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Options for follow-up and review of the trade-related elements of the Post-2015 agenda and financing for development
Trade and Sustainable Development: Options for Follow-up and Review
Trade is reflected throughout the draft Sustainable Development Goals (SDGs) of June 2015 and the May 2015 draft outcome of the third international Financing for Development (FfD) conference. These two high-level meetings and their outcome documents will guide global development work for the next 15 years. The first aim of this paper is to map where trade-related elements are found in the SDGs and FfD. The second aim is to describe the trade-related architecture for review and follow-up that could support these outcomes, and to map where it exists or could be built. The SDGs in themselves will not cause anything to change, let alone ensure policy coherence, but the review process might.
Trade’s contribution to the Post-2015 Agenda is diffuse, which means follow-up and review will be a challenge, but it need not be overly burdensome, and it will be useful. This paper presents an initial set of options for how progress towards these trade-related commitments could be reviewed in the years to 2030. The process would provide information on progress by United Nations Member States, based on inputs from governments, civil society and international organisations. This information would be reviewed through self-assessment by Member States themselves, and through peer review by other governments at the regional level (for example in United Nations regional commissions), and at the global level in multilateral agencies and the High-Level Political Forum, the apex of the follow-up and review process. The point of these review processes is not ‘evaluation’, but the sharing of experiences as a way to facilitate learning and policy improvement.
The paper identifies six clusters of trade-related elements in the draft SDGs and in the draft FfD outcome. These elements range from improving access to markets for small-scale producers to strengthening the multilateral trading system. They include commitments to the reform of perverse subsidies to agriculture, fisheries and fossil fuels, and to ensuring that regional trade and investment agreements are coherent with sustainable development objectives. For each cluster, the paper identifies current thinking on indicators, where the necessary data are already collected (if they are) and where progress against these political commitments could be reviewed. The paper then presents the information from another perspective, focusing on the potential roles of the various peer review mechanisms. These mechanisms range from multilateral reviews like the Trade Policy Review Mechanism of the World Trade Organization and UNCTAD’s voluntary policy peer reviews to regional mechanisms that could review groups of United Nations Members, like the Organisation for Economic Co-operation and Development or regional economic integration organisations like Asia-Pacific Economic Cooperation.
The last part of the paper explains how the various reports could be brought together. Given the profusion of options for review mechanisms, an interagency task force on trade could provide an analytical synthesis of reporting and reviews useful for discussions at national, regional and global levels on the interrelated effects and trade-offs between goals. The broad mandate for such a task force, and perhaps others that would serve the Post-2015 review process, could be part of the Summit outcome document, with details to be proposed by the agencies to the High-Level Political Forum on sustainable development at its July 2016 meeting.
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tralac’s Daily News selection: 20 November 2015
The selection: Friday, 20 November
Made in Africa: some new thinking for Africa Industrialization Day (Brookings)
Today Friday, November 20 marks yet another “Africa Industrialization Day” by the United Nations. There have now been 25 such events, and they seem to have come and gone with relatively little notice. This year may be different: Africa’s failure to industrialize has come to the attention of a growing number of observers, including the venerable magazine, The Economist. The objective is clear - Africa needs more industry - but the path forward, at least in the eyes of The Economist remains “more a marathon than a sprint.” Some of us who study Africa and industrial development are not so pessimistic. Over the past five years the African Development Bank, Brookings and United Nations University-World Institute for Development Economics Research have jointly sponsored a multi-year, multi-country research project designed to answer three questions: Why is there so little industry in Africa? Does it matter? And, what can be done about it? [The author: John Page]
Pharmaceutical Manufacturing Plan for Africa: update
The objective of this meeting, 28-29 November, is to review the progress made so far on the implementation of the PMPA, identify challenges and opportunities to further advance the sector for improved access to much needed medical products on the continent and pave the way forward for the future of the pharmaceutical industry and related sectors. [Concept note]
Development assistance aspects of cotton: report by WTO Director-General
The world cotton market has registered major changes in respect of global production, planted area and trade over the last two seasons. In a difficult context, marked by dwindling cotton prices and compounded by the persistence of sluggish world economic growth, the cotton sector of several LDCs and, in particular, African cotton-producing countries, has managed to remain stable. Cotton production in Africa increased by 13% in 2014/15 in relation to last season, to reach 1.69 million tons, accounting for 6% of world output and 14% of the global cotton area. Conversely, due to weak overseas demand, exports from African countries decreased by 7% in the 2014/15 season, amounting to 1.22 million tons.
Overview of developments in the international trading environment: annual Report by the Director-General
Brazil, EU propose tighter WTO rules on agricultural export competition (ICTSD)
Regional parliamentary fora updates:
SADC PF 38th Plenary Assembly Session: This Plenary Assembly Session is being held under the theme: 'From Millennium Development Goals to the Sustainable Development Goals: towards a greater parliamentary role in the development agenda'
EALA sitting to resume: Two key Bills on the cards at the EALA meeting are the EAC Disaster Risk Reduction Bill 2013 and the EAC Forestry Management Bill 2014. A special sitting is expected to be addressed by the President Paul Kagame.
ECOWAS, development partners renew commitment to implementation of priority programmes (ECOWAS)
The meeting identified emerging trends in the collaboration between ECOWAS and the Development Partners as well as the challenges in the implementation strategies currently employed. These include issues surrounding the CET, checkpoints, the need to have a good grasp of informal trade within the region, signing of the Economic Partnership Agreement by all member states, awareness (of community programmes) raising activities as well as the need for greater competitiveness. The President of the ECOWAS Commission, Kadre Desire Ouedraogo, said the parties recognised the need to strengthen partnership in order to meet the major sustainable development challenges that are taken into account in ECOWAS regional policies.
SADC domestic resource mobilization through taxation and oversight: SADC PF conference communique
Whereas the European Parliamentarians for Africa, the SADC Parliamentary Forum and the African Tax Administration Forum convened a Regional Parliamentary Seminar on SADC Domestic Resource Mobilization through Taxation and Oversight, on Tuesday, 10th of November 2015, at Sandton Sun Hotel, Johannesburg, South Africa. Finally, recommend that this Final Statement be presented to the Trade, Investment, Finance, Infrastructure and Integration Committee for further processing within the structures of the SADC Parliamentary Forum and beyond.
Malawi: New trade tools to help businesses export more and better (Intracen)
The international competitiveness of Malawi’s businesses has been given a boost by the launch of two new trade information systems: the Trade Map Malawi, and the Malawi Investment and Trade Centre Trade Information Portal. ITC Trade Map, which provides online access to one of the world’s largest trade databases, has been customised and embedded into the website of the National Statistical Office, allowing for multiple ways of displaying monthly, quarterly or yearly Malawi trade data in tables, graphs or maps. The Trade Information Portal which has been developed by ITC for MITC, serves as a hub for trade-related intelligence needed for exporters to gain access to new markets. The portal provides users with up-to-date information on market access conditions, business opportunities and trade incentives and agreements. It will also provide analytical data on production, consumption and trade flows.
ZimTrade urges govt ro review investment policies (The Chronicle)
ZimTrade has implored government to review investment and trade policies to support private sector initiatives in accessing export markets. While presenting the findings of the Namibia Market Survey, Africa Corporate Advisors director Malvern Rusike yesterday said there were market opportunities for Zimbabwean companies but a review of trade policies remains fundamental.
Zimbabwean contractors cry foul over awarding of tenders to foreign firms (The Chronicle)
Understanding Mozambique’s growth experience through an employment lens (UNU-Wider)
Over the past twenty years, Mozambique has achieved remarkable progress in promoting macroeconomic growth and stability. Nonetheless, poverty rates remain high and labour market activity is dominated by smallholder farming. We use recent household survey data to dig into these trends and provide an updated analysis of transformation in the labour market. We find that movement of labour out of agriculture has contributed to aggregate growth. But, this trend is slowing and is leading to a saturation of the services sector. Moreover, productivity growth is weakening within more labour-intensive sectors. We conclude by reflecting on policy challenges, including demographic trends. [The authors: Sam Jones, Finn Tarp]
Chinamasa walks tight rope (Zimbabwe Independent)
Finance minister Patrick Chinamasa is walking on a tight rope as he finalises his 2016 National Budget, due for presentation on Thursday next week, at a time revenues continue to dwindle. His task is no stroll in the park and his biggest headache, according to analysts, is making good on a promise to clear US$1,8 billon the country owes to multilateral creditors by mid-2016 and institute reforms that can convince cynical lenders and investors there is some form fiscal discipline.
Rwanda: Govt to create new agency to spearhead implementation of ICT master plan (New Times)
The government is set to create a new agency to spearhead the implementation of the recently adopted Smart Rwanda Master Plan. The master plan, adopted by Cabinet earlier this month, outlines a five-year plan for the ICT sector in the country and takes effect beginning 2016. It focuses on digitising the economy and positioning ICT as one of the key exports of the country.
Tanzania shilling slides 24% in ten months (Daily News)
The shilling has gone down by 24% since the beginning of this year, as demand from importers continued to outpace foreign currencies inflow. The Bank of Tanzania data showed that the shilling depreciated from 1,723/25 in January to 2,142/65 in mid November. The shilling in the first week of this month, started to appreciate hence returning hopes to importers that the trend would continue.
Kenya: Flower firms shifting base to Ethiopia over taxes (Business Daily)
Four Kenya-based flower firms have shifted to Ethiopia as a result of punitive taxes that are making the horticulture industry uncompetitive in the global market, industry players have said. Data from the Kenya National Bureau of Statistics indicates that earnings in the flower sector dropped by 3% to Sh40bn in the first eight months of the year compared to Sh41.5bn the same period in 2014. Jane Ngigi, the chief executive of the Kenya Flower Council, says multiple taxation by the governments is negatively affecting the sector and is likely to pose an existential threat in the coming years if not reviewed.
Infrastructure-driven regional integration: updates
Abidjan-Lagos road corridor update: The Abidjan–Lagos Corridor is a PIDA flagship project. The 1028km road, under construction, connects Abidjan, Accra, Cotonou, Lagos and Lome, considered to be West Africa’s largest and most economically dynamic cities, with a combined population of more than 35m people. The six-lane corridor also links vibrant sea ports, serving all the region’s landlocked countries, thus facilitating intra and inter regional trade. “The corridor is one of the most important developments in the region; it accounts for about 75 percent of trade in the ECOWAS region”, said Edy Anthony, a transport expert with Abidjan-Lagos Corridor Organisation.
Headway in Kazungula bridge construction – Mabeo: The Minister of Transport and Communications, Tshenolo Mabeo told journalists this week the P1.4bn project is on course and will be delivered by December 2018. However, Mabeo indicated that the contractor, Daewoo Engineering Company had assured the ministry that it has put in place remedial measures or a catch-up plan to mitigate the time lost and to make sure that the project will be delivered within the agreed time. He asserted that they are not anticipating an extension of time nor will there be request for extra funding, emphasising on the need for the contractor to complete works on the bridge on time.
Plans to widen motorway linking Mozambique to South Africa: The Mozambican government on Tuesday approved the widening of the Maputo-South Africa motorway at its most critically congested point. In sections 19 and 20 of the road, which are in Matola municipality, the motorway will be widened from four lanes to six, in an attempt to ease the traffic jams that have come to characterize these stretches at rush hour. A critical problem is overloading. Studies undertaken by TRAC on one stretch of the road between October 2011 and March 2012 showed that 19% of trucks on the motorway were overloaded, which is why the road surface has deteriorated so quickly. Hence the addendum also envisages more weighbridges to check vehicles for overloading.
African Development Fund: 13th replenishment (AfDB)
A number of key issues were discussed, including the findings of an independent evaluation of the ADF-12 and ADF-13 commitments, the Fund’s operational priorities, and the Bank Group’s institutional effectiveness. The meeting discussed progress on the fragility and transition support agendas. It noted with satisfaction that the Fund has made significant progress in mainstreaming gender in its operations, achieving decisive outcomes for women’s empowerment in areas including transport, agriculture, water and sanitation. Participants also commended the Bank’s action in countries facing fragile situations. [The Mid-Term Review report]
East Africa: EOI for establishment of a PPP advisory hub (AfDB)
Mombasa eyes mass rail system in talks with JICA (Business Daily)
DRC traders urge JPM to help boost Dar port (The Citizen)
Kenya gets nod to export farm fish to European market (Daily Nation)
Somalia exports 5000 livestock to UAE (The East African)
SADC Food Security Early Warning System: update for the 2015-2016 season
Charles Chukwuma Soludo: ‘Can a new Buharinomics save Nigeria?’ (Premium Times)
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Renewable energy could be ‘game changer’ in Africa
Members of the Infrastructure Consortium for Africa (ICA) gave their full support this week to helping Africa achieve its target of 300GW of power from renewable energy by 2030, suggesting that it could be the ‘game changer’ that unlocks Africa’s energy potential and drives economic growth.
This year’s ICA annual meeting, which took place in Abidjan on November 16 to 17, 2015, further concluded that access to finance for investment in renewable energy projects was less of a challenge than the availability of well-prepared, bankable renewable energy projects to develop.
The 11th Annual Meeting of the ICA was jointly organised by the German government (Federal Ministry for Economic Cooperation and Development) and the African Development Bank (AfDB). It was hosted by the Bank at its headquarters in Abidjan. Over 150 participants attended the meeting, including senior officials from Germany (as Chair of the G7), the African Union Commissioner for Infrastructure and Energy, the Vice President of the African Development Bank, representatives from the Regional Economic Communities, senior African stakeholders, representatives from other international donors and key private sector players in the renewable energy sector.
During the first day of the meeting, restricted to ICA members and invited observers, participants reported and discussed the key activities of the ICA and provided guidance about its future activity and strategic direction. The primary topic for the meeting was the ICA’s annual report, Infrastructure Financing Trends in Africa 2014, which was well received and commended. The report showed that over US$74billion was committed in 2014 to the development of Africa’s infrastructure, and that disbursements by ICA members alone reached a record level of US$13billion.
Commenting on the reaction to the report, the ICA’s Coordinator, Mohamed Hassan, said: “ICA members felt that both the scope and analysis of data was commendable, specifically the coverage of 44 countries in Africa, while the private sector survey was extremely helpful in identifying major constraints to creating an enabling environment.”
The open Plenary Meeting on the second day focused on Implementing Renewable Energy Initiatives in Africa. In addition to highlighting the key role that renewable energy can play in Africa’s economic development and flagging up the need for a ‘pipeline’ of well-prepared renewable energy projects, other key messages from the meeting included:
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Political will and commitment at the highest level was vital if Africa is to achieve a target of 300GW of renewable energy by 2030, but this must also be supported by strong institutions and frameworks that inspire confidence.
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There is no ‘one size fits all’ solution for Africa’s energy challenges. Renewable energy, using a variety of technologies, can play a vital role in widening access to power, particularly as some technologies can be introduced rapidly.
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The role and experience of the private sector will be vital if the 300GW of renewable energy by 2030 target is to be met.
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Capacity building, skills improvement, job creation and the sharing of best practice were also critical factors if Africa’s target of 300GW of power from renewable energy sources by 2030 is to be achieved.
Both the timing of the ICA Annual Meeting and its focus on renewable energy were appropriate given the proximity of the UN Climate Change Conference (COP21), which will take place in Paris in from November 30 to December 11, 2015.
The official outcome statement for the 11th ICA annual meeting will be developed over the next few weeks and will be posted on the ICA website.
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Brazil, EU propose tighter WTO rules on agricultural export competition
The EU has joined forces with Brazil and five other farm exporting countries to propose tighter WTO rules on export subsidies and similar measures, one month ahead of the global trade body’s ministerial conference in Nairobi, Kenya.
Trade sources told Bridges that the proposal, which was presented at an informal negotiating meeting on Wednesday afternoon, raises the pressure on the US to make concessions on export credits and food aid – two areas where Washington has indicated it might have problems in accepting stronger WTO disciplines.
“How the US responds will be critical,” one negotiator said.
Agricultural exporting countries Argentina, New Zealand, Paraguay, Peru, and Uruguay also co-sponsored the proposal, a copy of which was seen by Bridges.
The paper calls for developed countries to eliminate their export subsidies in 2018 – in other words, five years later than a 2013 deadline that was missed by WTO members – and for developing countries to do the same by 2021.
Under the proposal, developing countries would also be allowed to provide export subsidies that cover transport and marketing costs until 2026, by extending article 9.4 of the WTO Agreement on Agriculture. This clause had previously authorised developing countries to use these payments until the agreement’s implementation period ended in 2004.
Australia: India’s “substantial” sugar subsidies
However, Australia – another farm exporting country that has long sought more stringent rules on export subsidies – circulated a separate communication arguing that developing countries should not be granted this additional flexibility.
“Australia sees no development policy rationale for the formal reactivation of a legal entitlement to use Article 9.4 export subsidies,” the Australian paper argues.
Some developing countries such as India have emphasised that the WTO’s Hong Kong ministerial declaration, which was agreed in 2005, would have allowed article 9.4 payments to continue for five years after the original 2013 end-date for eliminating all forms of export subsidies. Other countries underscore that the declaration does not have the same legal force as the Agreement on Agriculture, and that the authorisation to provide these payments has therefore expired.
The Australian paper, a copy of which has also been seen by Bridges, finds that India has applied an export subsidy for exports of up to four million tonnes of raw sugar. It concludes that it would “be difficult to export significant volumes without a subsidy” given the difference between domestic and international sugar prices.
US export credits
The co-sponsors of the EU-Brazil paper call for export credits, export credit guarantees, or insurance programmes to be subject to new rules, basing their proposal on draft text that was originally prepared in 2008 by the then-chair of the WTO agriculture negotiations, New Zealand Ambassador Crawford Falconer.
Although the US has indicated it would have difficulty accepting the 180-day maximum repayment term for export financing that was proposed in the 2008 draft, the co-sponsors have maintained this term – but added a footnote that may provide some additional flexibility that sources said could make it less difficult for Washington to accept.
The new footnote allows for longer repayment terms, up to a maximum of 270 days, subject to additional conditions. These include using “minimum premium rates” as defined by the Organisation for Economic Co-operation and Development (OECD) and country risk categories as a benchmark for calculating risk based fees.
A similar arrangement formed the basis for the US and Brazil to reach an agreement in 2014 on their long-running dispute over cotton subsidies.
Food aid “monetisation”
In another move aimed at accommodating Washington’s concerns, the co-sponsors also propose adding a footnote to the 2008 draft text that could make it easier for countries to sell in-kind food aid in non-emergency situations – a process known as “monetisation.”
While the proposed new rules would establish a “safe box” for humanitarian aid in emergency situations, they would also establish tighter disciplines on non-emergency situations so as to ensure that in-kind aid does not cause commercial displacement and harm local producers.
Under the co-sponsors’ new proposal, aid donors would be able to monetise some in-kind food aid in non-emergency situations, on condition that this did not exceed a to-be-determined share of total in-kind food aid donations.
Special safeguard mechanism
At Wednesday’s meeting, negotiators from the G-33 group of developing countries also presented a proposed ministerial decision on the “special safeguard mechanism” – a tool which several food-importing developing countries have argued is necessary to protect their domestic producers from surges in import volumes or sudden price depressions.
The G-33 – which includes major trading countries such as China, India, and Indonesia, as well as far smaller economies such as Barbados and the Dominican Republic – also propose that WTO members would agree not to challenge developing countries that use the new safeguard under the trade body’s dispute settlement mechanism.
The G-33 would like a political commitment that would allow them to use the SSM “from day one after Nairobi,” one source familiar with the proposal told Bridges.
“We’ve learned our lesson from the Trade Facilitation Agreement,” the official added, in a reference to the lengthy ratification process that has followed the conclusion of that agreement at the WTO’s Bali ministerial conference in December 2013.
Two years after the Bali meet, the trade facilitation pact is still not in effect, with only 52 “instruments of acceptance” having been submitted to date – less than half of what is required to bring it into force, though more are expected in the coming weeks and months.
However, many agricultural exporting countries remain opposed to the SSM in the absence of a broader negotiation on market access issues.
“We have already made it clear that we won’t accept the SSM without an outcome on market access,” one developing country negotiator said.
SSM and export competition linkage?
The G-33 reportedly had asked for the chair of the agriculture negotiations to convene meetings on the special safeguard mechanism in parallel to similar consultations on export competition in the remaining time leading up to the ministerial.
However, one African country official expressed concern about linking progress on export competition to the SSM outcome.
“Suppose the linkage created a stalemate: then we’d get nothing on export competition,” the source said.
Another negotiator said that the linkage was more on process than substance.
“The issue is not that the G-33 will block export competition,” the source said. “We want our issues also to be on the Nairobi agenda.”
Draft declaration talks bogged down
Disagreement between WTO members over the fate of the long-running Doha Round of talks continues to plague efforts to prepare a draft declaration for the Nairobi ministerial, sources said.
Negotiators said that the US, EU, and Japan in particular were determined to avoid any reference that would reaffirm previous declarations from the Doha ministerial in 2001 onwards. In contrast, various developing countries were anxious to preserve aspects of the progress that they felt had been achieved.
While a number of negotiators expressed anxiety about the slow progress, one source pointed out that the drafting process had effectively only just begun.
“We hope there’ll be compromises,” the source told Bridges.
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Overview of developments in the international trading environment: Annual Report by the WTO Director-General
This trade-monitoring report reviews trade-related developments during the period from 16 October 2014 to 15 October 2015. It is submitted by the Director-General to assist the Trade Policy Review Body (TPRB) in undertaking its annual overview of developments in the international trading environment that are having an impact on the multilateral trading system.
The report confirms that WTO Members continue to show some restraint in taking new trade-restrictive measures with the introduction of such measures remaining relatively stable since 2012. During the period under review, 178 new trade-restrictive measures were put in place – an average of just under 15 new measures per month.
More encouragingly, WTO Members continued to adopt measures aimed at facilitating trade, both temporary and permanent in nature. Members implemented 222 new trade-facilitating measures during the period under review – an average of almost 19 measures per month, the second highest number since the beginning of the monitoring exercise.
Nevertheless, the slow pace of removal of previous restrictions means that the overall stock of restrictive measures is continuing to increase. Of the 2,557 restrictions (including trade remedies) recorded by the monitoring exercise since October 2008, only 642 have been removed. In other words, the total number of those restrictive measures still in place currently stands at 1,915 – up by almost 17% compared to the last annual overview. The addition of new restrictive measures, combined with a slow removal rate, remains a persistent concern with 75% of all restrictions measures implemented since 2008 still in place. The longer-term trend in the number of trade-restrictive measures is an area where continued vigilance remains imperative.
The downturn in world trade observed in the last monitoring report continued in the second quarter of 2015. Global economic growth was modest during the review period and continues to be unevenly distributed across countries and regions. Prices for primary commodities including oil are down sharply from last year, squeezing a number of important exporters. Exchange rates have undergone important shifts since the last report and speculation surrounding monetary policy alongside recurring bouts of volatility in financial markets has stoked uncertainty. In light of these developments, the Secretariat recently (30 September 2015) lowered its forecast for world merchandise trade volume growth in 2015 to 2.8%, and reduced its estimate for 2016 to 3.9%.
In the area of trade remedies, the decelerating trend observed in the previous report continued. This owes particularly to the decline in the number of initiations of anti-dumping investigations. Concerning anti-dumping and countervailing measures applied on the basis of investigations initiated in 2008 and 2009 (coinciding with the onset of the financial crisis), the data on extensions of measures pursuant to sunset reviews versus expired measures show no discernible change from the pattern observed in prior periods.
During the review period, the WTO’s TBT and SPS Committees saw significant developments. The SPS Committee has witnessed a persistent growth in notifications from developing countries leading to the highest number of notifications to date. An increase in the number of notifications does not, however, automatically imply greater use of measures taken for protectionist purposes. Another noteworthy development was the significant increase in the number of specific trade concerns (STCs) raised in the TBT Committee.
This report shows that WTO Members introduced 128 new general economic support measures – an average of almost 11 new measures per month, and a significant increase from the previous report. The main beneficiaries were selected industries in the agricultural sector, oil and gas industries, the automotive sector and assistance schemes for exports and for SMEs.
In the area of services the period under review witnessed several important policy developments in such diverse sectors as financial services, telecommunications and ICT, audio-visual services, construction services, energy and transport services, services supplied through the movement of natural persons and a number of other sectors. The large majority of the policies adopted during the period under review reflect trade-liberalizing measures.
Several other important trade-related developments also took place during 2015. These include the adoption of the Trade Facilitation Agreement, the expansion of the Information Technology Agreement, the Global Review of Aid for Trade and new initiatives in the area of Regional Trade Agreements.
The overall assessment of this monitoring report is that the uncertain global economic outlook continues to weigh on international trade flows. It shows that the continuing increase in the stock of trade-restrictive measures recorded since 2008 remains of concern. Looking towards the 10th Ministerial Conference in Nairobi in December, WTO Members should reflect on the central role of the multilateral trading system as a predictable and transparent framework helping Members resist protectionist pressures and as a stable and inclusive platform for pursuing further multilateral trade liberalization.
Recent Economic and Trade Developments
Overview
The WTO downgraded, on 30 September, its forecast for world trade after declines in the first two quarters of 2015 reduced the potential expansion for the year and clouded the outlook for 2016. The Secretariat now expects merchandise trade to grow 2.8% in volume terms in 2015 (down from 3.3% in April) and 3.9% in 2016 (down from 4.0% previously).
These downward revisions reflect a number of factors that have weighed on world trade and output recently, including the rebalancing of the Chinese economy away from investment and towards consumption, declines in primary commodity prices that have hit export revenues and imports of resource-based economies, as well as strong exchange rate fluctuations and volatility in financial markets. Uncertainty over the timing and pace of expected interest rate rises in the United States has also raised the prospect of capital flow reversals in developing countries and clouded the outlook for the global economy going forward.
Economic Developments
If the September forecast holds, 2015 will be the fourth consecutive year with merchandise trade growth of less than 3%, and the fourth year where world trade has grown at approximately the same rate as world GDP, rather than twice as fast, as in the 1990s and early 2000s. The current forecast indicates faster trade growth of 3.9% in 2016, but this rate of increase is still well below the average of 5% since 1990.
Large exchange rate fluctuations since the middle of 2014 reflect changes in economic prospects and policy expectations in major economies, and have exerted a strong influence on nominal dollar denominated trade statistics.
Primary commodity prices, including oil prices, have not recovered since the last monitoring report and have in fact continued to decline. Lower prices for fuels (down 50% year-on-year in the latest month) are partly explained by new sources of supply. Investment in oil production from unconventional sources has fallen in North America as prices have declined, but output from existing capacity remains strong. Another contributor to falling prices is the appreciation of the dollar, which now commands more goods and services than it did a year ago. There has traditionally been an inverse relationship between dollar denominated commodity prices and the exchange value of the U.S. currency, with appreciations causing commodity prices in dollars to fall.
The IMF released its latest World Economic Outlook (WEO) on 6 October with projections for world GDP and trade in 2015 and 2016. GDP estimates received modest downward revisions but the organization's trade numbers were reduced sharply, bringing them more in line with WTO forecasts. The IMF expects world GDP at purchasing power parity to grow 3.1% in 2015 and 3.6% in 2016. Risks are tilted to the downside and include financial shocks stemming from exchange rate movements and commodity price declines.
Merchandise Trade
The dollar value of world trade was down sharply in the first and second quarters of 2015, around 13% in both periods compared to 2014. These drops were entirely attributable to changes in export and import prices since quarterly trade volume indices jointly prepared by the WTO and the United Nations Conference on Trade and Development (UNCTAD) show positive year-on-year growth over the same period (+3.1% in Q1 and +1.4% in Q2 on the export side). Very little useful information can be discerned from the contributions of developed and developing countries to trade growth in dollar terms in the current circumstance of strong dollar appreciation. However, the fact that these contributions are of similar magnitude suggests that both groups of countries are equally affected by the appreciation of the dollar.
Trade statistics in volume terms frequently provide a more accurate picture of trade developments since they are adjusted to account for fluctuations in prices and exchange rates. These data are illustrated by Chart 2.4, which shows seasonally-adjusted quarterly merchandise trade volume indices for Brazil, developing Asia (including China and India), the EU, Japan and the United States from 2010Q1 to 2015Q2. These data present a rather negative trend of trade in the first half of 2015, especially with regards to exports of developing Asia and imports of South America.
This report is submitted by the Director-General to the Trade Policy Review Body (TPRB) pursuant to Paragraph G of the trade policy review mandate in Annex 3 to the WTO Agreement. It builds on the Director-General’s report to the TPRB on trade-related developments circulated to Members on 3 July 2015.
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Made in Africa: Some new thinking for Africa Industrialization Day
This Friday, November 20 marks yet another “Africa Industrialization Day” by the United Nations. There have now been 25 such events, and they seem to have come and gone with relatively little notice.
This year may be different: Africa’s failure to industrialize has come to the attention of a growing number of observers, including the venerable magazine, The Economist. In its November 7 issue The Economist notes with some alarm at the fact that “many African countries are deindustrializing while they are still poor, raising the worrying prospect that they will miss out on the chance to grow rich by shifting workers from farms to higher-paying factory jobs.”
By any measure Africa’s failure to industrialize is striking. In 2013 the average share of manufacturing in GDP in sub-Saharan Africa was about 10 percent, half of what would be expected from the region’s level of development. Moreover, it has not changed since the 1970s. Africa’s share of global manufacturing has fallen from about 3 percent in 1970 to less than 2 percent in 2013. Manufacturing output per person is about a third of the average for all developing countries and manufactured exports per person, a key measure of success in global markets, are about 10 percent of the global average for low income countries
This lack of industrial dynamism is a growing matter of concern to Africa’s political leaders, as well. The U.N.’s Economic Commission for Africa (UNECA) will publish a major report on industrialization in Africa next month. The African Union has adopted an “Action Plan for the Accelerated Industrial Development of Africa.” And the newly adopted United Nations Sustainable Development Goals (SDGs) highlight the need for job creation and industrialization, two themes introduced largely at the request of African governments.
Historically, industry is the sector into which resources have first moved in the course of economic development. Industry is the pre-eminent destination sector at early stages of development because it is a high productivity sector capable of absorbing large numbers of moderately skilled workers. Between 1950 and 2006, about half of the catch-up by developing countries to advanced economy levels of output per worker was explained by rising productivity within industry combined with labor moving out of agriculture into manufacturing.
The objective is clear – Africa needs more industry – but the path forward, at least in the eyes of The Economist remains “more a marathon than a sprint.” Some of us who study Africa and industrial development are not so pessimistic. Over the past five years the African Development Bank, Brookings and United Nations University-World Institute for Development Economics Research have jointly sponsored a multi-year, multi-country research project designed to answer three questions: Why is there so little industry in Africa? Does it matter? And, what can be done about it? Our forthcoming books, Made in Africa: Learning to Compete in Industry (Brookings Institution Press) and Manufacturing Transformation: Comparative Studies of Industrial Development in Africa and Emerging Asia (Oxford University Press), offer some new thinking on what makes firms in low-income countries more competitive and what makes countries more attractive to competitive firms.
A series of policy notes (referenced in this blog) gives some of our insights into what needs to change if Africa wants to move from a marathon to a sprint in terms of industrial development. As The Economist correctly points out, one of the major constraints to Africa’s industrial development is a lack of the “basics” – infrastructure, skills and institutions – but a major finding of our research is that while industrialization cannot succeed without these, they are not enough. Three closely related drivers of firm-level productivity – exports, agglomeration and firm capabilities – have been largely responsible for East Asia’s industrial success, and their absence goes a long way toward explaining Africa’s lack of industrial dynamism. For example, in Tanzania, one of the continent’s more successful cases of industrial development, special economic zones (SEZs), which are export-oriented industrial clusters, contain about 40 firms, employing around 10,000 people. Vietnam has 3,500 firms in its export processing and industrial zones, employing 1.2 million workers. Putting policies in place that promote manufactured exports, encourage the development of industrial clusters and attract more capable foreign direct investors outside of the natural resources sector are essential first steps in reversing Africa’s industrial decline. In Made in Africa we spell out how African governments can do just that.
John Page, formerly chief economist for Africa and director, poverty reduction at the World Bank, currently studies industrial development, poverty and migration in Africa. He has also worked on the Middle East and East Asia.
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New UN report cites huge positive policy potential to cut greenhouse gas emissions
A new report packed with best practice climate policies from across the world was released on 18 November 2015 by the United Nations Framework Convention on Climate Change (UNFCCC), revealing a wealth of existing opportunities to immediately scale up reductions in greenhouse gas emissions while powering up ambition to keep the global average temperature rise below 2 degrees Celsius.
“Science tells us that there is one path for us to be able to have a stable planet and a safe stable economy, and that is to get onto a below 2 degree path – that is fundamental – and policy is actually following science as it should,” said Christiana Figueres, the Executive Secretary of the UNFCCC, speaking to reporters in Bonn, Germany.
Less than two weeks away from the UN climate conference in Paris, widely known as COP21, she announced that 168 countries, covering almost 90 per cent of global emissions, have now submitted their national climate targets, known as INDCs.
“These do make a huge dent in the projected increase in temperature that we would have by the end of the century, so if these INDCs are fully implemented then we would no longer be on a track of 4 or 5 degrees, we would be on a track of anywhere between 2.7 and 3 degrees, which is a much, much better projection in temperature rise,” Ms. Figueres continued, but warned that this is not yet two degrees or below 2 degrees, which is what some countries still need for their survival and safety.
Introducing the new UNFCCC report, Climate Action Now – A Summary for Policymakers 2015, Ms. Figueres said it is a “solutions” guide. It explains how nations can deploy a wide range of proven policies and utilize existing initiatives to meet the common challenge of climate change and sustainable development.
It also highlights both national and international cooperative actions while underling the vital role of non-State actors such as companies, cities, regions and provinces in realizing bigger reductions in current and future emissions.
UNFCC further described the report as providing, at the request of governments, a straightforward, inspiring go-to-reference to assist ministers, advisors and policymakers pursuing climate actions now and over the years and decades to come.
The findings spotlight how effective policies across six key thematic areas not only reduce emissions rapidly but also advance goals in 15 other critical economic, social and environmental areas.
“Under the UNFCCC, governments have, over the past few years, led a significant effort during a series of technical expert meetings to identify and scope out the policies that lead to effective climate action – this report is the fruit of that effort,” Ms. Figueres explained.
“It underlines the myriad of remarkable transitions that are already occurring nationally and internationally in areas ranging from renewable energy to transportation and land use. In doing so it provides governments and their partners with the blueprints and tool-kits to cost-effectively catalyze action now and take the Paris agreement to the next level of long term ambition,” she added.
She also noted that the “remarkable reality” revealed in this report is that the very policies that deal most effectively with climate change also offer a ready-made portfolio of actions that can equally assist the Sustainable Development Goals (SDGs), adopted by UN Member States in September.
Meanwhile, responding to questions from the press on how the recent attacks in Paris could affect the conference, the Executive Secretary said the UN is still addressing how security around the many events planned can be increased, and that she thinks “this should be a call for personal prudence” on the part of everyone.
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Development Assistance Aspects of Cotton: Seventh periodic report by the WTO Director-General
Since my last Periodic Report on the Development Assistance Aspects of Cotton to the membership in October 2013, four Rounds of the Director-General’s Consultative Framework Mechanism on Cotton (DGCFMC) have taken place, bringing the total number of such rounds held since 2004 to date to 23. The 24th Round of Consultations is scheduled for 27 November 2015. The Evolving Table on Cotton Development Assistance (ET), our well-known tool to track developments in financial assistance to the cotton sector, has been revised four times, including the latest update [of 27 October 2015].
I would like to commend Australia, Canada, the European Union – and several of its Member States, Japan, Switzerland and the United States. I would also like to commend Brazil, China and India on the specific platform of South-South Cooperation for Cotton-Sector Development. The support and engagement of these Members in the consultative forum has contributed to enhance the dialogue and consolidate the partnership between providers and recipients of development assistance for cotton.
Several multilateral and regional agencies have also been actively participating in this process, namely: the Food and Agriculture Organization (FAO), the International Cotton Advisory Committee (ICAC), the International Monetary Fund (IMF), the International Trade Centre (ITC), the United Nations Conference on Trade and Development (UNCTAD), the United Nations Industrial Development Organization (UNIDO) and the World Bank.
Context
The world cotton market has registered major changes in respect of global production, planted area and trade over the last two seasons. In a difficult context, marked by dwindling cotton prices and compounded by the persistence of sluggish world economic growth, the cotton sector of several LDCs and, in particular, African cotton-producing countries, has managed to remain stable. Cotton production in Africa increased by 13% in 2014/15 in relation to last season, to reach 1.69 million tons, accounting for 6% of world output and 14% of the global cotton area. Conversely, due to weak overseas demand, exports from African countries decreased by 7% in the 2014/15 season, amounting to 1.22 million tons. Exports from all major exporters, with the exception of India and the Francophone African countries, are expected to fall in the 2015/16 season. More detailed information on developments in the cotton sector worldwide and, more specifically, in Africa, is given in the Annex to this Report.
Implementation
As Members are aware, the work on cotton in the WTO follows a two-track approach, involving the development assistance aspects as well as the trade-related aspects of cotton. As regards the development assistance aspects, there is evidence of deeper consolidation of progress. The figures in the Evolving Table on Cotton Development Assistance show that the implementation of commitments is progressing, thereby shrinking the gap between commitments and disbursements. The traditional bilateral donors as well as relevant multilateral institutions have continued to be at the forefront of this process, accompanied by some developing Members on the platform of South-South Cooperation. This positive dynamic was complemented by the pursuit of domestic reform initiatives undertaken by the beneficiaries of cotton development assistance, as reflected in the tenth revision of the Table on Domestic Cotton Sector Reforms.
The trade-related aspects of cotton need to be assessed in the context of overall progress in the agriculture negotiations. In relation to this track, it is worth recalling the 2013 Bali Ministerial Decision whereby Ministers reaffirmed the importance of cotton and agreed to hold dedicated discussions on a bi-annual basis under the aegis of the Committee on Agriculture in Special Session to examine relevant trade-related developments across the three pillars of market access, domestic support and export competition in relation to cotton. As per this mandate, three such dedicated discussions have been held so far; the next one being scheduled for 27 November 2015. In these discussions, Members have engaged in focused examination of all forms of export subsidies, export measures and domestic support for cotton, as well as tariff and non-tariff measures applied to cotton exports from LDCs in markets of interest to them.
Evolution of cotton development assistance
Development assistance to the cotton sector provided by Members and relevant multilateral agencies shows a positive consolidation. The latest information is reflected in the twentieth version of the Evolving Table, which I forwarded to the membership on 27 October 2015. In summary, the results are as follows:
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In Part I, on Cotton Specific Development Assistance (of active operational activities), the number of individual beneficiaries stands at 28. The total number of commitments is 35, and the total value of these commitments is approximately US$226 million. Disbursement flows reached US$102 million. The ratio of total disbursements to total commitments is 45%.
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In Part II, on Agriculture and Infrastructure-Related Development Assistance (of active operational activities), the number of individual beneficiaries stands at 32. The total number of commitments is 54, and the total value of these commitments stands at US$4.97 billion. The disbursement flows reached US$3.05 billion. The ratio of total disbursements to total commitments is 61%.
Work in the Consultative Framework Mechanism continues to move forward. A tangible proof of this progress is the increased level of reporting by donors in all parts of the Evolving Table (ET) and the acceleration in the implementation of activities. There has been a significant reduction in the gap between commitments and disbursements, in particular in Part I of the ET. Thanks to the active engagement and involvement of participants in this forum, new initiatives are being discussed aimed at reinforcing regional integration on cotton in Africa. Participants are also continuing their collective monitoring and follow-up of projects to enhance the delivery of assistance. This is work in progress and there is still scope for further improvement. I would encourage providers of assistance as well as beneficiaries to pursue this positive trend.
South-South cooperation on cotton
Brazil, China and India have been showing notable leadership in this area. The important contributions and support initiatives of these Members in favour of LDCs and African countries are duly recognized. South-South Cooperation on cotton has become the epitome of the collaborative spirit that enabled to forge and consolidate a strong and lasting partnership amongst WTO Members and related multilateral and regional institutions.
Domestic cotton sector reforms
I would like to commend the cotton proponents for keeping Members regularly informed about their domestic reform priorities and action plans. The most recent information in this regard is shown in the last version of the Table on Domestic Cotton Sector Reforms, which I circulated to the membership on 27 October 2015. The information contained in this document has proved to be useful to better identify the kind of assistance needed, promote efficiency in the utilization of resources and foster the information exchange between providers and recipients to enhance cotton development assistance.
Conclusion
I welcome the continuous progress registered in the cotton sector, particularly in Africa. I underscore the need for continued engagement to address all aspects of the cotton dossier. On the development assistance aspects of cotton, sustained engagement and enhanced coordination between assistance providers and recipients, including “in-country” focal points, can bring positive results in the implementation of activities in support of the cotton sector.
The vital importance of cotton to particular LDCs as well as to a number of developing economies, especially in Africa, is continually recognized in the WTO. As a result, the cotton dossier remains at the core of our work. The dedicated discussions in relation to the trade-related aspects of cotton are enhancing transparency and monitoring of trade-related developments in this sector. I hope to see further progress in the cotton dossier in the coming days, including in the context of MC10.
Annex: Cotton sector developments
Cotton trade
The volume of world cotton trade contracted significantly by 13% in 2014/15 compared to the last season, reaching 7.6 million tons. The average price of cotton continued its downward trend and slipped by 20% from last season to an average of 71 US¢ per pound in the 2014/15 season. World cotton stocks increased by 7% to a record 21.8 million tons, out of which China’s share represented 12.7 million tons. World ending stocks are projected down by 5% next season to 20.6 million tons.
In the framework of continued sluggish world economic growth, major changes were registered in export and import flows in 2014/15, showing a mixed picture amongst the main players. Exports from the largest world exporter, namely the United States, rose by 7% to 2.5 million tons, accounting for 32% of total world exports whereas exports from African countries dropped by 7% to 1.22 million tons. Brazil’s exports jumped by 75% to 851,000 tons, while those from India and Australia slipped by 55% and 50% to 914,000 tons and 467,000 tons, respectively. Exports from all major exporters, with the exception of India and the Francophone African countries, are projected to decline in the 2015/16 season.
In 2014/15, imports from China, the largest importer in the world, fell sharply by 41% to 1.8 million tons. This decline was only partly offset by higher imports from other countries, in particular, Bangladesh, Viet Nam and Indonesia. China’s imports are forecast to fall further in 2015/16 by 24% to 1.4 million tons.
The top 10 cotton exporters and importers in the 2014/15 season are shown in the Table below.
Focussing more specifically on Africa, the trade performance in African countries in 2014/15 was generally characterized by a decline in exports due to low global demand. Cotton exports fell by 9% in Francophone African countries from the previous season. However, a recovery is anticipated for this region in 2015/16, and the share of CFA countries’ world exports is expected to rise to 14%. A few examples of countries whose cotton exports did increase in 2014/15 include, among others: Egypt (+110%), Togo (+17%) and Uganda (+8%). The following Table lists the top 10 African cotton exporters in 2014/15:
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Regional Parliamentary Seminar: SADC Domestic Resource Mobilization through Taxation and Oversight
Final Statement
Preamble
1. Whereas the European Parliamentarians for Africa (AWEPA), the SADC Parliamentary Forum (SADC PF) and the African Tax Administration Forum (ATAF) convened a Regional Parliamentary Seminar on SADC Domestic Resource Mobilization through Taxation and Oversight, on Tuesday, 10th of November 2015, at Sandton Sun Hotel, Johannesburg, South Africa.
2. In attendance were representatives of the Parliaments of Malawi, Mozambique, Namibia, Seychelles, Swaziland, Zambia and Zimbabwe.
3. The aim of the Seminar was to raise parliamentary awareness and commitment to advancing domestic resource mobilization (DRM) through taxation and greater oversight.
Tax and Development
4. Recognizing the importance of domestic resources mobilization in financing social and economic development.
5. Acknowledging the centrality of taxation in advancing Africa and SADC's countries sovereignty and statehood.
6. Taking note of the need to maximize and leverage natural resources revenue as a means to promote SADC's industrial and economic transformation.
Regional and International Taxation
7. Acknowledging the undesirable effects of tax competition amongst African countries.
8. Further recognizing the abusive tax avoidance and or evasion practices of multinational companies.
9. Recognizing the marginalization emanating from Africa's capacity constraints as well as inadequate voice in global decision making processes.
African Tax Administration
10. Recognizing the importance of revenue administrations in spearheading domestic revenue mobilization efforts.
11. Aware of the capacity constraints in revenue administration to deal with specialized tax administration matters such as cross-border taxation, transfer pricing and tax treaty negotiations.
12. Noting the importance of regional coordination, harmonization and exchange of tax information amongst revenue administration.
The Role of Parliament in Domestic Resource Mobilization (Taxation)
13. Recognize the need for the strengthening of the oversight role of Parliament through access to information, capacity building and research support.
14. Commit to advocating for effectiveness and independence of Revenue administration through legislation and funding.
15. Urge the continuation of the debate on the importance of DRM within the relevant portfolio committee as well as Parliament.
16. Recommend greater parliamentary involvement in the ratification and domestication of the relevant treaties and international instruments (related to investments).
Conclusion
17. Commend AWEPA, SADC PF and ATAF and urging the tripartite cooperation to continue in order to enhance parliamentary capacity development in the area of DRM (including taxation).
18. Encourage greater cooperation with Civil Society and other actors in advancing the role of Parliament in DRM.
19. Express our profound appreciation to the cooperating partners for convening the Seminar and recommend that this initiative be continued at the national and regional level. The purposeful inclusion of parliamentary staff is recommended.
20. Finally, recommend that this Final Statement be presented to the Trade, Investment, Finance, Infrastructure and Integration (TIFI) Committee for further processing within the structures of the SADC Parliamentary Forum and beyond.
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tralac’s Daily News selection: 19 November 2015
The selection: Thursday, 19 November
China's investment in Africa falls 40% in H1: MOC (China Daily)
China's investment in Africa collapsed in the first half of this year, but may remain robust in the long run, according to the Ministry of Commerce on Tuesday. China's direct investment in Africa stood at $1.19bn in the first six months, falling over 40% year on year, said MOC spokesperson Shen Danyang.
Western Cape strengthens relations with China (GCIS)
South Africa, Namibia adamant SACU formula must be reviewed (Swazi Observer)
With South Africa and now Namibia pressing for a review of the Southern African Customs Union, effects on members like Swaziland will be catastrophic. Swaziland relies on SACU to finance its annual national budget. At a recent SACU meeting attended by Prime Minister Sibusiso Barnabas Dlamini, Namibia President Hage Geingob called on a review of the SACU revenue sharing model. He said there must also be a review of the intellectual property, industrial development, and its industrial policy while strengthening the capacity of the SACU Secretariat.
SADC ministers to discuss regional industrialization (StarAfrica)
Botswana will this week host the 27th meeting of the SADC Committee of Ministers of Trade in Gaborone to discuss the Implementation of the SADC Industrialisation Strategy and Roadmap. According to the permanent secretary in the ministry Peggy Serame, the meeting would also discuss the implementation of the Revised Regional Indicative Strategic Development Plan which prioritises industrialization; as well as the implementation and consolidation of the SADC Free Trade Area; and monitoring, reporting and evaluation system for the Protocol on Trade and SADC Trade in Services Negotiations framework.
Zim/SA trade deficit falls 39% (The Chronicle)
Zimbabwe's trade deficit with South Africa narrowed 39% in the first nine months of 2015 to $417m compared with $681m recorded in the same period last year, according to Zimstat. Economic analysts say the decrease is a positive reflection of the country’s responsiveness to a raft of fiscal measures being implemented by the government to cushion the local industry. Imports from the neighbouring country totalled $1.6bn while exports settled at $1.2bn.
Zim lifts visas on SADC visitors (The Chronicle)
The government has introduced a new visa regime that will initially see nationals from a majority of SADC member States getting into the country without a visa. These include Botswana, the Democratic Republic of Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Tanzania and Zambia. Nationals from 58 countries outside SADC will now apply for visa at the port of entry on payment of the requisite fees. According to the new visa regime, nationals of 120 countries will still be required to obtain visas prior to travelling.
Cross-border collaboration key in ending malaria in southern Africa (Thompson Reuters Foundation)
Malawi Economic Monitor: adjusting in turbulent times (World Bank)
In the second edition of the Malawi Economic Monitor report, the Bank said Malawi’s growth prospects have deteriorated in the last few months resulting in a reversal of earlier projections of continued recovery in 2015 after a strong performance in 2014. While the impact of the January floods on economic growth was fairly limited, the impact of the late arrival and early cessation of rains on the agriculture sector has been significant, resulting in a 30.2% drop in maize output. In addition while the tobacco crop proved to be more resilient in the face of weather shocks, global price declines saw tobacco earnings drop by 6.7% at the close of the season.
“Malawi is facing twin pressures arising from vulnerability to climate shocks, made worse by fiscal management challenges,” said Richard Record, lead author of the report and Malawi’s Senior Country Economist. Weak fiscal discipline is the most significant contributor to Malawi’s macroeconomic instability, with Government running a large fiscal deficit and borrowing heavily on the domestic market to close the gap. By the end of the 2014/15 fiscal year, Government’s annual domestic borrowing was four times the amount approved in the budget estimates. [Download]
Ethiopia: AfDB publishes Development Effectiveness Review
Our work in Ethiopia over the past few years has given us a strong foundation on which to build in the coming years. We will continue to work closely with the Government in support of its Growth and Transformation Plan. Our priority continues to be helping Ethiopia to close its infrastructure gap and pursue regional integration. We will also continue to support agriculture, basic services and the business environment. We will also work with the Ethiopian Government and other development partners to ensure that our support is well aligned and coordinated, that our projects are implemented efficiently and that our development impact is maximised.
Mozambique: the rapid devaluation of the Metical - what’s happening? (SPEED)
The Mozambican currency, the Metical, lost 50% of its value from 30Mt / 1USD in January to 45Mt /1USD as of October 1st. Normally, when the metical devalues, The Government of Mozambique intervenes to restore the currency to equilibrium through the monetary policy. The tight monetary policy implemented by the central bank, has two fundamental objectives:
Uganda: Shilling makes major gain as demand for dollar drops (Daily Monitor)
Rwanda a conflict-free mineral country – govt (New Times)
Rwanda must be considered as a conflict-free mineral country, the Minister of State in charge of Mining, Evode Imena, told the US House of Representatives. “Despite all that has been accomplished, our efforts to improve are hampered by the fact that Rwanda was lumped together with nine other countries under Section 1502 of Dodd-Frank. Putting them in one group and applying a ‘one-size-fits-all’ regulation is not only an impediment to efficient implementation of the regulations, but also fails to recognise the efforts made and challenges faced by individual countries,” Imena added.
Dodd-Frank five years later: what have we learned from conflict minerals reporting? (US House of Representatives)
Uganda: Minister urges South Sudan to pay traders’ debts (Daily Monitor)
The government of South Sudan is yet to clear arrears with Ugandan traders amounting to Shs123b and this continues to anger Ugandan traders. The debt goes as far back as two years and the traders see no end in sight. Mr Shem Bageine, the State Minister for East African Affairs, told Daily Monitor in an interview that for South Sudan to be considered for entry into the East African Community, it should first clear the debts.
Kenya: Shippers face two-week deadline for new import cargo inspection rule (Business Daily)
All cargo imported into the country will undergo mandatory inspection at the point of origin starting December 1 as the government moves to enforce a scheme aimed at curbing tax evasion and entry of sub-standard goods.
Uganda: IMF completes fifth PSI review for Uganda
Annual core inflation reached 6.3% in October and is expected to rise somewhat before converging to the medium-target of 5% due to monetary tightening. The external current account deficit widened in FY2014/15 and is expected to expand further as a result of high infrastructure-related imports, stagnant exports, and weak tourism receipts stemming from the difficulties in neighboring countries. Nonetheless, international reserves remain at comfortable levels. Supported by public investment, real GDP growth reached 5 percent in FY2014/15 and is expected to remain at that level in FY2015/16—below initial projections reflecting tight credit conditions and a smaller-than-expected fiscal stimulus.
Buhari: Nigeria cannot sustain N1tn spending on food imports (ThisDay)
President Muhammadu Buhari on Monday in Birnin Kebbi, the capital of Kebbi State, decried the huge sums spent by the country importing food items that could be produced locally, stating that the N1 trillion importation bill was no longer sustainable. The president, who spoke at the launch of the Central Bank of Nigeria’s Anchor Borrowers’ Programme and the commencement of dry season farming, said that the falling oil prices had left Nigeria with no option than to diversify. The president recalled that agriculture was the mainstay of the nation’s economy but was abandoned following the discovery of oil.
Nigeria's GDP expands by 2.84%, oil output rises to 2.17mb/d (ThisDay), Moody’s: Nigeria's oil output may fall by 2017 (ThisDay), ‘Nigeria’s problem with ECOWAS, EU deal self-inflicted’ (The Nation)
West Africa Gateway: latest weekly newsletter
Committee on Regional Cooperation and Integration: access the background papers
Transnational Corporations: latest edition (UNCTAD)
Articles include: Reform of investor-State dispute settlement - in search of a roadmap; International investment policy-making in transition - challenges and opportunities of treaty renewal; Towards a new generation of international investment policies - UNCTAD’s fresh approach to multilateral investment policy-making.
Reframing trade and development: building markets through legal and regulatory reform (The E15Initiative)
A stronger focus on development-led legal and regulatory reform, as presented in this think piece, could enhance regional and multilateral trade policies and build new pathways for using trade as a tool for both poverty reduction and entrepreneurship. At the market level, it could open up new economic opportunities for enterprises of all sizes across a wide range of sectors. At the institutional level, shifting the trade and development focus to development-led legal and regulatory reform would reinforce the efforts of many countries and regional blocks to negotiate and implement free-trade agreements and WTO commitments, generating new momentum in key areas of market regulation and strengthening the system to reflect the needs of all countries and stakeholders. [The author: Katrin Kuhlmann]
Namibia: Infrastructure funding gap stands at N$150bn (The Namibian)
Indian firm targets Lake Victoria oil transport deal (Business Daily)
Kenya: South Africa firm buys 45% stake in Buffalo Mall (Business Daily)
East Africa: TradeMark allocates Sh1bn in plans to cut business costs (Business Daily)
Rwanda, Belgian private sector bodies sign partnership deal (New Times)
Morocco: report on the implementation of the Investment Policy Review (UNCTAD)
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South Africa, Namibia adamant SACU formula must be reviewed
With South Africa and now Namibia pressing for a review of the Southern African Customs Union (SACU), effects on members like Swaziland will be catastrophic.
Swaziland relies on SACU to finance its annual national budget.
At a recent SACU meeting attended by Prime Minister Sibusiso Barnabas Dlamini, Namibia President Hage Geingob called on a review of the SACU revenue sharing model.
He said there must also be a review of the intellectual property, industrial development, and its industrial policy while strengthening the capacity of the SACU Secretariat.
The SACU revenue sharing formula has been a hot topic. South Africa is pressing to reform the SACU revenue-sharing formula and now Namibia is proposing same.
“I, therefore, call upon all our member states to work together to further deepen and strengthen work on the priority areas of focus of SACU, including a review of the revenue sharing model, intellectual property, industrial development, industrial policy, and strengthening the capacity of the SACU Secretariat, amongst others,” he said during the official inauguration of the headquarters of SACU in Windhoek.
South Africa’s Finance Minister Nhlanhla Nene, who also attended the Windhoek meeting, reiterated that the current framework is unfair on South Africa, which is in effect subsidising the four other members: Botswana, Lesotho, Namibia and Swaziland (BLNS).
The topic of reform has been on the agenda for several years but BLNS reliance on SACU transfers, coupled with diplomatic sensitivity, meant that little headway has been made.
However, with South Africa’s fiscal space being increasingly squeezed, reform has become more pressing and would be discussed at this year’s heads-of-state summit.
South African data show that transfers to SACU rose from E43.4bn (US$3.7bn) in fiscal year 2012/13 (April-March) to a provisional E51.7bn in 2014/15, equivalent to 5.4 percent of South Africa’s total revenue and 1.3 percent of GDP. The sum included both customs revenue (shared according to a pre-set formula) and a development subsidy (determined by each members’ per-capita income levels).
Notably, SACU’s E51.7bn allocation in 2014/15 accounted for almost two-thirds of customs duties collected, leaving South Africa with just one-third, despite being responsible for the vast majority of trade. South Africa is in effect losing about E30bn a year compared with a fairer formula, which is detrimental for the current-account.
Taxes put Swaziland in better position than SA in attracting FDIs
Taxes are lower in the other SACU members (apart from Namibia) than in South Africa, which is consequently being placed at a competitive disadvantage in terms of attracting investment.
However, the Botswana, Lesotho, Namibia and Swaziland (BLNS) states are inevitably resistant to change, given the importance of SACU transfers to their budgets.
Meanwhile, South Africa’s President Jacob Zuma at the inauguration said SACU member states needed each other more than ever before.
“We need to consider very seriously what we can do to avert these crises for the benefit of our people. It is my considered opinion that as we celebrate another achievement in SACU we should spare a moment to reflect on all these urgent and pressing challenges. It cannot be business as usual, we need to develop practical work programmes that address the challenges we collectively face to promote complementarities between our economies,” he said.
He said a funding mechanism to ensure speedy and effective implementation of agreed programmes must be considered.
Zuma said this required taking charge of destiny due to limited resources and aid globally.
“Diversification is important. An economy and export basket concentrated in a few products could be very vulnerable and prone to destabilisation. Sustainable and continued economic development becomes very unlikely, if not impossible, in such a destabilised economic environment.
“In addition, a strong and diversified manufacturing sector across the region will increase the impact of SACU as an integration tool for all of us. Competitive and diversified manufacturing will increase the trade potential among us,” he said.
He said SACU had a potential through collective effort to address the challenges facing the region. Zuma said the economies have resources that can be utilised to spur economic growth through the development of both our agriculture and manufacturing sector.
He said efforts must be enhanced so as to build and rehabilitate the regional infrastructure that must underpin production and trade growth.
“We also agreed that SACU continues to play an important role in the economies of its Member States and that it should be transformed into a vehicle for regional integration capable of promoting equitable development and the new SACU Vision. Consequently, as leaders, we agreed on the need to take bold decisions, requiring a collective commitment towards securing the long-term economic prosperity of our region to the benefit of our people,” he said.
Rwanda a conflict-free mineral country – govt
Rwanda must be considered as a conflict-free mineral country, the Minister of State in charge of Mining, Evode Imena, told the US House of Representatives.
Imena made the appeal on Tuesday during an over two-hour hearing entitled, ‘Dodd-Frank Five Years Later: What Have We Learned from Conflict Minerals Reporting?’ that was held by the monetary policy and trade subcommittee of the United States House of Representatives (committee of financial services) in Washington D.C.
Describing how Rwanda is working to ensure its minerals are conflict free, Imena said the country had made great strides by developing a mineral traceability programme.
“Rwanda has made significant efforts to clean the mineral supply chain. 100 per cent of the 3T minerals, tin, tantalum and tungsten, mined in Rwanda are traceable from the mine site up to the point of export,” he told US lawmakers.
“Despite all that has been accomplished, our efforts to improve are hampered by the fact that Rwanda was lumped together with nine other countries under Section 1502 of Dodd-Frank. Putting them in one group and applying a ‘one-size-fits-all’ regulation is not only an impediment to efficient implementation of the regulations, but also fails to recognise the efforts made and challenges faced by individual countries,” Imena added.
Given the costs associated with complying with the law, the minister argued that it should not apply to Rwanda since there is no conflict in the country.
His submission was based on what appears to be challenges based on the Dodd–Frank Wall Street Reform and Consumer Protection Act (commonly referred to as Dodd-Frank) which was signed into federal law by President Barack Obama on July 21, 2010.
The Act is a financial reform legislation passed by the Obama administration.
In August 2012, the US Securities and Exchange Commission (SEC) approved a law mandated by the Dodd-Frank to require companies to publicly disclose their use of conflict minerals that originated in the DR Congo or an adjoining country.
The law requires companies to disclose whether the sourcing of conflict minerals in their products benefited armed groups.
And, in particular, section 1502 of the Dodd-Frank Act requires mining companies to disclose whether they source “conflict minerals” – tin, tungsten, tantalum and gold – from the DR Congo and nine neighbouring countries, including Rwanda.
It affects the DR Congo and its neighbouring countries, including Angola, Burundi, Central African Republic, Republic of Congo, Rwanda, South Sudan, Tanzania, Uganda and Zambia.
The minerals are used in products such as cell phones and other electronic devices. However, proceeds from the sale of the minerals were blamed for financing rebel activity in eastern DR Congo.
National mineral revenues stood at $216 million last year, and the government targets annual mineral production worth $400 million by 2017.
The sector targets at least $250million by the end of this year despite turbulence in global prices for major minerals. In an effort to achieve these targets, the government has recently approved 29 mineral and quarry licences under the new ministerial guidelines to help boost the sector.
Unintended consequences
Meanwhile, in his opening statement at the onset of the hearing, Congressman Bill Huizenga noted that five years on, he is convinced that the law is now “harming the very people it was intended to help”, noting that many miners in the DR Congo are now forced to find other sources of livelihood – including joining armed groups.
Huizenga said the law was “the wrong vehicle” notwithstanding the honourable goals.
“Dodd-Frank is full of unintended consequences. Today we have the opportunity to hear from expert witnesses... the conflict minerals provision within the Dodd-Frank is limiting opportunities to create jobs in the African mining sector, failing to improve the living standards for local miners and failing to ensure source of minerals from African nations that are totally free of bloodshed,” he noted.
However, recalling that improvements have been made over the past few years due to the legislation, Congresswoman Gwen Moore stressed her support of the Dodd-Frank.
Moore said: “I am open to improving Section 1502 but now is not the time to discuss repeal of 1502, especially as we’ve witnessed rogue organisations and rogue states seeking revenue streams for terrorist activities.”
In his testimony, Professor Jeff Schwartz, a law don from University of Utah, stressed that Section 1502 is not working but there is still hope about it.
The assertion that it is not working, he said, was based on empirical evidence he obtained from studies he conducted in 2014.
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Tight public expenditure management key to reversing Malawi’s deteriorating growth prospects
The World Bank projects that Malawi’s economic growth rate for 2015 will slow down to 2.8 percent due to a combination of factors such as weak fiscal discipline and a now clearer impact of weather shocks on agricultural production. The rate of inflation is also projected to continue in double digits, reaching an estimated average of 21.5 percent in 2015, the second highest in Africa.
In the second edition of the Malawi Economic Monitor (MEM-2) report released in Lilongwe titled Adjusting in Turbulent Times, the Bank said Malawi’s growth prospects have deteriorated in the last few months resulting in a reversal of earlier projections of continued recovery in 2015 after a strong performance in 2014. While the impact of the January floods on economic growth was fairly limited, the impact of the late arrival and early cessation of rains on the agriculture sector has been significant, resulting in a 30.2 percent drop in maize output. In addition while the tobacco crop proved to be more resilient in the face of weather shocks, global price declines saw tobacco earnings drop by 6.7 percent at the close of the season.
“Malawi is facing twin pressures arising from vulnerability to climate shocks, made worse by fiscal management challenges,” said Richard Record, lead author of the report and Malawi’s Senior Country Economist. Weak fiscal discipline is the most significant contributor to Malawi’s macroeconomic instability, with Government running a large fiscal deficit and borrowing heavily on the domestic market to close the gap. By the end of the 2014/15 fiscal year, Government’s annual domestic borrowing was four times the amount approved in the budget estimates. “Government expenditure continues to be under pressure due to the rising cost of servicing increased debt, increasing wage demands, and the high cost of subsidy schemes,” added Record.
In the face of these challenges, the Bank said Malawi could set itself on a path of better economic growth if it restored its fiscal balance to reduce inflationary pressures and control Government’s domestic borrowing requirements. The MEM-2 recommends tight management of public expenditure throughout the 2015/16 fiscal year, appropriate prioritization of expenditures, and more efficiency in budget execution, public finance and expenditure management.
The second edition of the MEM also includes a special topic focusing on primary education under fiscal constraints. Compared to regional comparators, Malawi spends a higher than average proportion of public resources on education but educational outcomes still remain poor. The MEM-2 therefore recommends a number of measures that Malawi could implement to improve outcomes in a constrained fiscal environment. These include relocating teachers from upper to lower classes to improve teacher-pupil ratios, training school heads on efficient utilization of inputs; reducing classroom shortages in the lower classes through better management of existing classroom space; and improving distribution and use of textbooks.
This second edition of the MEM provides an update on economic issues discussed in the first edition released in April 2015 which was titled Managing Fiscal Pressures. Overall, the aim of the MEM report series is to foster better informed policy analysis and debate regarding key challenges that Malawi needs to address in order to achieve high rates of stable, inclusive and sustainable economic growth through an in-depth analysis of economic trends and macroeconomic outlook.
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Fiscal reform success: Zim/SA trade deficit falls 39 percent
Zimbabwe’s trade deficit with South Africa narrowed 39 percent in the first nine months of 2015 to $417 million compared with $681 million recorded in the same period last year, according to Zimstat.
Economic analysts say the decrease is a positive reflection of the country’s responsiveness to a raft of fiscal measures being implemented by the government to cushion the local industry.
Imports from the neighbouring country totalled $1.6 billion while exports settled at $1.2 billion.
South Africa is Zimbabwe biggest trading partner, importing mainly finished products in exchange for raw mineral exports.
Among the measures Finance Minister Patrick Chinamasa outlined a few months ago to protect local industry is the ban on second hand clothes and the scrapping of rebate on imported basic goods that can be produced locally.
Duty on second hand vehicles has also been increased while a proposal to remove blankets from the Open General Import Licence for two years has been tabled.
These measures form part of extensive interventions, which the government is taking to grow the economy.
Given the persistent liquidity challenges and poor agriculture output in the 2014/15 season, the country’s economic growth rate has been revised from 3.2 percent to 1.5 percent.
Economic commentator, James Wadi, said low domestic industrial activity was also to blame for the wide trade deficit.
“The country currently has weak economic activity as consumer spending is low. There’s not much activity taking place in companies as they’re faced with limited cash inflows,” said Wadi.
He said there was a need for local industries to “have a skin” on the game and avoid reliance on imported goods.
Overall Zimbabwe’s trade deficit in the nine months to September stood at $2.3 billion after imports of $4 billion and exports of $1.7 billion, with the deficit seen at $3 billion by year end, said Zimstat.
The country has over the years incurred systemic trade deficits due to structural weaknesses in the economy.
This has resulted in the closure of many companies, which compromised the country’s global competitiveness, resulting in a marked decline in exports.
Analysts say the country is now more of a trading economy, with capacity utilisation for the manufacturing sector remaining stagnant due to increasing power outages and the strengthening United States dollar against the South African rand.
While the economy has been slowly recovering since 2009, mostly on the back of the mining boom, the consumer market remains dominated by imports from across the border.
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tralac’s Daily News selection: 18 November 2015
The selection: Wednesday, 18 November
AGBF 2015: ‘Africa is beyond commodities’, says Dubai Chamber CEO (Gulf Africa News)
Another area in which the Dubai Chamber have been providing greater awareness, is through the research and publication of studies, conducted in partnership with The Economist. Having recently produced two reports, the first on Africa’s Islamic economy and the second entitled ‘Africa beyond commodities’, have both uncovered a data which will support and assist the decision making process for investors, when considering the African continent. [Downloads from Economist Intelligence Unit/Dubai Chamber of Commerce: Mapping Africa’s Islamic Economy, Beyond commodities - Gulf investors and the new Africa]
DP World launches infrastructure report at Africa Global Business Forum (Gulf Africa Review)
Dubai is Asia's gateway to Africa: DCCI chairman (Khaleej Times)
Red tape, risk can harm Africa trade, Bin Sulayem warns (Gulf News)
Next week in Gaborone: the Connecting Resources and Society in Botswana conference
The Connecting Resources and Society in Botswana conference (23-24 Nov), organised by Chatham House, will be hosted jointly by The De Beers Group of Companies and the Ministry of Minerals, Energy and Water Resources. It will discuss the significance of public-private partnerships in assisting growth and explore how responsible resource management safeguards the benefits of resource extraction for future generations.
Kimberley Process: Civil society boycotts conflict diamonds certification scheme (PAC)
Civil society organizations who sit as members of a conflict diamond certification scheme, announced today they will boycott the Kimberley Process in 2016 in response to the upcoming chairmanship of the United Arab Emirates. The 11 members of the Kimberley Process Civil Society Coalition called the chairmanship crossing a "red line" due to widespread concerns over UAE's lenient standards and antagonistic relationship with the Coalition. "Judging by UAE's favoured status as the go to place for illicit gold and diamonds, it would appear Dubai is not only a tax-free haven, but an ethics free haven as well," Jaff Napoleon Bamenjo, the Coalition's representative from Cameroon told the Kimberley Process members gathered in Angola.
Mozambique: Celso Correia to suspend all new logging, forestry licences (Club of Mozambique)
The proposal to suspend all new logging licences and all new forestry concessions is part of a package of measures to protect Mozambique’s forests that will shortly be submitted for approval to the Council of Ministers, Correia said. He said this is part of the government’s efforts to safeguard forestry resources, which are still under strong pressure from logging, despite the fall of timber prices on international markets.
In coal setback, rich nations agree to end export credits (Bloomberg)
Members of the Organization for Economic Cooperation and Development struck an historic agreement Tuesday to scale back public financing for coal-fired power plants, dealing another blow to the industry ahead of a global summit on climate change in Paris. Under the agreement, detailed by the White House in a conference call, the world’s richest economies will restrict subsidies that helped companies export technology to build coal-fired power plants, among the largest sources of emissions blamed for rising global temperatures. The policy would cut off financing for 85% of coal projects going forward, according to a senior administration official who briefed reporters. According to an analysis by the World Resources Institute in Washington, some 1,200 coal-fired plants have been proposed for construction across the globe. More than three-quarters are in India and China.
Natural resource booms in the modern era: is the curse still alive? (IMF)
The paper finds no country in which (non-resource) growth per-person has been statistically significantly higher during the boom years. In some Gulf states, oil rents have financed a migration-facilitated economic expansion with small or negative productivity gains. Overall, there is little evidence the booms have left behind the anticipated productivity transformation in the domestic economies. It appears that current policies are, overall, proving insufficient to spur lasting development outside resource intensive sectors.
Regionalism in services: a study of ASEAN (World Bank)
Can regionalism do what multilateralism has so far failed to do—promote greater openness of services markets? Although previous research has pointed to the wider and deeper legal commitments under regional agreements as proof that it can, no previous study has assessed the impact of such agreements on applied policies. This paper focuses on the Association of Southeast Asian Nations (ASEAN), where regional integration of services markets has been linked to thriving regional supply chains.
APEC: Enhanced trade in services deemed key to achieving inclusive growth (Business World)
In his remarks at a press briefing, Foreign Affairs Secretary Albert F. del Rosario highlighted the endorsement for adoption of the APEC Services Cooperation Framework as one of the “major achievements” of this year’s summit under the Philippines’ chairmanship. The services framework will give rise to an APEC Services Competitiveness Roadmap that will chart trade and investment in services in the next 10 years, Mr del Rosario said at the International Media Center at the World Trade Center in Pasay City. The services framework is considered “vital” to achieving inclusive growth since every $1 million of service exports is estimated to generate 105 jobs, compared to merchandise exports that create only 59 jobs for the same amount. [APEC statement]
Mercosur is ready to present market access offer to EU (Fox News)
Why Nairobi WTO conference must deliver for Africa (Business Daily)
To Ms Mohamed, who once headed the powerful WTO General Council, the Nairobi meeting will be deemed successful if it avoids the kind of deadlocks witnessed in past ministerial conferences. “Even if we can’t get all that we expect, Nairobi must reaffirm the negotiation role of WTO,” she said.
South Africa: Why the BITs had to bite the dust - Minister Rob Davies (Politicsweb)
South Africa is an early mover and is not apologetic for reforming its investment policy and has been participating in various international platforms to shape the new paradigm. The approach is informed by a three-year review of BITs. The review assessed the role of foreign investment in South Africa, the levels of protection afforded to investment, and the risks and benefits of BITs. Overall, the review suggested that the BITs open the door for narrow commercial interests to subject matters of vital national interest to unpredictable international arbitration that may constitute direct challenges to legitimate, constitutional and democratic policy-making. It is on that basis we agreed to develop an Investment Act that is aligned to the Constitution and clarifies typical BIT provisions under South African law.
Democratic Alliance commentary on Protection of Investment Bill (Politicsweb)
SA MPs back foreign investment bill (Independent Online)
Recovery in cross-border mergers and acquisitions: latest Global Investment Trends Monitor (UNCTAD)
Key finding of this issue include: Cross-border merger and acquisition activity increased significantly in the first half of 2015, but may be slowing down in the second half of the year. The value of cross-border M&A purchases, which is an indicator of outward FDI flows, rose to $441bn, a 136% increase over the same period of 2014. Multinational enterprises from developed countries were the principal drivers of the global cross-border M&A trend. European MNEs, after a number of years of high divestment levels, registered a sharp rise in the value of acquisitions in 2015.
At WTO: Goods Council approves AGOA waiver, hears call for talks on illicit trade
SMEs financing: women entrepreneurs in Ethiopia (World Bank)
However, Ethiopia is falling behind its peers in the area of credit to the private sector. According to the World Bank’s Enterprise Surveys, access to finance is perceived as the main business environment constraint by micro (41%), small (36%), and medium (29%) enterprises in Ethiopia, compared to a Sub-Saharan Africa average of 24%, 20%, and 16% respectively. At the same time, opportunities for women entrepreneurs in Ethiopia lag far behind those of men. Since the Women’s Entrepreneurship Development Project created the first ever women-entrepreneur focused line of credit in Ethiopia in 2013, the demand has been staggering. The WEDP line of credit is disbursing roughly US$2 million in loans to growth-oriented women entrepreneurs every month, far exceeding initial targets.
Kenya: Coffee is suffering because whims and interests of ruling elite have changed (Daily Nation)
The coffee industry in Kenya is a story of benign State neglect. It is one of the biggest scandals of our time. And why has government policy neglected the revival of the coffee industry? You must go beyond popular myths and wisdoms to understand the dynamics. The plight of the coffee farmer is a study in the political economy of agricultural policy — how economic policy shifts depending on the whims and interests of the elite. [The author: Jaindi Kisero]
Kenya: Listed tea export firms reap the benefits of weak shilling (Business Daily)
North-South Corridor: implementation status results report of Malawi component (World Bank)
The objective of the Southern Africa Trade and Transport Facilitation Program - Phase 2 is to facilitate the movement of goods and people along the North-South Corridor and at the key border crossings in Malawi, whilst supporting improvements in road safety and health services along the corridor. The Bank team has emphasized to the GoM that any further delays in signing of the Finnancing Agreement would jeopardize the implementation progress and may lead to potential loss of IDA funds. The implementation of a number of activities has been initiated under the Project Preparation Advance, though the overall progress has been very slow due to poor implementation capacity of the Roads Authority.
Efficiency needed in road maintenance – RA (New Era)
The new president of the Association of Southern African National Road Agencies, Conrad Lutombi, says the old and traditional way of maintaining the road network infrastructure in the SADC region will soon be replaced by a long-term performance-based road management and maintenance contract system. Sharing some of the resolutions taken by national road agencies of SADC member states following a two-day workshop in Windhoek, Lutombi, who is the chief executive officer of the Roads Authority in Namibia, said the new generation of road agencies faces a challenging task in managing road networks due to scarce financial resources and competing priorities.
African Public Private Partnerships conference concludes (AfDB)
Drought in Botswana is learning opportunity to achieve water security – UN rights expert
A UN human rights expert has urged Botswana to take the current extreme drought as an opportunity to develop a strategy for providing access to safe drinking water and sanitation for all as “a short-cut to prevent illnesses and deaths” in the long run. “The current drought should not be considered as a sporadic event, but rather as a driver for acquiring water security as a national priority,” said Léo Heller, the UN Special Rapporteur on the Human Right to safe drinking water and sanitation at the end of a nine-day official visit to Botswana.
Zambia to champion the ratification campaign of forced labour protocol in Africa (ILO)
With Zambia leading the 50 for Freedom campaign in the region, it’s time to make the elimination of forced labour, human trafficking and slavery-like practices a reality in Africa, stated Aeneas Chapinga Chuma, ILO’s Assistant Director-General and Regional Director for Africa. "On behalf of SADC member States, I am pleased to accept the role of championing the (50 for Freedom) campaign on the ratification of the ILO Protocol", H.E. President Edgar Chagwa Lungu of Zambia announced at the Sub-regional Conference on the ILO Protocol on Forced Labour held in Lusaka. [Draft report: Forced labour and human trafficking in SADC]
Swaziland: Sluggish economic growth to linger on until 2018 (The Swazi Observer)
Minister of Economic Planning and Development Prince Hlangusemphi in the ministry‘s second quarter report for the 2015/16 financial year said medium term growth prospects indicated that economic performance would decelerate further to 1.4% in 2016, 1.3% in 2017, and rebound to 1.6% in 2018. “This downward trend is mainly due to the expected decline in the Southern African Customs Union receipts between 2016-2017 that could lead to a possible contraction of government expenditure and hence slow growth, as experienced in 2011,” he said.
SADC: Regional cooperation on health important (Daily News)
Angola/Nigeria Bilateral Commission meets soon (AngolaPress)
Multi-currency regime makes Zim more attractive: CZI (NewsDay)
UNSC debate on the link between development, security
Charles Ntwaage (Botswana), speaking for SADC and aligning himself with the AU, said security and development were interrelated and the attainment of both should be the ultimate goal. Regional and subregional mechanisms must therefore be at the forefront in promoting sustainable peace and development. The Community remained committed to strengthening effective, inclusive and accountable national and regional institutions.
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‘Africa is beyond commodities’, says Dubai Chamber CEO
H.E Hamad Buamim summaries this year’s AGBF 2015 and some of the key developments
Dubai Chamber of Commerce and Industry president and chief executive officer H.E Hamad Buamim commented during the summary of this year’s Africa Global Business Forum, that ‘Africa is beyond commodities’, during a press conference earlier today.
Speaking on the second day of the 3rd Africa Global Business Forum, H.E Buamim offered a variety of insights into this year’s event, including the success of the Chamber’s meeting program which coordinated over 100 bilateral meetings.
Commenting during the conference, H.E Buamim, said, “This is the third Africa Global Business Forum and a lot has happened in Africa in the previous twelve months. Africa is still the fastest growing region in the world in terms of population and there’s more interest in business.”
Dubai’s trade relationship with Africa has certainly blossomed, representing 10% of the Emirate’s total trade volume, an increase of 9% in just a decade.
H.E Buamim went on to say; “People were sceptical in 2016, because of low commodity prices that Africa wasn’t attractive. Africa is beyond commodities. It’s going towards the service economy, including sectors such as tourism retail, logistics, which are important avenues for investors from different parts of the world.”
This year’s AGBF was also the venue for an MoU signed between the Dubai Chamber of Commerce and Industry with Coface and National General Insurance Company (NGI) for co-operation in supporting Dubai Chamber members with trade and export into African markets.
Commenting on the agreement, H.E Buamim said, “This powerful synergy now allows Dubai Chamber to work diligently with experienced partners and stakeholders to provide a toolkit of practical solutions that can help boost real economic activity. One example is the SME business community of Dubai and their counterparts in Africa, who will be helped in tapping into underutilized SME trade finance funds available with many UAE Banks.”
Another area in which the Dubai Chamber have been providing greater awareness, is through the research and publication of studies, conducted in partnership with The Economist.
Having recently produced two reports, the first on Africa’s Islamic economy and the second entitled ‘Africa beyond commodities’, have both uncovered a data which will support and assist the decision making process for investors, when considering the African continent.
“From our Islamic economy study, we’ve found that while there are 250 million muslims in Africa, there will be approximately 400 million in 15 years. This is an interesting fact in terms of the development of Islamic finance. While Islamic finance currently exists in 21 different African countries, with the leaders being Kenya and South Africa, there are other economies which are beginning to expand, in particular Mozambique and Uganda. There is potential in two ways, firstly a growing population, of which 40% are below the age of 25 and secondly an increasing trend of consumer spending.”
Other discoveries included the development of the Halal meat industry, with H.E Buamim mentioning that South Africa is currently the fifth largest exporter of halal food in the world.
Relating to the ‘Africa beyond commodities’ study, H.E Buamim noted that the continent has shown resilience, withstanding the effects of the global recession and low commodity prices. With economic stability improving, a growing consumer market, and an improvement in business environment, Dubai’s businessmen are well positioned and experienced in non-commodity investments such as healthcare, retail, property and hospitality, to support this stage of African development.
By the same token, the UAE’s position as a travel and tourism hub, thanks to the success of its airlines including Emirates, Fly Dubai and Etihad, have allowed “the opening of doors”, making destinations in Africa more accessible.
Commenting on some of the challenges raised at this year’s AGBF, H.E Buamim expressed his concern for Africa to pay greater attention to the logistics, security and the regulation of financial products.
Celebrating its 50th anniversary in 2015, the Dubai Chamber’s prioritisation of Africa as a trading partner has been clear through its various initiatives, and while other regional business forums are in the pipeline for 2017, specifically with the CIS and Latin American countries, there is little doubt the 4th AGBF will return in 2016, and continue to stimulate Dubai’s clear position as a versatile trade and investment partner for the continent.
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Why Nairobi WTO conference must deliver for Africa
Trade negotiators from across the globe have up to Friday to agree on the agenda for the World Trade Organisation’s (WTO) ministerial conference to be held in Nairobi – the first to be held in Africa.
The latest dispatch from the WTO indicates that negotiators who began to arrive in Geneva from Sunday have been given the short timeline to “agree on the remaining Doha Round issues and develop an outcome document for the 10th Ministerial Conference in Nairobi.”
The ministers have opted for “renegotiated outcome” after it became clear that Nairobi Conference slated for December 15 to 18 would not give the world a common trade policy.
While the WTO has also ruled out possibility of striking a comprehensive deal that incorporates all the contentious issues, the outcome document being developed is expected to provide timeline for handling every outstanding issue.
“It would be disastrous if Nairobi Conference failed,” said Ms Amina Mohamed, Kenya’s foreign affairs and international trade secretary who is set to chair the December Ministerial Conference.
“I have been consulting widely with my African colleagues. They all want the Nairobi forum to succeed for the continent. They want WTO members to make concessions that are realistic and built on Bali outcomes.”
To Ms Mohamed, who once headed the powerful WTO General Council, the Nairobi meeting will be deemed successful if it avoids the kind of deadlocks witnessed in past ministerial conferences. “Even if we can’t get all that we expect, Nairobi must reaffirm the negotiation role of WTO,” she said.
Among the issues that remain outstanding since the search for a common global trade policy started in Qatar 14 years ago (Doha Round One), the developing states such as Kenya want to be allowed to subsidise their agriculture and lock out imports that threaten their manufacturing industries.
The least developed countries (LDCs) such as Tanzania, Uganda and Rwanda have been pushing for improved access of their products to rich country markets, trade and technical assistance and product diversification support.
“The extension of the $1.3 trillion Information technology agreement is likely to be finalised in Nairobi. We could also have agreement on the list of environmental goods on which tariffs will be slashed,” says WTO spokesperson Keith Rockwell. “But many big ticket issues will not be decided before or at Nairobi.”
To agree on the outcome document for Nairobi, negotiators are expected to get the United States and European Union to put aside their push for open public tenders, liberalisation of service sectors and strict intellectual property rights that they have been fighting to include in the Doha list.
“Generally, Nairobi forum would be considered successful if it concludes Doha Rounds in whatever form and launch search for a new global pact known as Nairobi Round. That’s the ultimate success we all aim for in Nairobi, but it is impossible,” Mr Daniel Owoko, a long time negotiator for Kenya told the Business Daily in Geneva.
“The likely outcome will therefore be small, largely sympathetic package of issues that are LDC-related,” said Mr Owoko, who is currently serving as special advisor to UNCTAD Secretary-General Mukhisa Kituyi.
Of all the possible outcomes, insiders have ruled out emotive activism and walkouts that have stalled WTO negotiations in the past. The LDCs and developing states – the blocs that normally trigger the fallouts – have currently taken the driver`s seat.
Africa, which has the highest concentration of LDCs is hosting and chairing the ministerial forum for the first time. Mr Roberto Azevêdo, the WTO Director-General is a citizen of Brazil, a developing country.
“We must ensure that Nairobi is a success – and that it delivers for Africa. We still face very significant challenges. Despite intense efforts this year, we have made little progress on the core Doha issues,” Mr Azevêdo acknowledges in a statement issued last week.
The statement adds: “A package of development and LDC issues would be at the heart of any such outcome. An agreement on export competition in agriculture would be the WTO’s first ever negotiated outcome on agriculture. In addition, it may be possible to deliver some measures to increase transparency in some areas of trade policy, potentially covering issues such as antidumping and fisheries subsidies.”
“These potential deliverables could have real economic and developmental significance – particularly for Africa, which could be the biggest winner of the ministerial conference. I am working hard to make sure that we deliver for Africa.”
David Ochieng, an international trade dispute resolution expert shares the sentiments. He says Nairobi Conference can only unlock the more than a decade-old stalemate if members agree to harvest the low hanging fruits.
“The ministers have been struggling with an unnecessarily heavy burden. The only way out is for ministers to craft an agreement based on areas already agreed upon and terminate Doha Round in favour of a completely new Nairobi pact,” Mr Ochieng who is currently serving as Ugenya MP told the Business Daily in Geneva.
Apart from harvesting the low-hanging fruits of the Doha Rounds, WTO members expected to use the Nairobi forum to rally states to sign the Trade Facilitation Agreement (TFA).
The TFA protocol – which will ensure that world customs bodies adopt similar procedures, automations and transparency measures – will enter into force once two-thirds of members have completed their domestic ratification process, easing cross border movement of cargo.
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Goods Council approves AGOA waiver, hears call for talks on illicit trade
The WTO’s Goods Council approved on 10 November a request from the United States for the extension of a waiver regarding the Africa Growth and Opportunity Act (AGOA), a preferential trade programme granting special access to the US market for goods imported from 39 beneficiary countries in sub-Saharan Africa.
The US enacted legislation in June 2015 extending the AGOA programme for 10 years, or until 30 September 2025. The waiver will run until the expiry of the programme. The text of the US waiver request is available below.
The US told the Goods Council that imports of goods under AGOA provisions totalled $11.8 billion in 2014. Over 91 per cent of US imports from AGOA-eligible countries entered the United States duty-free under the AGOA, the Generalized System of Preferences, or other zero-tariff provisions, it added.
The waiver means that the AGOA preferences are exempted from the most favoured nation and non-discrimination provisions under Articles I and XIII of the WTO’s General Agreement on Tariffs and Trade (GATT). The waiver will now be forwarded to the WTO’s General Council for final approval.
The Goods Council continued reviewing a longstanding request from Jordan, which is seeking to extend the phase-out period of an export subsidy programme for domestic producers, in particular small and medium-sized enterprises (SMEs). Many delegations expressed continued support for extending the waiver for the programme, which expires at the end of 2015.
Yousef Shammali, Jordan’s Secretary-General for the Ministry of Industry, Trade and Supply, noted that Jordan has revised the proposed waiver, reducing the period sought to three years, or until the end of 2018 (down from its earlier request for 2022) and setting out a detailed time-frame to replace the current export subsidy programme with a new, WTO-compliant programme. The text of the waiver request is available here.
Mr Shammali said Jordan was facing an “exceptional geopolitical situation” and that “severe instability” in the region continued to negatively affect the country’s economy and hinder the industrial sector. He noted that Jordan’s borders with both Syria and Iraq were now closed, resulting in a diversion of commercial traffic and a doubling of freight costs.
More than 20 delegations took the floor, with all expressing support for Jordan’s plight. Qatar (for the Gulf Cooperation Council), Saudi Arabia (for the Arab Group), Yemen, Chinese Taipei, Bahrain, Egypt, Canada, Turkey, the European Union, Oman, Pakistan, the United Arab Emirates, Korea, Morocco, China, and Norway voiced their support for the waiver request. But Japan, Switzerland, the United States, Australia and New Zealand said they had systemic concerns with the waiver request and were willing to work with Jordan to find a solution; four delegations said the best way forward was for Jordan to modify or replace the existing programme as soon as possible.
The Chairman of the Goods Council, Ambassador Héctor Casanueva (Chile), concluded by noting that Jordan’s request continued to have wide support among the WTO membership. Some members still had systemic concerns, he said, even though they recognized Jordan’s unprecedented situation, but welcomed Jordan’s efforts, openness, and transparency to address their concerns, and particularly welcomed the action plan for adopting a WTO-compliant programme.
Call for WTO talks on illicit trade
Colombia issued a call for talks within the WTO on the issue of illicit trade and the fight against money laundering. Colombia noted that illegal trade was a global problem that was growing in seriousness and magnitude – between 8 per cent and 15 per cent of global GDP, and much more in some countries. The WTO itself has estimated trade in counterfeit and pirated goods accounts for 7 per cent of global trade, with the World Bank estimating money laundering at 3-5 per cent of global GDP.
Illicit trade undermines the multilateral trading system and the people that participate in it, Colombia argued, and the WTO needs to rise to the challenge by putting the issue on its agenda. Discussions could address the relationship between illicit trade and WTO rules, and what collective instruments could be used to address the issue.
Peru, Costa Rica, Mexico, Guatemala and Chile all expressed support for the Colombian initiative, highlighting the growing problem of illicit trade worldwide.
Specific trade concerns
Chile, the EU, Iceland, Norway, Uruguay, the United States, Thailand, Malaysia and Switzerland took the floor to express concerns about various measures in Nigeria which were restricting imports. These measures include restrictions on imports of fishery products as well as local content requirements in the oil and gas sectors, and more recently, a decision by the country’s central bank in June to prohibit foreign exchange transactions for imports of 41 product categories. This latter decision was affecting sectors such as fisheries, agricultural goods, plastics, metals, and aircraft/aircraft parts, the delegations said.
Nigeria said it was addressing the concerns raised. It noted the foreign exchange issue has already been raised by the country’s trade ministry with the central bank and that the ministry requested a roll-back or standstill of the measure pending further domestic consultations. Local content requirements were being applied in a transparent manner and in accordance with Nigeria’s WTO obligations. Nigeria noted that a new government cabinet would be appointed on 11 November and that it expected new policy announcements to follow.
Ten delegations – the US, EU, Japan, Canada, Australia, New Zealand, Brazil, Chinese Taipei, Switzerland and Norway – took the floor to once again express concerns about policies restricting imports and exports in Indonesia. The policies cited included import licensing requirements, unique technical regulations and conformity assessment procedures, preshipment inspection requirements, export restrictions, port entry restrictions, retail distribution restrictions, and local content/domestic manufacturing requirements in sectors such as telecommunications and energy. Some delegations said they were encouraged by recent statements from Indonesia’s president and trade minister recognizing the need to improve the business and investment climate as well as Indonesia’s statement to the WTO that 134 regulations affecting imports and exports would be revised.
Japan, Mexico Colombia, Panama, Chile, Peru, the United States, Switzerland, Korea, Canada and the EU raised concerns about a variety of import restrictions in Ecuador, which include requirements for auto exporters to obtain certificates of conformity, labelling requirements for certain beverages and food, quotas on auto imports, and a tariff surcharge imposed for balance of payments purposes. The delegations said the measures were having a negative effect on their exporters and asked Ecuador to explain how the measures were in line with WTO rules.
Ecuador countered that its measures on motor vehicles were taken to address climate change and rising pollution from the growing fleet of cars, particularly in urban areas. Ecuador justified these measures under GATT Article XX(b) in order to protect public health. The EU said it was interested to hear from Ecuador that these measures were being applied equally to both domestic and imported cars, as it had understood this was not the case.
Norway, Iceland and Switzerland raised concerns regarding customs valuation practices in Ukraine. Norway said it had received recent complaints from its seafood exporters about Ukrainian customs authorities systematically rejecting the transaction values reported by the exporters, while Switzerland described the practices as burdensome and non-transparent. Ukraine replied that its customs valuation system was in full conformity with WTO requirements but that its regulations were undergoing reforms which have already significantly improved customs procedures in Ukraine.
Seven delegations (US, New Zealand, Chile, Canada, Australia, EU, China) took the floor to ask India for the reasons why it was now requiring all apple imports to go exclusively through its Nhava Sheva port near Mumbai. These delegations noted that the issue was raised in four other committees under the Goods Council but that India said the respective committees (agriculture, technical barriers to trade, sanitary/phytosanitary measures and import licensing) were not the place to raise the issue. They asked India to explain its justification for the measure, why it was imposed without advance warning, and how long it would remain in place.
India replied that it did not respond to the earlier concerns because the matter did not fall under the purview of the four committees. It asked that delegations express their concerns in writing, after which they would be conveyed to New Delhi. India said it would work bilaterally with members on the issue. Chile, New Zealand, the EU and Australia countered that India should be in a position to respond to the concerns at the Goods Council meeting since they were already submitted in writing to the four committees previously
The EU reiterated its concerns about Brazil’s imposition of non-automatic licensing requirements on imports of nitrocellulose, which is used in the production of lacquer and nail varnish. The EU said Brazil’s justification that the chemical can also be used for military purposes was unjustified and urged Brazil to immediately eliminate the requirement. Brazil countered that the measure was being misrepresented by the EU as an import ban, that the requirements were in conformity with WTO rules and that it considered discussions on the issue exhausted. It asked for the item to be removed from future meeting agendas, noting that no other member appeared to have a problem with the measure.
Finally, the EU, Canada, the US, Japan and Switzerland all expressed concerns regarding what they said were Pakistan’s discriminatory sales taxes, which impose a higher rate of tax on imported over domestic goods. The US said a regulation adopted last year led to increases in the sales tax on imported leather, footwear, apparel and sporting goods from 5 to 17 per cent. Pakistan said the government was currently considering withdrawing the measure at issue and that an indicative date for the withdrawal may be announced soon.
Other Business
China informed the Goods Council that Section 15(a)(ii) of its 2001 Protocol of Accession will expire on 11 December 2016. According to this section, which concerns anti-dumping (AD) investigations, when the Chinese producers cannot clearly show that market economy conditions prevail, the investigating authorities can use a surrogate or analogue country methodology that, according to China, results in much higher prices than those of the Chinese producers. China said that this methodology was outdated, discriminatory, and unfair. Considering the provision will expire on 11 December 2016 and in order to avoid disputes, China called those members having established in their AD laws, regulations and practices such analogue or surrogate methodologies to take the necessary steps to amend or put their legislation in line with the new conditions after the expiry date for Section 15.
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Why the BITs had to bite the dust: Minister Rob Davies
Addressing the Debate on the Protection of Investment Bill, 2015 in Parliament on 17 November, Minister of Trade and Industry Dr Rob Davies said the Bill provides strong protection to investment in accordance with the Constitution
Madame Speaker, Honourable Members, it gives me great pleasure to introduce the “Protection of Investment Bill, 2015”.
Foreign direct investment (FDI) is currently protected by more than 3 000 International Investment Agreements (IIAs) worldwide. Most of these agreements feature an Investor-State Dispute Settlement (ISDS) mechanism to enforce investor rights. These agreements are mostly structured along the “old architecture that allows investors to sue States in arbitral fora and give investors the right to bypass domestic courts.
One may legitimately ask whether the rule of law is adequately upheld in the investor-state dispute settlement (ISDS) system or in the BITs that underpin it. BITs, particularly early generation treaties, contain provisions that are imprecise and when subjected to international arbitration, leave wide scope for inconsistent and unpredictable outcomes.
There is also overwhelming awareness of deficiencies in ISDS, including by the EU, with respect to its ad hoc nature, its fragmentation and a perceived lack of transparency and legitimacy. The problems appear deep-seated as jurisprudence in this area continues to diverge and, in the absence of an appellate process, often falls short of meeting the standards of legal correctness and consistency.
Imprecise treaty provisions, inconsistent arbitration awards, combined with a growing number of investor claims that are challenging a widening ambit of government public policy measures, are cause for growing concern. The expansive definitions of rights and protection open the door for narrow commercial interests to contest important policy matters and vital national interests subjecting these to unpredictable international arbitration outcomes that could be interpreted as a direct challenge to constitutional and democratic policy-making.
Proponents tend to argue that BITs encourage investment and strengthen the rule of law particularly in jurisdictions where court systems are weak or biased against foreigners. This premise is contested. Studies on BITs and FDI suggest the relationship is, at best, ambiguous and that BITs are neither necessary nor sufficient to attract FDI.
The OECD states that some studies have found very weak, no or even negative correlation with BITs. Indeed, South Africa receives FDI from investors in countries with whom it has no BIT and often little or no FDI from others where a BIT was in place. In addition, studies reveal that FDI inflows did not correlate with more or less stringent dispute settlement mechanisms in IIAs.
In recent years there has been an increase in the number of ISDS cases. The 2015 Investment Report by UNCTAD reveals that ninety-nine (99) governments around the world have been respondents to one or more known ISDS claims. Most cases are brought by claimants in developed countries against developing countries although it is interesting to note that cases against developed countries are increasing.
Headline-grabbing cases such as Vattenfall v. Federal Republic of Germany relating to environmental laws, and Philip Morris Asia v. Australia on plain packaging on tobacco are of importance as they give a clear indication that investors are not challenging expropriation but challenging the rights of Governments’ to regulate in the public interest.
What is of concern is the increase in awards to investors. The OECD puts an average cost of defence against claims at almost US$10 million (equivalent to R120 million) in 2014 but individual cases have generated significantly higher costs including a recent case that cost over US$120 million.
South Africa has also had its own experience of investment disputes. A Swiss private citizen launched an arbitration claim against South Africa in 2001 under the terms of the Switzerland-RSA investment treaty due to a farm that was vandalised. RSA was found to have breached the treaty obligation to provide “protection and security” to the investor.
The second case was by Italian investors challenging the Mineral and Petroleum Resources Development aimed at alleviating the effects of the historical racial inequity that occurred under the apartheid system. The claimants challenged the policies as a violation of South Africa’s international obligations under its BITs and claimed that they amounted to expropriation under international law.
Madam Chair,
The investment policy landscape is changing globally. Both developing and developed countries are either undertaking reviews or have reviewed their investment frameworks so as to provide an environment that facilitates investment while ensuring that governments are able to regulate in the public interest.
The EU has also undertaken some changes which include moving the competence to negotiate IIAs to the Commission, defining more precisely investment to be protected and ensuring that substantial business operations benefit from protection, as well as preserve the right of governments’ to regulate in the public interest. Most importantly, the EU is considering terminating BITs among EU Member States as investment will be governed by EU law. These reforms are consistent with the approach we have taken in the development of this Bill.
South Africa is an early mover and is not apologetic for reforming its investment policy and has been participating in various international platforms to shape the new paradigm. The approach is informed by a three-year review of BITs. The review assessed the role of foreign investment in South Africa, the levels of protection afforded to investment, and the risks and benefits of BITs.
Overall, the review suggested that the BITs open the door for narrow commercial interests to subject matters of vital national interest to unpredictable international arbitration that may constitute direct challenges to legitimate, constitutional and democratic policy-making. It is on that basis we agreed to develop an Investment Act that is aligned to the Constitution and clarifies typical BIT provisions under South African law.
In a presentation to the Portfolio Committee, the Director of the Investment Enterprise at UNCTAD, James Zhan described the Bill before the House today as “…an important step towards a “new generation” investment policy framework for South Africa”. He said the Bill was “timely” and reflects some of the new international good practise in investment policy making.
Madame Chair,
We have adopted the approach of developing a law of general application that covers all investors and their investment, regardless of origin. South Africa already provides strong protection to investors in terms of the framework provided by the Constitution and other relevant legislation: It is also important to recall that, as a member of the WTO, South Africa subscribes to a range of disciplines and rules that provide multilateral guarantees to foreign investors.
Fundamentally, the underlying philosophy of the Bill is to clarify the standard of protection that an investor may expect in the Republic, and to promote all types of investments by creating a predictable business environment that is readily understandable to an investor. The Bill guarantees the rights of investors in accordance with the Constitution.
In addition to this, the Bill contains international investment law concepts such as national treatment, physical security of investment, legal protection of investment and transfer of funds in line with constitutional principles and applicable norms. This is aimed at re-assuring investors that South Africa is, and will remain, open to FDI and will continue to provide strong protection to investors.
In developing the Bill, we have taken into account all the concerns raised. Our aim is to modernise South Africa’s policy approach to foreign investment in view of national, regional and global developments. Regionally, investment is protected through the SADC Finance and Investment Protocol. At the highest political level of SADC, a decision has been undertaken to amend the Investment Chapter of the Finance and Investment Protocol in such a manner that will be consistent with the Bill.
That process is finalised pending a decision by Council and Summit through the relevant structures. A SADC Model BIT has been adopted and is aligned to the Bill. In terms of the Constitution, an international agreement becomes law in the Republic when enacted into law by national legislation. As such the FIP binds RSA at the international level but does not prevent RSA from enacting its own legislation. Furthermore, processes are underway through the Tripartite FTA and the recently launched Continental FTA negotiations to develop a continental approach to investment.
I should also point out that it is not the intention nor the mandate of the Bill to develop the law in areas that are not directly in the scope of investment regulation. Section 25 of the Constitution provides adequate protection to investors from arbitrary expropriation and deprivation. There is emerging jurisprudence on deprivation, it is not the role of this Bill to clarify and interpret law.
Madam Chair,
I want to assure this House that a process is in place to modernise all our investment relations with all the partners we have BITs with through various platforms. The Bill does not interfere with the protection afforded to investors under the existing Bilateral Investment Treaties and they will all continue to be protected for the period and terms stipulated therein.
South Africa through this Bill provides strong protection to investment in accordance with the Constitution. The Constitution does not allow us to grant better treatment to foreign investors than is provided to domestic investors, or to grant them enhanced protections that are not available to domestic investors. The Bill continues to provide protections to foreign investors in a manner that is consistent with the Constitution, and that is in accordance with international best practice, and international customary law.
To conclude, I wish to confirm that this Bill is crucial to strengthen the legislative environment to modernise the South African investment regime.
Thank you, Madam Speaker.
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DP World launches infrastructure report at Africa Global Business Forum
Infrastructure development to lead foreign investment says DP World Chairman
A five point plan to help tackle Africa’s infrastructure gap is among the findings of a new DP World report to be unveiled at the Africa Global Business Forum this week.
Public private partnerships, domestic bond financing, monitoring the life cycle of infrastructure by maintaining and upgrading existing stock, enhancing trade integration and improved trade facilitation are key point raised in the study “Africa at the Crossroads: Bridging The Infrastructure Gap”, produced in association with the Economist Intelligence Unit.
Over the past decade, investment in African infrastructure has risen sharply and some notable projects have been completed, but despite the impressive flow of projects and policy reforms, the continent’s infrastructure development has failed to keep up with the average annual GDP growth of 5%. The development of “soft” infrastructure, such as the legal and regulatory frameworks that enable physical infrastructure to be built and maintained, has also fallen short of requirements.
The report traces the continent’s strong economic growth in recent years and highlights how infrastructure development has not kept pace, placing an increasing strain on existing infrastructure assets.
To overcome infrastructure deficits on the continent, as much as $93bn will be required annually (approx 10% of African GDP), with only half of that amount currently available the report explains.
Speaking on behalf of DP World, chairman H.E Sultan Ahmed bin Sulayem said; “African countries need a solid foundation on which to place the building blocks of their economies. Both soft and hard infrastructure is needed, which will determine how quickly physical assets are built and how quickly trade develops.
“Our ports in Africa have shown us how the region has enjoyed strong growth over the last 10 years, leading to rising incomes, falling poverty and a step toward economic diversification. However, all this has also placed an increasing strain on existing inland and marine infrastructure. If Africa’s countries and regions were better connected, market sizes would increase and encourage greater foreign investment.”
Yet while Sub-Saharan Africa currently spends around $6.8bn per year on paving roads, this figure needs to be closer to $10bn.
H.E Bin Sulayem stressed the significance of the Public-Private Partnerships (PPP) model, explaining how several African governments have already started to design policies to accelerate infrastructure projects.
Referring to report findings, he added: “PPP’s are an increasingly popular model to fund projects and the regulatory frameworks supporting them are improving. In addition, resource-rich countries are using their commodities as leverage to obtain infrastructure investment. Today, a growing number of the new natural resource contracts that African governments had out have an ‘infrastructure industrialisation’ component – requiring the company in question to invest in new infrastructure.”
DP World has long advocated the power of partnership, having agreements with governments in all six of its ports in five African countries. Africa is a key market in DP world’s network, where it employs over 5,000 people and has established strong community ties, while creating jobs and opportunities for local businesses.
The report also finds that to address the soft infrastructure gap, better internal trade integration is key. One solution to encourage intra-African trade would be to create a pan-Africa free trade agreement, which has already been proposed.
The paper concludes that growth in Africa brings new challenges and current evidence suggests that the African continent is moving at a rate with which its infrastructure cannot keep up. There are encouraging signs of world-class infrastructure delivery on the continent, like South Africa’s Gautrain rapid rail transit system and Kenya’s new railway connecting Nairobi with Mombasa.
Other high impact projects underway could also be game-changers if they can overcome operational challenges. A notable example is the Inga Dam in the Democratic Republic of Congo.
Meanwhile, a range of policies from regional free trade agreements to improved PPP frameworks across a large number of countries are starting to happen, which suggests that the enabling environments for infrastructure development is improving. If momentum can be maintained and accelerated then it could help the continent overcome its critical deficits and seize the economic transformation that now lies within its grasp.