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Five lessons of regional integration from Asia, America, and Africa
More than 50% of today’s international trade goes through regional trading arrangements. While trade is a critical component of regional integration, integration has several other dimensions including energy cooperation and intra-regional investment, to name a few. After carefully examining cases of regional integration in Southeast Asia, the Americas and Africa, we present five lessons for South Asia.
Lesson 1: Facilitate trade in goods and services
Despite falling tariffs, there is still a large gap between the price of the exported good and the price paid by the importer, largely arising from high costs of moving goods, especially in South and Central Asia. On a percentage basis, the potential gains to trade facilitation in South and Central Asia, at 8 percent of GDP, are almost twice as large as the global average. High trade costs have contributed to South Asia being the least integrated region in the world.
FIGURE 1: Intra-regional trade share (percent of total trade), 2012
In the ASEAN region, most countries have established either Trade Information Portals or Single Windows that have enhanced trade facilitation, reduced trade costs and enhanced intra-regional trade. A Trade Information Portal allows traders to electronically access all the documents they need to obtain approvals from the government. A Single Window (a system that enables international traders to submit regulatory documents at a single location and/or single entity) allows for the electronic submission of such documents. These single windows, using international open communication standards, facilitate trade both within the region and with other countries using similar standards.
In services, one barrier to trade involves the movement of skilled workers, accountants, engineers and consultants who may move from one country to another on a temporary basis. The Southern Common Market (Mercosur)’s Residence Agreement allows workers to reside and work for up to two years in a host country. This residence permit can be made permanent if the worker proves that they can support themselves and their family.
Lesson 2: Streamline Non-tariff Measures (NTMs)
Countries impose legitimate controls on imports to ensure the health and safety of their citizens; however, such NTMs can become more trade-restrictive than necessary, in which case they become a non-tariff barrier (NTB). A simple way is to think of NTBs as measures applied only to imports and not imposed on domestic production. To reduce the occurrence of NTBs, NTMs need to be streamlined.
The African Economic Communities (COMESA, EAC, and SADC) established an online Mechanism for Reporting, Monitoring and Eliminating NTBs. This mechanism collects complaints and helps resolve disputes transparently and in a multi-country setting, thus building trust between trading partners. So far, the Mechanism has addressed nearly 500 cases, of which more than 80 percent have been resolved, according to the website.
Lesson 3: Do not discriminate between investors
Promoting intra-regional investment is an important tool for promoting intra-regional trade, given that trade and investment go hand in hand. In South Asia, intra-regional investment is even lower than intra-regional trade, which means the investment to trade linkages – for example, the possible formation of regional value chains – are absent. One of the issues in South Asia is equal treatment of foreign and domestic investors.
In the case of ASEAN, intra-regional investment is over 17 percent of total FDI in the region. ASEAN is a favored destination for global investment. That’s partly because of the ASEAN Comprehensive Investment Agreement (ACIA) that protects investments made by non-ASEAN parties. These parties are guaranteed fair and equitable treatment, and ASEAN governments agree not to make arbitrary decisions. Foreign investors are also protected against unlawful expropriation, and, to the extent feasible, extended security in the event of civil unrest. Free transfer of funds into and out of ASEAN is also guaranteed to foreign investors.
The ASEAN experience suggests that in order to take full advantage of a regional investment framework, each South Asian country would have to undertake reforms to improve its respective investment climate.
Lesson 4: Take advantage of existing opportunities
Successful regional cooperation takes advantage of geography. It is natural, for example, for countries to share electricity with each other. Such sharing helps balance supply and demand and allows smaller countries exploit economies of scale, and it can also lead to more efficient load management.
In Central America, the Central American Electrical Interconnection System (SIEPAC) interconnects the grids of six Central American nations over 1,790 km of transmission lines extending from Guatemala to Panama (Figure 2). SIEPAC was financed by a variety of sources led by the Inter-American Development Bank, and is owned by a regional operations entity with public-private ownership. SIEPAC has been credited with helping Panama recover from an energy crisis and is expected to lower electricity rates throughout the region.
Similar geographical circumstances afford opportunities for energy cooperation in the South Asian region, where sharp differences in elevations make for untapped hydropower resources.
FIGURE 2: SIEPAC regional transmission line connects six countries
Lesson 5: Be patient.
Our final lesson is that regional integration is a long and incremental process. Regional agreements suffer from a gap between intentions and implementation. One way to address this would be to set up credible institutional to monitor compliance and outcomes, housed in regional secretariats such as COMESA, or, in the case of South Asia, SAARC.
Improved regional outcomes, such as higher trade volumes, price convergence, reduction in border crossing times, or an increase in energy trade, take time and patience, and require political will and institution-building. South Asia can capitalize on recent political momentum in the region and keep pushing on issues that have a strong developmental impact – energy sharing, reducing costs of trade, and encouraging intra-regional investment.
Find out more about the authors’ lessons in the document below.
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More collaboration needed in SA tourism – report
Greater collaboration between the private sector and SA Tourism is called for to increase SA’s global tourism market share, according to the latest SA Tourism Review.
This is one of the recommendations from a panel of experts appointed to review how SA Tourism is responding to the dynamics of the national and international tourism sector.
Minister of Tourism Derek Hanekom said in due course he will engage the SA Tourism board on the process for implementing recommendations that will enhance SA Tourism’s initiatives to market South Africa as a prime tourist destination.
He said he is satisfied that the review panel, which included tourism, governance and marketing experts, has achieved its objectives and fulfilled its mandate.
“The panel’s recommendations will help the country to grow its competitive edge in the global tourism marketplace, and will also promote domestic tourism,” said Hanekom.
Another key recommendation identified is the need to innovate and revitalise SA Tourism’s marketing campaigns to keep pace with a fast-changing marketplace. Marketing enhancements that are proposed include, amongst others, enhanced collaboration with Brand SA to collectively promote the country and a greater focus on domestic tourism.
The review found that a strengthened Department of Tourism is essential to facilitate effective inter-governmental coordination in support of tourism growth objectives.
Certain aspects of SA Tourism’s organisational development and design, including the country office model, are recommended for an in-depth review to enhance the effective delivery of the marketing mandate.
A new institutional home is proposed for the Tourism Grading Council of South Africa.
Greater resourcing of the research function and an increased focus on research insights, analytics and market intelligence is also recommended in the review.
“A fully optimised SA Tourism is essential for the transformation and sustainable growth of the sector, and for tourism to achieve the NDP target of creating 225 000 jobs by 2020,” said Hanekom.
“It is critical that the tourism sector maintains and grows its global competitiveness, enabling tourism to continue making its overall contribution of 9.5% of the country’s GDP and supporting 10% of total employment.”
He said he is confident that the expert advice provided by the panel will help the Department of Tourism to make the correct strategic decisions.
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EU and Liberia sign deal on WTO accession
The EU and Liberia on 16 July signed a deal concluding their bilateral negotiations on Liberia’s accession to the World Trade Organisation (WTO). Accession to the WTO is expected to make a lasting contribution to the process of economic reform and sustainable development in Liberia.
“Today’s signature is a milestone in Liberia’s WTO accession process and an important step towards fostering our economic relations,” said Angelos Pangratis, EU Ambassador to the WTO. “Against the background of the devastating public health challenge of Ebola Liberia has made remarkable progress in preparing for WTO entry and we are looking forward to rewarding Liberia's efforts and welcoming the country into the WTO family very soon.”
The bilateral deal – signed by EU Ambassador to the WTO Angelos Pangratis and Liberia’s Minister for Commerce and Industry Axel M. Addy – defines the level of market access that Liberia will grant to EU goods and services in the WTO. These commitments will be then embodied in the future Protocol of Accession of Liberia to the WTO.
The Republic of Liberia applied for WTO membership in mid-2007. The accession talks started half a year later with the establishment of a dedicated Working Party made of interested WTO members. In order to join the WTO, Liberia must complete bilateral negotiations with each of them and obtain the endorsement of the entire Working Party.
EU-Liberia trade in facts and figures
Trade flows between the EU and Liberia are small but balanced. From an EU perspective, trade with Liberia represents just 0.03 percent of its total trade value. The EU imports from Liberia, worth half a billion euros in 2013, amount, however, to as much as over 40% of Liberia’s total goods’ exports.
As a Least Developed Country, all Liberia’s products (except arms) enjoy duty-free and quota-free access to the EU market.
Trade between the EU and Liberia will be soon also governed by the Economic Partnership Agreement that the EU has initialed with 16 West African states last year.
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Uganda mines close as export ban hurts
Miners under their umbrella association, the Uganda Chamber of Mines and Petroleum (UCMP) have asked the government to remove the ban that was instituted on the exportation of unprocessed minerals.
They argue that this will help to avoid more economic losses for investors, government and other sector players within the mining sector.
“We support and encourage our members to embrace minerals value addition as a strategic policy. However, the omnibus ban on all minerals has created a credibility crisis for Uganda.
“We cannot be saying that we’re attracting investment in the mining sector and at the same time we impose a ban on mineral exports,” Richard Kaijuka, the Vice Chairman of UCMP said.
The Former Uganda Energy Minister there is need for a case by case approach to the beneficiation drive.
“Currently many companies have obligations that they have failed to meet and some have closed shop while others have cut back on both operations and staff. Lifting the mineral exports ban will therefore go a long way in reinvigorating the young mining sector,” Kaijuka added.
Uganda has since been relatively successful in attracting some investors in the mineral sector from Australia, Russia, Canada, India and Europe. But, the chamber of mines believes it is very difficult to attract exploration money because of the overall global decline in commodity prices.
Kaijuka, said although value addition is an important part in the mining sector, there is need to technically study the situation and give more time and support if value addition is going to be realized.
Ikrom Muminov, the Operational Manager of 3T Mining Ltd said their company had so far invested over US$6m in its two mines – Wampewo Mine in Wakiso and Buyaga Mine in Lyantonde – but had to lay off at least 50 of its original 160 casual labourers due to financial constraints caused by the ban.
“The company is averaging losses of US$60,000 every month because of the reduction in revenues and penalties on pending contracts with its buyers who are still holding part its payments due to 3T Mining’s failure to deliver materials,” Muminov said.
He said they have 20 tonnes and 6 tonnes of well processed tungsten (wolfram) and coltan material respectively ready for export, with similar amounts being prepared for processing.
For Kabale based Krone (U) Ltd, its ready-for-export tungsten product is at 80 tonnes – valued around US$720,000.
“This ban must be lifted so that we can start work again and avoid more loses,” Muminov stressed.
Namekara Mining Company Limited has around 1400 tonnes of vermiculite worth $ 260,000, on standby waiting for export. The company said it has been squeezed to the limit now struggling to pay its employees, creditors and suppliers.
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PwC roots for SMEs role in African trade
The recently signed African Tripartite Free Trade Area (TFTA) agreement should incorporate financial co-operatives if its impact is to trickle down to the small sectors of the economy, a new paper by financial advisory and audit firm PricewaterhouseCoopers says.
According to PwC, free trade agreements (FTAs) are not designed to meet the needs of emerging market economies or smaller financial institutions, and thus risk marginalising the small and medium enterprises (SMEs) and the agriculture sector in areas where financial inclusion is still low.
The cooperative movement in Kenya forms the backbone of the key agriculture sector, and is also plays an important role in the SME sector.
“FTAs should make special provisions for cooperative financial institutions in recognition of the distinctive benefits they can provide for emerging economies, especially within the under-financed agricultural and small business sectors,” said Anna Jerzewska, PwC senior associate for customs and international trade.
“Emerging markets face the pressing challenge of how to develop their agricultural sectors, turn SMEs into companies that can compete on a national or regional scale and raise the living standards of their people,” she said.
The TFTA deal which was signed last month will pool the interests of the East African Community (EAC), Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (Comesa), whose members have a combined GDP of more than $1 trillion (Sh102 trillion).
The first phase of the deal is largely focused on liberalising trade in goods and services in the three blocs, with PwC stating that the inclusion of cooperatives could come in the second phase which will focus on investment services and trade-related measures.
The schedule for dismantling trade barriers in the various trading blocs is being worked out and the agreement would still have to be ratified by national parliaments within two years. The TFTA envisions the eventual merger of the three blocs.
Kenya is a member of EAC and Comesa, meaning that under the new deal the country is likely to add SADC member states to the list of states with which it has a trade pact.
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tralac’s Daily News selection: 20 July 2015
The selection: Monday, 20 July
AU Trade Ministers meet in Nairobi today (tweets by @AMB_A_Mohammed)
As part of my consultative efforts to prepare for MC10, I will be meeting a group of African Union Trade Ministers, [Monday] in Nairobi. WTO Director-General could not be here because of negotiating responsibilities, in Geneva, but he has designated a Team of his Senior officials and advisers to provide Ministers with an update on the state-of-play and potential areas of "deliverables" for MC10.
African ministers warm up to December WTO forum (Daily Nation)
Speaking at the same meeting the United Nations Conference on Trade and Development (UNCTAD) Secretary General, Dr Mukhisa Kituyi called on African governments to slow down on commodity exports. “Slowing down on commodity exports gives you pressure to think of areas - other than commodities and raw materials being exported to china - as a leaver for growth. It allows the capacity to start producing “made in Africa and made in Kenya.” Mr Kituyi said. Dr Kituyi also called on the governments to think around what needs to be done right to ensure that “we don’t just import products made in china, some components can be made locally,” he said.
Ms Mohammed also called upon Africa to work together to ensure the continent achieves, the threshold of two thirds of the total number of Acceptances required for the Trade Facilitation Agreements to enter into force by end of November this year.
Will Aid for Trade momentum continue after Global Review? (Devex)
CCC to study supermarkets impact on entrepreneurs (Zambia Daily Mail)
The Common Market for Eastern Southern Africa Competition Commission (CCC) intends to undertake a study on the impact of proliferation of supermarkets on the local entrepreneurs. CCC director George Lipimile said the increase in the number of supermarkets have pushed the small businesses out of the market and contributed to the rise in the poverty levels in the member states. Mr Lipimile said in an interview on Thursday that the commission is currently organising funds for the study whose objective will be to look at the anti-competitive practices currently going on the market. “We plan to conduct a study on the mushrooming of the supermarkets in the region, its effect on local entrepreneurs, if it is killing the local entrepreneurs at what rate, what actually is required and how would they be regulated,” he said.
Wallie Roux: 'The TFTA is far from a done deal' (The Namibian)
However, reality paints a different picture in that the TFTA is not a done deal yet, especially given the numerous outstanding issues. An eagle's eye-view from above might observe these intricacies as a potential political pipedream that maybe extended its hand too far. Let's look at the facts:
Political will key to African free trade (Mail and Guardian)
Despite the slow pace of trade regime harmonisation in Africa, the various regional initiatives to eliminate tariffs and other trade barriers will eventually bear fruit and boost business, experts believe. “It is all about baby steps, as long as they are moving in the right direction,” says Venter Labuschagne, head of the KPMG Africa Tax Solutions Centre.
Why bother about regional harmonisation of legal and operational frameworks of central banks? (New Era)
Bank of Namibia is currently reviewing the Bank of Namibia Act in order to align it to international best practices and the SADC Model Law. Some of the provisions of the SADC Model Law required amendments to Article 128 of the Namibian Constitution that defines the role of the Central Bank. The changes effected in 2014 included clarification of the central bank’s authority.
Namibia: Trade deficit slows in first quarter (The Namibian)
The Namibia Statistics Agency said this week the decline in the deficit was due to a slight decline in the overall import expenditure to N$19,4 billion recorded during the first quarter of this year from N$20,6 billion in the first quarter of 2014. “The overall export revenue for the first quarter of 2015 remained relatively constant when compared to the same quarter a year ago. It rose only by a mere 3,9% to account for N$13,6 billion up from N$13 billion in the corresponding quarter of the preceding year,” the agency said.
Namibia's total exports for the quarter was valued at N$13,6 billion of which the bulk valued at N$8,6 billion was destined for Botswana, South Africa, Switzerland and Angola, including N$739 million which was destined for the Export Processing Zone. South Africa, China, Switzerland, Botswana and DRC were the main sources of imports for Namibia during the quarter. The overall value of imports from these markets increased by 22% to N$16,3 billion in the quarter under review as compared to N$13,4 billion the same period last year. [Download]
Zim imports water, toothpicks (NewsDay)
Zimbabwe's import products list is growing and now includes water and toothpicks which Industry and Commerce minister Mike Bimha said should be procured locally. Bimha told a meeting of retailers and wholesalers on Friday that a number of products from the Open General Import License had been removed to reduce some of the imports coming into the country. "We have set up a committee that comprises of ministry officials and representatives of the private sector which will be evaluating applications for imports before recommending the same to us for approval,” Bimha said.
Kampala-Kigali railway project derails (The Independent)
The Kampala-Kigali leg of Standard Gauge Railway line, under the northern corridor infrastructure development initiative, may delay as Uganda shifts its priority to “a more economically viable line” to South Sudan. And in the wake of Kampala’s changed priorities, Rwanda has been left with no option but to look east to Tanzania, a non-member of the so-called coalition of the willing of the northern corridor, for a quicker railway connection to the sea. Individuals familiar with these developments told The Independent in Kigali on condition that they are not named that the burden is now on Kenya, with huge business interest in Rwanda and the vast DR Congo, to try and persuade Uganda to stick to the original plan to prioritise construction of Kampala-Kigali railway line.
Latest statistics shows that South Sudan is Uganda’s main export market accounting for 15 per cent of the country’s total exports by July 2015. It was followed by Kenya, DRC, Netherlands, Germany, South Africa and UAE. Uganda mostly exports agricultural products (80 percent of total exports). The most important exports is coffee (22 percent of total exports) followed by tea, cotton, copper, oil and fish. Despite the conflict in South Sudan, Uganda trade with Africa’s youngest country has been improving with informal exports to Juba growing from $9.1 million in 2005 to $929.9 million in 2008. Formal exports also increased, but less dramatically, from $50.5 million in 2005 to $245.9 million in 2008.
Dar Es Salaam-Isaka-Kigali/Keza-Musongati railway project: EOI (AfDB)
An extensive feasibility study was carried out by Canarail and Gibb Africa and completed in March 2014 which presented viable project options together with a number of recommendations for the required Institutional and Legal framework and PPP Options. The Partner States acting through the Rwanda Transport Development Agency are seeking Expressions of Interest from suitable qualified and experienced firms (single company, consortium or joint venture) which have the capacity to finance, design, construct, operate, maintain (or some combination of those responsibilities) the 1,661 km DIKKM railway described above under a PPP arrangement.
Ethiopia: Transport and Poverty Observatory study on Modjo-Moyale Road Corridor - EOI (AfDB)
Lagos unveils Africa’s biggest deep sea port in Badagry (ThisDay)
The Lagos State Government Thursday disclosed that it would commence the construction of the biggest deep sea port in Africa, which it said, would be situated on over 1,000 hectares of land in Badagry with the capacity to create thousands of employment opportunities. The state government also disclosed that a good number of foreign and domestic investors including Maersk Group “have already signed on to the project,” thereby suggesting that the state would have largest cargo container port in Africa.
East or West, Kenya spoilt for choice in search of global business partners (Business Daily)
But why embrace both the West and East? China and US have different things to offer. China is rich in manufacturing and technology, and the US, on the other hand, has effective institutions in place. Kenya is supported by a large pool of English-speaking skilled workers with high computer literacy, especially the youth. With good partnership relations the challenge of unemployment can be tackled without much strain. Creating a conducive atmosphere for investors from the West and East will expand the economy, grow financial institutions, increase foreign currency as well as improve the living standards of Kenyans.
Fitch downgrades Kenya's credit rating (Daily Nation)
London based ratings agency, Fitch, has downgraded Kenya’s ability borrow from the international market over the long term on account of worsening public spending habits and widening current account deficit. In downgrading Kenya’s long term external borrowing outlook from stable (B+) to negative (BB-), the ratings agency said Kenya's public finances have been “deteriorating steadily since 2008, reflecting weak revenue performance, increasing infrastructure spending and persistently high current expenditure”.
Illicit cigarette trade undermining Zambia’s revenue collection (Zambia Daily Mail)
Tentative expert estimations indicate that illegal quantities of cigarettes on the Zambian market are between 20 and 30% of the market, translating to about 300 to 400 million sticks per year based on the size of the market. It is believed that these non-taxed and unstamped quantities are almost displacing legitimate quantities. The illicit trade in cigarettes is a full-blown crisis in Zambia and poses a challenge to the industry which provides a stable source of livelihood to a mix of farmers, transporters, manufacturers and distributors. [The author, Isabel Mukelabai, is executive director of the Centre for Trade and Policy Development]
OECD Economic Survey of South Africa
Thus, while some sectors are relatively well integrated into global value chains, the economy’s overall participation is the lowest among the OECD and BRIICS countries; the contribution of the service sector to manufacturing exports is also on the low side (Figures 13 and 14). Areas where the economy is most integrated include mining, the automotive industry, regional finance and retail trade. Broadening integration to other industries is key to moving up the value-added production curve. Relying on a model of exploiting natural resources to boost employment corresponds poorly with declining employment in the increasingly capital-intensive mining sector. Rather, there is a need for better framework conditions to improve external cost competitiveness, for example by removing entry barriers, tackling infrastructure bottlenecks and securing a better alignment between wage and productivity growth. [Download, Treasury responds to OECD's report]
South Africa calls for more trade with China
SADC, EU inch closer to ratifying EPA agreement (Southern Times)
DR Congo relaxes rules for foreign investors (The East African)
Workshop alert: trade and public health (WTO)
Drivers of financial integration: implications for Asia (IMF)
Deeper intraregional financial integration is prominent on Asian policymakers’ agenda. This paper takes stock of Asia’s progress toward that objective, analyzing recent trends in cross-border portfolio investment and bank claims.
Regional trade agreements and the environment: report from a Hanoi workshop (OECD)
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An inclusive South Africa needs more investment and jobs
South Africa has made impressive social progress over the past two decades, lifting millions of people out of poverty and broadening access to essential services like water, electricity and sanitation. Now is the time to build on these successes to reduce inequality further, create badly needed jobs and ensure stronger, sustainable and more inclusive growth for all, according to the latest OECD Economic Survey of South Africa.
The Survey, presented in Pretoria by OECD Secretary-General Angel Gurría and South African Finance Minister Nhlanhla Nene, notes that prudent macroeconomic policies have secured the confidence of financial markets. However, economic growth has been too slow and further measures are needed to overcome infrastructure bottlenecks, strengthen the business environment, improve labour markets and ensure future spending needs can be financed.
“The National Development Plan sets the direction for reforms needed for a strong and inclusive country. Our survey provides targeted recommendations to reach these objectives,” Mr Gurría said. “Millions of young South Africans are eager to work, and their potential must not be wasted. Their future is precious enough to justify tough reforms and hard spending choices.” Read the speech.
Improving infrastructure will be essential for boosting future growth and living standards. Given the large needs, prioritisation and cost effectiveness will be crucial, the OECD said.
The most immediate priority is to secure additional electricity generation capacity by opening the market to independent producers. Opening electricity and transport will require strong and independent regulators to protect households and firms.
Improving the regulatory environment would foster entrepreneurship and growth opportunities for SMEs, which offer the greatest potential for creating jobs and future growth, the OECD said. Reducing barriers to entry, cutting red tape and promoting competition, will be essential.
Labour market reforms can raise employment and incomes. Establishing a public employment service as a one-stop shop for job seekers would make it easier for people to find jobs, and for employers to find the right workers. Costly industrial actions have held back the economy without delivering major gains to workers. To reduce conflict and provide better outcomes for workers and employers, the OECD suggests an increased role for mediation and arbitration.
Meeting public spending needs for infrastructure and the social safety net will require a high degree of public sector efficiency, prioritisation of spending and a strong revenue base, the Survey said. The South African tax system is well designed and well administered, but there is scope to broaden key tax bases by reducing deductions, credits and exemptions. Such tax reform would solidify public finances and make the tax system fairer.
» Treasury responds to OECD’s 2015 Economic report.
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Political will key to African free trade
A customs union, a common market, a monetary union and eventually even a single currency are on the agenda
Despite the slow pace of trade regime harmonisation in Africa, the various regional initiatives to eliminate tariffs and other trade barriers will eventually bear fruit and boost business, experts believe.
“It is all about baby steps, as long as they are moving in the right direction,” says Venter Labuschagne, head of the KPMG Africa Tax Solutions Centre. He hails the signing of the Tripartite Free Trade Area (TFTA) agreement in Egypt earlier this month as an important moment. “It had been postponed many times, so this really sends the right message. Businesses are seeing huge opportunities and are tremendously positive about Africa. Harmonising trade regimes will only bolster those opportunities.”
Many trade experts say that the future of free trade is largely in the hands of politicians, a sentiment echoed by Barclays Africa chief executive Maria Ramos during a recent panel discussion on the future of Africa’s capital markets at the World Economic Forum (WEF) on Africa in Cape Town. “Frankly, and I know it’s always controversial when you say it, but it actually takes political will to get this done. You cannot get the rules of the game harmonised without getting the people who make these rules around the table,” she says.
The free trade zone from Cape to Cairo is scheduled to commence in the next few years, although many technical details still need to be ironed out by the 26 member countries. The TFTA is an agreement between three partly overlapping regional groups: the Southern African Development Community (SADC), the Common Market for East and Southern Africa (Comesa) and the East African Community (EAC). When the agreement comes into effect it will create a market of 626 million customers, including a rapidly emerging middle class.
Mark Schoeman, researcher at the South African Institute of International Affairs, told Bloomberg that the signing is “quite a milestone”, but cautioned against too much optimism. In the SADC free trade zone, which came into effect in 2008, only 20% of trade is with other member states – compared to 70% in the European Union and 55% within Asia. “On paper it sounds really great,” says Schoeman. “But there has really not been a lot of increase in trade among SADC members.”
According to Labuschagne, a KPMG partner who works with large firms trading across the continent, that comparison is not entirely valid. “The SADC economies are similar in their character, which means there is no big need for internal trade. They all have similar industries and raw materials. The benefit of the TFTA would be to link economies that are vastly different.”
Soamiely Andriamananjara, econo–mics lecturer at George Washington University, recently pointed out that merchandise exports among the members of the TFTA have grown twenty-fold from R28-billion to R437-billion between 1994 and 2014. In that period, intra-regional trade increased from 7% to 25%. Andriamananjara also notes that in the past various regional initiatives have created “a confusing mixture of overlapping, sometimes incompatible, preferential trade regimes”. The TFTA, he argued in a blog for the US-based Brookings Institution, is “potentially a game changer”.
While Labuschagne acknowledges that overlapping trade blocs have made things complicated in the past, he feels that “further SADC integration and the TFTA can be developed in parallel”.
Harmonising of trade regimes
The KPMG partner argues that the mere fact that countries are slowly but surely working on harmonisation of trade regimes already has a positive effect. “Things don’t happen overnight. The more documentation is harmonised, the easier it becomes for businesses. Meanwhile, increased expenditure on road infrastructure and the creation of one-stop borders also help.”
During the African Union summit the body’s trade commissioner Fatima Haram Acyl announced the start of negotiations for a continent-wide free trade zone, spanning all 54 African countries and aiming for a starting date in 2017. According to Haram Acyl the TFTA provides a perfect launch pad for this. “They negotiated on goods, negotiated their schedule of liberalisation. This is very good news for us, so we are not starting from scratch.”
Labuschagne lauds the initiative: “The Continental FTA is much more ambitious than the TFTA. Luckily a lot of lessons have been learned during the establishing of the TFTA and it won’t be the same blueprint.”
Participants of the WEF panel on the future of trade in Africa concluded earlier this month that removing impediments to the movement of goods and people around Africa is critical for economies to develop. At the moment only 12% of African countries’ total trade is with each other and the continent only accounts for 3% of value addition in global trade.
Yonov Agah, the deputy director-general of the World Trade Organisation, said that trade policies, infrastructure and governance structures are all crucial for the success of the Continental Free Trade Area (CFTA). “At the end of the day it’s about how a country and a region like Africa manages the interaction of these external and domestic factors that would provide the frame as to how you benefit.”
Labuschagne predicts that one of the major challenges on the path towards further harmonisation, besides things like timing of implementation and exemptions, will be the rules of origin which are used to determine the country of origin of a product for purposes of international trade. “These rules are already different for Comesa, the EAC and SADC. With Ecowas (Economic Community of West African States) included in an Africa-wide zone it would be even more difficult, because those West African economies are very different.”
To illustrate the technical difficulty negotiators will have to deal with, Labuschagne explains the rules of origin with an imaginary business that has set itself up in Botswana to service the SADC region. “To get origin in Botswana it needs to comply with a host of technical rules, which impact their entire procurement function, for example.
“If you change the rules of origin, the way they have set themselves up might mean they suddenly lose that origin. This has major implications.”
Trade at different stages of development
Another major problem is that African countries are in “vastly different stages of development”, Labuschagne says. “That is very difficult for further harmonisation between SADC countries – what do you do with tax revenue for import from outside the union? Revenue in South Africa is relatively high, but a poor, smaller, land-locked country like Malawi does not contribute much.” On a pan-African scale this issue is exacerbated; the Seychelles’ GDP per capita is almost $16?000, while Burundi lags at $270.
In 2013 Ron Sandrey wrote an analysis of the SADC Free Trade Area for the Stellenbosch-based Trade Law Centre, which confirmed “the commonly accepted position that intra-SADC trade is low (and not necessarily increasing) and that South African trade dominates both the overall SADC and intra-SADC trade”. Although Sandrey admits that “trade data for the SADC region and the rest of the continent are notoriously unreliable and difficult to obtain”, he mentioned that “in 2010 South African exports were 68% of intra-SADC exports”.
“That doesn’t mean harmonisation is not a good idea for South Africa,” says Labuschagne. “There are also a whole lot of political considerations, not only commercial. But the lesson from SACU – the Southern African Customs Union – has been that it does favour the smaller countries like Lesotho and Swaziland, but also Namibia and Botswana, at the expense of South Africa.”
Customs union
SACU prides itself on being the “oldest in the world” with roots dating back to 1910. It consists of Botswana, Lesotho, Namibia, South Africa and Swaziland. SADC’s free trade area includes SACU and a group of countries further to the north, but member states Angola, Democratic Republic of Congo and Seychelles are not participating.
Eventually the SADC aims to form a customs union, with a view to later establish a common market, then a monetary union and eventually even introduce a single currency, although that target is still “several years away”, according to the SADC website. “The single biggest challenge in obtaining this, and any of the more advanced economically related integration milestones, is the lack of clarity surrounding the issue of countries with membership of more than one customs union,” states the organisation.
Meanwhile the EAC and Ecowas have also started talking about the pathway from a customs union to a single currency. Labuschagne says that in the end it boils down to the same issue: “If there is political will, it is viable.”
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South Africa calls for more trade with China
South Africa would like to see more local companies expand into China. More than 60 South African companies had travelled to China in 2014 to engage with the country and collaborate on joint opportunities, Deputy President Cyril Ramaphosa said last week.
“South African companies are focusing their efforts on emerging economies for new opportunities, and access to the Chinese market is at the heart of their strategy,” he said, speaking at the China-South Africa Business Forum held in Beijing, China, on 15 July.
“The recent expansion of Distell, a South Africa wine distributor, into China creates an opportunity to accelerate the excellent progress achieved so far, and build on its existing presence into this lucrative market.
“We would like to see more South African companies expand into China and the South African expos in China provided a good platform to achieve this objective,” Ramaphosa said.
Value-added exports
He commended the commitment made by China to re-balance the nature of Africa’s burgeoning trade ties with China so that these would be sustainable over the long term.
South Africa and Africa had to ensure structural transformation of their trade with China, to enable China to import more value-added and labour intensive products, and to move away from their dependence on raw materials exports.
“The expos proved that South Africa was not just about resources, and that we have many products and services to offer by way of value-added, labour intensive and technologically advanced products,” Ramaphosa said.
“We are encouraged by the prospect that Chinese enterprises are increasing their investment in the South African manufacturing industries, in order to promote beneficiation of minerals at source.”
Local beneficiation
The recent announcement of Chinese financing for local beneficiation through the development of a metallurgical complex in Musina, was part of a new trend aimed at employment generating investment for South Africans.
He said this seemed to be echoed in the expansion of Hisense and the FAW automotive manufacturing plants, discussions for the revival of the Coega Industrial Development Zone and even a prospective mixed-use residential, retail and light- industry facility east of Johannesburg.
“For South Africa, the hosting of the sixth Forum for China-Africa Co-operation (FOCAC) in 2015 promises to be a major event on the diplomatic calendar… The FOCAC process, which is a tri-annual meeting and now formally includes the African Union, provides an opportunity for leaders to highlight the areas of co-operation and growth in China’s relationship with Africa.”
South Africa also saw China as a vehicle to drive the African agenda of continental growth and development. South Africa chaired the African Union Commission, he said, and it was committed to initiatives that grew the African continent and improved intra-African trade.
“China has consistently doubled its financing commitment to Africa during the past three FOCAC meetings – from $5-billion [about R62-billion] in 2006 to $10-billion in 2009 and $20-billion in 2012. The announcement that China would finance and construct a railway link between Nairobi and the port of Mombasa, with possibility of extended routes to Rwanda, Uganda, Burundi and South Sudan, is seen in this light.”
Investment invitation
Ramaphosa invited the Chinese business community to invest in South Africa, especially in the special economic zones focused on the 10 investment projects on which the respective governments had agreed.
“Both of our governments have agreed that we need to change the structure of trade away from commodity-based trade, to trade in more value-added products emanating from South Africa. To this end we have presented the Chinese government with a list of 10 value-added products which we would like to see incorporated into your supply chains.
“We have already benefitted from skills and technology transfer and would like to encourage the Chinese government to continue to support us, as we work towards closing our skills gap,” he said.
China was a 21st century partner for development and a unique catalyst for growth on the African continent. He said South Africa would like to partner with China to ensure that the economic engagement was mutually beneficial, continued to lead to infrastructure development, greater economic participation and the greater good of both countries.
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U.S. to help trace Nigeria’s stolen funds, boost military aid
Ahead of his official visit beginning from today [20 July] and at a time the Federal Government needs all the money it can muster to fund promises made during the last electioneering campaigns, the United States has offered to help President Muhammadu Buhari track down billions of dollars in stolen assets and increase U.S. military assistance to fight Boko Haram insurgents, Reuters on Sunday quoted U.S. officials as saying.
As the U.S. cooperation with immediate past president, Goodluck Jonathan, virtually grounded to a halt due to his refusal to investigate corruption and human rights abuses by the Nigerian military, President Buhari’s visit to Washington is viewed by the U.S. administration as a chance to set the seal on improving ties since he won the election on March 28.
U.S. Deputy Secretary of State Tony Blinken told Reuters: “President (Barack Obama) has long seen Nigeria as arguably the most important strategic country in sub-Saharan Africa.
“The question is: Would there be an opportunity to deepen our engagement, and that opportunity is now.”
This development is taking place at a time U.S. relations have gone cold with two other traditional Africa powers – Egypt and South Africa.
U.S. officials say they are willing to send military trainers to help Nigeria counter a six-year-old northern insurgency by the Boko Haram Islamist movement.
Since Buhari’s election, Washington has committed $5 million in new support for a multi-national task force set up to fight the group. This is in addition to at least $34 million it is providing to Nigeria, Chad, Cameroon and Niger for equipment and logistics.
U.S. officials also affirmed that President Buhari’s decision to sack military chiefs appointed by Jonathan clears the way for more military cooperation.
“We’ve made it clear there are additional things that can be done especially now that there is a new military leadership in place,” a senior U.S. official said.
Another senior U.S. official was also quoted as saying that the Washington has urged Buhari to step up regional cooperation against the militants and provide more aid to afflicted communities to reduce the group’s recruiting power.
Buhari has said his priorities are strengthening the nation’s economy hard-hit by the fall in oil prices, boosting investment, and tackling corruption.
“Here too, he is looking to deepen collaboration and one of the things he is focused on is asset recovery,” the official said. “He is hopeful we can help them recover some of that.”
In 2014, the United States took control of more than $480 million siphoned away by former Nigerian dictator Sani Abacha and his associates into banks around the world.
Johnnie Carson, a former assistant secretary of state, warned Washington not to allow security issues overshadow the need for closer trade and investment ties.
“Nigeria is the most important country in Africa,” said Carson, currently an adviser to the U.S. Institute of Peace.
Now more than ever, “the relationship with Nigeria should not rest essentially on a security and military-to-military relationship,” he added.
Lauren Ploch Blanchard, an Africa specialist with the non-partisan Congressional Research Services, said the U.S. challenge was to work with Buhari while giving him time to address the country’s vast problems.
How Buhari will handle the campaign against Boko Haram is still to unknown, Blanchard said.
During a meeting with state governors on June 23 in the Presidential Villa, the President vowed to recover funds stolen by government officials, who abused their offices in the recent past, and also stop systemic leakages.
He assured his guests that the days of impunity, lack of accountability, and fiscal recklessness in the management of national resources were over in Nigeria.
In a statement after the parley, the Presidency lamented that although “there are financial and administrative instructions in every government parastatal and agency, all these were thrown to the dogs in the past.
“Honestly, our problems are great, but we will do our best to surmount them”.
Buhari also told the Governors that the next three months may be hard, but billions of dollars could be recovered, even as he expressed surprise that the governors tolerated the atrocities allegedly committed with the Excess Crude Account (ECA) since 2011, but promised to tackle the issue decisively.
The President declared that the payment of national revenue into any account other than the Federation Account was an abuse of the constitution, stressing that what he heard was going on in many agencies and corporations, particularly the Nigerian National Petroleum Corporation (NNPC), was clearly illegal.
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Paving the way to better development in Tunisia
Can modern Tunisia learn from the Romans? Two thousand years ago, as part of a trans-North Africa highway, the Romans built a road that linked ports on the Mediterranean coast of what’s now Tunisia. From them, other roads struck deep into the interior of North Africa.
Today, the old ports have new names and modern highways connect them, but fewer modern roads have been built in Tunisia’s agricultural hinterland. A medium-term US$230 million World Bank project to widen regional roads connecting cities inland to cities on the coast is seen as a way of opening-up neglected areas of the country. It will be several years before the roads are done but, in time, they could put Tunisia in a stronger position to weather economic setbacks – such as that caused this year to the country’s important tourism sector, for example, by two separate terrorist attacks on tourists.
Tourism accounts for at least 7% of Tunisia’s GDP, and according to World Bank estimates, had already declined by 22% in the first six months of this year before a second attack in June. Despite more political freedom since the end of a long era of political dictatorship in the 2011 Arab Spring, economically, Tunisia has become a more – not less – unequal society in the past decade.
Its richer coast is at odds with its poorer interior. A stretch of highway skirts the coast between the cities of Bizerte and Sfax, for example, but away from the coast, drivers can find themselves on narrow, two-lane roads blocked with heavy trucks carrying agricultural produce. (Although it has rail network, 80% of goods are moved by road in Tunisia.) Its largest coastal cities – Tunis, Sfax and Sousse – account for a whopping 85% of its GDP and most of its industries and services. Pockets of poverty in coastal areas are said to be nothing like as widespread as rural poverty inland.
Improved roads demonstrate public commitment to poorer areas where many people feel forgotten by government. The Center-West is an area that has seen public demonstrations since the revolution began there in 2010 in Sidi Bouzid, part of Tunisia’s second poorest region where 20% of adults are out of work. About 65km of Route Nationale 4 to the city of Siliana is due to be widened from two- to four-lanes to carry the heavier volume of traffic it is already experiencing and support future traffic coming from improved connectivity.
The Road Transport Corridor project marks the Bank’s first engagement with road improvement and management in Tunisia in ten years. “For me, the most important thing is that we are reestablished as an important partner in the Government’s response to the development and citizen's needs in lagging regions,” says Vickram Cuttaree, Senior Infrastructure Economist. It took the Bank team about a year to fully understand how Tunisia’s road sector was managed and performing, finding common ground between Bank policies and local practice following the revolution.
The two other scheduled road upgrades are a 56km section of the Route Nationale 12 from the tourist resort city Sousse to Kairouan. Another 25km road in more industrialized areas just outside the Tunisian capital of Tunis from the governorate of Zaghouan, the country’s third poorest region.
Improving road safety is also part of the upgrade, with plans for better storm culverts, bridges, traffic signs, and intersections. Although Tunisia’s accident rate fell from 2008 to 2011, the Tunisian government and World Health Organization reported 1,200 to 2,000 deaths, mostly of passengers and drivers in vehicles on national and regional highways, as opposed to pedestrians or cyclists knocked down on city streets.
The roads project is seen as just the beginning of more high-impact Bank projects targeting poorer, more underdeveloped areas of Tunisia.
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SADC, EU inch closer to ratifying EPA agreement
The European Union (EU) and Southern African Development Community (SADC) are on the verge of finalising the signing of an Economic Partnership Agreement (EPA).
Negotiations for the EPA between the EU and SADC were concluded last year.
At a recent meeting held between Botswana’s Trade Minister, Vincent Seretse who is also Coordinator of the SADC EPA Group, and his counterpart in the European Union, Commissioner for Trade Cecilia Malmstrom, the two parties recognised the vast amount of work done thus far.
The SADC EPA group consists of seven SADC member states out of the 15. These are the five Southern Africa Customs Union (SACU) member states Botswana, Namibia, Swaziland, Lesotho and South Africa, plus Angola and Mozambique.
In a statement, the Trade Ministry recently noted that both Minister Seretse and the EU Commissioner have reiterated their full commitment to conclusion of the process leading to the signing, ratification, and enforcing the EPA.
Also on the agenda was the conclusion of the processes towards the signing and ratification of the SADC-EU Economic Partnership Agreement, the upcoming World Trade Organisation 10th Ministerial Conference in Nairobi, Kenya, and other trade issues of mutual interest to the two parties, according to the ministry.
Commissioner Malmstrom did mention that the EU has set aside funds to assist SADC states in implementing the EPA upon its coming into effect.
Malmstrom also indicated that Botswana was eligible to benefit to the tune of Euro 2.6million and urged the country to come up with proposals to motivate for the release of the funding.
The two officials further indicated their sincere hope and commitment that the Nairobi Conference will come up with meaningful outcomes relating to the post-Bali work programme of the remaining Doha Development Agenda issues (inter alia on agriculture) in the form of a political decision which will allow the technical negotiators to come up with agreements thereafter.
Minister Seretse indicated to his counterpart that Botswana had, as recently as last week, ratified the WTO Agreement on Trade Facilitation (ATF).
Commissioner Malmstrom indicated that the internal EU processes leading to ratification of the WTO ATF were at an advanced state in all EU member states and they hope to have concluded them by the time of the 10th Ministerial Conference in Nairobi at the end of this year.
With regards to technical and other assistance for developing and least-developed countries in relation to the implementation of the WTO ATF, Commissioner Malmstrom stated that the EU had set aside the sum of Euro 400 million to assist.
The parties made an in-principle agreement that when the time for signing comes, Botswana will be considered as the preferred host for the ceremony.
SADC member states who are part to the EPA are strong in the export of diamonds and South Africa, Botswana, Lesotho and Namibia’s large share of exports are to the EU.
Other products from the region include agricultural products (beef from Botswana, fish from Namibia and sugar from Swaziland), oil from Angola and aluminium from Mozambique.
South Africa’s exports to the EU are much diversified and range from fruits to platinum and from manufactured goods to wine.
The EU exports a wide range of goods to the SADC EPA countries, including vehicles, machinery, electrical equipment, pharmaceuticals and processed food.
The SADC member states who are party to the EPA are a diverse group with Lesotho and Mozambique considered the least developed countries (LDCs), while countries like Namibia and Botswana are given the upper middle income status.
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tralac’s Daily News selection: 17 July 2015
The OECD's Economic Survey of South Africa 2015 launches today: Preview, Government's response
Intra-African trade – an analysis (tralac)
This paper clearly reinforces the data warning outlining the dangers inherent in trying to analyse intra-African trade data. The use of mirror data, late and non-reporting and ‘vanishing’ trade has been the bane of this research; we must therefore emphasise that this paper is far from being a definitive analysis of intra-African trade. We must also emphasise, however, that the ITC is the best available source of consistent trade data and this paper represents a systematic attempt to use the available data to start shedding light on intra-African trade.
Over the last few years the aggregate intra-African trade’s (imports and exports) share of total African trade has consistently been around the 12% mark (with a high of 14% in 2009) as shares from both the European Union (EU) and the United States (US) are dramatically declining in the face of increasing Brazil, Russia, India and China (BRIC) trade. [The author: Ron Sandrey]
Global value chains: the missing link in Sub-Saharan Africa’s trade integration (AFD)
Our analysis finds that increased trade integration has had a strong influence on growth in sub-Saharan Africa. Average real GDP per capita growth increased from 2.9 percent in the 1990s, to 4.3 percent in the 2000s. Of that 1.4 percentage point increase, about half was accounted for by higher trade integration. [The author: Roger Nord]
Obama to announce key initiatives in Kenya, Robinson Githae says (Daily Nation)
President Barack Obama is set to announce major new agreements with Kenya, the country’s ambassador to the United States, Robinson Githae, said on Thursday. The agreements are on military assistance, trade and investment and other subjects, Mr Githae said.
AGOA: Next steps
With the African Growth and Opportunity Act set in place for another decade, the Administration is asking African countries to begin thinking about what will come next – including free trade agreements, a US trade official said yesterday. When US Trade Representative Michael Froman attends the annual AGOA forum next month in Gabon, he intends to get the discussion started on preparing to move away from unilateral preferences to reciprocal trade, Deputy Assistant US Trade Representative Constance Hamilton said. Part of that discussion will focus on which African countries or regional groupings would be ready to engage in FTA negotiations with the United States, the USTR official told a program on the next steps for AGOA hosted by Rep. Karen Bass (D-Calif).
AGOA: US government submits waiver request to WTO's Council for Trade in Goods (WTO)
Pursuant to Article IX:3 of the WTO Agreement, the United States requests a waiver of its obligations under paragraph 1 of Article I and paragraphs 1 and 2 of Article XIII of the GATT 1994 through September 30, 2025, to the extent necessary to permit it to provide duty-free treatment under the AGOA to eligible products originating in beneficiary countries. The United States requests the Council for Trade in Goods to give this application for a waiver expeditious and favourable consideration. In the meantime, the United States will promptly enter into consultations, on request, with any interested Member with respect to any difficulty that may arise as a result of the preferential treatment provided under the AGOA.
Circumstances justifying the waiver: Because of the severe and pressing development challenges facing sub-Saharan Africa, these policy objectives cannot be fully achieved through measures consistent with U.S. obligations under GATT 1994. More than 400 million people in sub-Saharan Africa live on less than $1.25 a day, and regional GNI per capita was less than $1,700 in 2013. Average annual GDP growth in the region was 4.1 percent in 2013.
Portugal was the 3rd largest investor in Mozambique during the 1st quarter (Club of Mozambique)
The list for the first quarter, totalling US$500m is led by Spain and China, although together they account for only eight projects, compared to 22 for Portugal, which remains the main foreign job creator, with 28 jobs per US$1 million invested versus an average of 13 for all other countries. Most Portuguese investment (45.5%) was applied in the industrial sector, followed by services (30%) and insurance (14.5%), and concentrated in the South, in the provinces of Maputo and the city of Maputo.
IGC Mozambique Growth Week 2015: some presentations now posted (IGC)
Zimbabwe: French firm to start import testing exercise (The Herald)
French-based standards firm, Bureau Veritas, will begin testing imported products for acceptable standards at the end of this month after the initiative failed to start in May this year. The Consignment Based Conformity Assessment was initially scheduled to start on May 16 2015, with all products regulated by the Ministry of Industry and Commerce of Zimbabwe exported into Zimbabwe having to be accompanied by a CBCA certificate. But Industry and Commerce Minister Mike Bimha said yesterday enforcement of the Consignment Based Conformity Assessment exercise would now commence on the 27th of this month and the initial phase of the CBCA would run for six months.
The next and full implementation phase of the standards verification process for all imported goods will commence on November 1, 2015 after the transitional phase period to end of October and thereafter run for four years, Minister Bimha said. Minister Bimha said the exercise had been delayed to allow incorporation and considerations regarding issues to do with pricing or rates levied to importers for their goods and some technical issues that the minister would not discuss yesterday.
From evidence to policy: innovations in shaping reforms in Africa (World Bank)
This four-day learning event, to be held in Cape Town, will bring together policymakers, academics, civil society representatives, and development partners to discuss innovations in the use of evidence to inform policy design in Africa. The event will feature a 2-day conference (July 21-22) and a 2-day training (July 23-24). [Programme]
Data and debates: launch of SmartGov Africa (Democracy in Africa)
This month, SmartGov Technologies Ltd, the Cambridge (UK) based data lab, announced the launch of the SmartGov Africa project. SG Africa was designed to aggregate, geo-reference and enable discussion on all African public data. It is now the largest single pan-African data portal, with 1.2m data-points already available, across 54 African countries. The platform is open for anyone to use.
Financing for Development conference: selected updates
Financing for Development forges ‘New Financial Alliance’ (UN)
DESA briefing note on the Addis Ababa Action Agenda (UN)
Pressure on governments, critical in probing Africa’s stolen funds (UNECA)
Reshaping finance for sustainability: a moment in time (UNEP)
Blended Finance Vol. 1: a primer for development finance and philanthropic funders (WEF)
Financing for Development: US government development priorities
FY16 State and Foreign Operations Appropriations (CGD)
Enlisting the media in regional competition regime (COMESA)
Business writers from select COMESA Member States are meeting in Livingstone, Zambia for the regional sensitization forum on trade competition regime in the region. Immediate former Principal Judge of the COMESA Court of Justice Prof. Samuel Rugege who presented a keynote address said 42 cases has been filed in the Court since its establishment in 1994. He attributed the low number to parties resorting to other dispute resolution mechanism and lack of awareness about the Court's operations.
Reviewing the security situation in the East Africa region: heads of intelligence and security services (African Union)
SEAC workshop on the revision of the SADC Principles and Guidelines Governing Democratic Elections (SADC)
SADC-COMESA-EAC Climate Change YEAR BOOK 2015: EOI (SADC)
PRARI Second Stakeholder Meeting for SADC: update, project www
Transport emission mapping and monitoring and capacity building in 5 selected African cities (AfDB)
The AfDB wishes to recruit a consultant to carry out a pilot project in 5 Selected Cities based on regional diversification and ongoing/proposed transport projects namely; Abidjan, Rabat, Yaounde, Dar es Salaam and Lusaka to build capacity in concerned government agencies in transport emission monitoring, raise awareness of options for financing low emission transport and facilitate the quantification of the wider benefits of low emission transport.
China launches first World Bank trust fund (World Bank)
President Kim and Finance Minister Lou Jiwei signed an agreement to establish a $50 million fund to help reduce poverty. The World Bank President also met with leaders of the Multilateral Interim Secretariat for Establishing the Asia Infrastructure Investment Bank (AIIB) to discuss closer collaboration. These initiatives reinforce the growing partnership with China, which already is the Bank’s third-largest shareholder and an important contributor to IDA, the institution’s fund for the poorest, as well as the Global Infrastructure Facility.
The impact of IMF-supported programs on FDI in low-income countries (IMF)
It is common for IMF-supported adjustment programs with low-income member countries (LICs) to project that they will facilitate FDI inflows. The main objective of this paper is to empirically examine this hypothesis. Using an unbalanced panel dataset for 73 low-income countries over the period 1980–2012, and two different econometric methods that address the selection-bias problem, the empirical results robustly show that participating in IMF-supported program is associated with a significant increase in FDI inflows.
Featured infographic: the radical US cargo shift to the East Coast
Expatriates make huge gains from weakening shilling weakens (Business Daily)
This week in the news
Catch up on tralac’s daily news selections for the past week:
The selection: Thursday, 16 July 2015
The selection: Wednesday, 15 July 2015
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UN officials hail outcome of conference on development financing as first milestone of 2015
Secretary-General Ban Ki-moon and senior United Nations officials on Thursday hailed the outcome of the financing for development conference in Addis Ababa as the first milestone in a critical year in which major decisions are also expected on the future sustainable development agenda and on climate change.
“The Addis Ababa Action Agenda is a major step forward in building a world of prosperity and dignity for all,” Mr. Ban said in a statement, adding that it revitalizes the global partnership for development and establishes a strong foundation for implementation of the future development agenda.
The Action Agenda, adopted at the conclusion of the Third International Conference on Financing for Development, contains a series of bold measures to overhaul global finance practices and generate investments for tackling a range of economic, social and environmental challenges.
Building on the outcomes of previous conferences held in Monterrey, Mexico, and in Doha, Qatar, the document addresses all sources of finance, and covers cooperation on a range of issues including technology, science, innovation, trade and capacity building.
Mr. Ban noted that the Addis conference was the first of three milestones this year. “Member States have now passed this first hurdle. Now we must work ever harder for a successful summit on sustainable development in September in New York and for a meaningful agreement on climate change in December in Paris.”
Wu Hongbo, Under-Secretary-General for Economic and Social Affairs and Secretary-General of the Conference, highlighted the fact that the Action Agenda features a comprehensive set of policy actions with a package of over 100 concrete measures and some concrete deliverables.
“The Addis Ababa Action Agenda testifies to our collective resolve to build a better future for all in a more equal and sustainable world,” said General Assembly president Sam Kutessa in his statement to the Conference’s closing plenary, in which he spotlighted the agreed concrete deliverables, policies and actions to support the implementation of the post-2015 development agenda.
With the international community now having “embarked on a momentous journey in a common pursuit to eradicate poverty, improve livelihoods for all and protect our planet,” he called on all delegations to fully implement the Action Agenda.
“With this successful outcome, we have a strong basis to build upon and continue our path towards historic Summits in New York in September and Paris in December. I count on your continued commitment to ensure an ambitious outcome for the post-2015 development agenda,” he said.
“The Action Agenda provides a global framework for financing sustainable development and developing sustainable finance. This new framework aligns all financing flows and policies with economic, social and environmental priorities.”
Also delivering a statement at the closing plenary, Letty Chiwara, UN Women Representative to Ethiopia, the African Union and the UN Economic Commission for Africa (UNECA), said that, along with other aims, the Action Agenda reaffirms that achieving gender equality, empowering all women and girls, and the full realization of their human rights are essential to achieving sustained, inclusive, and equitable economic growth and sustainable development.
Delivering a statement on behalf of UN Women Executive Director Phumzile Mlambo-Ngcuka, she said that to date, no country in the world has closed the gender gap. The chronic and persistent under-investment in critical areas for women and girls, such as economic empowerment including reducing and redistributing women’s unpaid care and domestic work; sexual and reproductive health and rights; violence against women and girls, women, peace and security; and participation and leadership, has hindered the realization of gender equality and the empowerment of women and girls.
”New and existing commitments on gender equality require unprecedented and transformative financing, in scale, scope, ambition and quality, from all sources and at all levels,” she said, calling on all Member States to endorse and implement the Addis Ababa Action Plan on Transformative Financing for Gender Equality and Women’s Empowerment and to give the next generation of development goals the financial impetus necessary to achieve gender equality and to empower all women and girls.
Among the new initiatives agreed by Member States is the establishment of a Technology Facilitation Mechanism at the summit to be held in September in New York to boost collaboration among various actors to support the Sustainable Development Goals.
In addition, countries agreed to establish a Global Infrastructure Forum to identify and address infrastructure gaps, highlight opportunities for investment and cooperation, and work to ensure that projects are environmentally, socially and economically sustainable.
They also decided to strengthen the financing for development follow-up process to ensure that no country is left behind, including by establishing an annual financing for development forum and an inter-agency task force which will report annually on progress in implementing the FFD outcomes.
In the Action Agenda, countries also recommitted to achieving the target of 0.7 per cent of gross national income for official development assistance (ODA), and 0.15 to 0.20 per cent for least developed countries.
“We are really, really pleased with the outcome,” said Amina Mohammed, the Secretary-General's Special Adviser on Post-2015 Development Planning, welcoming in particular the decision on ODA. “A few years after the financial crisis, when we began this conversation, there was very little appetite for a discussion on 0.7 but today we have a recommitment to it.”
The recommitment on ODA was also welcomed by Gyan Chandra Acharya, High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States.
“There is a very clear forward-looking commitment coming from the Addis Ababa Action Agenda. It talks about, with a timeline, implementation of 0.2 per cent of GNI going to the LDCs,” Mr. Acharya said. “It was there before but it was more aspirational. But now it is coming with a very strong commitment to implement it.”
The Action Agenda also calls for strengthening support for the work of the UN Committee of Experts on International Cooperation in Tax Matters to improve its effectiveness and operational capacity, and the engagement with the Economic and Social Council.
On climate change, the outcome calls on developed countries to implement their commitment to a goal of jointly mobilizing $100 billion per year by 2020 from a wide variety of sources to address the needs of developing countries. Countries also committed to phase out inefficient fossil fuel subsidies that lead to wasteful consumption.
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International Monetary Fund boosts efforts to help countries finance development
As countries meet in Addis Ababa to consider ways to ensure adequate financing for sustainable development, the International Monetary Fund (IMF) is taking measures to boost access to its resources, help countries better mobilize domestic revenue and focus more of its own work on issues such as equity, inclusion and the environment.
The measures are intended to better support countries in their pursuit of the set of Sustainable Development Goals (SDGs), which world leaders are expected to adopt in New York in September and which focus on ending poverty, transforming lives and protecting the planet.
The Deputy Director of the IMF’s Strategic Policy and Review Department, Sean Nolan, said that ahead of the Third International Conference on Financing for Development, the Fund took a look at its operations “through the lens of FFD” to see how it could improve its work.
It has decided to expand access to all of its concessional facilities by 50 per cent, which means making more money available for eligible low-income countries. “Working the numbers, we felt we could lend more to lower-income countries,” Mr. Nolan said in an interview with the UN News Service.
In addition to this, the Fund set the interest rate at zero for all loans extended under the Rapid Credit Facility, which is targeted at countries hit by natural disasters and fragile/post-conflict States.
Another way for the Fund to “deliver more value,” Mr. Nolan said, is increased policy advice, technical assistance and capacity building to help countries boost economic resilience. This includes doing more to assist countries with domestic resource mobilization, or tax collection, a critical source of revenue for governments.
“There’s only so much amount of aid countries can rely on. Indeed, often you can’t rely on aid in the sense of relying on certain amounts every single year… it goes up, it goes down… governments fall in and out of love with the donors… so it’s not so reliable,” said Mr. Nolan.
“At the end of the day, a State operates on the basis of its own revenue collection. And a developmentally-oriented State, a State that actually wants to promote development through infrastructure, health, education spending, needs to raise most of the money itself.”
He added that raising revenue does not necessarily mean going into the rural areas and heavily taxing people. “It actually means taxing the better off in the society and also taxing companies, both domestic and foreign, more effectively.”
Tax rates, he noted, are very low in many low-income countries, in some cases under 15 per cent of gross domestic product (GDP). This could easily be increased by a series of reforms, as well as by better structuring of taxation in the extractive industries and greater attention to the transfer of money out of the country.
This includes the profits of companies that are being transferred abroad. “If they’re legal transfers, that’s fine. But if the tax code is weak or inadequate, then the country is losing revenue to foreign companies. They should be doing a better job of capturing it.”
Ahead of the Addis Ababa Conference, the IMF and the World Bank launched a new initiative to help developing countries strengthen their tax systems, with the belief that raising additional revenues will help these countries to fill financing gaps and to promote development.
Among the other sustainable development-related issues the Fund intends to focus more on are energy pricing, environmental tax issues and carbon pricing schemes, as well as helping countries build up their infrastructure.
Headquartered in Washington, D.C. and comprised of 188 countries, the IMF’s mission is to ensure the stability of the international monetary system in three ways: keeping track of the global economy and the economies of member countries; lending to countries with balance of payments difficulties; and giving practical help to members.
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Pressure on governments, critical in probing Africa’s stolen funds
“Many of our governments will only act on this [problem of illicit financial flows] if there is pressure from the people,” said a much applauded Chairman of the High Level Panel on Illicit Financial Flows (IFFs) from Africa, in a well attended side event of the third International Conference on Financing for Development (FFD3).
The discussion moderated the Deputy Executive Secretary for Knowledge Generation of the United Nation’s Economic Commission for Africa (ECA) Mr Abdalla Hamdok, grouped eminent discussants invited to reflect on practical ways for the continent to implement the recommendations of the Mbeki-led Panel’s report titled ‘Track it! Stop it! Get it!’ The report that was officially presented to the 8th Joint AUC-ECA Conference of Ministers of Finance, Planning and Economic Development, last March in the Ethiopian capital. It blames Africa’s loss of over US$50 billion per year since 2010, to IFFs via shady business transactions including kickbacks and other forms of abusive of public office, criminal activity such as drug and money trafficking and money laundering, as well as tax evasion, the distortion of money transfer charges and over-billing (especially by transnational firms).
“We can only get cooperation [from States in tackling IFFs] under duress,” said ECA’s Executive Secretary of ECA Mr Carlos Lopes, in consonance with Mr Mbeki’s earlier remarks at the FFD3 side event. “In the case of Africa, all the discussions about domestic resource mobilisation are tied up to the way we deal with this phenomenon,” Mr Lopes went on, while noting the critical role that civil society, the media and politicians, especially parliamentarians, have to play in keeping the pressure up.
“If you stop the bleeding, you can start healing and move on to other things,” reckoned the African Union Commission’s Chairperson, Mr Erastus Mwencha, who added that the IFF report should be a strong part of the Financing for Development agenda and must get the support of governments, private sector and international community working together.
Representing the governments of Norway and Sweden that have highly contributed to the efforts to stem IFFs from Africa, were Mr Bjørn Brede Hansen and Ms Charlotte Gornitzka, respectively. They reaffirmed their countries’ commitment to working with Africa to tackle IFFs. Norway, for instance would no longer allow room for the creation of anonymous bank accounts while Sweden will keep engaging with Africa’s stakeholders through capacity building.
Such capacity building happens to be one of the most important crosscutting issue from the High Level Panel’s findings on the field, according to the Executive Secretary of the African Capacity Building Foundation, Mr Emmanuel Nnadozie, who worked closely with the Mbeki-team at the time he served the ECA.
Civil Society Organisations used the occasion to praise ECA and its partners for their unprecedented move to involve them in the important issue of IFFs.
The other key speakers during the discussion were: Zambia’s Minister of Finance Zambia – Mr Alexander Chikwanda, the Acting Chief Economist and Vice-President at the African Development Bank – Mr Steve Kayizzi-Mugerwa and the Co-Founder of Third World Network (a partner organisation of the ‘Stop the Bleeding’ Africa campaign) – Mr Yao Graham.
“Stop the bleeding” campaign
The side event was jointly convened by ECA and African Civil Society Networks that joined the fight against IFFs with a campaign launched in June 2015 in Nairobi, Kenya. It is made up of: the Tax Justice Network-Africa, Third World Network-Africa, Africa Forum and Network on Debt and Development (AFRODAD), the African Women’s Development and Communication Network (FEMNET), the African Regional Organisation of the International Trade Union Confederation (ITUC-Africa) and Trust Africa, supported and joined by the Global Alliance for Tax Justice.
The Network came in handy with a pledge to which the panellists and other key figures signed. Here is the content off the pledge:
Illicit Financial Flows (IFFs) from Africa are directly damaging Africa’s development prospects. It is time to stop them.
The ‘Stop the Bleeding’ campaign supports the findings and recommendations of the AU/ECA high Level Panel Report on Illicit Financial Flow from Africa.
This call is for Regional and International action to do the same in order to stop Illicit Financial Flows from Africa.
The aim of the “Stop the Bleeding Campaign” is to curb Illicit Financial Flows (IFFs) from Africa. To achieve this, the campaign sets out:
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to deepen knowledge on IFFs through research and to share information widely on how such illicit flows affect African economies
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to mobilize a broad base of supporters who take action to build more awareness of IFFs through a popular initiative, called the “One Million Voices” petition, aimed at mobilising citizen action and support against the bleeding of African economies from IFFs
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to enlist eminent persons who amplify the voices saying “STOP THE BLEEDING” in order to curb illicit financial flows from Africa
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to build the momentum for citizen and policy action via powerful grassroots networks and also strategic partnerships for a popular outcry and a big noise calling on African leaders to take action to curb IFFs.
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to advocate to African leaders themselves, and through them to the international community and the corporate entities behind IFFs, so that they find lasting solutions to the IFF problem and all its related issues.
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UNCTAD Investment Policy Framework 2015 launched at Financing for Development Conference
Ministers met with UNCTAD Secretary General Kituyi at the official UNCTAD side event to the Financing for Development (FfD) conference. There Dr. Kituyi launched the newly updated and expanded UNCTAD Investment Policy Framework that outlines a new generation of investment policies that put sustainable development issues at their core.
The High Level session addressed the challenge of financing the Sustainable Development Goals (SDGs), including how to mobilize investment, how to channel it towards the SDGs and how to maximize the benefits and minimize the risks. According to UNCTAD’s 2014 World Investment Report, achieving the SDGs will require a significant ratcheting up of investment.
The private sector will need to be a vital partner to public efforts to reach the scale of investment required. Recent years have seen a tectonic shift of foreign direct investment (FDI) going to developing countries, but most of this investment is not reaching the poorest economies.
Ministers and other high-level participants deliberated on the question of what policy strategies and actions can be developed to better target investment to finance development.
In this context, Secretary General Kituyi announced the update of UNCTAD’s Investment Framework. The updated Investment Framework seeks to address a comprehensive group of policy areas that collectively impact a country's ability to attract and benefit from FDI.
James Zhan, Director of UNCTAD’s Investment and Enterprise Division, was on hand in Addis Ababa for the launch, saying “Today’s investment policies are very different from those of a decade ago. ‘New generation’ investment policies place inclusive growth and sustainable development at the heart of efforts to attract and benefit from investment. This makes investment an integral part of the financing for development discussion.”
The UNCTAD Investment Framework consists of an overarching set of Core Principles for Investment Policymaking that serve as design criteria for three sets of operational guidelines or action menus:
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Guidelines for national investment policies.
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Guidance for the design and use of International Investment Agreements (IIAs).
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An action menu for the promotion of investment in sustainable development goals.
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Investor-State Dispute Settlement: Review of Developments in 2014
Statistical update (as of end 2014)
In 2014, investors initiated 42 known ISDS cases pursuant to international investment agreements (IIAs). This is lower than the record high numbers of new claims in 2013 (59 cases) and 2012 (54 cases) and closer to the annual averages observed in the period between 2003 and 2010. As most IIAs allow for fully confidential arbitration, the actual number of cases is likely to be higher.
Last year’s developments brought the overall number of known ISDS claims to 608. Ninety nine governments around the world have been respondents to one or more known ISDS claims.
Respondent States
The relative share of cases against developed countries is on the rise. In 2014, 60 per cent of all cases were brought against developing and transition economies, and the remaining 40 per cent against developed countries. The share of cases against developed countries was 47 per cent in 2013, and 34 per cent in 2012, while the historical average is 28 per cent. In total, 32 countries faced new claims last year. The most frequent respondent in 2014 was Spain (five cases), followed by Costa Rica, the Czech Republic, India, Romania, Ukraine and the Bolivarian Republic of Venezuela (two cases each). Three countries – Italy, Mozambique and Sudan – faced their first (known) ISDS claims in history.
Home country of investor
Of the 42 known new cases, 35 were brought by investors from developed countries and five were brought by investors from developing countries. In two cases the nationality of the claimants is unknown. The most frequent home States in 2014 were the Netherlands (seven cases by Dutch investors), followed by the United Kingdom and the United States (five each), France (four), Canada (three) and Belgium, Cyprus and Spain (two each). This corresponds to the historical trend where developed-country investors – in particular, those from the United States, Canada and several European Union (EU) countries – have been the main users of the system responsible for over 80 per cent of all ISDS claims.
Applicable investment treaties
The majority of new cases (30) were brought under BITs. Ten cases were filed pursuant to the provisions of the ECT (twice in conjunction with a BIT), two cases under the Central America-Dominican Republic-United States Free Trade Agreement (CAFTA), one case under the NAFTA and one case under the CanadaPeru FTA. Looking at the full historical statistics, the ECT has now surpassed the NAFTA as the most frequently invoked IIA (60 and 53 cases respectively). Among BITs, the Argentina-United States BIT remains the most frequently used agreement (20 disputes).
Economic sectors involved
About 61 per cent of cases filed in 2014 relate to the services sector. Primary industries account for 28 per cent of new cases while the remaining eleven per cent arose out of investments in manufacturing. Looking at the industries in which investments were made, the most numerous was generation and supply of electric energy (at least eleven cases), followed by oil, gas and mining (ten), construction (five) and financial services (three).
Measures challenged
The two types of State conduct most frequently challenged by investors in 2014 were (i) cancellations or alleged violations of contracts or concessions (at least nine cases); and (ii) revocations or denial of licenses or permits (at least six cases). Other challenged measures include: legislative reforms in the renewable energy sector, alleged discrimination of foreign investors vis-à-vis domestic ones, alleged direct expropriations of investments, alleged failure on the part of the host State to enforce its own legislation, alleged failure to protect investments, as well as measures related to taxation, regulation of exports, bankruptcy proceedings and water tariff regulation. Information about a number of cases is lacking. Some of the new cases concern public policies, including environmental issues, anti-money laundering and taxation.
ISDS outcomes in 2014
In 2014, ISDS tribunals rendered at least 43 decisions in investor-State disputes, 34 of which are in the public domain (at the time of writing). Of the 34 public decisions, eleven principally addressed jurisdictional issues, with six decisions upholding the tribunal’s jurisdiction (at least in part) and five decisions rejecting jurisdiction. Fifteen decisions on the merits were rendered in 2014, with ten accepting – at least in part – the claims of the investors, and five dismissing all of the claims. The remaining eight public decisions were rendered on applications for annulment and on preliminary objections.
Of the ten decisions finding States liable, six found a violation of the FET provision and seven a violation of the expropriation provision. At least eight decisions rendered in 2014 awarded compensation to the investor, including a combined award of approximately USD 50 billion in three closely related cases, the highest known award by far in the history of investment arbitration.
Five decisions on application for annulment were issued in 2014 by ICSID ad hoc committees, all of them rejecting the application for annulment.
Ten cases were reportedly settled in 2014, and another five proceedings discontinued for unknown reasons.
By the end of 2014, the overall number of concluded cases reached 356.13 Out of these, approximately 37 per cent (132 cases) were decided in favour of the State (all claims dismissed either on jurisdictional grounds or on the merits), and 25 per cent (87 cases) ended in favour of the investor (monetary compensation awarded). Approximately 28 per cent of cases (101) were settled14 and eight per cent of claims (29) were discontinued for reasons other than settlement (or for unknown reasons). In the remaining two per cent (seven cases) a treaty breach was found but no monetary compensation was awarded to the investor.
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tralac’s Daily News selection: 16 July 2015
The selection: Thursday, 16 July
From Twitter: for coverage of the just-completed TIPS Annual Forum 2015, view the TL of @regrum, or #TIPSforum
Featured infographic: India's trade tanks (LiveMint)
The Financing for Development conference closes today in Addis: a selection of updates
The Addis Ababa Action Agenda (UN News Centre)
The Addis Tax Initiative declaration (International Tax Compact)
Joseph Stiglitz: 'On financing for development, we need to lead against the wind' (UNECA)
Multilayer approach to capacity building needed for digital financial inclusion (ACBF)
Africa’s economic transformation in focus at UN development financing conference (UNECA)
UNCTAD Special Editions prepared for the Third FFD conference:
Investing in Sustainable Development Goals: Part 1 - Action Plan for Private Investments in SDGs, Part 2 - Reforming International Investment Governance
Fostering Africa’s services trade for sustainable development
PPI and the poorest: New private participation in infrastructure results highlight critical role of MDBs in IDA countries (World Bank Blogs)
The newest PPI Database results show that investment commitments to infrastructure projects with private participation investment in IDA countries from 2009 to 2014 totaled US$72.8 billion. This is significant because it accounts for just seven percent of the total recorded over this period for all emerging markets and developing economies covered in the database. This is not that surprising, but does show that we have a long way to go. The number of projects with private participation in IDA countries is also only 10 percent of the total — a little better, and indicating that, unsurprisingly, projects are smaller on average in IDA countries.
Better trade logistics could jump-start Africa’s light manufacturing industry (World Bank Blogs)
Nonetheless, Africa still has some catching up to do when compared with other regions. Reform efforts should not only focus on removing barriers for trade in goods, but also for trade in services. Access to competitively produced services – including banking, insurance, communication, IT, engineering, auditing and legal services – is crucial to the development of manufacturing exports. Recent studies – such as the Bank Group report Defragmenting Africa: Deepening Regional Trade Integration in Goods and Services – have shown that poor business services for trade function as barriers to the enhanced integration of both goods and services.
Weigh bridges are faulty, transporters tell UNRA probe team (Daily Monitor)
AGOA: Report of the Government of the United States for 2014 (WTO)
In 2014, US imports under AGOA fell 52.2% from $24.8 billion to $11.8 billion, due in most part to a large drops in imports of mineral fuels and motor vehicles and their parts (HTS chapter 27 and 87 respectively). Nevertheless, mineral fuels still accounted for almost 75.9% of US imports under AGOA in 2014, compared to approximately 86% in 2013. [Download]
Abuja to host conference on economic partnership between ECOWAS, EU (Bilaterals)
An international conference designed to take a critical appraisal of the proposed Economic Partnership Agreement between Economic Community of West African States, (ECOWAS) and the European Union (EU) will take place in Abuja between July 28 and 29 2015. The event is being organized by the leading pan-African newsmagazine Africa Today. [Conference www]
Building the capacity of WTO National Consultative Committees in six SADC countries (SATH)
During August and September 2015, workshops will be held in Mozambique, Malawi, Lesotho, Zambia, Botswana, and Swaziland - countries where the Trade Hub has been offering assistance with training and capacity building for NEPs over the past two years.
Tanzania: Current account deficit narrows (Daily News)
The current account deficit narrowed 26.3% in the year to May, thanks to increased earnings from tourism and manufacturing, the central bank has said. The deficit narrowed to US$3.94bn in the 12 months to May from US$5.35bn in the same period last year. Bank of Tanzania said in its monthly economic report that higher exports of goods and services offset a decline in financial aid from Western donors, who reduced their help amid claims of corruption in government. Imports of goods and services fell to US$13.3bn from US$14.05bn previously. Total exports rose by 9.8 % to US$9.45bn. [Download]
Tourism earnings on the rise (Daily News)
WB revises Zim’s growth prospects (The Herald)
The World Bank has revised downwards Zimbabwe’s economic growth for this year but improvement is expected in 2016 going forward in line with the Sub-Saharan Africa growth trend. According to the World Bank’s Global Economist Prospects for June, Zimbabwe’s economy will grow by 1% this year and will be at 2,5% in 2016 and 3,5% in 2017.
‘Consult SMEs on policy formulation’ (NewsDay)
Tobacco season difficult: stakeholders (NewsDay)
State firms on the brink (Financial Gazette)
The AU's plans for an African passport a pie in the sky? (Institute for Security Studies)
The AU is certainly aware that this call for open borders has fallen on deaf ears many times before. The idea of an African passport has surfaced periodically at AU summits – the last time being at the July 2007 summit in Accra, Ghana – but it has never become a reality. Former Libyan leader Muammar Gaddafi, one of the great supporters of free movement in what he termed as the United States of Africa, was repeatedly voted out when he tried to push forward this idea before his death in 2011. For now, the AU has asked foreign ministers of member states to organise a retreat to discuss the issue.
Investor-State Dispute Settlement: review of developments in 2014 (UNCTAD)
Investors continue to use the investor–State dispute settlement (ISDS) mechanism. In 2014, claimants initiated 42 known treaty-based ISDS cases. The total number of known ISDS cases reached 608. 40% of new cases were initiated against developed countries (the historical average is 28%). A quarter of all new disputes are intra-EU cases.
Why BRICS trade in local currency doesn’t work for India (The Indian Express)
In any swapping arrangement, the country with the weaker currency gains. From a more strategic point of view, it makes sense for India to have local currency invoicing arrangements mostly with countries with which it enjoys a surplus in bilateral trade. India suffers a huge deficit with China (See chart). With Russia and South Africa too, India runs a deficit. It has a small advantage with Brazil. A local currency swap arrangement with countries from whom India imports will only encourage more imports.
Ufa Declaration of the IVth Trade Union Forum of BRICS countries (ITUC)
We expect that BRICS Governments will pursue more vigorously the reforming of the IMF and of the World Bank. The time has come to establish real control over large-sized MNCs operating on our territories and to subordinate their activities to development objectives. Trade unions have a role to play in this process. For this aim, we have a tripartite ILO Declaration of principles concerning MNCs and social policy.
Cyril Ramaphosa: speech at the SA-China State Owned Enterprises seminar (GCIS)
We are here to learn about best practice in the management of state-owned enterprise (SOEs). We are keen to find out more about the institutional arrangements and financial models that ensure that SOEs are sustainable and deliver on their mandate to accelerate economic growth and transformation. We would also like to know about frameworks for private sector participation in the SOEs to augment the capacity of the state.
South Africa, China expand trade (iafrica)
Deputy President Ramaphosa invited the Chinese business community to invest in South Africa, especially in the Special Economic Zones focussed on the ten investment projects agreed to between the respective governments. "Both of our governments have agreed that we need to change the structure of trade away from commodity based trade, to trade in more value added products emanating from South Africa. To this end we have presented the Chinese government with a list of 10 value added products which we would like to see incorporated into your supply chains. We have already benefitted from skills and technology transfer and would like to encourage the Chinese government to continue to support us, as we work towards closing our skills gap," he said.
Kenya to host Tokyo International Conference on African Development summit next year as Gambia bows out (The Standard)
What does the Global Entrepreneurship Summit mean for US-Kenya Relations? (The Star)
Commonwealth Sec-General aspirant, Ronald Sanders, to visit Nigeria (ThisDay)
Pact opens up Iran to renewed SA trade (Business Day)
West Africa: Capital markets integration gets boost (ThisDay)
StanChart, Lipa na M-Pesa link up for real-time money transfer (Business Daily)
China's steel firms are playing the long game in Africa (The Economist)
China’s Huawei gets security clearance to manufacture in India (LiveMint)
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African Growth and Opportunity Act (AGOA): Report of the Government of the United States for the Year 2014
On 27 May 2009, the United States was granted a waiver of its obligations under paragraph 1 of Article I and paragraphs 1 and 2 of Article XIII of the GATT 1994 to the extent necessary to permit the United States Government to provide duty-free treatment to eligible products of certain sub-Saharan African countries as authorized by the provisions of the African Growth and Opportunity Act (AGOA) without being required to extend the same duty-free treatment to like products of any other Member. This waiver expires 30 September 2015.
Under the terms of this waiver, the United States is required to submit to the General Council an annual report on the implementation of the trade-related provisions of AGOA with a view to facilitating the annual review provided for in paragraph 4 of Article IX of the WTO Agreement. This report covers calendar year 2014.
Duty free treatment under AGOA
AGOA was enacted on 18 May 2000. Section 506A of the Trade Act of 1974, as added by section 111 of AGOA, authorizes the President of the United States to provide duty-free treatment to certain products from eligible sub-Saharan African beneficiary countries, in addition to the products designated for duty-free treatment for these countries under the US Generalized System of Preferences (GSP). The President exercised this authority on 18 December 2000, when he designated 1,835 products as eligible for duty-free treatment in the United States when originating from an AGOA beneficiary country. Section 103 of the Trade Preferences Act of 2015 extends preferences for these products and for GSP products to AGOA beneficiary countries through 30 September 2025.
Section 506A of the Trade Act of 1974 also authorizes the President of the United States to designate certain sub-Saharan African countries as eligible for benefits under AGOA. In June 2014, President Obama withdrew Swaziland’s eligibility to receive AGOA benefits in 2015. On 23 December 2014, President Obama reinstated Guinea-Bissau’s eligibility for AGOA benefits effective immediately, and withdrew The Gambia and South Sudan’s AGOA eligibility, effective 1 January 2015. As of 30 June 2015, 39 sub-Saharan African countries were eligible for AGOA trade benefits. These countries are: Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Chad, Comoros, the Republic of the Congo, Côte d’Ivoire, Djibouti, Ethiopia, Gabon, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mozambique, Namibia, Niger, Nigeria, Rwanda, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, South Africa, Tanzania, Togo, Uganda, and Zambia.
Section 112(a) of AGOA provides duty-free treatment for certain textile and apparel products from beneficiary countries that adopt certain procedures to prevent illegal transhipment. Section 112(c) of AGOA provides duty-free treatment for apparel made in “lesser developed” beneficiary countries regardless of the source of the fabric or yarn, subject to an annual quantitative limit through 30 September 2025.
AGOA performance
Since its inception in 2000, the AGOA program has helped African beneficiary countries to expand and diversify their exports to the United States. By providing new market opportunities for African exports – especially of non-traditional and higher-value products – AGOA has helped African firms become more competitive internationally, thereby bolstering African economic growth and helping to alleviate poverty in one of the poorest regions of the world. In 2014, over 91% of US imports from AGOA-eligible countries entered the United States duty-free, under AGOA, GSP, or other zero-tariff provisions.
In 2014, US imports under AGOA fell 52.2% from $24.8 billion to $11.8 billion, due in most part to a large drops in imports of mineral fuels and motor vehicles and their parts (HTS chapter 27 and 87 respectively). Nevertheless, mineral fuels still accounted for almost 75.9% of US imports under AGOA in 2014, compared to approximately 86% in 2013. Other leading categories of US imports include apparel (HTS chapters 61 and 62), iron and steel products (HTS chapter 72), and edible fruits and nuts (HTS chapter 8). Non-oil imports under AGOA (not including its related GSP provisions) nearly quadrupled from 2001 to 2014, rising from $752 million in 2001 to $2.9 billion in 2014. South Africa is currently the largest non-oil AGOA beneficiary. Other leading beneficiary countries are Angola, Nigeria, Chad, Gabon, Kenya, the Republic of Congo, Lesotho, and Mauritius.
Motor vehicles and their parts was the leading AGOA non-oil product sector for most of the period 2001-2014. Imports under AGOA in this product sector reached approximately $1.3 billion in 2014. US imports of agricultural products, metals, certain footwear, and certain chemicals also grew during this period.
Another leading non-oil sector for the period 2001-2014 was apparel. Apparel represented 25% to 79% of total non-oil AGOA imports (not including its related GSP provisions) during this period. Imports of apparel under AGOA rose from $356 million in 2001 to $985 million in 2014. Eighteen AGOA beneficiary countries have shipped apparel products to the United States under AGOA since 2001, led by Kenya, Lesotho, Mauritius, Tanzania, Ethiopia and Botswana. The leading
The US Government has provided substantial trade-related technical assistance to AGOA beneficiary countries to help them make the most of the trade opportunities available under AGOA. For example, under the four-year, $120 million African Competitiveness and Trade Expansion (ACTE) initiative, the US Agency for International Development operates three Regional Hubs for Global Competitiveness – in Botswana, Kenya, and Ghana – that assist African governments and businesses to identify and develop market opportunities in the United States for African products, especially value-added and non-traditional products such as those covered under AGOA.
Statistical annexes are provided to present a detailed description of the trade aspects of the AGOA programme from 2006 to 2014.