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Intergovernmental Group of Twenty-Four (G24) on International Monetary Affairs and Development: Communiqué
Communiqué of the Ministers of the Intergovernmental Group of Twenty-Four, held in Lima, Peru on October 8, 2015
1. We, the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development, held our ninety-fourth meeting in Lima, Peru on October 8, 2015 with Alain Bifani, Director-General of the Ministry of Finance of Lebanon in the Chair; Mauricio Cárdenas, Minister of Finance and Public Credit of Colombia as First Vice-Chair; and Sufian Ahmed, Minister of Finance and Economic Development of Ethiopia as Second Vice-Chair.
Global Economy and Implications for Emerging Markets and Developing Countries
2. Growth in the global economy is weaker than expected at the time of our last meeting. Emerging markets and developing countries (EMDCs) remain the key drivers of global growth, although some are experiencing a slowdown. Downside risks have risen for many of our countries, including tightening financial conditions, reduced capital flows, and persistent low commodity prices. In this context, we call for effective and well-sequenced policy that is adequately communicated to guard against potential financial instability risks, including those coming from normalization of U.S. monetary policy. We stress the importance of a more inclusive SDR basket and look forward to the completion of the work of the International Monetary Fund (IMF) on the method of valuation in view of recent changes in the economic weights in global trade and financial flows.
3. In the context of uncertainty and increased volatility, we must continue to build strong foundations for growth while addressing unemployment, poverty, and inequality. Strengthened global financial safety nets should be a priority in order to ensure the availability of adequate liquidity support in times of need, and we call on the international financial institutions (IFIs) to step up their efforts in this regard. We recognize the important role of regional, bilateral, and multilateral arrangements that can provide complementary precautionary financing to help countries face potential shocks.
4. EMDCs are disproportionately affected by the influx of refugees and internally displaced populations, including as a result of terrorism and conflicts. We call for strong and timely support by the international community in alleviating their impact, and for enhanced support, including through concessional financing from the IFIs. More broadly, we continue to call on the IMF and the World Bank Group (WBG) to strengthen their support for fragile and conflict-affected countries.
Financing the 2030 Sustainable Development Agenda
5. We welcome the 2030 Agenda for Sustainable Development and the Sustainable Development Goals (SDGs), which focus strongly on eradicating poverty in all its forms and dimensions and achieving sustainable development in its three dimensions – economic, social, and environmental – in a balanced and integrated manner. We also welcome the Addis Ababa Action Agenda on financing for development. Building the foundations for strong, inclusive, and sustainable growth by investing in people, promoting effective public institutions, investing in sustainable infrastructure, and putting in place solid economic policy frameworks and fundamentals will be crucial to achieving the SDGs.
6. We stress the importance of country ownership and leadership in the implementation of the SDGs, but the agenda must be underpinned by credible means of implementation and a revitalized global partnership for sustainable development. Mobilizing sustained and predictable financing from various sources will be essential to the achievement of our development goals. To this end, we call for scaled-up support from the IFIs, accompanied by peer learning. We recognize the initiatives by the IMF and WBG to support the implementation and financing of the 2030 Agenda, in line with country priorities. We urge their management to define a clear action plan to help countries in the implementation of such complex agenda. We also call for strengthened efforts by the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) to catalyze private financing.
7. We underscore the vital need to increase the quantity and quality of investments in infrastructure to support growth, contribute to poverty reduction, and promote environmental resilience. Efforts by both the public and private sector, at the country and international levels, are necessary given large infrastructure deficits and financing requirements. We call on the multilateral development banks (MDBs) to strengthen their roles in supporting infrastructure development and financing, including at regional levels. We also call on the IFIs to support developing countries to have greater access to external infrastructure financing while maintaining debt sustainability. We look forward to the operationalization of the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB).
8. To enhance the ability of MDBs to finance infrastructure investments and support development, we call on MDBs to ensure adequate capitalization and to optimize their balance sheets, while maintaining financial integrity. In this context, we also call for further work and dialogue to ensure that methodologies employed by credit rating agencies to gauge the MDBs’ financial strength, which is the basis of their credit ratings, take into account the specific characteristics of the MDBs and appropriately assess their risks.
9. Concessional resources will continue to be an important source of financing for development in the low income countries. Fulfillment of existing commitments from advanced economies and ensuring the best development impact of official development assistance (ODA) must remain key priorities. We note the proposal by the WBG to leverage existing International Development Association’s (IDA) resources but we stress that it is critical to preserve its regular replenishments and concessionality as core elements of IDA. This measure should not negatively impact the voice and participation of developing countries in the WBG’s governance. Increasing the participation of developing countries in policy setting will help ensure development impact informed by experience of the use of IDA resources. We also welcome the review of IDA’s non-concessional borrowing policy for low income countries, with a view to increasing flexibility in their access to financial markets. We look forward to the review of the IMF/WB framework for Debt Sustainability Assessments. We also urge the international community to work with small and climate vulnerable developing countries in finding solutions for improving their debt sustainability, including by enhancing their access to concessional financing.
10. We are concerned about the adverse impacts of Illicit Financial Flows (IFFs) and harmful tax avoidances, especially by multi-national firms, on the sustainability of public finances, particularly in African countries. We consider policies that combat IFFs as vital to raising revenues and supporting the attainment of the SDGs, consistent with agreement in the Addis Ababa Action Agenda. This is made even more urgent in the context of uncertainty with respect to future ODA flows and the investments necessary to support the post-2015 agenda. We welcome the proposed work on illicit flows by the WBG and the IMF as well as their commitment to assist countries to build capabilities in developing domestic policies and practices that reduce such flows. International tax cooperation is an important complement to our domestic resource mobilization efforts. We call for the participation of developing countries on an equal footing in the implementation of G20/OECD Base Erosion and Profit Shifting Project and Automatic Exchange of Information initiative. We welcome the commitment of the IMF and the WBG to deepen the dialogue with developing countries and help increase their voice on international taxation issues. We also welcome the U.N. Tax Committee’s efforts to encourage dialogue among tax authorities worldwide. Asset recovery and repatriation of funds to countries of origin also represent an important component of global cooperation.
11. We are concerned about the unintended consequences of anti-money laundering and combating of financing terrorism standards on the de-risking behavior of banks and loss of correspondent banking relationships in many developing countries. We call on the IMF, the World Bank, and the Financial Stability Board to develop appropriate guidance on how to properly implement the risk-based approach rather than seeking to avoid money laundering and financing terrorism risks by wholesale termination of entire classes of customers through de-risking, which contributes to financial exclusion.
12. In order to address incentives for holdout behavior that seriously undermines sovereign debt restructuring processes, we recognize as positive steps the sustained progress with regards to the contractual provisions for debt issuance as well as the recent passage by the U.N. General Assembly of the resolution on the Basic Principles on Sovereign Debt Restructuring Processes. We also encourage sovereign issuers to include enhanced Collective Action Clauses and the modified pari passu clauses.
13. We look forward to the outcomes of U.N. Framework Convention on Climate Change’s 21st Conference of the Parties (COP21). We stress the importance of incorporating environmental sustainability into growth and development strategies, while respecting the principle of common but differentiated responsibilities.
Governance and Reform of International Financial Institutions
14. We reiterate our deep disappointment with the lack of progress in implementing the IMF quota and governance reforms agreed to in 2010 and strongly urge the U.S. to complete ratification. This remains an impediment to IMF credibility, legitimacy, and effectiveness and has considerably delayed forward-looking commitments, namely, a new quota formula and the 15th General Review of Quotas. Implementing the 2010 reforms remains our key priority. Nevertheless, we believe that a decision to de-link quota reform from the Board reform amendment, which is the element of the 2010 reforms that requires ratification by the U.S. Congress, would be the preferred option in the interim, as it increases IMF resources and also realigns quotas to reflect the increased economic weight of EMDCs. The alternative option, interim ad hoc increases, can, if properly designed, achieve meaningful progress towards the shifts in representation under the 2010 reforms, although it would increase IMF quota resources only marginally. It is important that any interim measures be designed so as not to lower incentives to complete the 14th General Review of Quotas.
15. We strongly urge the initiation of the 15th General Review of Quotas, including a new quota formula, without further delays, with a view to meet the December 2015 deadline, as mandated under the Articles of Agreement. We urge that quota reforms at the IMF protect the quota share of low income countries. We reiterate our longstanding call for a third Chair for Sub-Saharan Africa on the IMF Executive Board, provided this does not come at the expense of other EMDCs’ Chairs.
16. We note the 2015 Shareholding Review of the World Bank, including the proposed roadmap. We call for a timely agreement on a dynamic formula for future shareholding realignment and stress that any such formula must meaningfully increase the voting power of developing countries and move towards equitable voting power, while protecting the voting power of the smallest poor countries. Through the shareholding review, we also call for the strengthening of the WBG’s responsiveness to the developing countries and the increase of the developing countries’ voice and representation in the Bank’s Executive Board.
17. We note the ongoing work on the review of the World Bank’s safeguard framework. We underscore that the framework should give a greater role to the use of country systems and effectively address the concerns of the borrower countries. Additionally, the consultations should consider the implementability of standards and their implications in terms of cost and time. We call on the Bank to allocate the resources necessary to assist in building countries’ capacity to implement the forthcoming safeguards framework. We welcome the Bank’s new procurement guidelines and call on the WB to build capacities in client countries to support implementation of the guidelines.
18. Finally, we reiterate our call for concrete efforts towards greater representation by nationals from under-represented regions and countries in the form of recruitment and career progression to achieve balanced regional representation in the WBG and the IMF. We reiterate the importance of staff diversity and gender balance at all levels, including diversity of educational institutions and background as well as experiences.
Other Matters
19. We thank Lebanon for its Chairmanship of the Group and welcome Colombia as the incoming Chair. We also welcome Sri Lanka as the Second Vice-Chair. The next meeting of the G-24 Ministers is expected to take place on April 14, 2016 in Washington, D.C.
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SADC: Regional investment policy framework on the cards
A regional investment policy framework for southern Africa is expected to be finalized by the end of the year. The Trade, Industry, Finance and Investment (TIFI) Directorate at the SADC Secretariat said in its annual report that significant progress has been made to develop a regional investment policy framework. The regional programme on investment has the objective of strengthening the investment environment in southern Africa.
“The investment policy framework is aimed at harmonizing investment policies and regimes in order to improve the investment climate in the region, working with selected four pillars of tax incentives, infrastructure investment, foreign direct investment restriction and legal protection,” TIFI said, adding that “this exercise is expected to be completed by 31 December 2015.”
The SADC Investment Policy Framework is being developed under the Regional Economic Integration Support (REIS) Programme funded by the European Union. The Secretariat has facilitated the development process of the SADC Investment Policy Framework, which has included the following activities:
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Taking stock of Member State investment policy programmes using diagnostic questionnaires;
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Member State input through questionnaire responses and the drafting of analytical reports that practical recommendations for implementation; and
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Development of common guidelines, together with analytical reports, on the four pillars of tax incentives, infrastructure development, FDI restriction and legal protection.
The SADC region has huge investment opportunities ranging from sectors such as mining, tourism, energy to infrastructure development and agriculture.
The mineral sector alone contributes about 55 percent of the world diamond production while the platinum group of metals contribute about 72 percent.
The region also has an abundance of arable land and vast water watercourses such as the Congo and Zambezi, with the Inga Dam situated on the Congo River. With regard to energy resources, the region has the capacity to produce enough energy for itself as well as export.
According to the African Development Bank, the total hydropower potential in SADC countries is estimated at about 1,080 terawatt hours per year (TWh/year) but capacity being utilised at present is just under 31 TWh/year.
A terawatt is equal to one million megawatts.
Regional payment system reaches R1 trillion mark
In a related matter, more than R1 trillion (about US$79 million) has been traded on a regional electronic payment system that aims to promote the smooth settlement and clearance of payment in southern Africa.
The SADC Integrated Regional Electronic Settlement System (SIRESS) was established in July 2013 and piloted in four countries – Lesotho, Namibia, South Africa and Swaziland. The system has since been expanded to five more SADC Member States – Malawi, Mauritius, Tanzania, Zambia and Zimbabwe.
Therefore, a total of nine countries are now participating in SIRESS, with more expected to so soon. SIRESS is a SADC electronic payment system developed by Member States to settle regional transactions among banks within the SADC countries.
Where transactions previously took two to three days to clear, now they are cleared within 24 hours and fees previously paid to non-SADC clearing banks are saved.
The main benefits of the system is its efficiency and reduction in costs because previously the transactions would go through a correspondent bank.
Therefore, the cutting out of the intermediary – often a United States or European correspondent bank – means money stays in the region.
The establishment of SIRESS has thus facilitated the cross border transactions that are essential for boosting intra-regional trade among the SADC Member States.
Since its launch in 2013, volume of transactions traded on the system has significantly increased, and have reached the R1 trillion mark as of April 2015.
The development of SIRESS is in line with the SADC Protocol on Finance and Investment which aims to improve the regional investment climate through enhanced cooperation among member states on payment, clearing and settlement systems in order to facilitate trade integration. To accelerate the implementation of this objective, the SADC Committee of Central Bank Governors (CCBG) was in May 2009 given the approval to spearhead the initiation of the SADC payment integration system project. In addition to the CCBG, which focuses activities from a regulatory perspective, the SADC Bankers Association (BA) was also established in 1998 to coordinate activities of commercial banks in the SADC region in developing the financial market infrastructure and regional clearing house operations to support the utilization of SIRESS.
The implementation target is to have all SADC countries participating in SIRESS by 2016.
The current settlement currency is the South African Rand, and the payment system is housed at the South African Reserve Bank. However, as the system grows to include other countries, a permanent location will soon be identified.
![SADC SIRESS infographic 2015](/images/News/SADC_SIRESS_infographic_2015.jpg)
This article was first published in Southern Africa Today, August 2015 (sardc.net)
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“Vulnerable Twenty” ministers call for more action and investment in climate resiliency and low-emissions development
Led by the Philippines, the V20 group say they represent a significant number of nations most vulnerable to climate change – low and middle income, least developed, arid, isthmus, landlocked, mountainous and small island developing countries from Africa, Asia, the Caribbean, Latin America and the Pacific.
In a communiqué marking the first meeting of their finance ministers, the V20 group said because of climate change, they are already facing an average of more than 50,000 deaths a year, with the number expected to rise exponentially by 2030.
And they say they face escalating annual losses of at least 2.5 percent of their GDP potential per year.
Speaking at the launch, on the sidelines of the Annual Meetings of the World Bank Group and the IMF in Lima, Peru, Cesar Purisima, Finance Minister of the Philippines said costs would rise without concerted action.
“In the absence of an effective global response, annual economic losses due to climate change are projected to exceed US$400 billion by 2030 for the V20, with impacts far surpassing our local or regional capabilities,” he noted. “Here in Lima, we unite for what we believe is the fundamental human rights issue threatening our very own existence today. Global climate action gives us hope that we can still see a future free from the most devastating effects of climate change.”
Afghanistan, Bangladesh, Barbados, Bhutan, Costa Rica, Ethiopia, Ghana, Kenya, Kiribati, Madagascar, Maldives, Nepal, Philippines, Rwanda, Saint Lucia, Tanzania, Timor-Leste, Tuvalu, Vanuatu and Vietnam are all members of the V20.
“The world needs stronger voices from developing countries to draw more attention to their great needs for investment in fighting the impacts from climate change,” said World Bank Group President Jim Yong Kim. “This new group of 20 countries, led by the Philippines, will play an important role in pushing for greater investment in climate resiliency and low carbon growth at home and internationally.”
And speaking at the launch, the Bank Group’s Managing Director Sri Mulyani Indrawati also supported the V20’s aims to share its lessons and experiences on the ground.
She said countries could learn for instance from the Philippines with its initiatives to mainstream climate change into the budget process – so public funds are prioritized for vulnerability and risks to the community, while aiming to create a policy environment to spur private sector investment.
The Philippines government is also at the forefront of countries that are mapping out proactive disaster risk financing strategies. With the technical support of the Global Facility for Disaster Risk and Reduction (GFDRR) and the World Bank, the Philippines government recently approved a new National Disaster Risk Reduction and Management plan that streamlines disbursement procedures in emergencies so that rapid response and recovery operations can be undertaken more quickly.
The plan also facilitates longer term, sustainable investments and policy reforms.
Another V20 member, Bangladesh, is also breaking ground with the Urban Resilience Project, an initiative driven by a three-year process helped by the GFDRR and the World Bank to build consensus among national decision-makers and technical experts on how to tackle the complex issue of urban disaster vulnerability. The $173 US million fund will provide state-of-the-art emergency management systems and equipment, and improve building construction planning and oversight in the country’s major cities, Dhaka and Sylhet.
In Mozambique, the Bank Group has been working to leverage funds to help bring in reforms with innovations on the ground in key sectors like transport, cities and water, to mainstream climate resilience.
The World Bank Group – through the Climate Investment Funds’ Pilot Program for Climate Resilience (PPCR) – has been piloting ways to integrate climate risk and resilience into core development planning. In the Caribbean, funding from PPCR as well as IDA, the Bank’s fund for the poorest, has been aiming to help vulnerable states go beyond disaster response to address climate resilience.
Among some of the most disaster-prone countries in the world, the V20 nations provide a real-time test bed for climate investments. Their hope is to share experiences and best practices, as well as to mobilize both public and private finance to tackle the challenges that lie ahead with a changing climate.
To find out more about the V20 Forum, visit their official website.
Introduction
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We, the Finance Ministers of the Vulnerable Twenty (V20) Group, in our inaugural meeting this 8th day of October 2015 in Lima, Peru, chaired by the Philippines’ Finance Secretary, Cesar Purisima, hereby set forth our common and collective challenges, aspirations, and proposed actions in this Communiqué.
Inception
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As called for by the Climate Vulnerable Forum (CVF) in its 2013-15 Costa Rica Action Plan, we agreed to form the V20 and discussed the role, objectives and activities of the group moving forward, and agreed to the creation of this new mechanism as a platform for leaders and countries highly vulnerable to climate change around the globe to highlight shared interests and contribute substantively to discussions on finance and other means of implementation, particularly to foster a significant increase in investment in climate resiliency and low emissions development.
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On this day, we established the V20 to serve as a new high-level mechanism for dialogue and action to concentrate attention on economic and financial responses to climate change through the dedicated cooperative efforts of economies systemically vulnerable to this global phenomenon.
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We believe urgent and ambitious global climate action is now a fundamental human right. Everyone, especially those living in the most vulnerable areas of the planet, has a right to breathe clean air, to drink clean water, and to live in prosperity on a secure and sustainable planet. Ineffective action on climate change deprives us of such rights.
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Climate change is the defining challenge of our time. Overcoming it is a matter of survival for people on all continents and vulnerable communities everywhere. Standing on those frontiers most fragile to decades of inadequately checked human-induced climate change, we call out with a plea for humanity to unite. Together, we fight for a new hope.
Who We Are
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Representing a significant number of nations most vulnerable to climate change, we are low-and middle-income, least developed, arid, isthmus, landlocked, mountainous, and small island-developing countries from Africa, Asia, the Caribbean, Latin America, and the Pacific. Home to close to 700 million people – or approximately one in ten alive today – our twenty nations are hugely diverse in ecology, biodiversity, culture, geography, language, population and territorial extent.
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We are united in our shared vulnerability and exposure to a changing climate. Likewise, we share the commonality of an equally marginal contribution to warming – at less than 2% of current greenhouse gas emissions – and means to directly address the monumental challenges of global climate change, recalling that nearly half our people live in extreme forms of poverty, which the international community has pledged to eliminate by 2030 with the global Sustainable Development Goals.
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Climate shocks already exceed our regional/national capabilities at approximately half our target level of global warming of not more than 1.5°C above pre-industrial temperatures. In light of insufficient measures to arrest dangers, the V20 already face:
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an average of more than 50,000 deaths per year since 2010, a number expected to increase exponentially by 2030;
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escalating annual losses of at least 2.5% of our GDP potential per year, estimated at US$45 billion since 2010, a number expected to increase to close to US$400 billion in the next 20 years;
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more than half the economic impact of climate change by 2030 and over 80% of its health impact for V20 and other low-emitting developing countries;
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doubling in the number of extremely hot days and hot nights in the last 50 years as the planet warmed appreciably;
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countless extreme events which include typhoons with wind speeds that are around 10% stronger than they were in the 1970s translating into more than a 30% increase in destructiveness;
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sea level rise that will partially or completely submerge the island nations of Kiribati, Maldives, and Tuvalu, displacing at least 500,000 people;
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the displacement of up to 40 million people due to the inundation of low elevation land resulting from climate change driven sea-level rise;
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the threat of increasingly devastating and more frequent disasters, such as storms, flooding and drought.
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We note the progress already made by V20 countries in promoting and undertaking climate action that serves as a foundation for future V20 work but draw attention to significant human, technological, institutional, risk-based and other special constraints facing vulnerable developing countries.
Our Call to Action
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In this critical year, the minimum deliverable for the UN Climate Change Conference at Paris (UNFCCCCOP21) is an agreement entirely consistent with the non-negotiable survival of our kind. Given this and the extent to which climate change has set back the lives of our people, denied human rights, and devastated our homes and entire nations, we recognize climate action as a foremost humanitarian priority for the international community.
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To concretize our own support for this international priority, we, the V20, commit to act collectively and decisively to promote the mobilization of public and private climate finance from wide ranging sources, including international, regional and domestic mobilization; share and exchange best practices on economic and financial aspects of climate action; develop and implement new, improved and innovative approaches; and engage in advocacy and other joint actions.
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In a major first step, we agree to study the creation of a sovereign V20 Climate Risk Pooling Mechanism to distribute economic and financial risks, to improve recovery after climate-induced extreme weather events and disasters, and to enhance security of jobs, livelihoods, businesses and investors. This trans-regional public-private mechanism modeled on similar pre-existing regional facilities, featuring index-based risk transferal and other innovative insurance tools, would specifically address acute and chronic hydro-meteorological hazards, as affected by climate change. It would also improve spatial and temporal risk distribution resulting in highly accessible, dependable and cost-efficient insurance while incentivizing, through risk-determined pricing, upscaled adaptation measures.
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We support innovative revenue generating fiscal and financial measures to finance climate action. A possible example is financial transaction tax and how the same can generate additional resources sourced from capital markets, while serving as a stabilizing financial measure.
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We also call for improved access to international climate change finance from all sources – public or private – towards adaptation and mitigation action. This can be done through streamlining processes, with special considerations to the capacities and realities of vulnerable developing countries, and supporting institutional readiness and administrative capabilities to access available climate finance.
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We will strive to develop or improve financial accounting models and methodologies and cost-benefit analysis to enhance accounting of climate change costs and effects and improve valuation of climate risks and co-benefits of climate action, among others. This will build on public and private sector initiatives on environment and natural resource accounting and valuation.
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We agree on the annexed V20 Action Plan focused on attaining a significant increase in climate investment in our countries through the voluntary country-owned, country-driven, and country-led design and application of financial innovations, in collaboration with our country partners, international financial institutions, and development banks while leveraging finance in all its forms, expertise, and technology from international resources.
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In pursuit of our vision of the world economy as a driving force for a resolution to the climate crisis, we plan to act as one to help lead the world towards a climate resilient future by inspiring strengthened efforts by all. We acknowledge that expanding our inherently limited contributions could nevertheless help to lessen the gap between life and death, prosperity and suffering, existence and annihilation: Every action will count just as every life does.
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We look for a new international partnership with development partners, business and public-private arrangements to support the realization of V20 ambitions. We invite international financial institutions, international development actors and other relevant international institutions, including the WBG, the IMF, regional development banks, the UN Secretariat, UNDP and others to work collaboratively in delivering enhanced capacity and other assistance, including capacity building and technical assistance, to facilitate the efforts of V20 members as we work to achieve these objectives and initiatives here outlined.
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We strongly welcome the increased climate focus and momentum for action by international financial institutions, bilateral and multilateral institutions, international organizations, the G7 and G20, and business, civil society and faith groups, among others. This includes the G20 commitment to phasing out inefficient fossil fuel subsidies and the launch of the Green Climate Fund.
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We expect the realization of internationally recognized commitments on climate change finance, in particular the US$100 billion per year from 2020 joint mobilization target of developed countries to support developing countries in responding to climate change in the context of meaningful mitigation actions and transparency on implementation. We urge a rapid acceleration of progress towards an equal [50:50] balance of resources for adaptation compared with mitigation [by 2020 at the latest]. In light of the scale of the challenges faced and the manifest inadequacy of current efforts to tackle climate change, we also seek further contributions in finance, capacity building, technology transfer and development, and fair share emission reductions, aimed at delivering climate justice for all humankind including robust climate security for those vulnerable groups so heavily exposed both now and tomorrow, especially our women and children, the poor and future generations.
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We have established an assigned V20 Working Group to define milestones and commence implementation of our Action Plan ahead of COP21 in Paris based on national circumstances. In guiding the Working Group’s efforts, we recognize the primacy and urgency of building climate resilient countries and the importance of safeguarding workplace health and productivity in light of increasingly adverse thermal conditions brought about by climate change.
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We will operate on a voluntary basis in cooperation and in partnership, as well as in recognition of common but differentiated responsibilities and of limits on our achievements in the absence of international support. We will promote learning, coordination and complementarities of efforts. We will meet biannually in the margins of the WBG/IMF Spring and Annual meetings and will monitor follow-up.
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SARS convenes regional forum on illicit financial flows (SAnews)
"Today's session is to formalise the establishment of the forum of Commissioners General in the region in which we take the agenda of development of our economies especially in revenue collection, strengthen our customs activities, stop illicit trade coming in and deal with drug trafficking, money laundering and all those nefarious activities but equally put a task team that is going to formalise the establishment of a forum of Commissioners General in the region," Commissioner Moyane told SAnews on Thursday. This as SARS convened a second forum of commissioners from 11 countries including Angola, Swaziland, Lesotho, Zambia and South Africa to unpack core tax and customs issues especially linked to illicit financial flows.
Botswana: BURS seeks to widen tax base (Mmegi)
According to Morris, a shortfall in SACU receipts is attributed to the appreciation of the Botswana Pula against the South African Rand. BURS annual revenue collections grew from P11.8 billion to P37.5 billion in 2014-2015 period representing an annual average increase of about P25.7 billion in nine years, which translates to 28.6 percent. During the period of April 1, 2015, BURS collected tax revenues amounting to P15 billion against a target of P15.3 billion.
Namibia: Pension billions repatriated (The Namibian)
The state pension fund has been instructed to recall part of its N$90 billion investments abroad to re-invest locally as government looks to boost its depleted cash reserves. Finance minister Calle Schlettwein confirmed that government had directed GIPF to recall between N$5 billion and N$10 billion invested in South Africa. He said the money is supposed to improve the country's reserves and that it has nothing to do with the government's cash flow problems.
Wealth funds from Oslo to Riyadh raid coffers to offset oil (Bloomberg)
The halving of oil to less than $50 a barrel has the potential to alter one of the most powerful economic and political forces of the past half century: the rise of the petrostate. These countries led a surge in state investments in the U.S. and Europe that now totals about $7.3 trillion globally, according to the Sovereign Wealth Fund Institute.
Angola: Government grants concession of eucalyptus forests to Angola Sovereign Fund (MacauHub)
The move is based on the “high economic potential of the eucalyptus plantations” located in those three provinces, which are still the responsibility of the Ministries of Agriculture, Transport and Industry. An audit by Deloitte showed that on 31 December 2014, 37% of the fund’s investment portfolio was applied in Europe, investments in Africa had a weight of 34%, North America 18%, and the remaining 11% was applied elsewhere
An Africa Mining Vision Compact with private sector leaders (ECOMOF)
To ensure successful implementation of the AMV, an explicit agreement between AU member States and private sector leaders in the extractive industries is necessary. This agreement which we are proposing, is to be in the form of an AMV Compact between AU member States and private sector leaders in Africa, fashioned along the same lines of the UN Global Compact. The AMV Compact would draw a set of standards that would serve as a benchmark for companies and governments to assess performance, resulting in robust policies that cover a range of principles. For the dialogue with private sector leaders to be continuous and meaningful, it is crucial to establish an Africa-wide network of Chambers of Mines and Mining Associations. [The author: Mrs Fatima Haram ACYL, Commissioner for Trade & Industry] [ECOMOF 2015 www]
West Africa Gateway: latest newsletter
Sound laws on oil and gas deals crucial for Kenya to gain from natural resources (Business Daily)
AU Department of Trade and Industry: stakeholders strategic retreat
The semi-annual 3rd Stakeholders Strategic Retreat, organized under the theme of “Financing for Industrial Development: a new era" was held at the Hilton Hotel in Nairobi, Kenya. The meeting was aimed at redefining the strategic pathway towards a better cooperation with Member States, RECs, partners and stakeholders. Participants at the meeting discussed regional experiences including challenges with the resources mobilization for the implementation of the Plan of Action of the Accelerated Industrial Development for Africa (AIDA).
Tripartite Agreement could boost intra-regional trade by one third (UNECA), The African Ministerial Conference on Technical and Vocational Skills Development: update (New Times)
Manufacturers Association of Nigeria: speech by Thabo Mbeki (TBF)
Then there is the important matter of the access of African manufactures to the international markets. In this regard the only issue I would like to raise is the matter of the Economic Partnership Agreements with the EU, a matter which is of great concern throughout Africa. As I understand it, all our regions which were involved in the negotiations with the EU on the EPAs have now signed these Agreements. Nevertheless the question remains – have the African concerns relating to the impact of these EPAs on our industrialisation processes been addressed? My own response to that question is – no!
WTO and LDCs: 20 years of supporting the integration of LDCs into the multilateral trading system (WTO)
This Secretariat Note has been written as part of WTO’s 20th Anniversary Event dedicated to LDCs titled “Twenty Years of Supporting the Integration of Least Developed Countries into the Multilateral Trading System” scheduled for 12 October 2015. This study traces the 20-year relationship between the WTO and LDCs, in particular the key developments and decisions taken in favour of LDCs, the institutional support provided and the trade capacity-building initiatives put in place.
Zimbabwe: Second Review Under the Staff-Monitor Program-Press Release and Staff Report (IMF)
The program is on track. Four of the five quantitative targets for end-June 2015, and all the structural benchmarks for the second review were met. Although a recently contracted $200 million non-concessional loan breached the quantitative target on non-concessional borrowing, it avoided the accumulation of additional external arrears. [Creditors approve Zim debt clearance plan (NewsDay)]
Parliament backs Rwanda's readmission to ECCAS (New Times)
Parliament has adopted a draft law authorising the ratification of the agreement between the Economic Community of Central African States and Rwanda on the readmission of the latter in the regional grouping after a nine-year absence. A founding member of ECCAS in 1983, Rwanda pulled out of the bloc in 2008 to concentrate on its membership to the EAC and Comesa, she added. “We should not be asking ourselves if we are in East Africa or Central Africa; we are in Africa. Classification depends on who classifies. Regional integration and cooperation should be an avenue leading us into the United States of Africa and that’s what Rwanda believes in,” Louise Mushikiwabo, the minister for foreign affairs, said.
Opening Kenya’s trade and development frontiers (World Bank)
The governments of Kenya and South Sudan and other stakeholders recently inaugurated a new project that will upgrade a critical trade route connecting the two countries. Through the East Africa Transport, Trade and Development Facilitation Project, a 309km trek of land will be rehabilitated, creating a safe route for goods and people along Lokichar – Nadapal/Nakodok part of Eldoret-Nadapal/Nakodok road in the north-west region of Kenya. The $500 million World Bank Group credit will also support other activities designed to improve the livelihoods for those living in the region, and increasing regional competitiveness.
Africa’s largest infrastructure projects to be discussed at Beijing's APIF (African Review)
Tanzania: 'Foreigners to own property' (The Citizen)
A review of laws on fixed assets ownership in the country could soon see foreigners enabled to buy apartments in structures constructed by the National Housing Corporation, President Jakaya Kikwete revealed on Wednesday. He said the government was considering reviewing the existing laws, particularly those that bar foreigners from making such purchases. [NHC housing project to turn Dar into Dubai, Manhattan of Africa]
Time tactics on the Grand Ethiopian Renaissance Dam (Ahram Weekly)
“Ethiopia is repeatedly relying on time tactics. They seem to work perfectly for it,” said Maasoum Marzouk, former assistant foreign minister, describing the current status of the tripartite negotiations on the Grand Ethiopian Renaissance Dam (GERD). On Sunday, Sudan and Ethiopia requested that Egypt postpone the 9th round of this week’s tripartite meeting, scheduled for 4-5 October, to later in the month.
The financial system we need (UNEP)
A new UNEP report released at the International Monetary Fund/World Bank Annual Meetings shows how to harness the assets of the world's financial system for sustainability - the key findings include: momentum is building and is largely driven by developing and emerging nations including Bangladesh, Brazil, China, Kenya, and Peru, with developed country champions including France and the UK.
G24: communique on international monetary affairs and development (IMF)
We note the 2015 Shareholding Review of the World Bank, including the proposed roadmap. We call for a timely agreement on a dynamic formula for future shareholding realignment and stress that any such formula must meaningfully increase the voting power of developing countries and move towards equitable voting power, while protecting the voting power of the smallest poor countries. Through the shareholding review, we also call for the strengthening of the WBG’s responsiveness to the developing countries and the increase of the developing countries’ voice and representation in the Bank’s Executive Board.
V20: communique on climate change (World Bank)
Led by the Philippines, the V20 group say they represent a significant number of nations most vulnerable to climate change – low and middle income, least developed, arid, isthmus, landlocked, mountainous and small island developing countries from Africa, Asia, the Caribbean, Latin America and the Pacific.
Namibia needs US$33 billion to tackle climate change (New Era)
On Tuesday Cabinet approved Namibia’s plan – called the Intended National Determined Contribution – which would be put before the United Nations Framework Convention on Climate Change as part of preparations for the December conference. Namibia’s INDC submission reiterates the need for the Green Climate Fund saying it “is of vital importance that the Green Climate Fund be capitalised rapidly in order to provide the much needed funds to developing countries to enable them to meet their intended targeted contribution.”
Botswana Renewable Energy Agency: consultancy services
Arab countries in transition: economic outlook and key challenges (IMF), Egypt: Behind the pack (Ahram)
Mantashe: We won’t be dictated to by US (IOL)
The ANC has given its clearest indication yet that the battle with the US over the highly contested Private Security Industry Regulation Amendment Bill could push the country away from traditional international financial institutions to the Brics bank. ANC leaders yesterday made it clear that the US demand that the government amend certain aspects of the bill were unreasonable and that there was likely not to be any compromise on the matter. [More harm than good in new laws (editorial comment, Business Day)]
A grouping well linked to Asia (IOL)
The Pacific Alliance is probably the most important alliance that South Africans may not have heard of. The new economic bloc of Latin American countries comprising Mexico, Peru, Chile and Colombia has exceeded expectations in its four years of existence and, when taken together, is now considered the eighth-largest economy in the world and the seventh-largest exporter.
BRICS in danger of collapsing as members fail to cohere (Business Day)
Ugandan company partners with Starbucks to market Uganda coffee (Daily Monitor)
Food prices are staying lower for longer periods (FAO)
Botswana woos South Korea, Angola investors (StarAfrica)
Mozambican leader chairs crisis meeting on Lesotho (StarAfrica)
Namibia joins call to put tourism at top of AU agenda (New Era)
This week in the news
Catch up on tralac’s daily news selections for the past week:
The selection: Thursday, 8 October 2015
The selection: Wednesday, 7 October 2015
The selection: Tuesday, 6 October 2015
The selection: Monday, 5 October 2015
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This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to over 300 recipients across Africa and internationally, serving in the AU, RECS, national government trade departments and research and development agencies. Your feedback is most welcome. Any suggestions that our recipients might have of items for inclusion are most welcome. Richard Humphries (Email: This email address is being protected from spambots. You need JavaScript enabled to view it.; Twitter: @richardhumphri1)
DG Azevêdo: WTO members have identified a road to success in Nairobi
Director-General Roberto Azevêdo addressed all WTO members on 8 October at a meeting of the General Council in Geneva. He looked ahead to the prospects of success at the WTO’s 10th Ministerial Conference which will be held in Nairobi from 15-18 December this year, and reported on recent discussions in Geneva and other discussions, including among G20 trade ministers in Istanbul.
He reported that some areas of negotiations still seemed more likely to yield outcomes in Nairobi than others. These include: development issues with a particular focus on least-developed countries (LDCs); export competition in agriculture; and a set of possible outcomes to improve transparency in a number of areas. He said that work should be intensified on these issues, but also that this did not preclude identifying other outcomes wherever members thought they could be achieved.
“Through the various consultations over recent weeks I think members have identified a road to success in Nairobi. Clearly there are many obstacles along the way, but none in my view are insurmountable.
“I think we have a general sense of what may be on the table in terms of substantive deliverables – though it is not a closed package, or a sure package. And I think we should recognize that agreement on the elements we are talking about would represent real progress. They would have a major economic and developmental impact, even though we must strive to do much more in the future. So now we need to firm these up with textual proposals that can be advanced through the negotiating groups.”
The Director-General also asked members to look beyond Nairobi. Pointing to differences in members' positions on the future of the Doha Development Agenda (DDA), he said:
“Clearly these views will be extremely difficult to reconcile. However, I think we cannot disregard important commonalities when thinking about the way ahead. For example, I think we all agree that: i) we want to deliver something in Nairobi and that it should be meaningful; ii) whatever we deliver will not be agreed to be the end of negotiations on the DDA issues and; iii) we are still ready to keep pursuing the core issues of the DDA and their development dimension after Nairobi – although there is no agreement on how to do this, whether under the DDA framework or whether under a reformulated architecture. The question is whether we can – or whether we want – to capture these and other possible commonalities in a consensual text in Nairobi.”
He continued: “I would suggest that we start working on the basis that we will have a Ministerial Declaration that would take stock of the decisions taken at the 10th Ministerial Conference and that gives us guidance on our future work.”
The meeting saw a debate on these issues, with a range of views being expressed. The Director-General concluded the conversation by suggesting there was a need for further consultations with members on the substance of any potential Ministerial Declaration and the process of producing such a document.
These consultations will begin in the coming days. Negotiations on the potential deliverables for Nairobi will also continue, mainly through the formal negotiating groups and other relevant committees. In addition, the Director-General will be consulting ministers at forthcoming meetings of the African Union, the African, Caribbean, Pacific Group of States and a meeting of Arab Trade Ministers.
Report by the Chairman of the Trade Negotiations Committee
I’d like to add a warm welcome to those who are joining us today at their first General Council meeting. You chose an interesting time to arrive!
To those of you who are leaving, I wish you all the best and thank you for your contribution to our work.
At the last General Council meeting, on the 28th of July, I reported that limited progress had been made on developing a work programme by the July deadline.
I then convened a TNC meeting on the 31st of July to take stock of progress and to discuss the way forward.
That meeting ended with an unequivocal and united message from members that we must now focus our efforts towards delivering outcomes in Nairobi.
With that in mind, we restarted our work in September with renewed impetus.
I held a Room W meeting with heads of delegations on the 17th of September to report in detail on the consultations to date.
I gave my assessment of the situation at that point. I said that progress on some key issues, like domestic support, and market access in agriculture, NAMA and services was looking very difficult.
While continuing our work on those efforts, I said that it was time for us to start working more intensely on issues where there appeared to be more convergence and which might be potential deliverables for MC10.
These included – but were not necessarily limited to:
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development issues with a particular focus on LDCs,
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export competition in agriculture,
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and a set of possible outcomes to improve transparency in a number of areas.
A range of consultations have taken place since that last Room W meeting which have further pointed things in this direction, even though it is not the preferred outcome for many of you.
I have continued my consultations in a variety of configurations. I held numerous bilateral meetings with ministers where possible – for example in the margins of the Public Forum, the G20, or the UN Sustainable Development Summit in New York.
In addition, on the 29th of September I convened a meeting focused on advancing LDC issues.
And on the 1st of October I held a meeting to start discussing how we approach our work after Nairobi.
I have also taken part, by invitation, in a number of meetings convened by members, including meetings in Istanbul with a small group of ministers, and then with G20 trade ministers at the invitation of the Government of Turkey.
I think it would be helpful to give a short overview of each of these meetings, before drawing some conclusions about where things stand today.
Report on recent consultations
I will start with the meeting on LDC issues which was held on the 29th of September.
Given the emerging view in favour of delivering an LDC package in Nairobi, I asked the Group Coordinator, Ambassador Shameem Ahsan of Bangladesh, to give an indication of what their forthcoming proposals might contain.
He gave a helpful overview of the potential issues, which included:
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Some elements of S&D treatment,
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All issues of interest to LDCs in Agriculture, including domestic support,
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Action on Non-Tariff Barriers, including a horizontal mechanism,
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Binding DFQF market access through scheduling,
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A reflection of flexibility that has already been agreed upon in various decisions, guidelines and Ministerial declarations in trade in services,
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Adoption of simplified procedures for taking anti-dumping action for use by LDCs and increasing the threshold on non-application of anti-dumping duties for LDCs,
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And strengthening of technical assistance.
There was not a detailed discussion of these issues in the meeting. Rather, reflecting the proximity of MC10, there was a desire to move to discussing textual proposals as soon as possible.
We also briefly reviewed progress on implementation of the Bali issues. I won’t say too much about this now as the General Council Chair will cover these issues under agenda item 2. However I did want to mention Rules of Origin – and the submission from the LDC Group on this issue – as this falls under the TNC.
I am pleased to say that I have appointed Steffen Smidt, who you all know in his role as LDC Facilitator, to take forward this proposal on my behalf, as TNC Chair – so he will be a Friend of the Chair. I thank Steffen for his continued commitment to LDC issues and wish him luck in this important role, where he will have my full support.
While I am talking about LDC issues I would like, very quickly, to mention a few other points.
First, I was delighted that the terms of Liberia’s WTO membership were agreed earlier this week. I congratulate the Government of Liberia on this achievement – and all those in Geneva who have been involved in making this happen. I very much look forward to formally agreeing this accession in Nairobi.
Second, I would like to remind members that we are holding an LDC event on Monday at 10am in Room W, looking at 20 years of supporting the integration of LDCs in to the multilateral trading system. That will be an important opportunity to discuss what has been achieved on this front since the WTO was created – and, perhaps more significantly, what we can aim to deliver in the future.
Third, preparations are underway for the Pledging Conference to support Phase Two of the EIF. I will be chairing the event, which will be held in Nairobi on the 14th of December. A successful pledging conference would be a significant outcome of the ministerial and I strongly urge all existing and potential donors to be ready to lend their support.
Now, continuing with my report of recent consultations, I held a meeting last Thursday, the 1st of October.
My preference was in fact to call another Room W meeting, but with the Public Forum still ongoing and in full swing most rooms in the house were occupied. The Forum is an important outreach event and a symbol of our openness as an organization, so I did not want to disrupt proceedings. Instead I convened a session in my own meeting room so we were quite crowded in, with some 48 delegations attending.
This meeting was a chance to update members on the state of play. We also discussed the question of how we can intensify our work, including on the specific outcome documents for Nairobi, and how we will continue our work after Nairobi.
A range of views were expressed. I floated an idea at the meeting on a possible way forward. In concluding the meeting I promised to bring that idea to the General Council today – so I will come back to this point in a moment.
Indeed, the post-Nairobi issue has become a feature of many of my consultations over recent weeks, and I will come back also to this point in a moment.
I want to turn now to meetings convened by members.
On the 28th of September and the 1st of October, I was invited to participate in a meeting hosted by Australia. It included representatives from Brazil, China, the EU, India, Japan and the US.
The Chairs of the General Council, the Special Session of the Agriculture Committee and the NAMA Negotiating Group also joined the meeting.
In both meetings, discussions revolved around our possible outcomes for Nairobi. In particular, participants discussed the possibility of agreeing on a subset of DDA issues in Nairobi, combined with a statement on our post-Nairobi work.
On the Nairobi package itself, participants mentioned again, export competition, a development and LDC package, and some transparency provisions. They all agreed, however, that there would be challenges in negotiating these issues. These were promising issues, but not “sure outcomes”. Participants did not discuss the details of the difficulties that they thought they might face.
Again, a key issue discussed was our post-Nairobi work. Here, the views were quite divergent. Some wanted to continue our work and reaffirm the Doha architecture and constructs. Others said they would be prepared to engage on issues we have been negotiating under Doha, but were not willing to pursue them under the current DDA framework.
Participants also acknowledged that it would be difficult to find common language on the post-Nairobi work, but no-one disagreed with the importance of trying to work out a common message on the future, which would form part of the overall Nairobi outcome.
Participants explored their commonalities in terms of guidance for our future work. If members deliver the package that has been outlined for Nairobi, centred around development, transparency, and export competition, no-one disagreed that it would be a meaningful outcome.
Participants also argued that such a package would not mean that it would successfully address the DDA single undertaking.
After Nairobi, participants would be willing to think about how to make progress on issues that might not have been fully addressed by MC10.
I must say this was a very preliminary conversation. Some participants noted they had no instructions on these issues. It was clear that, even if there were some commonalities about our future work, important differences still existed.
Finally, participants went through the different possibilities in terms of the nature of the outcome documents. Again, I will come back to this point in a moment.
Those same participants accepted Australia’s invitation and met at the Ministerial level in the margins of the G20 trade ministers meeting in Istanbul earlier this week. This time, Ambassador Amina Mohamed, as Chair of MC10, joined the meeting as well.
The conversation focused on what issues participants thought could be dealt with in Nairobi and what the approach should be to post-Nairobi work. So as you can see, it is a repetition of the familiar conversation – focusing these two points.
Participants were asked to say whether they were prepared to proceed on a package of issues which would be DDA minus, along the lines of what I have already outlined. And they were asked if they were willing to evaluate whether and how we should start working on a final Nairobi document.
The conclusion that I took from that meeting was that participants were willing to work on both fronts. This is encouraging.
In addition to the arguments made in previous meetings, some other elements emerged more clearly this time. Some participants said that reassurance regarding post-Nairobi was needed for a successful outcome in Nairobi. No-one seemed to fundamentally disagree with this. Some stressed the importance of a balanced outcome even in the context of a package containing some issues only.
Some noted that the post-Nairobi agenda should be open to issues that are relevant to all members, and some made the point clearly that the DDA issues must remain the primary focus and cannot be forgotten. No-one disagreed that development should stay central to our conversations after Nairobi and that principles like S&D treatment and less-than-full reciprocity should be kept in our post-Nairobi work.
Differences still remained on the role of the DDA framework in the post-Nairobi agenda. In spite of that, there was no apparent disagreement on the desirability of a consensual document, a Ministerial Declaration, as part of the outcomes for MC10.
I told participants that I would bring these discussions to the General Council, as I am doing now.
I also stressed the importance of not leaving the discussion about our future work to the last minute, so as to avoid the risk of having a chaotic process in Nairobi.
I was reassured by the participants. All of them expressed willingness to engage in negotiations in Geneva along the lines of what I described here, and they underscored the need of discussing these issues with the wider membership, which we are doing here.
On Tuesday I attended the G20 trade ministers meeting in Istanbul. Again Cabinet Secretary Amina Mohamed also joined the meeting.
I set out the shape of the potential deliverables that had been discussed in Geneva and posed the two key questions:
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First: was there a willingness to proceed on the basis of a package of specific issues which is DDA-minus – and therefore should we intensify our work on the more promising issues that I outlined earlier, without prejudice to the other items we were already negotiating?
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And second: should we start work on a final Nairobi document immediately, without prejudice to the outcome of this exercise, either in terms of substance or format?
I was pleased with the response.
There was strong support to begin working – in the negotiating groups – more intensively on a package of specific substantive outcomes for Nairobi, with a focus on areas where outcomes seem to be more likely to be successfully concluded.
Again, however, it was clear that work on these issues should not preclude work on other areas where some members felt consensus may still be achievable.
I cautioned ministers that there was still a great deal of intensive work ahead if we were to narrow the gaps between positions and reach outcomes, even on the specific issues identified as part of the potential package.
Ministers also gave their backing to a parallel discussion on the path of future work on unresolved Doha issues after Nairobi.
No-one disagreed with the continuing central importance of development to this work – nor that core DDA issues which remain unresolved, such as agriculture, industrial goods and services, will continue to be an important part of the post-Nairobi discussion.
Overall I think a very clear, high-level political message emerged from this meeting that the political will exists, among these important players, to make Nairobi a success.
Post-Nairobi
So, drawing on all of these meetings and consultations, let me now focus on the issue of our post-Nairobi work in a bit more detail.
While there is a potential package on the table, it seems that, whatever we deliver in Nairobi, it will not be viable or credible, to announce it as an agreed conclusion of the DDA single undertaking. This seems to be a consensual view.
In this scenario, the unavoidable question is: what to do with the DDA issues that are not properly addressed in the Nairobi package?
At this point, there are divergent views on what happens after Nairobi. Many say that if there is no consensus to end the Doha Round then it will simply continue – you would need consensus to end it – and that we should state this clearly. Others say that if we do not deliver Doha by Nairobi then that will be it – even without a formal statement affirming the demise of the DDA.
Clearly these views will be extremely difficult to reconcile.
However, I think we cannot disregard important commonalities when thinking about the way ahead.
For example, I think we all agree that:
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We want to deliver something in Nairobi and that it should be meaningful.
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Whatever we deliver will not be agreed to be the end of negotiations on the DDA issues.
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We are still ready to keep pursuing the core issues of the DDA and their development dimension after Nairobi – although there is no agreement on how to do this: whether under the DDA framework, or whether under a reformulated architecture.
The question is whether we can – or whether we want – to capture these and other possible commonalities in a consensual text in Nairobi.
We have a number of options in terms of the type of document that could result from the Ministerial. It could be:
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a Ministerial Declaration, which is the usual type of document that you get from these meetings;
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a non-consensual Chairperson’s statement, which is something we have done before;
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or a hybrid of some sort – for example it could be partly consensual text and partly non-consensual text.
So those are the potential options.
Then we arrive again at the question of how such a document can be produced – how do we get there?
This is not a small challenge and it is important that we need to think now about the process that would allow us to find convergence on a satisfactory solution.
I would suggest that we start working on the basis that we will have a Ministerial Declaration that would take stock of the decisions taken at MC10 and that gives us guidance on our future work.
Of course, this would be without prejudice to what outcome we will have in Nairobi, but it is important to start somewhere and to aim for the highest possible result.
My proposal to you therefore is to start a process that will lead us to text based negotiations on an MC10 Ministerial Declaration.
There are still different views on what this process would look like and I will be informally consulting you about this.
Whatever this process is – and as I say, I don’t know what it will look like – we should bear some things in mind:
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It must be progressive (for example, right now we still don’t know what the Nairobi package will look like);
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It must be a bottom-up, transparent and inclusive process;
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It will not deal with substance – that will happen in the negotiating groups;
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My instinct is that it should probably start with a focus on the post-Nairobi elements of the declaration.
These are just my preliminary views. As I have indicated, I will be holding consultations to hear your own views.
Conclusion
Through the various consultations over recent weeks I think members have identified a road to success in Nairobi. Clearly there are many obstacles along the way, but none in my view are insurmountable.
We have very little time remaining.
I think we have a general sense of what may be on the table in terms of substantive deliverables (though it is not a closed package, or a sure package) – and I think we should recognize that agreement on the elements we are talking about would represent real progress. They would have a major economic and developmental impact, even though we must strive to do much more in the future. So now we need to firm these up with textual proposals that can be advanced through the negotiating groups.
But it is now very clear that the post-Nairobi conversation must take place at the same time. These two elements need to move in parallel. Otherwise the differences we already see today could compromise any chance of success on the substantive issues.
So this is where we are today Mr Chairman. I hope it provides food for thought.
Thank you.
Tripartite Agreement could boost intra-regional trade by one third
Reflecting efforts to boost intra-regional trade and investment, 26 African countries have recently agreed to establish a Tripartite Free Trade Area (TFTA) by January 2016. The TFTA agreement comprises the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA), and the Southern African Development Community (SADC). With a total population of 638 million people and a total Gross Domestic Product (GDP) of USD 1.2 trillion, the TFTA will create Africa’s largest free trade area.
In one of the first papers to quantify the potential benefits from the TFTA, UNECA economists Andrew Mold and Rodgers Mukwaya suggest the TFTA could boost intra-regional trade by USD 8.5 billion. Particularly interesting is the fact that the economic sectors most likely to benefit are the industrial sectors – such as processed foods, light manufacturing and heavy manufacturing, providing an important impulse to regional industrialisation. The authors also speculate that, if the elimination of tariffs is accompanied by measures to remove non-tariff barriers and infrastructural deficits, the potential gains could be much larger.
The TFTA is estimated to increase regional welfare by US$2.4 billion, with South African consumers being among the main beneficiaries. Other principal beneficiaries include Angola, D.R. Congo, Tanzania and Egypt.
The paper also addresses concerns that industrial production in the TFTA may concentrate in the countries with the highest productivity levels – namely, Egypt and South Africa. The simulation results suggest that these fears are exaggerated, with little evidence of concentration of industries in the larger countries, with only marginal changes in industrial output in the largest countries in the region – in South Africa and Egypt output increases by 0.21 percent and 0.06 percent, respectively.
Why are the changes in output on average so modest? Even after the elimination of tariffs on intra-TFTA trade, the simulation results suggest that the level of intra-regional trade will still be relatively low (barely 12 percent of total trade). And because, with the exception of commodity-exporting activities, traded output in many sectors is still a relatively small share of total output, it implies that the tariff changes on intra-TFTA trade alone have a relatively limited potential to change the overall pattern of trade. This in itself should allay fears of a dramatic concentration of industrial activity through the elimination of tariffs on TFTA trade. But it also highlights the fact that more would need to be done to incentivise both industrialisation and intra-TFTA trade beyond the removal of tariff barriers.
In this sense, it is important to note that the results are dependent on the full implementation of the free-trade area, and contingent on resolving outstanding issues such as regional-wide rules of origin. Issues like this need to be resolved if the TFTA is to reach its full potential. Nonetheless, Mold and Mukwaya's research shows that the TFTA provides an excellent opportunity for countries in the region to increase intra-regional trade, and create a more attractive market for both greater foreign and domestic investment. It is an opportunity which deserves to be seized.
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WTO and Least Developed Countries: 20 years of supporting the integration of LDCs into the multilateral trading system
Of the 48 countries designated by the United Nations (UN) as Least Developed Countries (LDCs), 34 are World Trade Organization (WTO) Members and a further eight are in the process of acceding to the WTO. The LDC WTO Members account for more than one fifth of the WTO Membership and therefore represent an important constituency in the WTO.
Considerable progress has been made in integrating LDCs into the multilateral trading system (MTS) over the last 20 years. The establishment of the WTO has supported LDCs to become more active players in the system, resulting in provisions aimed at increasing the trade opportunities for these countries. As a result, the participation of LDCs in global trade has seen gradual improvement over the last 20 years. LDCs increased their share in world trade of goods and services from 0.59% in 1995, to 0.80% in 2005, to 1.23% in 2013.
The increased trade opportunities have also been complemented by enhanced flexibilities for LDCs in implementing WTO rules and disciplines as well as in undertaking commitments. Members have shown willingness to respond to concerns and needs of LDCs to beneficially integrate them into the MTS. The special situation of LDCs and its commensurate recognition in the negotiations has thus been one of the defining features of the MTS; and special provisions are continually being introduced to assist LDCs in their development efforts.
This Secretariat Note has been written as part of WTO’s 20th Anniversary Event dedicated to LDCs titled “Twenty Years of Supporting the Integration of Least Developed Countries into the Multilateral Trading System” scheduled for 12 October 2015. This study traces the 20-year relationship between the WTO and LDCs, in particular the key developments and decisions taken in favour of LDCs, the institutional support provided and the trade capacity-building initiatives put in place.
This Note focuses on the measures taken in favour of LDCs following the establishment of the WTO, though the evolution of the MTS has seen special consideration for LDCs, even prior to the establishment of the WTO in 1995. The importance of development in the MTS advanced in 1964 when a dedicated chapter on trade and development was added to the GATT as Part IV, which spelled out the principle of non-reciprocity in the MTS. The principle of non-reciprocity, and Part IV more generally, created a stronger basis for developing countries to seek flexibilities in trade negotiations and special action with respect to their trade interests.
One of the key achievements of the GATT period was the adoption of the “Enabling Clause” during the Tokyo Round in 1979. This decision, titled “Differential and More Favourable Treatment Reciprocity and Fuller Participation of Developing Countries”, made a first mention of LDCs in a legal instrument under the GATT period. The Enabling Clause formed an important basis of subsequent special and differential treatment (S&D) for developing countries in the MTS. It, inter alia, facilitated specific preferences for LDCs among developing countries.
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World trade talks offer historic opportunity for Africa
As world leaders met at the recent United Nations summit to adopt global goals to end extreme poverty in 15 years, a determination to create broader and more participatory development was evident.
That the sustainable goals were created in an inclusive process signals a departure from paternalism, which has in the past characterised global development. The broad participation of diverse groups of countries and people to determine the world’s future symbolises a new era of shared responsibility and mutual accountability.
Notable in the goals is the clarity with which they recognise trade as a key element of development, with a target to “increase aid for trade support for developing countries, in particular least developed countries, including through the enhanced integrated framework for trade-related technical assistance to least developed countries.”
This December, the world will meet in Nairobi – my capital city – for the 10th World Trade Organization (WTO) Ministerial Conference. Known as the MC10, the meeting aims at shaping the global trade and investment framework in the post-2015 development agenda.
This being the first time the meeting will be held on African soil, it is a momentous event – a coming of age for Africa. More importantly, by coming to Africa, MC10 signifies inclusivity.
As a continent with the largest share of the fastest growing economies in the world, Africa is a great site for the conference – not just because of our enormous growth potential but also because of the many possibilities the meeting presents.
Even as the continent’s economies register strong growth, millions of people remain poor. Many great trade policies suggested and debated over the last decade or so and meant to lift these people out of poverty have stagnated. So the Nairobi meeting should not just be symbolic, it should be substantive in its unequivocal support for poor countries to join the global marketplace.
The meeting should explore more ways of making trade fairer and giving a bigger voice to smaller countries where many poor people live. Peasant farming families in Africa and in the global south generally will look up to the MC10 to create policies that will improve their livelihoods.
The meeting must continue to seek more ways to cushion the poor against unfair trade practices, and it should explore ways of helping the WTO be more agile in helping vulnerable countries manage the effects of disasters.
The Nairobi meeting offers a great chance for the world to entrench the new sustainable development goals. One of the surest ways to achieve that transformation is by promoting fair trade, and the time has come for Africa to take a more prominent seat around the table of trade negotiations.
The poor have invested many of their hopes in MC10 and we have confidence the world will strive to meet those hopes. We welcome hosting in Nairobi the vibrant conversation around how to achieve more for the poor.
Ambassador Amina Mohamed is Kenya’s foreign minister, her formal title being Cabinet Secretary Ministry of Foreign Affairs and International Trade.
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Africa’s largest infrastructure projects to be discussed at APIF
China’s growing interest in developing Africa’s infrastructure and economy goes a step further, as the 4th annual Africa Power and Infrastructure Forum (APIF) will be held in Beijing next week
The event, hosted by EnergyNet, will be held between 15 and 16 October at the Ritz Carlton, Beijing. The China Africa Development Fund and the China Electricity Council are event partners. Africa’s Standard Bank is the forum sponsor. The two-day meeting will focus on large-scale projects in Africa, and how to progress on the projects in a planned and resourceful manner.
The delegates that have confirmed their attendance for the event include Henry Rotich, cabinet secretary for the treasury of Kenya; Matadi Atadi Nenga Gamanda, minister of energy and water resources in DR Congo; Christopher Yaluma, minister of energy of Zambia; Henry Macauley, minister of energy of Sierra Leone; Obeth Kandjoze from Namibia; Aston Kajara, minister of finance in charge of privatisation in Uganda; Maria Kiwanuka, minister of energy and mines/senior advisor to the President of Uganda and Silas Zimu, presidential special advisor on energy in South Africa.
The main projects that will be discussed are the LAPSSET Corridor; East African Standard Gauge Railway; Dry Port Development in Ghana; The Unbundling of a State Owned Utility-Liberia; gas investment projects in South Africa; The East Africa Roads Programme and the Grand Inga I and II Project in DR Congo.
China has always shown keenness to develop Africa in a significant manner, and capitalise its vast number of natural resources. In August, China’s Sinoma International Engineering signed a deal with African cement major Dangote for US$4.3bn, making it one of the largest deals signed between China and Africa. Meanwhile, East African nations such as Tanzania and Uganda are uncovering more reserves of oil, and need sound infrastructure such as ports, storage facilities and offshore/onshore extraction facilities to capitalise on the same. In 2013, China National Offshore Oil Corporation signed a US$2bn contract to develop Uganda’s Kingfisher oilfields.
However, Africa has had its share of troubles with infrastructure, electricity and financial lapses. Through the event, delegates from China and Africa will highlight the ways to overcome such hurdles and gauge the best practices to realise the aforementioned projects to fruition.
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SARS convenes forum on illicit financial flows
Commissioners General of South Africa’s bordering countries are to formally establish a forum that will take forward the development of economies as well as to stop the illicit trade among others, says South African Revenue Service (SARS) Commissioner Tom Moyane.
“Today’s session is to formalise the establishment of the forum of Commissioners General in the region in which we take the agenda of development of our economies especially in revenue collection, strengthen our customs activities, stop illicit trade coming in and deal with drug trafficking, money laundering and all those nefarious activities but equally put a task team that is going to formalise the establishment of a forum of Commissioners General in the region,” Commissioner Moyane told SAnews on Thursday.
This as SARS convened a second forum of commissioners from 11 countries including Angola, Swaziland, Lesotho, Zambia and South Africa to unpack core tax and customs issues especially linked to illicit financial flows (IFF).
“We hope by end of this financial year in December, semblance of the establishment of this forum should have resonance with us and find expression to the point where we can say that the Commissioners General have in principle achieved this objective,” he said.
The Commissioner said the team led by former President Thabo Mbeki in the Economic Commission for Africa said that approximately $60 billion (in IFF) leave Africa on an annual basis.
“If you look into that amount of money, it could have changed the face of our continent. It could also change the plight of our people to a better dispensation but at the same time we need to address the factors of unemployment, these illicit financial flows affect productivity but the poorer much heavily,” he explained.
The Commissioner said today’s gathering – which follows from an earlier session held in July – is about the coming together of Commissioners General with one common view that there’s a need to work together and collaborate on issues like collection of revenue.
“Underpinning that we are aware of illicit financial flows that affect our continent, our region and the world. Therefore it is our duty as Commissioners General that we stamp the tide of financial outflows out of our countries,” he said.
Commissioner Moyane said while Commissioners General are tasked with revenue collection, this is in order to support the initiatives of their respective countries.
“But we see there is excessive bleeding and outflows of cash from our region that could have been used profitably to maximise and make the lives of our people much better,” he explained.
Among the harm done by IFFs is that it reduces much needed finances to fund social development programmes and economic infrastructure that is imperative to raising the standards of living of vulnerable people in society.
In addition, by depriving the fiscus of much needed resources, IFFs force developing countries to go with empty bowls in hand to ask for aid grants that if granted has many strings attached.
“Africa has so much resources, we are a resource based continent. We cannot allow ourselves to be beggars and going into international financial institutions begging for money when we have the resources that could make our country much richer,” said Moyane.
The forum, which was held at the Sheraton Hotel in Pretoria, seeks to chart a road map and maximise the respective participating countries’ statutory mandates of revenue collection.
Joint Outcomes Statement by the Commissioners General Forum for Southern Africa (South Africa, Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Swaziland, Zambia and Zimbabwe)
Tshwane – South Africa, 8 October 2015
We the Commissioners General and Heads of Delegations of the Revenue Authorities of Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Zambia and Zimbabwe gathered at the Sheraton Hotel in Pretoria, South Africa, on 8 October 2015 and deliberated on the following matters:
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Integrity in Revenue Administrations
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The negative impact of the illicit economy on revenue collection
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VAT fraud: a domestic and cross border challenge
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Customs Data interconnectivity
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Domestic aggressive tax planning schemes
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Data as a tool to counter trade mispricing
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Establishment of a sub-regional Revenue Academy
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Practical steps to Automatic Exchange of Information (AEOI)
We, having deliberated on the aforesaid matters and with a view to strengthening sub-regional cooperation as well as the integrity of our respective tax and customs systems:
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Agree to establish a Commissioners General Forum for Southern Africa and such other structures as may be required.
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Agree that the impact of VAT fraud manifests itself across borders and that closer cooperation and collective action is key to curb this scourge.
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Commit to utilise appropriate international legal frameworks to fast-track IT Interconnectivity within our region. We encourage that bilateral engagements that are currently underway be expedited. We agree that within two years this process must be completed.
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Recognise that aggressive tax planning schemes are harmful and need to be addressed expeditiously, in order to stem the negative impact of Illicit Financial Flows.
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Recognise that our enforcement capabilities are central to combating such harmful activities within our domain that contribute to illicit financial flow. We agree to work together closely to enhance these capabilities, and where possible undertake joint action to uproot illicit activities.
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Note the proposal on the establishment of a sub-regional Revenue Academy and agree to fast track its establishment.
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Recognise that developing countries are dependent on foreign-direct investment, and that the disparate offering of incentives provides the basis to leverage tax avoidance. We note the negative impact that the abuse of tax incentives has on revenue and we advocate that they should be better targeted and their impact measured.
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Agree to share experience in improving administrative functionalities through treaty networking, as well as the implementation thereof.
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Agree to assist one another in developing and applying rules related to thin capitalisation, transfer pricing, withholding taxes and other international tax principles.
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Recognise the importance of Exchange of Information in order to deal with illicit activities in the sub-region and agree to expedite such exchanges.
Commissioners General and Heads of Delegation:
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UNEP Inquiry shows how to align global finance with sustainable development
The heartland of the global economy, the financial system, can evolve to serve its core purpose of growing and sustaining the real economy.
A new UNEP report released at the International Monetary Fund/World Bank Group Annual Meetings shows how to harness the assets of the world’s financial system for sustainability – the key findings are that:
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A ‘quiet revolution’ is underway as financial policy-makers and regulators take steps to integrate sustainable development considerations into financial systems to make them fit for the 21st century.
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Momentum is building and is largely driven by developing and emerging nations including Bangladesh, Brazil, China, Kenya, and Peru, with developed country champions including France and the UK.
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Amplifying these experiences through national and international action could channel private capital to finance the transition to an inclusive, green economy and support the realization of the Sustainable Development Goals.
These are the core findings of a two-year Inquiry by the United Nations Environment Programme, summarized in a new report, The Financial System We Need. Commenting on the release:
Achim Steiner, UN Under-Secretary-General and Executive Director of UNEP said: “UNEP’s Inquiry has for the first time compiled and analyzed inspiring initiatives from across the world that seek to better align the financial system with sustainable development, showing that there is much to be learnt from the developing world. We now need to raise the level of ambition and cooperation to ensure that the heartland of the global economy, the financial system, can evolve to serve its core purpose of growing and sustaining the real economy. UNEP’s report opens a new chapter by setting out how such an evolution can be achieved,” he added.
Also speaking at the launch, Yi Gang, Deputy Governor of the People’s Bank of China, said the UNEP Inquiry report “delivers a vision of embedding sustainable development into the core of financial and capital markets. It should be a very useful guide and reference for many governments, financial institutions and international organizations in thinking about how to advance green finance.” Yi praised UNEP’s contribution to the joint study with China’s central bank on the country’s green financial system, and said that “we have benefited significantly from UNEP’s vision of sustainable finance as well as its analysis on international experience,” and “are looking forward to continuing this partnership with UNEP in the future.”
Dr Atiur Rahman, Governor of the Bangladesh Bank, and a member of the Inquiry’s Advisory Council, speaking at the launch, said: “For the first time, the Inquiry has mapped the many innovations around the world seeking to ensure that the financial systems serves its purpose of financing inclusive, green development”.
John Lipsky, former first Deputy Managing Director of the IMF and a member of the Inquiry’s Advisory Council, “Reforming the financial system remains unfinished business – we have stabilized the system, but have a long way to go in designing a financial system that meets the needs of sustainable development.”
Murilo Portugal, the President of Brazil’s banking association, FEBRABAN, and a member of the Inquiry’s Advisory Council, “The Inquiry has catalyzed awareness of the need to align financial markets to sustainable development, and highlighted practical pathways to improving such an alignment.”
Naina Kidwai – Chairman, HSBC India, Director, HSBC Asia Pacific, and a member of the Inquiry’s Advisory Council, “Too often the financial system and sustainable development have been tackled in separate silos. The Inquiry has shown for the first time how to systematically connect the dots, demonstrating practical ways in which we can mobilise the scale of capital needed in emerging markets, particularly for clean energy and clean water.”
Sharan Burrow – General Secretary of the International Trade Union Confederation (ITUC), “The UNEP Inquiry is a valuable contribution to help reframe the financial system which is essential for a socially just transition to a low carbon economy.”
Henri de Castries, Chief Executive of AXA, one of over 40 partners of the Inquiry, “I welcome the Inquiry, as only a financial system with a sustainability orientation serves the economy and society, and so provides a sound foundation for fostering the long-term orientation of finance.”
Rachel Kyte, Vice President and Special Climate Envoy, World Bank Group: “The UNEP Inquiry has uncovered a new generation of policy innovations that aim to ensure the financial system serves the needs of inclusive, environmentally-sustainable, economic development. Its findings are an important input in advancing a new generation of financial system reform and support the delivery of our most important sustainability goals, and could play an important role for implementing the results of the forthcoming Paris climate talks.”
Highlights from ‘The Financial System We Need’ report from the UNEP Inquiry
The UNEP Inquiry into the Design of a Sustainable Financial System was established in January 2014 with a mandate to advance policy options that would improve the effectiveness of the financial system in supporting sustainable development.
Supported by a high-level Advisory Council of financial leaders, the Inquiry has looked in-depth at practice in more than 15 countries as well as across key segments of the financial system, such as banking, bond and equity markets, institutional investment, insurance as well as monetary policy. To reach its findings, the Inquiry has worked with central banks, environment ministries, international financial institutions as well as major banks, stock exchanges, pension funds and insurance companies.
The Inquiry has identified five types of measures that are being introduced by financial rule-makers:
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Enhancing market practice through better disclosure, clearer responsibilities and improved product criteria.
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Harnessing the public balance sheet, through fiscal incentives, public financial institutions and central bank action
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Directing finance through policy measures, such as priority sector lending, legal requirements and liability regimes
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Transforming financial culture, through capacity building, reformed incentives and market structure
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Upgrading system governance, through guiding principles, regulatory mandates and performance measurement.
In total, the Inquiry found over 100 measures that are already in place, including:
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China, a portfolio of 14 distinct recommendations to advance China`s green financial system, covering information, legal, institutional and fiscal measures
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France, new disclosure requirements on climate change have been introduced for institutional investors as part of the country’s energy transition legislation
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Kenya, has advanced financial inclusion through scaling of mobile based payment services, which is now also supporting green financing
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Peru, new due diligence requirements have been introduced for banks to help reduce social and environmental externalities.
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USA, emphasizes fiscal measures to accelerate green finance, and had made significant advances in disclosure and investor action.
The Inquiry’s report presents a Framework for Action that includes a toolbox of nearly 40 different measures, a set of five policy packages across banking, bond and equity markets, institutional investors and insurance, and a prioritized set of 10 next steps to promote international financial cooperation.
Along with The Financial System We Need, the Inquiry will also be launching the ‘Inquiry Live’ website which will house a dedicated platform the body of knowledge and research materials encompassing the Inquiry’s work over the past 20 months. The website will provide a one stop shop to all of the Inquiry’s research materials, as well as a dedicated portal for partner countries to enable communication and sharing of knowledge. The country portal will initially be dedicated to the 15 countries where there has been enhanced country engagement.
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Improving market access for the least developed countries in the 2030 Agenda for Sustainable Development
A new UNCTAD Policy Brief focuses on key questions concerning how to achieve target 17.11 of the Global Goals though improving market access conditions faced by the least developed countries.
The sustainable development goals (SDGs) in the 2030 Agenda for Sustainable Development aim to double the share of global exports of the least developed countries (LDCs) by 2020.
The agenda also calls for providing duty-free and quota-free (DFQF) market access to LDCs as one of the main pillars of international support for export expansion by LDCs. DFQF market access is important, but will it be sufficient to double the export share of LDCs? And will it contribute to sustainable development?
What kind of market access conditions are least developed country exports facing today?
Least developed country exports receive preferential market access in most developed countries. In 2014, 89.5 per cent of the value of the exports of LDCs to developed countries was duty free. Developing countries also provide preferential market access to LDC exports. Average applied tariff rates to LDC exports continued to fall even after the financial crisis in 2008-2009. As the presence of import quotas has diminished in international trade, market access conditions faced by LDCs are moving closer to DFQF market access. However, the true value of preferential market access is determined by the tariff margins, that is the difference between the tariff rates applicable to LDC exports and those applicable to the exports of competitors.
UNCTAD has estimated the preferential tariff margin of LDC exports relative to the exports of non-LDC countries competing in the same markets in 2008 and 2013. The relative preferential margin in 2013 increased from the 2008 level except in Latin America, where LDC competitors enjoy better market access conditions through regional trade agreements (RTAs). The fall in relative preferential margins in low-income countries and South Asia may have resulted from a compositional shift of LDC exports from low-tariff products (e.g. fuels) to higher-tariff products (e.g. foodstuffs).
What will genuinely improve the market access conditions faced by the least developed countries?
Considering market access conditions as one of the binding constraints to the export growth of LDCs in the post-2015 development agenda (along with constraints related to infrastructure, energy and transport), UNCTAD proposes the following package of six international actions:
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Provide duty-free and quota-free market access
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Implement the WTO ministerial decision on the services waiver and fulfil article IV.1 and 3 of the General Agreement on Trade in Services
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Reduce future trade costs by cooperating in SDG implementation
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Physically connect LDCs to the international market
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Target aid for trade to upgrade the productive and export capacity of LDCs
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Help LDCs use their export growth to achieve sustainable development
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Food prices lower for longer
FAO maps decline in both trade volumes and volatility for key agricultural commodities
Agricultural commodities are going through a period of lower and less volatile prices, according to the FAO Food Outlook released on 8 October 2015.
After several dramatic upward price spikes from 2007 through early 2011, most cereal and vegetable oil prices are on a trajectory that is both steady and declining, the Outlook reports in a special feature.
Among the reasons are high inventory levels, sharply lower oil prices and the renewed strength of the U.S. dollar, none of which appear likely to be reversed in the short term, although unexpected shocks, such as weather-driven impacts on harvests, can never be excluded.
The FAO Food Price Index, a trade-weighted index tracking international market prices for five major food commodity groups, fell to a six-year low in August. New figures, also released today, show it inched up by about two-thirds of a percentage point from its August low to 165.3 points, which is still 18.9 percent less than a year earlier.
“The takeaway message here is that statistically, the most recent shifts in behaviour foresee downward price momentum with lower volatility,” Adam Prakash and Friederike Greb, both commodity specialists at FAO, write of their analytical findings.
The price path of the past few years, and the prospective path ahead, are not the same for all food groups. Rice prices tend to move independently from other grains, while sugar prices have always been volatile, having lost and gained over half their value more than 12 times since 1990. Meat and dairy products fit the broad trend but, as more perishable commodities, they often do so with a time lag.
Staple grains are at the core of the declining price trend, as a result of several years of robust harvests around the world as well as stockpiling that has taken reserves to record highs. Such precautionary reserves are now being slowly unwound, and global cereal stocks will likely close the 2016 season at 638 million tonnes, down four million tonnes from their opening levels, according to new forecasts in FAO’s latest Cereal Supply and Demand Brief.
Meanwhile, this year’s world cereal production projection was notched down to 2.534 billion tonnes, six million tonnes below last month’s forecast, and 0.9 percent below 2014’s record level, due mostly to reduced output of U.S. maize, for which prices have fallen by half since July 2012.
Low prices and food security
Lower food prices “seem to be a boon to food security” and are indeed just that for households who spend a large share of their income on food purchases, the authors note.
Indeed, the global food import bill is expected to fall in 2015, dropping to USD1.09 trillion, a five-year low, and down almost 20 percent from the record high of USD1.35 trillion in 2014. That drop, to which cereals, dairy products, meat and sugar all contributed substantially, was also encouraged by declining freight rates.
However, the authors warn that calculating overall benefits also requires considering that lower prices reduce farmers’ incomes.
Slimmer margins for rural farmers are likely to reduce on-farm investments, whose past inadequacy was largely blamed for the sharp price hikes of the last decade. Low returns may also require more incentives for more investments in agriculture and rural economic services ranging from credit, to roads and warehouse facilities.
Trade flows declining
While global production is robust and inventory still high, the volume of cereals being traded internationally is declining, and forecast at around 364 million tonnes for the 2015/16 season (July/June), down 2.9 percent from the previous period.
The downward trend is driven by wheat, mostly due to lower imports in Asia – especially the Islamic Republic of Iran – and North Africa, and by coarse grains, where demand from Asia is lower, even though Africa and Europe are both expected to increase their imports.
Trade in cassava, meanwhile, is poised to grow by 19 percent and to hit a record high, due mostly to demand from China for a cheaper raw material for its animal feed, energy and industrial sectors.
Trade volumes in seafood are also rising. Currency movements cast a heavy shadow over this sector, as a strong dollar has made the U.S. a major destination for shrimp exports while weaker currencies elsewhere impact a range of sectors from Norwegian salmon to Chinese fish processors reliant on imports. Still, overall fish production is forecast to grow by 2.6 percent this year, driven by aquaculture expanding at nearly twice that rate.
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East and West Africa build trade ties
Kenyan and Ghanaian government officials are set to gather in November, with the aim of opening new economic frontiers to boost development and intra African trade between the countries.
The President of the two countries met earlier in the year and agreed on protocols regarding ICT, farming and tourism to establish a co-operation between the two countries.
The core contribution to East Africa’s trade flow is informal trade which accounts for 30 to 40 per cent.
Sarah Warren, Structured Trade Transactor at Rand Merchant Bank, shared a relative example that a preliminary report of informal trades in Gauteng showed that R2.6 billion is contributed to Johannesburg’s economy by them coming across South Africa’s borders and purchasing goods to take back.
“We are not talking about small numbers despite the fact that a lot of these informal traders are small scale traders on an overall basis, we are still looking at very big numbers,” shared Warren.
An identified concern in this sector is that many of these traders are moving unprocessed goods across the value chain and they do not retain much from that. Warren said there are regulations that are aiming to formalise the informal sector in the EAC (East African Community).
“There are some clear benefits, they would increase tax revenues because often this kind of trade evades normal tax procedures, also for security processes, tracing them back and moving them in the banking sector,” Warren said.
James Ngomeli, Managing Director of Brands and Beyond, said, “We see a lot of opportunity in the intra-trade between the two countries. Ghana is mainly an import country and Kenya has a lot of talent.”
Although the geography of the two countries is a challenge, Ngomeli said the trade would create an incentive to build the Trans-Africa freight that has been in talks, because trade between the countries faces a big obstacle when there are large volumes of goods.
Warren said another important consideration for policymakers is safety, establishing if the goods and products moving across the borders are being safety-checked correctly. There are a fair amount of measures for smaller traders but not enough incentives for the larger, more formalised sectors to move their trade across formally.
One of the key opportunities for the EAC is increasing revenue given the low commodity prices that we are facing and in diversifying economies and infrastructure, “the benefits there are enormous,” said Warren.
With recent initiatives to strengthen regional trade in East Africa neighbouring countries, Warren said these regimes should simplify things like less complex documentation, and goods less than 2000 dollars should not be taxed.
Ngomeli reinforced that saying, “There are very good incentives, Ghana is waiting for us. There are tax incentives, there’s no visa to go to Ghana, their goods are the same price as in Kenya.”
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tralac’s Daily News selection: 8 October 2015
The selection: Thursday, 8 October
Pascal Lamy, José María Figueres, Oby Ezekwesili : ‘A fish called development’ (Policy Innovations)
When political leaders meet at the 10th WTO Ministerial Conference in Nairobi in December, they will have an opportunity to move toward meeting one of that goal's most important targets: prohibition of subsidies that contribute to overfishing and illegal, unreported, and unregulated fishing by no later than 2020. This is not a new ambition; it has been on the WTO’s agenda for many years, and it has been included in other international sustainable development declarations. But, even today, countries spend $30bn a year on fisheries subsidies, 60% of which directly encourages unsustainable, destructive, or even illegal practices. The resulting market distortion is a major factor behind the chronic mismanagement of the world's fisheries, which the World Bank calculates to have cost the global economy $83bn in 2012.
Charles Onyango-Obbo: 'WTO meet heads to Nairobi: It could be Africa’s moment of glory...or disaster' (The Citizen)
So come December, the world will be watching Nairobi. If the WTO meeting ends in chaos and with no deals, you can expect to read about “in the end, it was impossible to reach to reach agreement in Africa’s sweltering heat”.
Roberto Azevêdo welcomes G-20 Ministers’ support for significant Nairobi outcome (WTO)
Remarks by Roberto Azevêdo to G20 Trade Ministers meeting (WTO)
Dubai Chamber study explores untapped Islamic economy potential of the African market (Dubai Chamber)
Launched in association with the Economist Intelligence Unit, the highlights pointed to the growing demand in Kenya, Ethiopia and South Africa markets for Islamic finance products and banking instruments in asset management and takaful sectors. It further revealed that the African region needs somewhere near $98bn a year to fund its infrastructure needs. Sukuk lends itself well to Africa’s infrastructure gap, it said. The study will be fully published during the Africa Global Business Forum in Dubai next month.
Kenya to host first East Africa Islamic Finance Summit
WIPO African ministerial should embrace a pro-competitive and pro-development IP vision (ICTSD)
An African ministerial meeting, organised by the World Intellectual Property Organization (WIPO) and the Japan Patent Office (JPO), to be held in Senegal next November 3-5 should embrace a balanced and development-oriented approach to intellectual property. Such an approach ought to take into account the needs, priorities and socio-economic circumstances of African countries as well as the most recent empirical evidence on the dynamics of intellectual property and innovation on the continent. [The authors: Ahmed Abdel-Latif , Dick Kawooya, Chidi Oguamanam]
Concluding, today: Trade Policy and Sustainable Development Forum (UNCTAD)
The United Nations Conference on Trade and Development will organize its Trade Policy and Sustainable Development Forum for developing countries, particularly for African countries, from 6 to 8 October 2015. It will bring together senior trade and development policymakers, trade negotiators, experts, academia and other stakeholders to examine the role of trade policy in reaping developmental benefits from trade and improving the welfare for the population in the post-2015 development context.
Mauritius eyes maritime projects, Africa links to boost growth (Reuters)
Mauritius has a deal with a Chinese firm to develop a $113m fishing port and is working with investors on plans to become a maritime hub for Africa, part of its bid to accelerate growth, the island nation's finance minister said on Thursday. Such [BOTT] deals usually leave a project in private hands for 20 or more years before it is transferred back to the state. The minister said the term of this plan had yet to be finalised. The quay and related facilities, worth 4 billion rupees ($113 million), would handle up to 20 vessels at a time on completion in 2018, he said. A Mauritian official said the developer was China's LHF Marine Development Ltd.
Fuad Cassim: 'State and private sector must shift attitudes to spur growth' (Business Day)
In conclusion, some lessons can be drawn from the Indian experience, despite the different context. The primary reason for choosing India as a comparative experience is because of the distrust that existed between the private sector and the government. A similar situation prevails in South Africa.
Driving SA's industrial development agenda: call for papers (ERAN, dti)
This highlights a need to assess how existing policy instruments and incentives (and their application) currently contribute to the creation of an enabling environment in support of the objectives of increased productive capacity and inclusive growth. This includes fiscal incentives, preferential procurement and localisation, technical regulations, technology transfer, Rand D support, skills development, trade, investment and market development support. ERAN is therefore hosting a conference entitled Driving South Africa’s Industrialisation Agenda to explore some of these issues and draw practical lessons on improving the economic landscape in South Africa. ERAN is structured around four key thematic working areas, which determine the key focus areas for the conference:
Economic policy low on agenda at ANC council (Business Day)
Zimbabwe: Regional currencies depreciation exposes local industries (The Herald)
Zimbabwe's manufacturers say the continued depreciation of regional currencies is worrying as it further exposes local industries to the threat of cheap imports. Dairibord Holdings chief executive officer Mr Anthony Mandiwanza said the loss of value of the South African rand and the Zambian kwacha against major currencies, particularly the United States Dollar, makes local producers uncompetitive. Zimbabwe’s use of the US dollar pushes up operating costs which feed into the pricing structures of goods produced locally. This makes products manufactured in the region cheaper and makes Zimbabwe the destination for producers from neighbouring countries.
Zim to face international creditors (Financial Gazette)
An International Monetary Fund official has said Zimbabwe’s debt situation will be tabled before creditors at a side meeting of the IMF/World Bank annual meetings to be held in Peru from Friday. Christian Beddies, IMF resident representative in Zimbabwe, told the Financial Gazette’s Companies & Markets: “All of Zimbabwe’s creditors, multilateral and bilateral, have been invited to the (side) meeting”.
Tension rising over depleting Kariba waters (Financial Gazette)
Angola creates Customs Risk Management Centre (MacauHub)
The government of Angola will create a Customs Risk Management Centre to share information between agencies involved in trade with foreign countries, the Minister of Trade said in Luanda. Minister Rosa Pacavira, who was speaking at a seminar on trade facilitation, said the aim of creating the Risk Management Centre was to ensure intelligent risk management when imports arrive in Angola. The creation of the Centre is part of a programme for ratification of the Trade Facilitation Agreement, of the World Trade Organization, which calls for elimination of physical inspections of shipments that include goods that pose no risk and have no tax burden.
Government laments trade imbalance between Zambia, South Africa (The Post)
Commerce minister Margaret Mwanakatwe says Zambia needs to increase its exports to South Africa in order to reduce the negative trade imbalance between the two countries. And South African High Commissioner to Zambia Sikose Mji has observed that trade and investment are the most dynamic aspects in regional integration efforts.
Textile manufacturing becomes costly in Zambia (YNFX)
With continuous depreciation of Zambian currency, textile makers are finding it too costly to import raw materials in Zambia as it would increase the cost of production, said Ajit Desai, managing director of Kariba Textiles. The blankets are manufactured by using materials like acrylic yarn and fibre, which are not produced in the local market thereby making it costly to manufacture blankets in Zambia, he said.
Rwanda to host world's first 'drone airport' (New Times)
The government has moved to set up a regulatory framework for remotely piloted aircraft, popularly referred to as ‘drones,’ following investor interest to establish the world’s first drone airport (drone port) in the country beginning next year. Last month, Norman Foster, a renowned British architect, expressed interest by his firm, Foster + Partners, alongside business partners to build the world’s first drone port in the country to facilitate transport of urgent medical supplies and electronic parts to remote parts of the region using drones. In their proposal, the investors said, beginning next year, they intend to begin construction of three drone ports, which will take about four years to complete.
JK: Kenyan projects in Tanzania now worth $1685m (IPPMedia)
“For us in Tanzania, Kenya is not a competitor but a strategic partner. Kenya ranks fifth in the Top Ten list of countries with the largest investments in Tanzania. Kenya comes after only United Kingdom, United States, China and India. Actually, in that Top Ten List, there are only two African countries namely Kenya and South Africa, on which Kenya is the leader. Kenya’s investments in Tanzania account for 518 projects with the total value of USD1,685.47m and have created about 55,762 jobs.”
Broadening the sources of growth in Africa: the role of investment (UNCTAD)
A new UNCTAD Policy Brief argues that enhancing the contribution of investment to the growth and development process in Africa will require three complementary policy measures: boosting the level and rate of investment; improving the productivity of new and existing investment; and ensuring that investment goes to strategic sectors deemed crucial for economic transformation and the realization of national development goals.
Study on gender and inclusive growth: EOI (AfDB)
Under the supervision of the Special Envoy on Gender, the incumbent is expected to perform, inter alia, the following duties: Conduct the study on Gender and Inclusive Growth using evidence from a sample of African countries and will provide evidence to inform the design of future AfDB policy dialogue and development assistance to RMCs aimed at enhancing growth that leaves no one behind.
Global Monitoring Report 2015/2016: development goals in an era of demographic change (World Bank)
According to the Global Monitoring Report 2015/2016: Development Goals in an Era of Demographic Change, released in Peru at the start of the Annual Meetings of the World Bank and the IMF, the world is undergoing a major population shift that will reshape economic development for decades and, while posing challenges, offers a path to ending extreme poverty and shared prosperity if the right evidence-based policies are put in place nationally and internationally.
Donor support to local private sector development: concept paper and methodology for research (OECD)
Current activities also include a peer learning exercise on donors working with and through the private sector. As part of the deliverables for the DAC’s Programme of Work and Budget 5.1.3.3.1, this paper presents a proposal on examining donor support for local private sector development, a topic that has drawn significant attention in numerous DAC discussions. [Prepared for the OECD's Advisory Group on Investment and Development, 14-15 October 2015] [Companion analysis: Private sector engagement and development - deepening private sector engagement in aid for trade (Chapter 7 in Aid for Trade at a Glance 2015)]
How fiscal policy can tame the commodities roller coaster (IMF)
Slump hits Kenya’s private sector on weak shilling (Business Daily)
Namibians urged to invest in Congo (The Namibian)
Kenya-Russia to strengthen trade ties (The Citizen)
Turkish business delegation in Namibia to explore opportunities (StarAfrica)
Environmental crimes change face of Sub-Saharan Africa (Bloomberg)
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World undergoing major population shift with far-reaching implications for migration, poverty, development: WB/IMF Report
As migrants and refugees from Africa and the Middle East continue to arrive in Europe in unprecedented numbers, a new World Bank/IMF report says that large-scale migration from poor countries to richer regions of the world will be a permanent feature of the global economy for decades to come as a result of major population shifts in countries.
According to the Global Monitoring Report 2015/2016: Development Goals in an Era of Democratic Change, released in Peru at the start of the Annual Meetings of the World Bank and the IMF, the world is undergoing a major population shift that will reshape economic development for decades and, while posing challenges, offers a path to ending extreme poverty and shared prosperity if the right evidence-based policies are put in place nationally and internationally.
The share of global population that is working age has peaked at 66 percent and is now on the decline. World population growth is expected to slow to 1 percent from more than 2 percent in the 1960s. The share of the elderly is anticipated to almost double to 16 percent by 2050, while the global count of children is stabilizing at 2 billion.
The direction and pace of this global demographic transition varies dramatically from country to country, with differing implications depending on where a nation stands on the spectrum of aging and economic development. Regardless of this diversity, countries at all stages of development can harness demographic transition as a tremendous development opportunity, the report says.
“With the right set of policies, this era of demographic change can be an engine of economic growth,” said World Bank Group President Jim Yong Kim. “If countries with aging populations can create a path for refugees and migrants to participate in the economy, everyone benefits, Most of the evidence suggests that migrants will work hard and contribute more in taxes than they consume in social services.”
More than 90 percent of global poverty is concentrated in lower-income countries with young, fast-growing populations that can expect to see their working-age populations grow significantly. At the same time, more than three-quarters of global growth is generated in higher-income countries with much-lower fertility rates, fewer people of working age, and rising numbers of the elderly.
“The demographic developments analyzed in the report will pose fundamental challenges for policy-makers across the world in the years ahead,” said IMF Managing Director Christine Lagarde. “Whether it be the implications of steadily aging populations, the actions needed to benefit from a demographic dividend, the handling of migration flows – these issues will be at the center of national policy debates and of the international dialogue on how best to cooperate in handling these pressures.”
At country level, governments with young populations can maximize the benefits of demography by investing in health and education to maximize the skills and future job prospects of their youth. Those countries with aging populations should consolidate their economic gains by boosting productivity and strengthening social safety nets and other welfare systems to protect the elderly. At the global level, freer cross-border flows of trade, investment, and people can help manage demographic imbalances.
Countries can earn a first demographic dividend when a workforce grows as a share of a nation’s population, providing a powerful acceleration to growth. As changes in age structure expand production and resources, a second dividend is possible as savings build up and investment rises.
Although low-income countries can expect to see the largest growth in their working age populations, many of these countries are held back by conflict and fragility, putting these gains at risk. Sub-Saharan Africa’s high fertility and population growth will make the region home to an increasing share of the world’s children and working-age population in decades ahead, the report says.
“As heartbreaking images of families desperately fleeing conflict remind us, many migrants leave home due to conflict, instability and shrinking economic opportunities at home,” said Kaushik Basu, Senior Vice President and Chief Economist at the World Bank. “While refugees are moving to rich countries what is often overlooked is that the flows into middle and low income countries are vastly greater. Creating economic opportunities for countries with growing proportions of youth will contribute to economic stability and development and will help countries lower fertility rates, which contributes to stronger growth.”
Countries that are lagging in development and have high fertility rates are classified as pre-dividend, such as Niger. They would benefit from improving health care and education, facilitating lower fertility rates and accelerating the transition to a greater share of their populations that are working age, the report says.
Early-dividend countries that have already seen a drop in fertility but that still have young populations, such as Ethiopia, could benefit from speeding up job creation. An expanding workforce is linked to growth: an increase of 1 percentage point in the working age population can translate to a rise in the GDP per capita of as much as 2 percentage points, the report says.
In late-dividend countries where the share of the working age population is declining, such as Brazil, economic dynamism is at risk of fading. There, governments should encourage savings for productive investment, female participation in the workforce, and strengthening of social welfare systems. Post-dividend countries such as Japan, which are characterized by declining workforces and rising numbers of elderly, would do well to complete health care and pension reforms and take further steps to raise workforce participation and productivity, the report says.
“To leverage demographic change within countries, the centers of global poverty need to facilitate the demographic transition to slower population growth and accelerate job creation to absorb the swelling working-age population,” said Philip Schellekens, the report’s lead author. “The engines of global growth need to address demographic headwinds and adapt institutions and policies to aging. In today’s interconnected world, effective policies will also arbitrage demographic change across countries. Freer flows of capital, trade and – especially – labor present tremendous opportunity to turn this era of intense demographic change into one of sustained development progress.”
In a separate section, the report details the decline of those living in global poverty, which is reclassified as living on $1.90 or less a day, to a forecast of 9.6 percent of the world’s population in 2015, a projected 200 million fewer people living in extreme poverty than in 2012.
The report notes that world economic growth in 2015 is set to disappoint, down to 3.1 percent, from 3.4 percent in 2014, on the basis of slower growth in many emerging market economies. Growth is expected to pick up to 3.6 percent in 2016, helped by strengthening recoveries in major advanced economies – led by the United States – and some turnaround from weak situations in several emerging market and developing economies.
“The global economic environment is increasingly uncertain, with growth prospects having again been marked down – feeding concerns about a more fundamental slowdown in the trend growth rate in many countries,”said Seán Nolan, Deputy Director in the IMF’s Strategy, Policy, and Review Department. “Supply-side reforms to revitalize productivity growth are essential, with the key actions required varying with country circumstances.”
The Global Monitoring Report analyzes the policies and institutions needed to make progress in achieving global development goals. Produced jointly with the IMF, these reports benchmark progress and present analytical work on issues that will impact global development. For a detailed discussion on updated poverty data, shared prosperity, and policy agendas, see “Ending Extreme Poverty and Sharing Prosperity: Progress and Policies”, World Bank Policy Research Note 15/03.
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Broadening the sources of growth in Africa: The role of investment
A new UNCTAD Policy Brief argues that enhancing the contribution of investment to the growth and development process in Africa will require three complementary policy measures: boosting the level and rate of investment; improving the productivity of new and existing investment; and ensuring that investment goes to strategic sectors deemed crucial for economic transformation and the realization of national develop-ment goals.
Achieving the African Union’s vision of an integrated, prosperous and peaceful Africa that can serve as a pole of global growth in the twenty-first century requires broadening the sources of growth on the continent to lay the foundation for sustained growth and poverty reduction.
For this to happen, however, it is necessary to enhance the contribution of investment to the growth process. This can be done by boosting the level and rate of investment, improving its productivity and ensuring that it goes to strategic sectors of the economy. Further, the international community has a key role to play – that of complementing the efforts of national Governments.
This policy brief outlines some of the key messages and recommendations of the UNCTAD Economic Development in Africa Report 2014: Catalysing Investment for Transformative Growth in Africa.
Investment and diversification of the sources of growth
Broadening the sources of growth in Africa will require enhancing the contribution of investment to the growth process on both the demand and supply sides of the economy. On the demand side this is necessary to obtain a more balanced role for consumption and investment in the growth process; on the supply side it is needed to foster transformative growth because investment has been identified as one of the main drivers of structural transformation. In this paper, “investment” refers to total investment in the economy, which includes public and private investment.
Private investment in turn consists of investment by local and foreign investors. The focus on total investment is important because all components of investment matter for growth and development. Government policy should therefore be geared toward exploiting the complementarities among the various components, rather than promoting one component at the expense of another. Crucially, how can African countries catalyse investment for transformative growth and development?
Key points:
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Concerted actions are needed at the national and international levels to stimulate investment in Africa.
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It is necessary to enhance the contribution of investment to the growth process on both the demand and supply sides of the economy.
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Government policy should be geared toward exploiting the complementarities between local and foreign investment.
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How fiscal policy can tame the commodities roller coaster
Resource-rich economies face enormous challenges to manage volatile and unpredictable commodity prices. In its latest Fiscal Monitor, the IMF examines how countries can tax and spend wisely so that their oil, gas and metals support strong and stable economic development.
Fiscal policy can either calm or magnify the effects of volatile commodity prices on the domestic economy. In many countries, large swings in commodity prices have resulted in large fluctuations in public expenditures and, in turn, exacerbated economic volatility.
The right reforms can make a difference. “Improved fiscal frameworks and policies can help ensure that natural resources are truly a blessing for resource-rich countries,” said Vítor Gaspar, Director of the IMF’s Fiscal Affairs Department.
So how can countries tame the commodities roller coaster? The report outlines how more stable expenditures can give a smoother ride, how well-planned public investment can help a steady economic climb, and how fiscal frameworks can lay the track for the long-term future.
A smoother ride: preserving economic stability
The experience of recent decades shows that many countries find it difficult to manage volatility around commodities. Their public expenditure tends to significantly accelerate during price upswings and fall during downswings. This is how fiscal policy can play a major role in transmitting commodity price volatility to the domestic economy. Macroeconomic instability, in turn, hampers sustainable growth.
The latest commodity price cycle illustrates the point. Many countries saw a massive increase in budget revenues during the 2003-08 revenue windfall, exceeding 200 percent of 2002 GDP in some cases, which financed enormous increases to expenditures. There are cases in which the size of the budget more than tripled. In contrast, other countries did build large fiscal buffers during the years of high commodity prices.
With the latest sharp fall in commodity prices, most countries will have to cut expenditures, in some cases by large amounts. However, those with fiscal buffers will be able to apply the brakes at a more gradual pace and cushion the impact on the economy.
A steady climb: promoting economic development
Designing an appropriate long-term strategy to manage natural resources is a complex task. If the wealth is simply consumed, the country will become poorer as the natural resources are depleted. Well-designed strategies promote economic development by investing, for example, in infrastructure. Investment in people is as important, namely by achieving strong health and education outcomes. These decisions are complicated due to the need to manage the high uncertainty of resource prices and commodities reserves.
Indeed, many resource-rich countries used a significant share of the recent windfall to boost capital spending, as well as expenditures on health and education. For example, public investment grew by more than 15 percent a year (at constant prices) in 2000-08.
Good policies are needed to ensuring that large increases in public investment and social spending deliver strong growth dividends. Namely, scaling up of public investment needs to be done at a pace that allows space for private investment and takes into account supply bottlenecks. Countries should build financial buffers to avoid costly “stop-go” cycles. Furthermore the pace of public investment should be consistent with the country’s institutional capacity, to ensure projects are wisely selected and efficiently implemented. The same holds for health and education. It is of paramount importance that social spending is effective and efficient.
Laying the tracks: fiscal frameworks
The Fiscal Monitor stresses the importance of developing a comprehensive fiscal framework to better manage public finances amid high uncertainty. It outlines four key main areas:
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First, set an appropriate long-term fiscal target to guide fiscal policy. This is especially important given that oil, gas and metals are non-renewable. It also calls for long-term stabilization savings to weather the large and persistent shocks.
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Second, intensify efforts to widen the revenue base and avoid an overdependence of government revenue on the resource sector.
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Third, make public spending more efficient. Resource-rich countries are likely to face long periods of lower fiscal revenues. Better management of public investment and expenditure can help ensure that government spending plans are efficient and are likely to yield important growth dividends. There is also room to further reduce energy subsidies.
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Finally, the Fiscal Monitor highlights the importance of developing strong institutions. Experience suggests that improvements, for example to governance and quality government services, are essential to use natural resources in a way that will support long-term growth.
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UNEP Executive Director welcomes illegal wildlife trade provisions in TPP
The Trans-Pacific Partnership (TPP) trade deal contains unprecedented provisions to combat illegal wildlife trade.
UN Environment Programme Executive Director Achim Steiner released the following statement following the conclusion of negotiations on the Trans-Pacific Partnership (TPP) trade deal.
The TPP contains unprecedented provisions to combat illegal wildlife trade, including requirements for the 12 countries involved to protect wildlife covered under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) from illegal trade, and to take action to protect any wildlife that has been taken illegally from any country.
“The inclusion of wildlife protections in the TPP are an important move to help conserve biodiversity.
“In agreeing to fulfill their obligations under CITES, combat wildlife taken illegally from any country, and take further action to protect wildlife at risk in their own jurisdictions, TPP member states are taking important action to combat the illegal wildlife trade.
“These agreements on wildlife and on other environmental dimensions will need be followed up with concrete domestic legislation and regulation to ensure this accord results in effective implementation. UNEP will continue to support countries in this endeavour.
“Time will tell whether these provisions will engender significant benefits to the world's wildlife and environment.”
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Mauritius eyes maritime projects, Africa links to boost growth
Mauritius has a deal with a Chinese firm to develop a $113 million fishing port and is working with investors on plans to become a maritime hub for Africa, part of its bid to accelerate growth, the island nation’s finance minister said on Thursday.
Mauritius has revised down growth forecasts for 2015 from 4.1 percent to 3.6 percent, a level Seetanah Lutchmeenaraidoo told Reuters was not enough to meet a target of lifting the Indian Ocean country from its middle income status.
Mauritius aims for 5.7 percent growth in fiscal 2016/2017 and rising to 8 percent “within the next five years”, he said.
But he said private investment had to drive the expansion as there was no room for the government to borrow, given a commitment to cut public debt to 50 percent of gross domestic product by 2018. It stood at 56 percent in June.
“We cannot borrow or give a sovereign guarantee,” he said in an interview, adding reducing debt levels needed “huge growth”.
To deliver that, Mauritius was attracting new investors in shipping and other maritime projects to make the Indian Ocean island a hub for Africa, adding impetus to an economy that now relies on sugar cane farming, tourism and financial services.
Mauritius has a deal with a Chinese firm to start building a fishing port next year on a build-operate-transfer (BOT) basis, he said. Such deals usually leave a project in private hands for 20 or more years before it is transferred back to the state. The minister said the term of this plan had yet to be finalised.
The quay and related facilities, worth 4 billion rupees ($113 million), would handle up to 20 vessels at a time on completion in 2018, he said. A Mauritian official said the developer was China‘s LHF Marine Development Ltd.
Lutchmeenaraidoo said Mauritius had received applications to establish a shipping fuel bunkering facility, including from Horizon Energy Group from the United Arab Emirates.
Dubai-based DP World, one of the world’s biggest port operators, will submit a business plan in November to run a trade transhipment port to serve Africa, he said. A memorandum of understanding was expected to be signed in January.
“We are moving out from being a small port in the Indian Ocean to become the most important maritime hub in this region,” Lutchmeenaraidoo said, and projects would follow the BOT principle.
In a further Africa initiative, he said a Mauritius-based “special purpose vehicle” was being set up to channel investment into projects in Ghana, such as sugar cane production involving Mauritius firm Omnicane, a poultry project and technology park.
Projects using this vehicle would enjoy benefits such as exemptions from value added tax (VAT) and customs duties, he said, adding Barclays was assisting with the plan.
“This special purpose vehicle will be duplicated in other countries,” Lutchmeenaraidoo said, citing interest from Ivory Coast, Senegal, Zambia, Uganda and Mozambique.
He said the plan went beyond the “purely fiscal” double taxation avoidance agreements Mauritius has with African states.