Search News Results
Republic of the Congo rethinks its investment policy
UNCTAD experts have reviewed the investment policy of the Republic of the Congo and detailed their findings in a report presented and approved at a workshop organized by the Ministry of Economy, Finance, Planning and Integration, in partnership with the United Nations Development Programme and the Food and Agriculture Organization of the United Nations, in Brazzaville on 20 November.
Isadore Mvouba, Minister of State for Industrial Development and Private Sector Promotion, said that the review had correctly identified all the problems. Referring to the need to formulate a plan of action for implementing the recommendations, he stated that “the move from subsistence farming to industrial farming requires a change of mentality” and that, for the move to be successful, “foreign direct investment must be integrated in a manner that takes account of your recommendations”.
With a view to guaranteeing food security in the Congo, the review warns against the risks associated with large concerns and proposes incorporating inclusive agricultural models in national development strategies. Such models favour a gradual development of land which is respectful of local communities and biodiversity, while satisfying the need for increased local production.
The review recognizes the huge investment potential of the Congo and highlights its current dependence on the oil sector and the need for economic diversification. With this in mind, the UNCTAD report recommends specific solutions to the main challenges faced by local and foreign investors, especially during the start-up phase and in accessing factors of production. In this connection, the review underscores the need for clear guidelines in various domains and for institutional capacity-building to improve the transparency and efficiency of the public administration.
Prepared on the request of the Government of the Congo, the investment policy review focuses on two areas: the legal and institutional framework for investment, and the choice of an agricultural development model compatible with the country’s development goals. These issues were also discussed in the course of high-level bilateral meetings between the main sector ministers and the country’s development partners.
The Government of the Congo has undertaken to follow through the review process and to take an active role in implementing the recommendations. The final report will be made public at an intergovernmental presentation during the Spring 2015 session of UNCTAD’s Investment, Enterprise and Development Commission.
Related News
More than copper: toward the diversification and stabilization of Zambian exports
This paper analyzes Zambian export patterns using a new transaction-level trade data set for the period 1999-2011. The data show that, in international comparison, Zambian exports are exceptionally concentrated (on mining products). This reliance has been increasing in recent years. Zambia’s exports are also characterized by a high level of churning of firms and products. Multivariate models of survival probabilities suggest that exchange rate volatility and difficult access to imported inputs significantly inhibit diversified and stable exports. The econometric analysis is complemented with a qualitative study of the Zambian export sector. The analysis concludes that one of the main policy levers for unleashing Zambia’s full potential as an exporter is by facilitating access to imported inputs. Additional measures that ease foreign exchange transactions, simplify export and certification requirements, and increase the predictability of Zambia’s trade regime could be effective to promote Zambia’s nontraditional exports.
Zambia is well known for its mineral riches, which naturally endow the country with a highly successful export industry. This lucrative asset, however, also implies an internationally exceptional degree of export product concentration. We show that, even controlling for its level of economic development, Zambia has one of the world’s highest degrees of export concentration, as copper and cobalt account for more than 80% of the value of formal exports. Zambia’s exports are in addition characterized by a large degree of churning. Analyzing new transaction-level trade data covering the period 1999-2011, we find that Zambian firm-level export spells are numerous but short.
The Zambian authorities have long been aware of these features of their economy, and efforts at diversifying and stabilizing exports are ongoing. For such efforts to be effective, it is important that the main impediments to export diversification and stabilization be understood. Interviews with Zambian exporters bring up two recurrent themes: problems with unexpected exchange-rate movements and constraints on foreign exchange transactions, and impediments to importing inputs required for export-oriented production – in addition to a number of well-known challenges linked to human capital shortages, bottlenecks in transport and telecommunications infrastructure, erratic policy changes, and political favoritism. We therefore analyze the export micro data with a view of substantiating these frequently heard explanations for the fragility of Zambian exports. The data are consistent with what many business people say: exchange-rate volatility and problems related to the importing of inputs contribute to destabilizing Zambian firm-level export spells.
Figure 1: Share of Sub-Saharan African destination countries in total Zambian exports of non-traditional products
This paper is a product of the Trade and Competitiveness Global Practice Group. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world.
Related News
New EABC code of conduct to boost regional trade
The East African Business Council (EABC) is in the process of developing a code of conduct and ethics for businesses aimed at boosting trade in the region.
This will be promoted within the business community in the EAC Partner States and is expected to guide the private sector in provision and acquisition of services across the region, Andrew Luzze, the Executive Director East African Business Council, has said.
The new code of conduct is expected to be ready by April 2015.
“The Code seeks to incorporate key themes that are internationally recognised as basic principles for responsible global citizenship for any business,” he added.
EABC will also organise training for Staff of companies that sign up to the Code to help coordinate business activities including organising the launch of the code of conduct at EAC level by April 2015.
“As a regional private sector lobby and advocacy body, EABC’s success depends on its reputation, integrity and transparency. Both regionally and globally, a clear business case has repeatedly been underscored for businesses to behave in a manner that promotes ethical business practices, transparency and fair competition in the private and public sectors; for the benefit of their companies; the economy, the citizenry and the environment.” Luzze noted.
According to Fiona Uwera, the East African Business Council (EABC) technical liaison officer for Rwanda, the Code of Conduct/Ethics shall ensure compliance with legal requirements and standards of business conduct.
“The Code will set out responsibilities and values to guide business operations and relationships. The business community will be expected to serve as role models by visibly demonstrating support and by regularly encouraging adherence to the set standards,” Uwera told The New Times.
The Code shall guide the conduct of the private sector with respect to provision and acquisition of services from one another, and from businesses facilitating institutions and government
Business community welcomes the initiative
In July this year, EABC was nominated to seat at the World Customs Organisation (WCO), and according to business experts, establishing a code of conduct will help boost competitiveness on the global stage.
Edwin Mwumvaneza, a Kicukiro based business man, said that it very critical for the regional business community to get organized.
“That’s when we shall be able to win the trust of those championing regional integration especially the political leaders,” Mwumvaneza said.
Stephen Byaruhanga, a Risk manager at Eskom Uganda, said establishing a code will help lure investors into the region through joint partnerships.
Related News
Fourth Zambia Economic Brief highlights the importance of financial inclusion for rural population
Each month, Bana Mulenga’s oldest daughter sends her money instantly through her mobile phone, or through the post office, which is near her rural village in Northern Zambia. Mulenga, a widow, uses the much-needed funds to buy school uniforms and food for her six children at home, and fertilizer and seeds for her small farm.
In recent years, more Zambians like Mulenga have gained access to and now use quality financial services, but there is room for improvement as the country still lags behind its economic and geographic peers, according to a new World Bank study.
The country’s fourth economic brief, Financial Services: Reaching Every Zambian, shows that although commercial banks, micro-lenders and mobile phone transfer facilities exist, of the 62% of adults who own a mobile phone, only 5% of them use it to pay bills or receive money. This is far lower than the average of 16% in Sub-Saharan Africa, the report says.
Kundavi Kadiresan, World Bank country director for Zambia, said the main obstacle to financial inclusion is the high cost of formal banking services due to the small size of the banking sector.
“Other factors includes high interest rates, fees and other costs of banking, which exclude a considerable size of the population such as women the less educated, youth, the poor, and rural residents are the least likely to have a formal account,” she said. “The gap between urban and rural residents is wide.”
While 36% of adults in Zambia’s urban areas have a bank account, only 17% in rural areas have one, according to the report, and women are far less likely than men to have a formal account. In addition, the concentration of these services in urban areas means that a considerable section of the population is cut off, because the majority live in rural areas, the report says, and most Zambians rely on family or friends to borrow or send money. Additional findings include:
-
Some banks have introduced low-fee accounts that are proving popular, but have not been broadly introduced
-
Government payments can play a catalytic role in providing volume and scale in rural area for financial service providers
-
Zambia’s economy is expected to grow around 6% in 2014, slower than the 6.7 % in the previous two years
-
Average inflation this year is expected to be around 7.8% higher than the targeted 6.5% and the average 2013 average of 7%
-
Changes to the mining tax proposed in the 2015 budget and the outstanding value-added tax (VAT) refunds need to be resolved soon as these issues could have an adverse impact on investment.
Related News
Showdown now looms over Comesa sugar exports
A showdown looms between Kenya and its 18 trading partners from eastern and southern Africa over a bid to extend the country’s three-year restriction of sugar imports into 2015.
The sugar directorate officials have begun to lobby the Comesa Secretariat for a fourth extension of safeguards that have shielded the local millers from direct competition of cheap sugar from the region.
“We are in the process of applying for an extension and currently, our officials who have just come from a trip in other countries to study the cost of production in those states are writing a report which will be key in determining whether we will get another extension,” says Alfred Busolo, the director-general at Agriculture, Fisheries and Food Authority (AFFA).
Kenya first sought the Common Market for Eastern and Southern Africa (Comesa) intervention in 2003 and was given a four-year window to reform its sugar sector to make it competitive. But it has always sought more extensions since. Comesa is a free trade area with 19 member states straddling Egypt to Swaziland.
Mr Busolo said officials of the sugar directorate, a department within AFFA, have already visited five Comesa states, among them Egypt, to conduct a comparative study on production which will be compiled into a report used to push for another extension.
Last October, Comesa Competition Commission ruled out another extension, saying such a deal would encourage laxity in development of the sugar sector in Kenya.
“So far, we have accorded Kenya three extensions, which have gone past required limits of two safeguard periods. And all along, there is not much that the sector has achieved in line with the requirements,” the agency’s director George Lipimile said.
Kenya which initially pledged to prepare its sugar industry for full competition with region’s producers by February 2012 has failed to implement the agreed reforms, choosing instead to cushion its market by seeking the yearly extensions.
The third extension granted early last year will lapse next month, putting local millers in head-to-head competition with regional exporters like Egypt, Sudan and Uganda.
The continued restriction of sugar imports from the three states have frequently bred damaging trade rows that have threatened Kenya’s exports like tea, building materials and cooking fat. To date, Kenya has hardly met the required conditions that the regional bloc had set when the country was granted the safeguards.
The conditions include privatisation of the state-owned millers and diversification of their revenue streams.
Last week, Parliament went on a two-month recess without adopting the report that would allow for the sale of the state-owned sugar millers. The companies that are lined up for privatisation include Nzoia, Chemelil, South Nyanza (Sony) and Miwani.
The endorsement of the report would be significant in privatisation of the five state-owned millers as one of the conditions by Comesa.
MPs from the sugar growing areas say they are crafting a Bill to protect entrepreneurs seeking to invest in the sector. Last week, Matayos MP Godfrey Odanga was quoted as saying that some of the laws on sugar curtail and frustrate growth of the sector.
The Comesa also requires Kenya to transit to using early maturing cane, and move away from the current tonnage-based payment for sugarcane to one that is linked to sucrose content in the cane delivered.
Mumias, the only miller that has so far opened other revenue streams such as the co-generation, production of ethanol and water-bottling, has been off radar in the last two months, having closed its factories for maintenance amid material shortage and boardroom corruption claims.
The firm has been making losses on its co-generation project. The losses are mainly attributed to low feed in tariffs and penalties that Kenya Power charges the sugar miller for interrupted supplies.
Recently, Mumias sought to delay some of the debts that were to mature early by a further three to four years. Its debt stood at Sh5.2 billion in June, up from Sh2.4 billion in July 2012, costing Mumias Sh601 million in financing expenses in the year to June.
Sugar millers returned total losses of Sh6.1 billion last year, according to a financial report that the Treasury presented to Parliament. Nzoia Sugar was the most-indebted miller with a liability burden of Sh21 billion by the end of June 2012.
The figure is five times more than the miller’s Sh4 billion worth of current assets, resulting to a negative working capital position. On the cane buying formula, the sugar directorate is still had initiated pilot projects in two millers and it is yet to be rolled out in other factories.
The country has exceeded the maximum allowable limit of 10 years. The Comesa window was first introduced in 2003 and Kenya was given a four-year waiver, with the subsequent extensions in 2007 and 2011.
Kenya remains a net sugar importer and is struggling to boost output as its consumption continues to outpace production. Consumption of sugar stands at 800,000 tonnes per year against local production of 550,000 tonnes.
Related News
Survey: Bribes rife on Tanzania roads
Traffic police, Tanzania Revenue Authority (TRA) personnel and weighbridge attendants still demand bribes from truck drivers, a new report says.
Though the amount of bribes which the truck drivers were made to pay as well as time they spend in roadblocks have decreased, the problem is far from over, the report noted.
The Central and Dar Corridor Roadblocks Monitoring Survey by the Centre for Economic Prosperity shows that truck drivers paid an average of Sh1,354 in bribe to traffic police per stop, making an annual total of Sh3,320,970.
This bribe was paid to either at traffic police or checkpoints by 334 truck drivers in 2,452 stops in all three routes – Dar-Rusumo, Dar-Kabanga, and Dar-Tunduma – on the Central and Dar Corridor between November 2013 and May 2014.
“Although, the average amount paid in bribe to traffic police by truck drivers in 2013-2014 (Sh1,354) dropped compared with Sh2,008 paid in bribe to traffic police in 2012, there has been an increase in both – the number of stops enforced by traffic police, 2,452 stops in 2013-2014 compared with 854 stops in 2012, and – and total amount of money paid in bribe, Sh3,320,970 in 2013-2014 compared with Sh1,715,000 paid in bribe in 2012,” reads part of the report.
According to the survey, payments made in bribe to traffic police were more than Sh5,000 in more than half of all incidents.
Reacting to the survey findings, Traffic Police Commander Mohamed Mpinga said it was a shame to hear such statistics at the time when a lot of campaigns had been conducted to sensitise law enforcers on the adverse effects of corruption on roads.
“It is a shame because one of key reminders for every policeman or woman is to work in ethical manners and avoid corruption,” he told The Citizen on Sunday by phone paper yesterday.
Mr Mpinga said what had been captured in the survey was sad because it painted a bad image of the country as some of such trucks were used to ferry goods to neighbouring countries.
“This might scare away investors as well as and we might lose a number of trucks using our roads, thus affect our economy since the transport sector accounts for a large per cent of the national income.”
But Mr Mpinga said their efforts to tame corruption on highways had been hampered by truckers’ poor cooperation.
He said all drivers had been given contacts of top traffic officers in every region. They are free to call whenever they are asked to pay bribes, but most of them do not do so.
“But I do not agree with the reported number of stops because we have reduced the checkpoints from 58 in 2012 to six in 2014.
What we are planning now is involving the intelligence unit to investigate. They will be travelling by the truckers from the beginning to the end. We want to gather information ourselves because sometimes some of the issues we are being told through these surveys don’t seem to reflect what we know,” he said.
A TRA official who did not want to be named because he was not official spokesperson, said were ongoing efforts to reduce time which truck drivers spend at checkpoints.
However, he said it was obvious that compared with other checkpoints, drivers were likely to spend more time for TRA checks due to the process of documentation and verification of necessary information.
Weighbridges
According to the report, weighbridges continue to account for the most stops on the Central Corridor.
A contrast between 2012 and 2013-2014 shows a considerable increase on stops at weighbridges where the mostly affected truck drivers were those destined for Rusumo border (1,175 stops) and Tunduma border (1,094 stops).
However, truckers destined for Kabanga border encountered fewer checkpoints – 130 stops in 2013-2014 compared with 261 stops in 2012.
A drastic decrease in stops at TRA checkpoints in 2013-2014 is also recorded. The report says this development may be due to fitting of electronic devices on transit trucks to monitor their movements.
“It should be noted that, the stops at weighbridges, TRA checkpoints are normally consistent, while those enforced by traffic police are unpredictable – one must stop only when ordered to by police,” says the report.
According to the report, though TRA stops are consistent, drivers spent more time at TRA checkpoints than at weighbridges and traffic police or traffic police checkpoints.
Related News
Export revenues dip by Sh8bn
Kenya’s export revenues dropped by Sh8 billion in the third quarter of 2014 compared to the previous quarter in the same year due to declining earnings from tea and tourism.
Interestingly, the import bill rose by Sh49 billion in the period under review, a situation likely to worsen Kenya’s terms of trade, shows the Kenya National Bureau of Statistics (KNBS) data.
In the third quarter – period between July and September 2014 – earnings from exports dropped by 5.7 per cent to Sh133 billion from Sh141 billion realised between April and June last year. Kenya paid Sh452 billion in imports between July and September 2014 compared to Sh403 billion in the preceding quarter.
“The expansion in the import bill was mainly due to increases in the value of imports of machinery and transport equipment, manufactured goods and fuel products,” KNBS said.
LIKELY TO DECLINE
A parliamentary budget office report released last year indicated that Kenya’s exports are likely to decline by 5.1 per cent in the next two years due to lower-than-expected tourist arrivals, muted activity in the private and agriculture sectors, as well as declining competitiveness of exports.
Kenya is a net importer and depends on tourism, tea, coffee and horticulture for foreign exchange earnings to enable it meet its import bill and to stabilise the shilling.
Last year, tea and tourism faced huge challenges that cut foreign exchange. The price of tea, Kenya’s largest forex earner, hit record lows, while tourism faced a double whammy of insecurity and travel warnings by top source markets.
Tea revenues dropped by Sh16 billion in the year to October 2014. The greenleaf fetched Sh96 billion in the period ending October 2014, a 14.3 per cent drop from Sh113 billion the commodity earned in the year to October 2013.
The poor market of the cash crop has now cast a dark cloud over the country’s export revenues and farmers’ bonuses going forward.
Over half of the country’s revenues come from tea, coffee and horticulture but the low prices that the greenleaf is fetching are expected to put pressure on the current account.
Tourism, another key sector, is on its knees, owing to insecurity that has sparked holidaymakers’ flight from Kenya. Analysts have indicated that should the poor prices of tea persist, coupled with a slump in tourism, the economy will be exposed to macro-economic shocks.
MACRO-ECONOMIC SHOCKS
The worsening of the overall balance of payments is also attributed to exhaustion of foreign exchange reserves, which the government used to service a $600 million debt. The Central Bank’s plan to stabilise the shilling depleted the foreign exchange reserves further. Should Kenya’s trade balance worsen on the back of falling export earnings, this may result in macro-economic shocks last seen in 2011 and 2012.
A huge import bill, as a result of external market shocks, saw the shilling hit a historic low in 2011 even as inflation spiralled to 19.72 per cent in the same year. As a consequence, interest rates were raised to help stabilise the economy.
Related News
Africa Capacity Report 2014: Capacity Imperatives for Regional Integration in Africa
The 2014 Africa Capacity Report takes a fresh look at an old issue: regional integration, which attracted the attention and interest of leaders and development specialists and partners even before the independence of African countries. For at least three reasons, this is a good time for the African Capacity Building Foundation to be thinking about the capacity imperatives for regional integration.
First, regional integration has been extensively debated in the literature. But relatively few works have paid attention to the capacity dimension. The Africa Capacity Report 2014 is therefore meant to serve as a guide to African governments, development partners, regional economic communities (RECs) and continental bodies, nonstate actors, and civil society organizations on strengthening their capacities for successful regional integration. It also contributes to the ongoing timely debate, and the broader literature on regional integration, filling gaps related to the capacity imperatives for regional integration in Africa.
Second, regional integration is a relentless reality of modern times, and it is even more important for Africa, as featured in the continental Agenda 2063. Besides being a priority and subject of discussions among the continent’s development partners and elites, regional integration is considered as a key driver and the way forward for the structural transformation of African economies. The strong commitment to regional integration and the increasing recognition that collaborative actions and regional approaches are critical to achieving Africa’s development goals suggest a different angle for attending to the imperatives for capacity development.
Third is the necessity to have empirically based evidence underlying the policy recommendations and way forward for Africa’s regional integration. For regional integration to provide the expected benefits in trade, peace, security, investment, and above all economic transformation and sustainable development, African countries, the RECs and continental bodies need to understand the key issues and constraints, formulate and coordinate appropriate strategies and policies, and implement successfully the different regional development projects and plans.
The 2014 report identifies the many challenges of regional integration: overlapping memberships, limited financing, uneven commitments, and slow implementation. Experience from the European Union (EU) shows that although African RECs have treaties that let the countries dominate the relationship with RECs, member states lack the minimum enforcement capacity that the EU has. Further, the RECs that we surveyed have expressed their capacity needs as related to the required number of staff, the mobilization of resources, the coordination of activities, the conduct of research, the sharing of knowledge, and the monitoring and evaluation of projects, programs, and plans.
The report’s results provide a compelling case to support the efforts of capacity building throughout the continent. The surveyed RECs have indicated that they need institutional capacity building in fiscal policy, energy, and statistics. They also need organizational capacity building in fiscal policy, financial market development, infrastructure, and free movement of people. And they need individual capacity building in trade, agriculture, food security, industry, and the free movement of people.
Clearly, capacity is needed to drive the integration process in Africa and to support the creation of the African Economic Community. More pressing is building the capacity to implement regional projects and programs, to coordinate and harmonize country and REC strategies and programs, and to conduct research and share knowledge.
» Download the Africa Capacity Report 2014 (5.45 MB).
Infographics
Country coverage in 2014
The ACR aims ultimately to target all African countries. The inaugural ACR (2011) covered 34 countries, 2012’s ACR 42 and 2013 and 2014’s ACR 44 (The figure of 44 in 2013 and 2014 masks a change in composition: Angola, Botswana, and South Africa were surveyed in 2013 but not in 2014, and vice versa for Comoros, Egypt, and South Sudan).
Country motives for joining RECs
The Indian Ocean Commission (IOC) aside, countries joined RECs mainly for economic reasons, which calls for interventions focusing on that dimension.
Major areas of capacity and other needs for the RECs
The RECs are at different stages of integration. Among the surveyed RECs, EAC has shown the best performance over the stages of regional integration. It has fully achieved a free trade agreement and customs union, made good progress on a common market and monetary union, and is preparing for economic and political union. ECOWAS, too, has made relatively good progress, especially on its free trade agreement, customs union, and monetary union. RECs such as UMA and the ECCAS, though active on the ground, are only just preparing for a free trade agreement and have yet to start any of the other stages.
Capacity priorities for RECs
Related News
Forthcoming Economic Report on Africa to tackle trade and industrialization
The 2015 edition of the Economic Report on Africa (ERA) is scheduled for release in March 2015 and will build on the key messages of the previous editions on industrialization and structural transformation.
Both ERA 2013 and ERA 2014 emphasized the role of trade in fostering industrialization at the regional and global levels; and underlined the importance of implementing trade policies aimed at overcoming market and institutional failures that hinder export competitiveness.
According to Mr. Carlos Lopes, Executive Secretary of the Economic Commission for Africa, the new report will explore the question of how trade can serve as an instrument to accelerate industrialization in Africa.
“We are building a case for the strategic and sequenced use of trade policies for boosting intra-African trade and building up regional value chains to strengthen the capabilities and potential of African industries,” he said.
The Report’s working title is industrialization through trade. It also highlights the importance of complementary social policies for inclusive structural transformation.
The publication is the joint effort of the Economic Commission for Africa and the African Union Commission. It is released annually in March 2015, during the Joint ECA-AU Conference of Ministers of Finance, Economy and Development Planning.
Related News
Azevêdo: WTO celebrates 20 years of helping the global economy grow
Director-General Roberto Azevêdo, noting that the WTO will celebrate its 20th anniversary in 2015, said: “Over the past 20 years, this organization has, on balance, made an important contribution to the global economy and to smoother trading relations between nations. Indeed, at a time when the global economy is more interconnected than ever it is difficult to imagine a world without the WTO”.
The WTO at 20 – a message from DG Azevêdo
20 years ago, on 1 January 1995, the WTO opened its doors for business. Since then this organization, and the system of transparent, multilaterally-agreed rules that it embodies, has made a major contribution to the strength and stability of the global economy. Over the years the WTO has helped to boost trade growth, resolve numerous trade disputes and support developing countries to integrate into the trading system. It has also provided a bulwark against protectionism, the value of which was made plain in the trade policy response to the 2008 crisis, which was very calm and restrained in contrast to the protectionist panic that followed previous crises. Indeed, when the global economy is more interconnected than ever, it is difficult to imagine a world without the WTO.
Our organization has evolved since 1995. We have welcomed 33 new members, ranging from some of world’s largest economies to some of the least developed. Today our 160 members account for approximately 98% of global trade. Moreover, at our 9th Ministerial Conference in Bali in 2013, we took our first major step forward in updating multilateral trade rules. The measures agreed in Bali were a real breakthrough for the WTO, and they will provide a significant economic boost. In December 2014 WTO Members came together to recommit to implementing all aspects of the Bali package.
So as we look to the year ahead there is a lot of work to do – and many challenges to meet. While we have delivered in many areas, and despite the success of Bali, the pace of negotiations remains a source of frustration. In future we know that we need to deliver more outcomes, more quickly. In addition, we know that our poorest members are still not adequately integrated into the trading system, so again we need to do more to help them reap the benefits that the system can offer.
2015 is set to be an eventful year for the WTO. We will be holding our 10th Ministerial Conference in Nairobi from 15 to 18 December – the first time the WTO has ever held a Ministerial Conference in Africa. Heads of international organizations will convene at our headquarters in Geneva to participate in the 5th Global Review of Aid for Trade from 30 June to 2 July, and we will welcome business people, NGOs, academics and others to discuss our work and a range of trade issues at the WTO's annual Public Forum from 30 September to 2 October. Moreover, we will be working to implement all aspects of the Bali package and we already have a full negotiating agenda – including a deadline of July to conclude a detailed road map to tackle the remaining issues of the Doha Development Agenda. We will also be seeking to make progress in negotiations on trade in environmental goods and on an agreement to remove tariffs on a wide range of information technology products.
Success in each of these areas would be the best way to mark our 20th anniversary – and to reaffirm the contribution that the WTO has made to improving people’s lives and prospects over the last two decades.
I would like to wish everyone a happy 2015.
Related News
Pan-African Cotton Road Map
A continental strategy to strengthen regional cotton value chains for poverty reduction and food security
Despite its significance in local economies, the African cotton sector is faced with serious problems.
-
Yield is low and has considerably diminished during the last decade.
-
Cotton research in most countries suffers from a lack of organization and means.
-
Support structures for trade and marketing are not always commensurate with the economic importance of the sector.
-
Value-addition to the sector can be substantially improved.
-
The low price of seed cotton and long delays in payment to farmers have contributed to a decrease in production by as much as 50% in certain countries.
There is the need for sectoral policy support at the national, regional and Pan-African levels, following the example of sectors in countries whose producers are supported by public policy. Furthermore, synergy and coordination of existing initiatives would need to be developed and sustained.
At the international level, African cotton is undermined by distorting trade practices of some large producers. Efforts to remedy this situation through the multilateral trade system have remained at a stand-still for several years now.
Although the African cotton sector is at a historical turning point, the calamitous fall of international cotton prices from 2002 to 2009 reflects a moment that crystallized awareness in the minds of the sector’s stakeholders and public authorities on the need to safeguard the sector for the long-term. Indeed, they are now conscious that the low competitiveness of the sector is also tied to internal factors and that questions in relation thereto should be treated in parallel to WTO debates.
The spectacular rise of prices in 2010 will strengthen this awareness and further support the request made by African governments to UNCTAD in December 2008 to facilitate a high level meeting on African cotton.
Held in Cotonou at the end of June 2011, the Pan-African meeting on cotton gave participants the opportunity to outline details and expectations with regards to the sector. The Pan-African Road Map (henceforth the “Road Map”) sketched out in Cotonou and the subject of this present report, takes into account not only the conclusion of the debates but also the existing three regional strategies mainly in the areas of productivity, marketing and value-addition.
The objective of the Road Map is to create synergies between the numerous interventions in favor of African cotton, including the three strategies, and between the different categories of stakeholders at national, regional and international level. As such, it aims to become a complement to what already is in place in the regions by providing a common framework at the Pan-African level that addresses the three existing strategies and national and regional policies from a Pan-African perspective.
This Road Map is organized as follows:
-
Part I succinctly describes the background to the Road Map, its link to the achievement of Millennium Development Goals and the translation of these into actions to be conducted.
-
Part II enunciates the Road Map’s various activities based on the outcome of the Cotonou meeting around the three themes: Productivity, Marketing and Value-addition.
This part also introduces other proposals, facilitation of the Road Map, its Action Plan and indicators of progress.
Related News
‘Record’ illicit money lost by developing countries triples in a decade
Developing countries are losing money through illicit channels at twice the rate at which their economies are growing, according to new estimates released Tuesday. Further, the total volume of these lost funds appears to be rapidly expanding.
Findings from Global Financial Integrity (GFI), a watchdog group based here, re-confirm previous estimates that developing countries are losing almost a trillion dollars a year through tax evasion, corruption and other financial crimes. Yet in a new report covering the decade through 2012, GFI’s researchers show that the rate at which these illicit outflows are taking place has risen significantly.
In 2003, for instance, cumulative illicit capital leaving developing countries was pegged at around 297 billion dollars. That’s significant, of course, but relatively little compared to the more than 991 billion now estimated for 2012 – a record figure, thus far.
In less than a decade, then, these illicit outflows more than tripled in size, totalling at least 6.6 billion dollars. GFI reports that this works out to an adjusted average growth of some 9.4 percent per year, or twice the average global growth in gross domestic product (GDP).
One of the most common mechanisms for moving this money has been the falsification of trade invoices.
“After turning down following the financial crisis, global trade is going up again and so it’s increasingly easy to engage in misinvoicing – a lot more people are coming to understand how to do this and are willing to indulge,” Raymond Baker, GFI’s president, told IPS.
“These rates are not only growing faster than global GDP but also faster than the rate of growth of global trade.”
Further, these estimates are likely conservative, and don’t cover a broad spectrum of data that is not officially reported – cash-based criminal activities, for instance, or unofficial “hawala” transactions.
Baker emphasises that these capital losses are a problem affecting the entire developing world. Yet given that illicit outflows run in tandem with a country’s broader interaction with global trade, these rates are particularly strong in the world’s emerging economies, led by China, Russia, Mexico and India.
There are also significant differentials between regions, both is size and the rate at which they’re increasing. In the Middle East and North Africa, for instance, illicit financial flows are growing far higher than the global average, at more than 24 percent per year.
Even in sub-Saharan Africa, home to some of the world’s poorest communities, these rates are growing at more than 13 percent per year. Such figures eclipse both foreign assistance and foreign investment – indeed, the 2012 figure was more than 11 times the total development assistance offered on a global basis.
“If we take [these] findings seriously, we can address extreme poverty in our lifetimes,” Eric LeCompte, an expert to U.N. groups that focus on these issues, said Monday. “Countries need resources and if we curb these illicit practices, we can get the money where it’s needed most.”
Lucrative misinvoicing
There is a broad spectrum of potential avenues for the illegal skimming from or shifting of profits in developing countries, carried out by criminal entities, corrupt officials and dishonest corporations. And for the first time, certain of these key issues are receiving new and concerted international attention.
Multiple nascent multinational actions are now unfolding aimed at cracking down particularly on tax evasion by transnational companies. New transparency mechanisms are in the process of being rolled by several multilateral groups, including the Group of 20 (G20) industrialized nations and the Organisation for Economic Cooperation and Development (OECD), a Paris-based grouping of rich countries.
Such initiatives are receiving keen attention from civil society groups, and would likely constrict these illicit flows. Yet in fact, GFI’s research suggests that the overwhelming method by which capital is illegally leaving developing countries is far more mundane and, potentially, complex to tackle.
This has to do with simple trade misinvoicing, in which companies purposefully use incorrect pricing of imports or exports to justify the transfer of funds out of or into a country, thus laundering ill-gotten finances or helping companies to hide profits. Over the past decade, the new GFI report estimates, more than three-quarters of illicit financial flows were facilitated by trade misinvoicing.
And this includes only misinvoicing for goods, not services. Likely the real figure is far higher.
Experts say that stopping misinvoicing completely will be impossible, but note that there are multiple ways to curtail the problem. First would be to ensure greater transparency in the global financial system, to eliminate tax havens and “shell corporations” and to require the automatic exchange of tax information across borders.
Efforts are currently underway to accomplish each of these, to varying degrees. Last month, leaders of the G20 countries agreed to begin automatically sharing tax information by the end of next year, and also committed to assist developing countries to engage in such sharing in the future.
GFI’s Baker says that developing countries need to bolster their customs systems, but notes that other tools are already readily available to push back against trade misinvoicing.
“There is a growing volume of online pricing data available that can be accessed in real time,” he says. “This gives developing countries the ability to look at transactions coming in and going out and to get an immediate idea as to whether the pricing accords with international norms. And if not, they can quickly question the transaction.”
Development goal
There is today broad recognition of the monumental impact that illicit financial flows have on poor countries’ ability to fund their own development. Given the centrality of trade misinvoicing in this problem, there are also increasing calls for multilateral action to take direct aim at the issue.
In particular, some development scholars and anti-poverty campaigners are urging that a related goal be included in the new Sustainable Development Goals (SDGs), currently under negotiation at the United Nations and planned to be unveiled in mid-2015.
Under this framework, GFI is calling for the international community to agree to halve trade-related illicit flows within a decade and a half. The OECD is hosting a two-day conference this week to discuss the issue.
“We’re not talking about an aspirational goal but rather a very measurable goal. That’s doable, but it will take political will,” Baker says.
“We think the SDGs should incorporate very specific, targetable goals that can have huge impact on development and helping developing countries keep their own money. In our view, that’s the most important objective.”
Related News
Strong reforms offer countries path to high-income status
Sub-Saharan Africa’s small middle-income countries should implement strong reforms to boost growth and avoid the “middle-income trap,” seminar participants concluded in Mauritius.
At an event featuring peer-to-peer learning, 18 senior officials from seven small middle-income countries in Africa came together at the Africa Training Institute in Mauritius to discuss their common macroeconomic and structural challenges. They agreed that peer learning offers untapped potential to help move reforms forward in their countries.
Organized by the IMF African Department and the Africa Training Institute, the November 18-21 seminar built on initial discussions during two earlier high-level meetings on the sidelines of the 2013 and 2014 IMF-World Bank Spring Meetings and joint work with the authorities in the context of a new book titled “Africa on the Move: Unlocking the Potential of Small Middle Income Countries (SMICs).”
The seminar involved multiple stakeholders and received broad sponsorship from the IMF’s African Technical Assistance Centers in Ghana and Mauritius, from the Africa Training Institute in Mauritius, from the Regional Multi-Disciplinary Center of Excellence in Mauritius, and from the European Union.
Avoid the trap
Building on past success, small middle-income countries in sub-Saharan Africa have now set themselves the challenge of reaching high-income status and avoiding the middle income trap. While still positive, growth has slowed, as previous growth drivers weaken and the rise in per capita income wanes.
The concept of a middle income trap grew from the observation that middle-income countries graduated to high-income status far less often than low-income countries became middle-income countries. From 1960-2012, fewer than 20 percent of middle-income countries – and none from sub-Saharan Africa – became high-income states, compared with more than half of low-income countries graduating to middle-income status.
The seven small middle-income countries facing this trap in sub-Saharan Africa are Botswana, Cabo Verde, Lesotho, Mauritius, Namibia, Seychelles, and Swaziland. The seminar examined common policy challenges these countries face, reviewed what individual countries have done to address them, and how IMF surveillance can build on successful approaches to help countries move forward.
Boosting growth
Opening the seminar, IMF African Department Deputy Director Anne-Marie Gulde-Wolf noted that while sub-Saharan Africa remains the second fastest-growing region in the world, the small middle-income countries are among the slowest growing in the region, and there are significant downside risks to this outlook.
Participants then explored policy responses to challenges to boosting growth in five key areas – macroeconomic vulnerability, employment and inclusiveness, productivity growth, financial inclusion, and the political economy of economic reform. To allow for peer learning – an approach which to date has been used relatively rarely by the IMF – small breakout sessions among country participants were a key feature of the program, with group discussions and presentations leading to review of country experiences and failure using specific policy initiatives.
Consensus emerged on the following points:
-
Like many small states, small middle-income countries are highly vulnerable to shocks, and there was broad agreement on the importance of building sufficient policy buffers to absorb external shocks – especially since official financing flows for these countries will fall over time. At the same time, there are significant opportunity costs of buffers such as holding large reserves, especially in view of important infrastructure gaps that restrain long-term growth in such countries.
-
To promote diversification there is a need for policies to reduce skills mismatch. If done right, these policies could help “crowd in” private sector employment, as supported by the analytic work in the book, while the state continues to foster smooth functioning of the labor market and provides safety nets. However, there is also a need to implement public employment and wage policies that will improve labor market outcomes, and to avoid the government becoming the “employer of last resort”.
-
Returning to an era of strong growth is necessary to achieve high-income status. This will require deeper reforms and innovative policies to boost productivity. In particular, the quality of public spending, especially for education and economic governance, was considered an important tool for supporting productivity growth.
-
Discussion on financial inclusion highlighted emerging evidence that financial inclusion is crucial for structural transformation and inclusive growth – while noting that small middle-income countries have some of the most uneven distributions of income in the world. Many country participants emphasized the need to go beyond relaxing financing constraints for small and medium-sized enterprises, such as loan subsidy programs, to address underlying market failures and structural weaknesses in the financial sector that keep intermediation costs high. At the same time, efforts by governments to promote financial inclusion need be pursued in a manner that preserves financial stability.
-
In the discussion of political economy constraints on reform, country participants highlighted the importance of effective communication in building support. Appropriate sequencing could reduce the chances of reform fatigue in small middle-income countries. They also agreed on the usefulness of “reform champions” that are insulated from short-term political cycles. Ultimately, they recognized that strategies to advance reforms need to be driven by country-specific circumstances.
Benefits of peer learning
Looking ahead, country participants felt that peer learning could help move reforms forward in their countries. They also concurred on the value of the forthcoming book as a vehicle to further foster peer learning among this group and offered to contribute their own country experiences and perspectives – which will enrich the analysis and improve traction.
The peer group is also eager to pursue cost-effective tools for knowledge sharing, including online, which the IMF African Department and the Africa Training Institute will help explore. More broadly, seminar participants noted that capacity building and training institutions in the region could become vehicles for peer-to-peer learning and support. They envisaged that these countries could eventually set common policy goals among themselves, with those doing well helping those that are lagging behind.
Related News
Infrastructure Financing Trends in Africa – 2013 Report
The Infrastructure Consortium for Africa (“ICA”) has published its Infrastructure Financing Trends In Africa 2013 annual report, which finds that, for the second year running, there was a significant rise in total commitments for energy, transport, water and information and communications technology (ICT) in 2013. Results were reported by ICA members and from independent research carried into other public and private sector funding flows.
ICA members – the G8 countries, South Africa, African Development Bank, Development Bank of Southern Africa, European Commission, European Investment Bank, and the World Bank Group – reported 2013 commitments up 35% compared with 2012, reaching a record level of $25.3bn. The increase has been substantially helped by $7bn of commitments by US government agencies in US President Barack Obama’s Power Africa initiative. The signs are that the rise in commitments has continued in 2014 as ICA members have lined up to support initiatives including Power Africa.
Commitments from the private sector, non-ICA members including China, India, the Arab Co-ordination Group of funds and institutions, and other European countries contributed to total external funding commitments of $52.9bn in 2013, reinforcing a trend of growing support for Africa’s infrastructure, which recorded $34.3bn and $46.6bn total external funding in 2011 and 2012, respectively.
The report indicated sustained growth in African national governments' spending on infrastructure. In the African countries for which data was obtained, while overall budgets increased by 3% in the 2011-13 period, budget allocations for infrastructure increased by 8% in the same period with 21 African countries reporting budget commitments of approximately $46bn.
External Financiers of Africa’s infrastructure
Project preparation frustrations
ICA members’ disbursements (not to be compared directly to commitments in the same year) reached only $11.4bn, 11% lower than reported in 2012. The annual report said: “ICA members identified the enabling environment as the biggest challenge in project preparation, including ensuring the right attitudes, policies and practices with stakeholders.” Critical issues included determining a project’s financial structure.
Respondents to ICA’s now annual Private Sector Survey (compiled by CbI) listed the slow pace at which DFI-led facilities disburse funds among the major constraints on implementing projects. “It seems that the public and private sectors share similar frustrations when it comes to project preparation, a process which may eat up 7-15% of total project costs,” said CbI’s managing director, Mark Ford.
The report said: “The extent that international focus is shifting towards solving the problem of gaps in Africa’s infrastructure is underlined by the attention now given… by senior leaders. It is reflected in an ever-growing number of initiatives – from the innovative Africa50 fund to help underwrite commercial infrastructure projects developed by the African Development Bank and the African Union’s potentially transformative Programme for Infrastructure Development in Africa to the United States’ Power Africa initiative, a range of European Union programmes and funding from China and other non-ICA member states, plus the United Nations-led global Sustainable Energy for All initiative. As the report shows, Power Africa is making progress in meeting the initiative’s initial goals of increasing energy access in sub-Saharan Africa.”
The ICA has created a Project Preparation Facilities Network with the aim of better co-ordinating schemes and their potential donors during the difficult early development stage. Respondents to the private sector survey highlighted the lack of early-stage funding as a key barrier to market entry. The report noted the launch of new early-stage project development facilities by a partnership of Dutch DFI FMO and the Lagos-based Africa Finance Corporation, and the African Sustainable Energy Facility, which “may prove to be useful tools”.
ICA members made by far their largest commitments in 2013 to the energy sector: 51.6% of the total, at $13bn, followed by transport ($5.3bn) and water ($5bn). The largest share of commitments by region was made to West Africa ($8.5bn, equivalent to 34% of the total), followed by East Africa ($6.9bn).
African states are themselves looking to provide more resources to finance infrastructure projects. The report said “national budget allocations’’ appear to be growing but investment levels vary substantially from year to year in several countries”.
China
China remains the largest bilateral investor in infrastructure on the continent. Lending reached $13.4bn in 2013, almost the same as in 2012, although somewhat less than in 2011, and all directed at sub- Saharan Africa.
Diversification of Private Sector Portfolio
Private sector interest is growing, reaching $8.6bn in 2013, spurred by a handful of large-scale projects/programmes such as South Africa’s Renewable Energy Independent Power Producer Programme (REIPP) and large port projects in Nigeria. The private sector survey found that most investors were looking to an internal rate of return of between 16% and 25%, and anticipated that their African infrastructure portfolios would expand over the next five years.
Related News
Ghana’s battle for seed sovereignty
Whoever controls the seed controls the entire food chain. If Ghana’s Plant Breeders Bill passes, small-scale farmers’ rights over this essential resource could go straight into the hands of transnational corporations, write Ali-Masmadi Jehu-Appiah and Chris Walker.
This month, Ghanaian farmers could see the way they control an ancient and essential resource, their seeds, change forever. Members of Ghana’s parliament have been due to resume negotiations on the Plant Breeders Bill 2013 since mid-October. The proposed legislation would put in place intellectual property laws that would allow companies and seed breeders anywhere in the world to gain ownership over seed varieties they claim to have created. Farmers would be prevented from saving, adapting or exchanging these varieties within traditional seed economies, risking heavy fines or even imprisonment if they do.
President John Mahama’s government claims that the laws would incentivise the breeding of safe, saleable and productive seeds to improve the country’s food security. Yet in recent months, farmers, campaigners, trade unions and faith groups have taken to the streets in the cities of Accra, Tamale and beyond. They fear the bill would allow a takeover of Ghana’s seeds and broader food system by transnational corporations (TNCs). It’s why campaigners have dubbed the bill “the Monsanto Law”.
TNCs indeed stand to make vast profits from the Plant Breeders Bill. Seed companies would be able to claim ownership of varieties that have adapted through millennia of indigenous seed breeding but which have been finely altered in a lab, possibly through – thanks to concurrent policy reforms in the country – genetic modification. The Bill does not require the seed breeder to disclose the origin of the genetic material used to develop the variety it wishes to protect or compensate the farmers affected, opening the doors to what opponents are calling “bio piracy”.
Across the world, farmers have got into dangerous levels of debt at the hands of companies which have promoted “improved seeds” and come to control their seed supply. The Ghana National Association of Farmers and Fishermen fears this will be the case with the proposed bill. “The Plant Breeders Bill aims to replace traditional varieties of seeds with uniform commercial varieties and increase the dependency of smallholders on commercial varieties”, says the association. “This system aims to compel farmers to purchase seeds for every planting season.”
Ghana’s bill follows a global push by governments towards new laws promoted under the controversial International Union for the Protection of New Varieties of Plants (UPOV). This trend aims to promote “harmonised” intellectual property laws worldwide, accommodating a truly globalised seed economy. With backing from aid donors, the International Monetary Fund, the World Bank and corporate investors, plant variety protection legislation is gaining pace around the world. But resistance is also growing, and legislation has been stopped in its tracks by widespread protests in both Guatemala and at the European Union this year alone.
Food Sovereignty Ghana and other campaign groups have raised particular alarm over Clause 23 of Ghana’s bill. This declares that the right of a plant breeder protected under the legislation would be “independent of any measure taken by the Republic to regulate within Ghana the production, certification and marketing of material of a variety or the importation or exportation of the material.” It is, in effect, a legislative “lock-in”. “We fail to see how in a country based on a constitutional rule, the rights of the plant breeder… [are] being made independent of any measure taken by the Republic to regulate within Ghana,” says Food Sovereignty Ghana.
The government has claimed that such legislation is a condition of Ghana’s membership of the World Trade Organisation (WTO). Yet WTO member states are permitted to develop “sui generis” legislative frameworks to suit the needs and context of each country. With the bill failing to provide specific protection for small-scale and indigenous farmers, opponents accuse the government of falling prey to hard lobbying from both the US government and TNCs.
Ghana’s proposed seed laws are the latest manifestation of a worldwide push by corporations to take over African food systems. Currently, 90% of Africa’s food production comes from small-scale farmers. But alongside issues such as land-grabbing, control over seeds and genetic material forms a key frontier in the battle for control of food systems in which small-scale farmers are increasingly losing control of their livelihoods. Seed companies including Monsanto, Dupont and Syngenta, who together already control 53% of the global seed market, are now gaining access to sub-Saharan Africa’s markets with the help of initiatives including the G8’s New Alliance for Food Security and Nutrition. Activists fear that community models of seed development and trade will be all but swept aside. “The origin of food is seed,” says Food Sovereignty Ghana. “Whoever controls the seed controls the entire food chain.”
Ali-Masmadi Jehu-Appiah is the Chairperson, Food Sovereignty Ghana. Chris Walker is a Food Campaigner, World Development Movement, UK.
Related News
AFC completes $300m fund raising scheme for trade facilitation, others
Africa Finance Corporation (AFC), a leading investment grade rated multilateral development finance institution, on 17 December 2014 announced the close of a $300 million dual tranche (two-year and three-year) club facility arranged by six initial mandated lead arrangers (IMLAs) and bookrunners.
The financial institutions involved are Bank of Tokyo-Mitsubishi UFJ, Ltd; Citibank N.A; Deutsche Bank AG; FirstRand Bank Limited; Standard Bank of South Africa Limited; and Standard Chartered Bank.
Each of the IMLAs and bookrunners committed $50 million funding to the facility.
Subsequent to the initial funding, a secondary market syndication of the facility was arranged, which witnessed a strong demand for the credit, with new commitments of $336.5 million obtained from 16 lenders across various geographies, such as Asia, Europe and the Middle East.
The lenders include Industrial and Commercial Bank of China Limited, Commercial Bank of Kuwait K.P.S.C, Korea Development Bank, KDB Bank Europe Limited, Burgan Bank S.A.K, Tunis International Bank, First Gulf Bank PJSC, Bank of China Limited, State Bank Of India, Banque des Mascareignes Ltée, Commercial Bank of Qatar Q.S.C, The Export-Import Bank of the Republic of China, Korea Exchange Bank, Al Ahli Bank of Kuwait K.S.C.P, First Commercial Bank Limited, Mega International Commercial Bank Co and United Taiwan Bank S.A.
Altogether, the facility was more than two times oversubscribed during the primary and secondary market processes, with AFC receiving total commitment of $636.5 million from 22 lenders.
The proceeds of the facility will be used by AFC for general corporate purposes including the facilitation of trade.
AFC, a multilateral finance institution, was established in 2007 with a capital base of $1 billion, to be the catalyst for private sector infrastructure investment across Africa.
The Senior Vice President and Treasurer of the development finance institution, Banji Fehintola, explained that “AFC’s long term vision is to help address Africa’s infrastructure deficit and ensure sustainable economic growth for the continent.”
He added: We are encouraged by the confidence that our lenders have placed in us. We believe that the well documented need for bridging the infrastructure investment divide across Africa will provide the opportunity to apply AFCs differentiated model of providing long-term infrastructure financing and value added infrastructure asset project development expertise, to generate real value for our investors and stakeholders”.
AFC’s investment approach combines specialist industry expertise with a focus on financial and technical advisory, project structuring, project development and risk capital to address Africa’s infrastructure development needs and drive sustainable economic growth.
Related News
OECD Development Assistance Committee: High Level Meeting Final Communiqué
The OECD Development Assistance Committee DAC convened its 2014 High Level Meeting from 15 to 16 December 2014 in Paris.
The principal objective of the meeting was the modernisation of the OECD DAC development finance measurement framework to ensure that it is credible and fit-for-purpose in today’s global context.
The decisions and actions taken in the meeting will enable the OECD and its members to make an important contribution to future monitoring of the financing framework underpinning the forthcoming Sustainable Development Goals.
This meeting was the culmination of an imperative fully endorsed by political leaders at the DAC High Level Meeting in December 2012. They called on the DAC to adapt its long-standing statistical concepts to the profound changes in the global financial and economic landscape.
Final Communiqué, 16 December 2014
-
We, the members of the OECD Development Assistance Committee (DAC), convened at high level in Paris on 15-16 December 2014. We welcomed the five new members who have joined the Committee since our last High-Level Meeting in 2012: the Czech Republic, Iceland, Poland, the Slovak Republic and Slovenia. We also welcomed the United Arab Emirates as the first country beyond the OECD membership to become a Participant of our Committee. The International Monetary Fund, the World Bank, the United Nations Development Programme, the Inter-American Development Bank and non-DAC OECD members – Chile, Estonia, Hungary, Israel, Mexico and Turkey – participated in our deliberations.
-
We have witnessed tremendous development progress over the past 15 years. Globally, extreme poverty has been halved, substantial progress has been made toward reaching gender parity in school enrolment at all levels and in all developing regions and child mortality has been halved as has the proportion of people without access to safe water. Yet the job of ending global poverty is unfinished, and we encounter continued instability and conflict, humanitarian crises and rising inequality. Addressing all these challenges in a sustainable way requires a renewed global partnership for development.
-
We met as the world prepares the ground for the post-2015 agenda, an ambitious global framework for achieving inclusive, sustainable development for all. Three decisive events taking place next year will sharpen the vision and clarify the means of implementation underpinning this agenda: the Third International Conference on Financing for Development, the United Nations Summit for the Adoption of the Post-2015 Development Agenda, and the 21st Conference of the Parties on the United Nations Framework Convention on Climate Change.
-
As we shape the new sustainable development goals for the post-2015 era, we want to ensure our contributions make the difference that is needed. We invite the OECD to fully use its interdisciplinary expertise to support members and partners as they design and implement the range of policies needed to achieve these goals in all countries. This new set of goals will require both financial and non-financial means and efforts. As regards the financing challenge, a wide array of domestic and international resources – both concessional and commercial in nature – needs to be mobilised from public and private sources and from all providers. These different resources must also be used effectively, drawing on their respective comparative advantages. In this context, we welcome relevant efforts from across the OECD on development finance, including in the areas of taxation and investment. We consider that improving global access to reliable statistics regarding all these resources will be essential for all stakeholders, including developing and provider countries, to optimally plan, allocate, use and account for development resources. Reliable statistics will also facilitate national, regional and global transparency and accountability.
-
OECD DAC statistics on development finance are a global public good that informs policy choices, promotes transparency and fosters accountability. Following a mandate that we adopted at the 2012 High Level Meeting, we began work to modernise our statistical system, measures and standards to ensure the integrity and comparability of data on development finance and create the right incentive mechanisms for effective resource mobilisation. We have today taken stock of progress achieved in this regard, and have taken decisions in a number of areas.
-
Official Development Assistance (ODA) will remain a crucial part of international development co-operation in implementing the post-2015 agenda, particularly for countries most in need. We also acknowledge the important role of international private flows. Domestic resources, however, will continue to be the main pillar of development finance for the broad majority of developing countries.
-
We note that despite challenging fiscal circumstances in many OECD countries, we have maintained high levels of ODA – which reached an all-time high of USD 134.8 billion in 2013. We reaffirm our respective ODA commitments, including those of us who have endorsed the UN target of 0.7 per cent of Gross National Income (GNI) as ODA to developing countries, and agree to continue to make all efforts to achieve them.
-
We also agree to allocate more of total ODA to countries most in need, such as least developed countries (LDCs), low-income countries, small island developing states, land-locked developing countries and fragile and conflict-affected states. We have agreed today to commit to reversing the declining trend of ODA to LDCs. Those members who have committed to the specific UN target of 0.15-0.20 per cent of GNI as ODA towards these countries reconfirm their commitment. We underscore the importance of collective action and individual steps to better target ODA towards countries most in need (See Annex 1). We will monitor progress in line with each member’s commitments through the OECD peer review process, and additionally on an aggregate DAC level at our senior level meetings.
-
In line with the 2012 High Level Meeting mandate, we have carefully examined how the ODA measure could be strengthened to reflect the nature of today’s development co-operation and to better address current and future development challenges, while maintaining its core character. We remain committed to maintaining the integrity of the ODA definition and further strengthening transparency regarding its measurement and use, including through defining clearly concessionality and updating the reporting guidance on peace and security expenditures. We also recognise that ODA can help bring in private investment to support development, and that it is essential to capture the breadth of official support provided to developing countries.
-
While most ODA is provided in the form of grants, concessional loans form an important part of the measure. However, differences have developed in the way members interpret the unclear “concessional in character” criterion of the ODA definition. We therefore agree to modernise the reporting of concessional loans to make it easier to compare the effort involved with that in providing grants, by introducing a grant equivalent system for the purpose of calculating ODA figures. This means that under the new reporting system, ODA credit counted and reported will be higher for a grant than for a loan. Furthermore, among loans which pass the tests for ODA scoring, more concessional loans will earn greater ODA credit than less concessional loans. Alongside reporting on a grant equivalent basis, ODA figures will continue to be calculated, reported and published on the previous cash-flow system. This means that data on actual disbursements and repayments of loans will continue to be collected and published in a fully transparent manner.
-
We have further decided to assess concessionality based on differentiated discount rates, consisting of a base factor, which will be the IMF discount rate (currently 5%), and an adjustment factor of 1% for UMICs, 2% for LMICs and 4% for LDCs and other LICs. This system, combined with a grant equivalent method, is expected to incentivise lending on highly concessional terms to LDCs and other LICs. To ensure that loans to LDCs and other LICs are provided at highly concessional terms, only loans with a grant element of at least 45% will be reportable as ODA. Loans to LMICs need to have a grant element of at least 15%, and those to UMICs of at least 10%, in order to be reportable as ODA.
-
Consistent with our commitment to pay particular attention to debt sustainability when extending loans to developing countries, we agree that loans whose terms are not consistent with the IMF Debt Limits Policy and/or the World Bank’s Non-Concessional Borrowing Policy will not be reportable as ODA. We request the WP-STAT to prepare the revised Reporting Directives, in accordance with our agreement further detailed in Annex 2, for endorsement by the DAC by the end of 2015.
-
We recognise the importance of strengthening private sector engagement in development and we want to encourage the use of ODA to mobilise additional private sector resources for development. We recognise that the present statistical reporting system does not fully reflect the changing way in which members are engaging with the private sector, nor does it incentivise innovation. We take note of progress already made in developing a modern taxonomy of financial instruments, and methodologies to measure private sector resources mobilised, for example through guarantees. We agree to urgently undertake further work to reflect in ODA the effort of the official sector in catalysing private sector investment in effective development. In doing so, we will explore further the institutional and instrument-specific approaches that have been developed by members, and potentially other approaches, with the aim of concluding at our next meeting. We will continue to collaborate with agencies with special expertise in this field, such as donors’ Development Finance Institutions and other bilateral institutions that use private-sector instruments, and similar multilateral institutions.
-
The development agenda is becoming broader. It is therefore important to recognise and further incentivise the efforts that are being made above and beyond ODA. Accordingly, we agree to continue to develop the new statistical measure, with the working title of Total Official support for Sustainable Development (TOSD). This measure will complement, not replace, the ODA measure. It will potentially cover the totality of resource flows extended to developing countries and multilateral institutions in support of sustainable development and originating from official sources and interventions, regardless of the types of instruments used and associated terms. The components of this measure have been discussed and will be refined, working with all relevant stakeholders, in the lead-up to the Third International Conference on Financing for Development in Addis Ababa. Its ultimate parameters will be clarified once the post-2015 agenda has been agreed. We will also collect data on resources mobilised by official interventions from the private sector using leveraging instruments such as guarantees. We support continued work to establish an international standard for measuring the volume of private finance mobilised by official interventions and want to explore whether and how this could be reflected in a new measure.
-
Supporting developing countries to optimally use the increased diversity of funding sources that they can access today will be important. The transparency of resource flows reaching developing countries plays a role in enhancing the effectiveness of development co-operation. We will therefore strengthen our dialogue with developing countries to ensure that our statistical system contributes to meeting their information and planning needs. Further, we will continue to develop our systems for measuring resource inflows to developing countries, building on our longstanding work with country programmable aid.
-
Recognising that building peaceful and inclusive societies will be an increasingly important part of the development agenda, we will generate greater political momentum in support of peacebuilding and statebuilding efforts. We agree to further explore how support in this area could be better reflected in our statistical system through a possible broader recognition in TOSD, and through updating ODA reporting instructions. In doing so, we will ensure that the main objective of ODA remains the promotion of the economic development and welfare of developing countries. We aim to complete this work in time for our next meeting.
-
We have come some distance in our efforts to upgrade and modernise our statistical systems and tools in order for them to contribute to monitoring the financing framework underpinning the post-2015 agenda. By implementing these changes, we reaffirm our commitment to remain the centre of excellence of high-quality statistics on official development finance. We will explore ways of engaging more systematically with other stakeholders (e.g. partner countries, other providers of development finance, foundations, civil society, private sector, the United Nations and other international organisations) in the further development and use of our statistical system, measures and standards. We welcome the reporting of development co-operation data from an increasing number of sovereign states beyond DAC members (such as European Union Member States, Israel, Kuwait, Liechtenstein, the Russian Federation, Saudi Arabia, Thailand, Turkey, and the United Arab Emirates) as well as other development actors (including the Bill and Melinda Gates Foundation and more than 30 multilateral institutions), and encourage other providers to follow their example.
-
We strongly support the work of the Global Partnership for Effective Development Co-operation (GPEDC), agreed in Busan, as a leading international policy platform and a hub to “share, support and spread development success”, including through the contribution of voluntary initiatives and building blocks. We believe the GPEDC’s flexible, multi-stakeholder, action-focussed approach means that it can play a useful role in helping to implement the post-2015 agenda. We stand ready – with other international fora such as the Development Cooperation Forum – to drive efforts at the international level to anchor the quality of co-operation and the development effectiveness principles in the post-2015 agenda, and at country level to foster learning and exchange of experience in achieving sustainable development results. We reaffirm our existing aid and development effectiveness commitments and resolve to further engage with other providers. We note that a strengthened GPEDC monitoring framework can be a useful tool to measure and report on progress in support of future efforts to implement the post-2015 agenda at developing country level.
-
We look forward to actively contributing to the UN-led process to shape the ambitious post-2015 agenda, and the renewed global partnership to support its implementation, including the future accountability and monitoring system. We will engage with international, regional and local initiatives and actions for a successful outcome of the decisive meetings in 2015.
-
We will reconvene end-2015/early-2016 to take stock of progress in implementing the decisions we have taken today, and in carrying out additional analytical work to bring to closure our effort to modernise the DAC statistical system for the post-2015 era.
Related News
Clim-Dev Africa providing more and better climate services to enhance adaptation to climate change
The Climate for Development in Africa (Clim-Dev Africa) programme dinner dialogue was held at the margins of the UN Global Climate Change Conference (COP 20) in Lima, Peru, to discuss various perspectives for enhancing the provision of climate information services in support of Africa’s economic transformation and capacity to adapt to climate change.
This Clim-Dev Africa programme is implemented under the auspices of the African Union Commission (AUC), African Development Bank (AfDB), and the United Nations Economic Commission for Africa (ECA) and intends to strengthen the policy response to climate change.
Africa currently bears the greater share of the burden posed by climate change, even as it has enjoyed the fastest continuous economic growth of all global regions over the past decade. Africa’s economic growth needs to be resilient to climate change using the best sciences and climate information services. Climate information services are the dissemination of climate data to the public or a specific user.
Fatima Denton, Director, Special Initiatives Division, UN Economic Commission for Africa (ECA), and Olushola Olayide, representative of the Commissioner for Agriculture at the Africa Union Commission, welcomed the recent operationalization of the Clim-Dev Africa Special Fund (CDSF), the financing arm of the programme housed in the AfDB. The objective of CDSF is to finance the enhancement of national and regional meteorological and hydrological services in providing African countries quality data and climate information services. CDSF has €33 million seed money from the Swedish International Development Agency, the European Union and Nordic Development Fund.
Alex Rugamba, Director of the Energy, Environment and Climate Change Department of the AfDB, said that “improving weather and hydrological observation network in Africa is an enormous undertaking that not only requires significant resources, but is also essential for Africa’s ability to adapt to the impacts of climate change.”
As an example, Clim-Dev Africa Special Fund has just approved its first project of €1 million to support enhancing access to climate data and information services in Ethiopia. This project aims to improve early warning systems for climate change adaptation in key climate sensitive sectors of agriculture, water, energy and health. Twenty automated meteorological monitoring stations and seven mobile calibration units will be added to the Ethiopian network.
The Environment Minister from Senegal, Abdoulaye Baldé, highlighted the importance of climate information to enhance resilience of crops in the agriculture sector. Climate affects sectors in a variety of ways and many climate services are used differently for the different sectors.
For her part, ECA’s Denton also stressed that climate information services provide the shield for safeguarding the gains made in economic growth, and capitalizing on emerging opportunities for continuous growth. Besides encapsulating Africa’s development from climate impacts, it can be a catalyst for increasing the scope and scale of transformation, and serving as a lubricant for interrelated sectors in optimizing their productivities cost-effectively, while minimizing trade-offs across systems.
Various perspectives from experts, policy-makers, actors and the private sectors about the means to increase in investments in climate information services and the need for further partnerships were also discussed.
Related News
Development Partners delivered a statement on “Supporting Agricultural Development in Africa”
The European Union as Chair of the Development Partners Task Team and the World Bank presented a statement agreed by development partners affirming their support to the Malabo Declaration on “Accelerated Agricultural Growth and Transformation for Shared Prosperity and Improved Livelihoods”. The Declaration was approved by African Heads of State and Government during the June 2014 AU Summit in Malabo.
The African Union partners welcomed the Malabo Declaration and its focus on agriculture’s central role in promoting sustainable development on the continent. The Malabo Declaration revitalizes the Comprehensive Africa Agricultural Development Programme (CAADP) as the overarching framework for increasing investment in the agricultural sector and for using sound, evidence-based approaches to inform policymaking.
The Malabo Declaration is timely as the “2014 Year of Agriculture and Food Security” draws to a close and there is a need to redouble efforts to make broad-based agricultural development a stronger tool in the fight to end poverty and boost prosperity on the continent.
The African Union partners committed themselves to enhancing their collaboration with African nations for the transformation of the agriculture sector in a consultative and coordinated manner taking into account the existing frameworks for continental, regional, and country-level cooperation. The results of their support will be communicated through the commonly agreed CAADP Results Framework.
Speaking on the occasion on behalf of the Partners, EU Ambassador said that the Malabo Declaration priorities are perfectly in line with Partners priorities for Food and Nutrition security. Malabo represents a paradigm shift insofar as the ‘political development targets’ set at continental level have taken over the ‘investment’ targets of the first 10 years of CAADP. He acknowledged the focus of the Declaration on African resources and efforts which demonstrates real African leadership and ownership. He strongly welcomed African Union Member States to take greater responsibility, within their countries, for pursuing the Malabo Declaration, for reaching the 10% allocation of public expenditures to agriculture, and for continuously improving their agricultural policies.
The Commissioner for Rural Economy and Agriculture of the African Union Commission, H.E. Mrs. Tumusiime Rhoda Peace, in her statement, acknowledged the collaborative endeavors which led to the Malabo Declaration and emphasized the significance of supporting accelerated implementation at the country level through a coordinated and harmonised approach at different levels, which partners can facilitate actions at country levels in their bilateral cooperation.
The Malabo declaration emphasizes ending hunger and malnutrition, enhancing growth and shared prosperity, enhancing intra-African trade, enhancing resilience of production systems and livelihoods, and mutual accountability for actions and results.
Related News
Is Africa’s oil and gas sector under threat?
The gathering of oil and gas companies at Africa Oil Week this year was characterised by a number of concerns regarding the sector’s prospects. Held in Cape Town in early November, the most immediate worry expressed at the event centred on plummeting oil prices and the impact of this trend on investment flows into new exploration.
Oil prices have been on the decline since the middle of 2014 when oil was commanding prices in excess of $100. By November, they had fallen to under $80 a barrel. At that price, the viability of the kinds of new frontier exploration that typify activities in Africa look particularly risky.
Weak oil prices have already had a huge impact on Africa’s largest economy, Nigeria, where the government relies on hydrocarbons for 80% of its revenues. Due to fears over tumbling prices, the Nigerian Stock Exchange all-share index went into freefall in November. In a bid to defend its currency, the Central Bank of Nigeria (CBN) has used its foreign reserves, which have descended to a four- month low, in order to avoid the need to increase interest rates or devalue the naira. By the end of the Africa Oil Week conference, on 7 November, Nigeria’s foreign exchange reserves had dropped for more than two weeks, sliding to $38 billion. It is estimated by Deutsche Bank that Nigeria needs an oil price of $126 a barrel to balance its budget. Were the oil price to continue its precipitous fall, a rise in interest rates and/or a devaluation of the currency would seem inevitable for Nigeria. This would deal a serious blow to President Goodluck Jonathan’s election prospects next year.
However, for all Nigeria’s woes, Rolake Akinkugbe, the Head of Energy and Natural Resources Coverage at First Bank of Nigeria, reminded the Africa Oil Week conference that only a minority of Africa’s 54 countries actually possess known oil and gas reserves. Even fewer actually export hydrocarbons, and as she pointed out, the effect of lower oil prices is generally welcome news to Africa’s majority of non-producers.
The next sub-prime crisis?
Another major concern for the oil and gas industry currently comes from the threat of climate change. More pressure has been exerted on the industry recently following the publication of a landmark report by the Intergovernmental Panel on Climate Change (IPCC). The publication issued the starkest warning yet that the world is on a path to a temperature rise of four degrees, a scenario scientists say would be “catastrophic”.
As Rajendra Pachauri, the IPCC chief, warned: “We have little time before the window of opportunity to stay within two degrees [of warming] closes. To keep a good chance of staying below two degrees, and at manageable costs, our emissions must drop by 40% to 70% globally between 2010 and 2050.”
Given these warnings, the oil and gas industry in Africa fears new emissions legislation could curb their activities. The burning of fossil fuels accounts for around 37% of all global greenhouse gas emissions, and 7% of global oil and gas supplies come from Africa. There have of course been plenty of similar alarms raised by experts and scientists in the past, but what makes the newest report particularly significant is the political backing it has received.
UN Secretary-General Ban Ki-Moon threw his weight behind the panel’s findings, stating: “Human influence on the climate system is clear, and clearly growing.” Meanwhile, US Secretary of State John Kerry claimed that “those who choose to ignore or dispute the science clearly laid out in this report do so at great risk for our kids and grandkids.”
Most significantly, however, US President Barack Obama and China’s President Xi Jinping announced in November after meeting in China that their respective countries – the former with the world’s highest per capita emissions, the latter with the world’s largest absolute emissions – would commit to targets to lower their carbon emissions.
The current flurry of activity around climate change comes ahead of UN talks in Lima, Peru, this month, which will set the groundwork for a global warming pact to be debated in Paris early next year. The tentative progress being made has encouraged some observers that negotiations are on track, but as ever, the devil will be in the detail. And Africa’s oil and gas interests will be keeping a particularly close eye on how any treaty talks differently about developed and developing economies. Many argue that any deal must be careful not to stand in the way of poorer countries industrialising and growing. This means that Africa’s obligations ought to be different to those of nations that reached high levels of industrialisation long ago.
Another way in which African oil and gas companies may avoid restrictions imposed by a climate change agreement comes in the form of Carbon Capture and Storage (CCS). CCS is a technology whereby fossil fuels are “stripped” of their dirty gas emissions that are then buried in underground reservoirs.
The first full-scale CCS plant, located in Canada, is reportedly operating relatively successfully, and in a surprise announcement, the European Union recently endorsed the process in its climate and energy package. If the technology were to be developed and the knowledge transferred to Africa, it could be used as an option to offset greenhouse gas emissions and therefore allow the continued exploitation of hydrocarbons.
The oil and gas industry could certainly do with these kinds of breakthroughs as a number of financiers and investors have warned that fossil fuels might be the next sub-prime crisis in waiting. Mark Lewis, the former head of energy research at Deutsche Bank, for example, says that if the Paris meeting results in emissions limits, the fossil fuel industry “would stand to lose $28 trillion of gross revenues over the next two decades, compared to a business-as-usual scenario. The oil industry alone would face ‘stranded assets’ of $19 trillion.”
Renewable competition
A further challenge that the oil industry will need to confront going forwards is competition from renewable energy. The rapidly declining price of solar panel systems and, to a lesser extent, wind turbines, makes them highly attractive propositions, especially with more African utility companies offering “buy-in” tariffs. Solving issues around energy storage and consistent generation would even further open up the possibility of grid-scale power plants using concentrated solar power.
There are currently systems being tried such as pumping water uphill during the times when electricity is generated then letting it fall to drive turbines and generate power at “off-times”, or attempts to use solar energy to heat molten salts which can store the energy to be released when needed. These are promising technologies, but in their current formulations, neither is particularly efficient.
However, scientists such as Nicolas Calvet, professor of mechanical and materials engineering at the Masdar Institute in Abu Dhabi, are constantly innovating and researching in the hope of developing more viable alternatives. And Calvet, who leads Masdar’s thermal energy storage research group, believes he may be onto a promising new system. Calvet believes using sand, which is both cheaper than salts and can store thermal energy at 1000°C rather than molten salts’ 600°C, could work even better.
It will be a while before we know how viable, efficient and scalable such a system would be, but either way it is clear that Africa’s oil and gas industry faces considerable challenges in the near future.
Whether from economic arguments against exploration, growing concerns around climate change, or competition from renewable energies, the delegates of Africa Oil Week will no doubt be polishing their crystal balls to work out what’s next for the industry.