring landlocked countries that have no access to the sea, such as Zambia, Uganda, and DR Congo, represent market opportunities: their total imports reached USD 12 billion in 2010, an amount that is expected to rise by 18% to 21% annually. On the other hand, Tanzania’s manufacturing sector faces stiff competition from Chinese manufactured imports, which have increased their share of the Tanzanian market from 4% in 2000 to 12% in 2010 and are making inroads throughout Eastern Africa.
Overall, Tanzania has great development potential: the country has booming manufacturing sector exports, vast natural resource endowments, and excellent development potential to better connect East Africa to global markets through its seaports.
» Tanzania Country Report (PDF, 8.25 MB)
Seychelles country report
The Seychelles face the limitations and constraints typical of Small Island States that have few inhabitants, are remote from the mainland, and have limited natural resources. Its economy is heavily dependent on two sectors, namely tourism and fisheries. This dependence makes the country extremely vulnerable not only to global developments, but also to the political or commercial decisions of its partners or environmental damage. Nonetheless, Seychelles has successfully managed to achieve high living standards.
The Seychelles economy has opened up considerably in the last decade, transitioning from state intervention to market-based economic policies. In terms of structure of the economy, the services sector has a dominant and growing share while industry and manufacturing have declined substantially since 2000, with manufacturing’s share falling from almost 20% to about 8%. The agricultural sector is very small.
Seychelles’ Manufacturing Value Added (MVA) per capita, which used to be the highest in Africa, has significantly declined in the last ten years and is now below the MVA per capita of countries such as Mauritius or South Africa (but still well above the regional average). The share of manufacturing employment in total employment has also declined but at a slower rate than MVA, which indicates a decrease in labour productivity (although labour productivity in Seychelles’ manufacturing sector is still higher than the regional average).
Resource-based manufactures account for about three quarters of Seychelles’ total manufacturing output: very limited low-technology or medium-technology products are currently being manufactured in Seychelles, and no high-technology products. The manufacturing output is indeed dominated by food products (in particular processed fish or fish products) and beverages. Other products manufactured in Seychelles include, inter alia: metal cans, specialised orthopaedic appliances, building materials, paint products, coconut oil and essential oils, crafts and jewellery. Seychelles manufactured products are generally not competitive because most inputs – e.g. raw materials, packaging materials, cardboard boxes, sugar – have to be imported (which inhibits manufacturers to achieve competitive prices), and production costs are high. Also, quality of output needs to be improved to increase chances of penetrating export markets.
Although the manufacturing sector declined both in terms of value added and employment, Seychelles’ manufactured exports have experienced a steady and strong growth since 2001. The share of manufactured exports in Seychelles’ total merchandise exports is high (more than 95%) and well above the regional average. However, this is mostly due to significant exports of processed or preserved fish or fish products which represent the bulk of manufactured exports: canned tuna alone accounts for more than 90% of total merchandise exports. Processed fish and fish products is thus the only manufacturing sub-sector where Seychelles can currently be said to have a comparative advantage. Other than processed or preserved fish or fish products, the only significant manufactured export are specialised orthopaedic appliances. While rum exports have grown in the last five years, the value of these exports is still very small.
Seychelles has also made little progress in recent years in diversifying its export markets – more than 90% of exports are to the EU. Seychelles’ geographical position, topography and small population are clearly significant constraints to diversification and structural transformation – but efforts should be pursued to reduce the dependence on a small number of products and markets as this dependence makes the country highly vulnerable to external shocks.
Seychelles now potentially faces a middle income trap, with limited opportunities to attain high-income status, held back in part by its geographical position, topography and small population, which make a major transformation of the Seychelles’ economy difficult. In spite of these constraints, there is potential for the country to further develop its (small-scale) manufacturing base.
» Seychelles Country Report (PDF, 4.33 MB)
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South Africa Merchandise Trade Statistics for October 2015
The South African Revenue Service (SARS) has released trade statistics for October 2015 that recorded a trade deficit of R21.39 billion. This figure includes trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS).
Including trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The R21.39 billion deficit for October 2015 is due to exports of R86.35 billion and imports of R107.74 billion. Exports decreased from September 2015 to October 2015 by R5.49 billion (6.0%) and imports increased from September 2015 to October 2015 by R14.64 billion (15.7%).
The R21.39 billion deficit is 1.8% less than the deficit recorded in October 2014 of R21.79 billion. Exports of R86.35 billion are 2.4% less than the exports recorded in October 2014 of R88.47 billion. Imports of R107.74 billion are 2.3% less than the imports recorded in October 2014 of R110.26 billion.
The cumulative deficit for 2015 of R59.39 billion is 37.6% less than the deficit for the comparable period in 2014 of R95.14 billion.
The month of September 2015 trade balance deficit was revised upwards by R0.38 billion from the previous month’s preliminary deficit of R0.89 billion to a revised deficit of R1.26 billion.
Trade highlights by category
The month-on-month export movements (R’ million):
Section: | Including BLNS: | |
Precious Metals & Stones | - R3 070 | - 19.3% |
Vegetable Products | - R1 817 | - 35.7% |
Mineral Products | - R1 238 | - 6.5% |
Vehicle & Transport Equipment | - R1 069 | - 8.7% |
Machinery & Electronics | + R 505 | + 5.7% |
The month-on-month import movements (R’ million):
Section: | Including BLNS: | |
Machinery & Electronics | + R 4 595 | + 19.2% |
Vehicle & Transport Equipment | + R3 658 | + 45.1% |
Mineral Products | + R2 007 | + 17.1% |
Chemical Products | + R1 598 | + 15.8% |
Vegetable Products | - R1 421 | - 44.8% |
Trade highlights by world zone
The world zone results from October 2015 to October 2015 are given below.
Africa:
Trade surplus: R16 502 million – This is a 16.8% decrease in comparison to the R19 843 million surplus recorded in September 2015.
America:
Trade deficit: R3 470 million – This is a 79.2% increase in comparison to the R1 936 million deficit recorded in September 2015.
Asia:
Trade deficit: R23 640 million – This is a 25.8% increase in comparison to the R18 793 million deficit recorded in September 2015.
Europe:
Trade deficit: R15 033 million – This is a 131.6% increase in comparison to the R6 490 million deficit recorded in September 2015.
Oceania:
Trade deficit: R 201 million – This is a deterioration compared to the R 79 million surplus recorded in September 2015.
Excluding trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The trade data excluding BLNS for October 2015 recorded a trade deficit of R31.22 billion. The deficit is a result of exports of R73.66 billion and imports of R104.88 billion. Exports decreased from September 2015 to October 2015 by R5.95 billion (7.5%) and imports increased from September 2015 to October 2015 by R14.78 billion (16.4%).
The cumulative deficit for 2015 is R147.75 billion compared to R180.63 billion in 2014.
Trade highlights by category
The month-on-month export movements (R’ million):
Section: | Excluding BLNS: | |
Precious Metals & Stones | - R2 953 | - 19.4% |
Vegetable Products | - R1 872 | - 40.9% |
Mineral Products | - R1 224 | - 7.1% |
Vehicles & Transport Equipment | - R 885 | - 8.1% |
Machinery & Electronics | + R 351 | + 5.0% |
The month-on-month import movements (R’ million):
Section: | Excluding BLNS: | |
Machinery & Electronics | + R4 613 | + 19.5% |
Vehicle & Transport Equipment | + R3 672 | + 45.5% |
Mineral Products | + R2 018 | + 17.3% |
Chemical Products | + R1 559 | + 16.6% |
Vegetable Products | - R1 422 | - 45.4% |
Trade highlights by world zone
The world zone results other than Africa from September 2015 to October 2015 are given above.
Africa:
Trade surplus: R6 677 million – This is a 37.1% decrease in comparison to the R10 611 million surplus recorded in September 2015.
Botswana, Lesotho, Namibia and Swaziland (Only)
Trade statistics with the BLNS for October 2015 recorded a trade surplus of R9.83 billion. The surplus is a result of exports of R12.69 billion and imports of R2.86 billion. Exports increased from September 2015 to October 2015 by R0.45 billion (3.7%) and imports decreased from September 2015 to October 2015 by R0.14 billion (4.6%).
The cumulative surplus for 2015 is R88.36 billion compared to R85.49 billion in 2014.
Trade Highlights by Category
The month-on-month export movements (R’ million):
Section: | BLNS: | |
Prepared Foodstuff | + R 162 | + 14.3% |
Machinery & Electronics | + R 154 | + 8.8% |
Base Metals | + R 101 | + 13.0% |
Vehicles & Transport Equipment | - R 183 | - 12.8% |
Precious Metals & Stones | - R 117 | - 17.2% |
The month-on-month import movements (R’ million):
Section: | BLNS: | |
Precious Metals & Stones | - R 238 | - 65.2% |
Base Metals | - R 22 | - 29.8% |
Textiles | + R 83 | + 19.5% |
Chemical Products | + R 39 | + 5.6% |
Prepared Foodstuff | + R 21 | + 5.1% |
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Development Banks vow to mobilize collective resources to confront climate change
The heads of the world’s largest development banks on 30 November 2015 pledged to work together to substantially increase climate investments and ensure that development programs going forward consider climate risks and opportunities.
In a joint statement released at the 21st Conference of the Parties of the UN Framework Convention on Climate Change (UNFCCC), the African Development Bank (AfDB), Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), European Investment Bank (EIB), Inter-American Development Bank (IDB), and the World Bank Group (WBG) announced their intention to further mobilize public and private finance to help countries reduce greenhouse gas emissions and adapt to climate change.
In the joint statement, the multilateral development banks (MDBs) pledged to “consider climate change across our strategies, programs, and operations to deliver more sustainable results, with a particular focus on the poor and most vulnerable.” It noted that the six institutions had already delivered US$100 billion for climate action in developing and emerging countries in the four years since starting to track climate finance in 2011.
The statement followed on commitments in recent weeks by the MDBs to increased financing for climate change mitigation and adaptation over the next few years.
The MDBs “pledge to increase our climate finance and to support the outcomes of the Paris conference through 2020,” the statement read. “Each of our organizations has set goals for increasing its climate finance and for leveraging finance from other sources. These pledges support the US$100 billion a year commitment by 2020 for climate action in developing countries.”
Around 180 countries have now submitted their national plans, the Intended Nationally Determined Contributions (INDCs) to the UNFCCC, laying out plans to tackle climate change and to reduce emissions.
The MDBs also expressed support for the voluntary Principles for Mainstreaming Climate Action within Financial Institutions, along with 17 other multilateral, bilateral, national and commercial finance institutions, and committed to “measure the impact of our work in partnership with others, including the International Development Finance Club.”
Quotes
“Africa has already been short-changed by climate change. Now, we must ensure that Africa is not short-changed in terms of climate finance. The African Development Bank stands fully ready to support greater climate financing for Africa,” said Akinwumi Adesina, President of the African Development Bank Group.
“Climate finance is critical to mitigate and adapt to climate change impacts. However, finance alone is not enough. It is imperative that we combine increased finance with smarter technology, stronger partnerships and deeper knowledge,” said Takehiko Nakao, President of ADB.
“With their long experience as leaders in climate finance, the Multilateral Development Banks are making important contributions to combatting climate change, using their strong base of expertise to step up green finance, policy advice and the mobilization of crucial private sector funding. For its part the EBRD is further scaling up its climate finance activity through the implementation of its recently approved Green Economy Transition approach,” said EBRD President Sir Suma Chakrabarti.
“It is only by working together that we will meet the challenge of climate change. I am optimistic that by pooling the efforts of the Development Banks to attract the private finance that is so critically needed, we can transform the ambitions of the leaders into a reality on the ground,” said President of the European Investment Bank Werner Hoyer. “For its part, the EIB is committing to provide US$100 billion by 2020 for climate action and to step up what we do in developing countries – in particular for those most vulnerable to global warming.”
“In the run-up to COP21, we have worked with many countries in designing their national contributions towards tackling climate change,” said IDB President Luis Alberto Moreno. “Following the Paris conference, we will help countries to translate these into investment plans that successfully attract the necessary capital for full implementation.”
“On climate change, the development banks are shifting into high gear,” said Jim Yong Kim, President of the World Bank Group. “We have the resources, we have the collective will, and we have a clear roadmap in the national plans that our clients have submitted ahead of Paris.”