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SADC organizes a Customs Training of Trainers Course on NTBs in cooperation with the WCO
The Southern African Development Community (SADC) organized a fourth Training Course under its Customs Training of Trainers (TOT) Programme 2013-2016 from 17 to 20 November 2014 at its Headquarters (Gaborone, Botswana). The training was conducted in collaboration with the World Customs Organization (WCO), the WCO Regional Office for Capacity Building (ROCB) for the Eastern and Southern Africa Region, and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ). Forty-two senior Customs officers from 13 of SADC’s 15 Member States, many of whom are active in their administrations’ training departments, participated in the Training Course.
The main objective of the TOT Programme is to provide technical and professional support, particularly in view of the contribution by Customs administrations to the consolidation of the SADC Free Trade Area and the successful implementation of the SADC Protocol on Trade. This will be achieved through the TOT Course on Non-Tariff Barriers (NTBs), which continue to be major stumbling blocks to trade in the region and many of which are Customs-related (or perceived as such). Participants who complete the Training Course will disseminate the knowledge gained, at national level, to relevant stakeholders including Customs officers from their own administrations.
Participants learnt the basic principles and definition of Non-Tariff Measures and NTBs, covering the World Trade Organization (WTO) Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) and inter-regional initiatives such as the online NTB monitoring mechanism and national monitoring committees. They also gained an overview of the Agreement on Trade Facilitation (TFA) recently concluded under the auspices of the WTO. The WCO gave an introduction to its tools and instruments for applying trade facilitation measures and to the Revised Kyoto Convention (RKC). Particular emphasis was placed on the new Transit Handbook and the TFA Implementation Guidance.
The course was highly interactive and participants shared their views on the importance of global standards to facilitate regional integration and various trade facilitation measures. They discussed how they could promote Coordinated Border Management (CBM) and increase public-private dialogue at national and regional level.
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Continent prepares for the launch of the Africa Regional Integration Index
The African Development Bank (AfDB), the African Union Commission (AUC) and the United Nations Economic Commission for Africa (ECA) have joined forces to produce an Africa Regional Integration Index.
The Index, the first systematic, quantitative, continent-wide monitoring system for regional integration in Africa, is designed to track the progress of African countries and regional economic communities (RECs) towards achieving their shared regional integration goals. It will also track and document the impacts of regional integration in Africa.
The Index will help countries and RECs to identify gaps and make informed policy decisions on how best to meet their regional integration aspirations and commitments.
Given the novelty of the project and the fact that most of the indicators that are to be used have never been compiled in this manner before, AfDB, AUC and ECA will organize a series of training sessions for national statistical focal points. In the first instance, the three institutions are focusing on training statistical focal points from the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and Southern African Development Community (SADC) countries.
The pilot training workshop, which was funded by the Africa Trade Fund, an AfDB hosted trade-related technical assistance facility, was held from the November 24-28, 2014 at the AUC Headquarters in Addis Ababa, Ethiopia. The training brought together statistical focal points from Mauritius, São Tomé and Príncipe, Comoros, Madagascar, Djibouti, Burundi and Cape Verde. The next training workshop is scheduled for February 2015 in South Africa. It will bring together more than 20 focal points from different RECs and Corridor Agencies.
The three institutions will also present their ongoing work on the Index at the margins of the first joint Africa Directors-General of Statistics meeting in Tunis from December 8-12, 2014, as well as at the African Union (AU) Summit in January 2015.
The first edition of the Index shall be presented at the Joint AU Conference of Ministers of Economy and Finance and ECA Conference of African Ministers of Finance, Planning and Economic Development in March 2015.
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Illicit financial flows: Why Africa needs to ‘Track It, Stop It and Get It’
Financing development in Africa has proved to be difficult in the past, compelling the continent to rely on external sources including overseas development assistance. This type of assistance is often unevenly distributed, unsustainable and, in some cases, damaging to national economies in the long run. Lessons learned from Africa’s development trajectory over the past three decades have prompted a fresh wave of thinking towards a post- 2015 development agenda and Agenda 2063 transformative developmental framework designed to ensure self-reliance for Africa. In the light of the recent global economic and financial crises and the approaching deadline for achieving the Millennium Development Goals, a structural transformation agenda will require an adequate, predictable, sustainable and integrated financing mechanism geared towards financing development goals. The continent must embark on reforms to capture currently unexplored or poorly managed resources. This includes curtailing illicit financial flows and transforming those funds into a powerful tool for enhancing domestic resource mobilization, as a way of furthering the continent’s development.
In response to the challenges set out above, the High-level Panel on Illicit Financial Flows was established in 2012 by the Economic Commission for Africa (ECA) and the African Union Commission (AUC), at the request of participants at the Fourth Joint Annual Meetings of the ECA Conference of African Ministers of Finance, Planning and Economic Development and AUC Conference of Ministers of Economy and Finance, which was held in March 2011. The Panel will present its final report in January 2015 at the twenty-fourth ordinary session of the Assembly of the African Union. The report is based on rigorous research, country case studies and regional consultations within and outside Africa.
The Panel has adopted a clear and specific definition of illicit financial flows. Such flows are defined as money that is illegally earned, transferred or utilized. This represents a major break from the dominant work on capital flight, which emphasizes macroeconomic instability, including the business environment, as the main driver of capital outflows and therefore places the burden of resolving the problem on developing countries rather than promoting shared responsibility. It also focuses attention on the structural and governance limitations that fuel such flows from Africa. The Panel’s focus on hidden resources and their potential impact on development places the issue of illicit financial flows firmly in the broader realm of international political economy and emphasizes the role of governance at both the origin and the destination.
These cross-border transfers of illicit money have a considerable detrimental impact on Africa’s development and governance, especially in the transnational context. Among other things, illicit financial flows stifle Africa’s socioeconomic progress by draining scarce foreign exchange resources, reducing government tax revenues, deepening corruption, aggravating foreign debt problems and impeding private sector development. The extractive sector is often particularly affected by these phenomena. This in turn reduces the resources that Africa has for development. The governance challenges of illicit financial flows include weakened public institutions and ultimately a reduced capacity of the State to provide public resources and welfare for the people.
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Africa Integration Index 2014
Since the launch of the Visa Africa Integration Index in 2013 the African economy has extended its best period of economic growth on record by delivering growth of 4.8 percent in 2013. With annual economic growth averaging in excess of five percent since 2000, Africa’s economic growth has outpaced the global average by more than two percent per annum since the turn of the millennium.At an individual level, a number of African countries have enjoyed faster economic growth than the established Asian economic success stories in recent years, and six of the world’s ten fastest-growing economies between 2001 and 2010 were African.
It is widely expected that this feature of buoyant economic growth will continue for the foreseeable future and it is likely that the African economy will achieve a growth rate approaching 5.5 in 2014. With a collective gross domestic product (GDP) of over $1.9 trillion – a figure that is expected to exceed $2.6 trillion by 2020 – Africa today is one of the world’s fastest growing regions, which translates into exciting investment prospects. To this end, whilst Africa’s economic fate for a long time was associated with a reliance on foreign aid, the region now boasts the highest rate of return on investment of any region in the world. Although boundless opportunities in natural resources currently serve as a key driver of this growth, Africa’s billion-strong youthful and increasingly urbanised population is translating into booming consumer and labour markets that will drive economic growth for years to come making Africa’s much-vaunted potential a reality. Notably, this bullish economic outlook represents a break with the past.
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New scheme seeks to cut freight costs in East Africa
A whooping $16 million (about Rwf11bn) fund has been set aside for innovators who can come up with effective strategies to cut costs on transport and logistics in East Africa.
The competition, dubbed Logistics Innovation for Trade (LIFT), will provide grants ranging from $200,000 (about Rwf137m) to $750, 000 (about Rwf514m) to winning proposals from innovators from across the world but whose ideas will be implemented in East Africa.
The challenge was launched yesterday in Nairobi, Kenya.
Managed by Trade Mark East Africa, the challenge seeks to trigger and introduce innovative approaches to tackling freight and transport costs in East Africa which reportedly has the highest freight and transport costs in the world.
Applicants are expected to devise strategies of reducing the time taken along the major East African transport corridors.
The two major corridors are; the Northern Corridor, which links EAC countries to Mombasa Port, and the Central Corridor which connects to Dar-es- Salaam.
TradeMark East Africa’s Senior Director of Business Competitiveness Lisa Karanja said their desire was to see East Africa adopt world class logistical technologies to ably compete with the rest of the world.
“It is a challenge to the private sector to develop and test new ideas that could reduce the cost and time of transport and logistics. TradeMark will co-invest with the private sector in projects that have the potential to achieve this but may be too risky to undertake without external support,” Karanja said.
The organisation’s Challenge Fund manager, Isaac Njoroge, said the fund will help private businesses and innovators mitigate risks of high return projects that are risky and have not been tested.
“Businesses in the transport and logistics industry are hereby invited to submit their ideas,” Njoroge said.
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NEPAD/SADC Food and Nutrition Security Knowledge-sharing and Monitoring Platform Consultation workshop
The New Partnership for Africa’s Development (NEPAD) and the Southern African Development Community (SADC), with the support of the Food and Agriculture Organisation of the United Nations (FAO), are organizing a 2 day consultation workshop on December 3rd – 4th 2014, in Johannesburg, South Africa to discuss the opportunity of consolidating efforts of knowledge-sharing and monitoring in the SADC region for improved Food and Nutrition Security and Resilience through Risk Management with the establishment of a NEPAD/SADC Food and Nutrition Security Knowledge-Sharing and Monitoring Platform.
This initiative is envisaged in response to the Malabo Declaration and Implementation strategy (to come), including the Accelerated Agricultural Growth and Transformation Goals 2025 (Assembly/AU/Decl.1(XXIII)), and the CAADP Results Framework (2015-2025) which stipulate the importance of conducting systematic mapping, monitoring and evaluation efforts at regional and country levels and set targets for improving food and nutrition security. It will also support regional mechanisms, such as the implementation of the SADC Food and Nutrition Security Strategy. It will build on on-going efforts to strengthen access to information and capacities of governments and stakeholders for improved informed decision-making within the CAADP framework and the SUN Movement.
Ultimately, this initiative is aiming at (i) improving access to up-to-date and accurate data, including specific nutrition, food security and risk management indicators, as well as information on the different policies, programmes, coordination mechanisms and investments in the area of food and nutrition security across countries, sectors and actors; (ii) providing a support decision and advocacy tool for improved food and nutrition security related policies and investments; (iii) enhancing sharing of knowledge on good practices and cooperation across countries for improving food and nutrition security and resilience building.
Objectives and outputs of the workshop
The consultation workshop goal is to set the stage and discuss the relevance and scope of a NEPAD/SADC Knowledge-Sharing and Monitoring platform for capturing, synthesizing and disseminating relevant information related Food and Nutrition Security, and encouraging exchange of knowledge and expertise across member states in the SADC region.
Specific outputs of the workshop will be:
- Take stock of existing networks and initiatives, their lessons learned and best practices ;
- Elaborate the purpose, the value addition to stakeholders, the functions and the scope of knowledge exchange across countries for enhancing food and nutrition security;
- Explore the possible content (incl. type of data, information and knowledge) of the platform and mechanisms for knowledge exchange ;
- Clarify the roles and responsibilities of different actors in contributing to this initiative and resources required for sustainable operating modalities ;
- Identify next steps (Roadmap) and pilot countries.
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Gabon announces final deal reached with WTO members on tariff changes
Gabon’s top trade official told a meeting of the Council for Trade in Goods on 17 November 2014 that it has concluded negotiations with WTO members on compensation for changes to the country’s tariff commitments resulting from its membership in the Central African Economic and Monetary Community (CEMAC).
Commerce Minister Gabriel Tchango noted that Gabon made adjustments to its tariff lines on imports of non-agricultural goods in order to match the CEMAC common external tariffs. This resulted in 38 per cent of its tariff lines, or 2,131 tariff lines in total, exceeding the maximum (“bound”) rates agreed to by Gabon in its WTO schedule of commitments.
Mr Tchango said the issue had been a point of contention since 1995 and was raised in WTO trade policy reviews of Gabon in 2001, 2007 and 2013. In 2008, Gabon commenced negotiations under Articles XXIV and XXVIII of the General Agreement on Tariffs and Trade (GATT) to compensate WTO members for the adjustment.
The negotiations will result in Gabon raising its bound tariffs on 2,159 lines and reducing bound tariffs on 2,626 lines, leading to an average bound rate of 18.08 per cent on imports of non-agricultural goods, the minister said.
The United States and the European Union both confirmed they reached agreement with Gabon on compensation, with Japan and Morocco welcoming the conclusion of the negotiations.
At the same meeting, Jordan submitted a request to extend the phase-out period for export subsidies provided to domestic producers, namely small- and medium-sized enterprises (SMEs), until the end of 2022. The current WTO arrangement, which will expire at the end of 2015, allows Jordan to provide this kind of export subsidies in the form of partial or total exemption from income tax of profits generated from certain exports.
Jordan’s Secretary-General of the Ministry of Industry, Trade and Supply, Ms Maha Ali, noted the request for extension would be limited to tax exemptions for SMEs, and that the request was justified by the “persisting severe regional and international circumstances” her country was facing, including “unprecedented regional volatility” which has resulted in the closure of more than 1,000 factories and the loss of almost 14,000 jobs since January 2013.
Kuwait, Bahrain, Oman, Qatar, Saudi Arabia, Turkey, Egypt, Tunisia, China and Korea all voiced support for Jordan’s request, given the challenges the country continues to face. Japan, the US, the EU, Australia, New Zealand and Canada said they were sympathetic to Jordan’s plight but would like Jordan to consider other relief measures besides export subsidies, which are one of the most harmful trade-distortive measures and prohibited under WTO rules. These members said it was also unfair to other developing countries that have phased out their export subsidies, and noted the decision by the WTO’s General Council in 2007 to extend the phase-out until the end of 2015 was granted on the condition that the deadline not be extended again beyond that date.
Also at the meeting, the EU voiced concerns about Armenia’s request to modify its WTO commitments in order to harmonize its tariffs with that of partners in the Eurasian Economic Union (EAEU). Armenia signed the treaty of accession to the EAEU on 10 October and will apply the EAEU’s Common Customs Tariff upon domestic ratification of the treaty, most likely in January. The EU said Armenia’s request implies revision of its entire tariff system, with more than 6,500 tariff lines concerned, and asked Armenia to submit a revised request with additional details. Japan said Armenia’s request raised systemic questions, given the extent of the proposed tariff increases and the large number of tariff lines affected.
Armenia replied that it was ready to enter into negotiations with WTO members on possible compensation under Articles XXIV and XXVIII of the GATT.
The EU, the US and Japan expressed continued concern with what they described as growing protectionism in the Russian Federation, concerns that were also echoed by Korea, Australia, Canada, Ukraine, Chinese Taipei and New Zealand. The EU said the experience of Russia in the WTO to date has been “disappointing” and said the fact that the EU had already initiated four WTO dispute proceedings against Russia pointed to “systemic problems”. The EU also deplored what it said was the frequency of Russia’s resort to protectionist measures, citing, among other things, Russian subsidies for automobile producers, safeguard measures targeting imported harvesters, and excessive import duties on various goods. Concerns were also expressed regarding different export taxes on oil shipped to the Far East and to the EU.
The US noted concerns with what it said was Russia’s growing trend to adopt discriminatory policies against imports affecting goods such as pharmaceuticals, medical devices and agricultural products. Japan cited Russia’s decision last April to raise tariffs on imported TVs as going against its commitments in APEC (Asia Pacific Economic Cooperation) and the G-20, while Ukraine cited “serious concerns about systemic noncompliance” with Russia’s WTO commitments, including the lack of scientific justification for sanitary restrictions on imported farm goods.
The Russian Federation replied that most of the interventions made were similar to those in previous Goods Council meetings. Russia said it is always ready for constructive dialogue and encouraged members to engage in bilateral discussions on the problems cited if such problems exist. Russia noted that on 1 September it revised its duties and reduced tariffs on items which had been of concern to some WTO members. Russia insisted its sanitary restrictions, safeguard on imported harvesters and other measures were in full compliance with its WTO commitments.
The Russian Federation for its part expressed concerns about recent association agreements concluded by the EU, in particular the agreement the EU concluded with Ukraine. Russia said its preliminary review of the agreements show some elements, especially those concerning the free circulation of goods, were in conflict with other free trade agreements and may conflict with WTO legal requirements. Russia said the association agreements were clear evidence of the fragmentation of, and a direct threat to, the multilateral trading system. Russia also hit out at Ukraine’s anti-dumping measure on imports of ammonium nitrate from Russia, saying it had serious concerns about the method for calculating the margin of dumping and adjustments made in regards to gas pricing. The EU responded that its association agreements were fully compatible with WTO rules while Ukraine said it received a number of questions from Russia about the anti-dumping measure and was working hard to provide answers.
Nigeria once again came under scrutiny for its restrictions on imports of fishery products as well as local content requirements in the oil and gas sectors. On the former, Chile, the EU, Iceland, Norway, the US and Uruguay all noted the impact Nigeria’s import licensing requirements and quotas were having in reducing imports from their producers, while on the latter the EU, the US, Australia and Japan all asked Nigeria to respond to longstanding questions about apparent local content requirements. In regards to fisheries, Nigeria said it was still in consultations with domestic stakeholders in formulating a new policy for the sector, while on oil/gas it said its policies provide a good balance between national aspirations and participation by international investors in the sector. Nigeria also noted ongoing inter-ministerial consultations on the questions raised.
A number of WTO members continued to question various restrictions imposed by Indonesia on imports and exports of goods. The EU, the US, Japan, Korea, Canada, Australia, New Zealand and Chinese Taipei cited restrictions on agricultural and horticultural products, mining products and high-tech goods such as cellular phones, among other Things. Japan in particular cited an Indonesian regulation which would impose an obligation on shopping centres and modern retail shops to ensure 80 per cent of products in their outlets are of domestic origin, and the country’s new Mining Law, which prohibits the export of raw materials such as nickel ore. The US, the EU and Japan encouraged new Indonesian President Joko Widodo to improve the business and investment climate in his country but Japan added it would seriously consider taking additional steps under WTO dispute settlement rules to address its concerns about the Mining Law as long as the current situation remains unchanged.
Indonesia replied that some of the import measures were justified by safety, security, health and environmental concerns but that it remained committed to continue working in the WTO and other forums to find a solution to the concerns while respecting its development objectives.
The meeting was chaired by Bulgaria’s ambassador to the WTO, Atanas Atanassov Paparizov, who was appointed to replace Sweden’s former WTO ambassador Joakim Reiter as Goods Council chairman.
Background
The Goods Council is responsible for the workings of the General Agreement on Tariffs and Trade (GATT), the WTO’s main agreement governing trade in goods. The Council oversees the work of the committees, working groups and working parties on sectors of activity covered by the GATT, including agriculture, market access, subsidies, trade remedy measures and others.
Further information on the Goods Council and its work can be found at www.wto.org/goods
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Economic diversification of Angola costs US$22.7 billion
The projects selected to accelerate the process of diversification of Angola’s economy over the next three years have an estimated cost of US$22.7 billion, Angola’s Economy Minister said recently in Luanda.
Abraão Gourgel, who was responding to questions from members of parliament at the 5th Economy and Finance Commission about specific points of the State Budget for 2015, pointed out that private investors would have raise funds abroad to sustain that amount investment.The minister said the government had identified, for the first phase, 36 projects which would speed up the process of diversification of the economy, with short lead times, of between 18 and 24 months.
“The government has concluded that the speed of the process of diversification of the economy was not satisfactory for the proposed objectives, which is why it has approved a strategy to speed up that process,” he said, cited by news agency Angop.To this end, he noted, the government has identified seven “clusters”: agro-industry and food, mining, oil and natural gas production chain, services, energy and water, transport and logistics.
The identified projects include Companhia de Bioenergia de Angola (Biocom), the Kizenga industrial hub, the Pedras Negras farm, phosphate production, gold mining and the big mining and steel project of the Cassinga and Cassala Quitungo mines as well as the production and export of iron.To this list, the minister added the production of fertilisers, based on gas derivatives, projects at the tourism areas of Okavango, Cabo Ledo and Calandula and the Lobito and Soyo refineries.
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The “Billion Dollar Map” technical report
The African Minerals Geoscience Initiative (AMGI) is a pan-African initiative under the leadership of the Africa Union Commission for the collection, consolidation, interpretation and effective dissemination of national and regional geodata through a geo-portal, thereby increasing accurate and updated geo-scientific data available in public domain. This would be done with the ultimate goal of seeking to facilitate broad-based governance changes in the mineral and other downstream and side-stream sectors, including: (i) improved licensing processes and procedures that efficiently leverage the natural resource wealth of countries; (ii) improved spatial planning, infrastructure development, forest and wildlife conservation through the use of regional resource corridors; and (iii) sustainable development policies for natural resources management.
AMGI corresponds to one of 9 clusters (Geological and Mining Information Systems) of the African Mining Vision (AMV) Action Plan. The African Mining Vision (AMV) was developed by Africa’s Ministers responsible for Mineral Resources at their conference in Addis Ababa in October 2008, with the ultimate objective that Africa’s mineral resources must be used to meet the Millennium Development Goals (MDGs), eradicate poverty, and achieve rapid and broad-based socio-economic development. The African Union Heads of State and government, at their assembly in Addis in February 2009, welcomed the AMV and requested the “AU Ministers in charge of Mineral Resources Development to develop a concrete action plan for its realization”. The AMV Action Plan therefore responds to this directive. It comprises several program clusters of activities constructed around the key pillars of the vision.
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Small island developing States: Challenges in transport and trade logistics
Small island developing States (SIDS) are a diverse group of island countries that share some common features and vulnerabilities such as insularity, geographic remoteness, and smallness of economies, populations and area. Together, these factors emphasize the importance of well-functioning, reliable, sustainable and resilient transportation systems, in particular maritime and air transport for SIDS development and survival. In this context and capitalizing on the renewed international commitment to advance the sustainable development agenda of those States, UNCTAD is increasingly focusing its attention on to tackle challenges in transport and trade logistics faced by SIDS. Relevant activities include a special chapter of the annual Review of Maritime Transport 2014 devoted to developments in the maritime transport sector of SIDS, an ad hoc expert meeting held on 11 July 2014 considering the theme “Addressing the transport and trade-logistics challenges of the small island developing States: Samoa Conference and beyond”, and a contribution to the Third International Conference on Small Island Developing States(Samoa Conference) in the form of a substantive report entitled “Closing the Distance: Partnerships for Sustainable and Resilient Transport Systems in SIDS” (forthcoming).
This paper highlights some of the key challenges in transport and trade logistics facing SIDS and identifies areas of potential action with a view to meeting these challenges and explores potential opportunities. Considerations raised seek to inform deliberations at the meeting and stimulate discussions with a view to shaping the way forward, in particular, in the light of the outcome of the Samoa Conference and the post-2015 development agenda.
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Mozambique Economic Update: November 2014
Selected Highlights
Economy continues to register strong growth
The Mozambican economy grew by 6.9 percent in the second quarter of 2014, bringing average growth in the first half of 2014 to 7.2 percent, somewhat lower than projected growth in 2014 at 7.4 percent. Quarterly growth figures indicate an acceleration of economic activity after a dip in the second half of 2013. Slowdown in economic activity in the second half of 2013 was related to challenges in the mining sector (infrastructure, international commodity prices) affecting investment as well as the persisting political violence and conflict, which have now eased after the peace deal.
Despite this pick-up in activity, growth remains well below the strong levels of early 2013. Expansion has decelerated in some sectors that have been major drivers of growth in the recent past, such as construction and transport and communications. These sectors would be affected by a slowdown in mining but also suffer from the effects of recent political tensions. Growth in the agricultural sector has also slowed down while the manufacturing sector has accelerated. Financial services and extractive industries remain among the fastest growing sectors in the second quarter, although the latter has decelerated when compared to previous years. Despite moderate and below average growth, agriculture remains the single largest contributor, accounting to almost one third of the total growth in the economy, followed by financial services and manufacturing, each explaining about one fifth of the total growth. On the other hand, due to the small size of the sector, the extractive industries explained only about 4 percent of the total growth despite rapid year on year growth.
International Reserves remain stable
International reserves stood at US$ 2.9 billion at the end of October 2014, a slight decline in the quarter, to some extent caused by the strength in the US dollar. Other contributors to the decline in reserves were payments by the Government, US$ sales by the Central Bank and debt servicing. Positive contributions came from payments to the state (including from extractive industries) and budget support. Despite this slight decline, reserves are still the equivalent to 4.2 months of imports excluding the mega-projects.
Budget Execution Rates are higher than in the first half of 2013
State revenue by the end of the second quarter reached MT 74.6 billion, representing 50.7 percent of the target for the entire year. This execution rate is 4.6 percentage points higher than during the same time in 2013. This improvement in tax collections was partially the result of large capital gains taxes collected in the first quarter of the year. However, grants have flown in slower than expected, with only 36 percent of all grants projected for the year disbursed in the first half of the year. Total expenditures during the first two quarters reached MT 100.2 billion, a nominal increase of 44 percent compared to the period in 2013, with higher execution rates of both current and capital expenditures. Execution rates at the sectoral level shows significant differences, with very low execution rates in the agriculture sector.
The Revised Budget increases public spending to almost 47 percent of GDP
In August 2014 parliament approved a revised budget that brings expenditures to a projected 46.6 percent of GDP (although execution may be somewhat lower, given the large increase in investment spending), a further increase from the original budget. This revision would also mean an increase in the budget deficit (after grants) from 9.2 percent of GDP to 10.0 percent of GDP. This expansionary fiscal stance is explained by one-off expenditures related to the election year as well as other factors like the inclusion of the non-commercial part of the EMATUM operation in the budget. A fiscal deficit of 10 percent does not seem sustainable over a longer period of time, which suggests that fiscal policy will need to tighten in the near term.
Inflation continues to be low
Inflation in October 2014 fell to 1.3 percent. Inflation has been on the decline since April 2014. The low rate can be attributed to factors like favorable import prices due to appreciation of the Metical against the South African Rand, decline in the prices of food helped by a good harvest as well as marginal reductions in fuel prices. This trend in inflation is expected to continue until the end of the year and the Central Bank expects this low inflation to continue into next year.
While growth remains strong in Mozambique, downwards risks persist
A modest rise in global growth in the second half of the year is expected to bring annual average growth to 2.6 percent. While growth is recovering in the developed countries, developing countries are expected to post growth rates below long run levels. Average growth in Sub-Saharan Africa is expected to be above average for the developing world.
Commodity prices remain a major external risk to growth in Mozambique. A further decline in already depressed coal prices would result in lower exports and could affect investment and operations in the mining sector negatively, putting downward pressure on growth and the current account deficit as well as government revenues, with regular (non-capital gains) revenues from mega projects already accounting for 6-7 percent of total revenues.
Commodity prices are expected to remain weak for the remainder of 2014 and much of 2015, a combination of both weak global demand and ample supply of key commodities; a rebound in prices is expected only by 2016. Metal prices remain low but stable, while prices for both agricultural and energy commodities have declined sharply in the past quarter. LNG prices in Asian markets have remained strong but are expected to slowly decline and converge with low energy prices in other markets.
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Energy Sector Capacity Building Diagnostic and Needs Assessment Study
The African Development Bank’s NEPAD Regional Integration and Trade Department (ONRI), has published the Energy Sector Capacity Building Diagnostic and Needs Assessment Study.
This report focuses on addressing the “soft infrastructure” challenges that hamper the efficient operation and financial performance of the energy sector in Africa. Such soft infrastructure issues include legal and regulatory reforms, energy sector restructuring (as partly envisaged in countries like Angola, Kenya and Tanzania), power planning and support for enhanced regional power trade. Addressing these challenges would boost capacity for regional energy trade across the four regional power pools of Sub-Saharan Africa, which in turn would enhance energy security whilst bringing economies of scale in energy sector investments.
Africa’s energy sector is undergoing an exciting period of transformation with a gradual shift away from purely national energy planning and investments towards more integrated regional approaches. This is evident from the emergence of various regional energy master plans, regional interconnection/grid codes, plans for regional market operations and efforts towards harmonization of standards. A critical milestone will be the full implementation and operationalization of regional guidelines for systems operation and platforms for regional energy trade. It is opportune, therefore, to ask what sort of technical reforms and skills would be required to serve the emerging interconnected energy sector in Africa.
On the physical infrastructure side, the investment needs to achieve interconnected regional energy systems in Africa are well documented. As the most energy poor region in the world with some of the highest prices per kilowatt hour, it is estimated that Africa needs more than US $40 billion worth of annual investments if it is to double current levels of energy access by the year 2030.
Increasingly today, the Bank and other development partners are being called upon to provide resources to improve the technical and financial performance of the energy sector to complement physical infrastructure investments. This report provides a useful guide on how the Bank can package such resources using regional and national approaches. Using interviews, surveys and literature reviews of technical documents the diagnostic assessment covered 88 stakeholders in the electricity industry that included the four regional power pool secretariats in Central, East, Southern and West Africa, energy utilities, regulators, policy-makers and energy training centres.
Energy sector reforms across Africa have not always translated into improved financial performance and operational efficiency. However, the entry of private sector players and the establishment of inter-connected regional power pools have renewed interest in sustained sector reforms in order to improve the enabling environment for investors. Key prerequisites include establishing a sound regulatory framework and institutions, achieving financial viability amongst the energy utilities, and developing high-level skills to ensure optimal operational performance.
Not surprisingly we find that the four regional power pools still face challenges in achieving the full benefits of regional power integration as a result of national electricity sectors being at different stages of reform, development and financial capability. This results in differences in regulatory environments (including lack of technical and regulatory harmonization), weak regional and national institutions, occasional misalignment in national and regional power investment decisions and so on. However, all four regional power pools have clear objectives to develop technical harmonization and competitive regional power markets.
To support these ambitions of deepening integration and energy trade within and across the regional power pools, the report places emphasis on five critical areas, namely: (i) improving the legal and regulatory framework governing the energy sector; (ii) improving performance amongst the energy utilities that constitute the regional power pools; (iii) strengthening capacity in systems operations and dispatch; (iv) supporting reforms to nurture a conducive enabling environment to attract energy investments; and (v) upgrading energy sector skills through targeted energy Centres of Excellence.
Already, the Bank has started to take on board some of the recommendations from the report and is exploring ways to incorporate energy sector reforms and capacity building within future energy infrastructure operations. The report consists of two (2) volumes. Volume 1 presents results of the SSA power sector diagnostic of technical needs, while Volume 2 presents the proposed technical assistance programme, an implementation plan.
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EAC leaders meet to decide on constitution of political federation
East Africa enters the most decisive stage in its ambitious quest for a political union this week when the five heads of state launch the writing of a federal constitution and issue a time frame for establishment of a regional government.
Political integration, which is the top agenda for the 16th Ordinary EAC Heads of State Summit scheduled for November 30 in Nairobi, would pave the way for a strong authority to reinforce implementation of the other stages of integration – the Common Market, the Monetary Union and the Customs Union.
The presidents of Burundi, Kenya, Rwanda, Tanzania and Uganda are expected to make a final decision on what form political federation will take before the draft constitution is put in place.
The presidents of South Sudan and Somalia, who have applied to join EAC, will be watching the proceedings with interest.
Among the things that the EAC presidents are expected to decide on is whether the political federation is to be under a two-tier structure with a federal entity and constituent state governments or a one-tier structure.
Under a two-tier arrangement, the federation would have a leader, with partner states sharing foreign policy, defence, currency, and economic and trade policies, even as they manage those domestic affairs that do not have a regional dimension.
The best example of a two-tier system is the Union between Tanganyika and Zanzibar, which formed the United Republic of Tanzania. While Zanzibar has its own elected government, it has to operate under the Union government in terms of foreign policy and international relations.
A one-tier system would see all member countries come under one president, with uniform policies and all citizens to be involved in the election of the federal president.
During their last summit in Kampala last year, the EAC heads of state directed partner states to hold consultations and agree on the final draft of the roadmap before it is presented to the Summit this year for approval.
2016 deadline
Early this year, EAC ministers were directed to initiate the process of drafting a constitution for the political federation ahead of the 2016 deadline.
A proposal by the ministers shows that the federal state will comprise an executive, legislature and judiciary, with functions based on the principle of separation of powers among the three organs. Constituent states of the federation will remain autonomous on matters that do not fall under the federal government.
The powers and functions proposed for the federal government will be informed by international practice: It will have control over defence and security, foreign affairs and international trade, immigration, infrastructure development and the federal public service, among other things.
The constituent states will be expected to implement federal laws and policies.
Prof Peter Kagwanja, executive director of the Africa Policy Institute, said that while the pillars of the economic federation have been established and the drafting of a regional constitution can take a short time, implementing it would take much longer.
He pointed out two challenges. One, the exploitation of mineral resources in the region, estimated as being about $5 trillion, has major political implications, which may delay the realisation of the federation. Two, there is the status of Zanzibar, which already has a federation arrangement with Tanganyika, and the place of the kingdoms of Uganda.
“The regional constitution must clearly define what will be federation issues, while at the same time leaving national issues intact,” said Prof Kagwanja.
The EAC countries have agreed that the presidency of the federation should be rotational, based on defined criteria, and that this should be the preserve of sitting presidents.
But this is where a major challenge lies, because the partner states have to decide whether the president will be elected through a collegiate system or universal suffrage. If it is rotational, then it may well turn out to be the responsibility of the partner state concerned to pick their person, just as happens with the EAC Secretary-General’s position.
Prof Kagwanja argued that a rotational presidency would not be an issue, because there is the precedent of the African Union, where the chairman – who serves for one year – is the legal spokesman of the continent.
He, however, noted that unlike the European Union, where the parliamentary system is given prominence with foreign ministers and specially elected MPs to the European parliament, the EAC is experimenting with the presidential system.
Uganda’s President Yoweri Museveni has long advocated the fast-tracking of the political federation, emphasising that the region should not only be an economic bloc, but also a political one.
Strictly economic integration
In his address last year as the chair of the EAC, President Museveni said that even if the economic integration were successful, there were certain issues that could not be addressed through economic integration alone. He said that it was not easy, for instance, to address the issue of common defence when you have different countries.
The EAC presidents will decide on whether all the five member states will join the federation at the same time or on the principle of variable geometry, which allows member countries to join the federation at different times and stages.
The admission of new members to the political union is also another matter to be decided on.
It will be known after the Heads of State Summit whether the presidents will go with the partner states’ proposal to have a political federation that comes into being instantly or the one that favours a gradual and incremental process that will culminate in a full-fledged political federation.
Uganda has proposed that the political federation take a transition period of five years to enable the development of federal institutions, but the other four partner states are asking for a longer period, to be determined later, as part of the phased roll-out that will allow for the building of strong institutions, confidence and mutual trust among member states.
Member states will also know whether they will have to lose their sovereignty once a political federation is in place as proposed by Uganda, or whether they will retain some level of sovereignty.
The fear of loss of national identity and the political power that goes with decision-making could be another headache. Memories of the collapse of the initial Community in 1977 following political differences among the three leaders and disputes over shared resources still lingers, raising apprehensions about political integration.
Then there is the issue of disparate constitutions, with some members having done away with the presidential term limit or being in the process of doing so.
Experts have expressed concern about the divergence in governance and democratic practices, accountability, respect for human rights and access to justice.
Dr Ben Sihanya, an international law lecturer at the University of Nairobi, said that sovereignty will not be a factor because it is the people who want a region that is economically integrated.
“So long as partner states are members of the EAC, African Union and United Nations, they have already ceded a portion of their sovereignty. But I believe that the citizens of East Africa are more concerned with a strong Customs Union than a political federation,” said Dr Sihanya.
He is concerned that while most of the partner states have adopted or are in the process of adopting progressive constitutions, the challenge is that some countries do not obey their constitutions and institutions.
He noted that it would be difficult to achieve a political federation when national institutions are not being respected.
The EAC partners have however agreed and adopted a draft protocol on good governance seeking to push for democratic elections and peaceful transition, potentially saving the region from recurring political instability.
They have agreed to put in place mechanisms for the appointment of an electoral management team to prevent bungled elections.
Characterised by controversy
Dr Sihanya argues that so long as elections in Kenya and Uganda – the two countries that are supposed to provide leadership – continue to be characterised by controversy, it will be difficult for others to buy into the idea of political federation.
The EAC political federation is the fourth and last pillar of the EAC integration, which aims at integrating the people of the region in all aspects of life.
The Customs Union, Common Market Protocol and the Monetary Union, which was signed last year by the Heads of State, are under implementation.
However since its signing, only Rwanda and Tanzania have ratified the Monetary Union Protocol for implementation. Kenya, Uganda and Burundi are still in the process of ratifying it.
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Africa and Turkey in historic meeting to strengthen partnership
African Heads of State and government on the one hand and the Republic of Turkey on the other, are meeting on 21 November 2014 in Malabo, Equatorial Guinea, in the second summit of the Africa-Turkey partnership, where they are expected to adopt a joint 4 year implementation plan to further strengthen their cooperation. The first summit between the two sides was held in 2008.
Africa and Turkey see their partnership as a historic opportunity to create a united front to serve socio economic development objectives. In the joint plan of action, the leaders are expected to have agreements across the following areas: institutional cooperation; trade and investment; agriculture, business, rural development, water resource management, small and medium scale enterprises; health; peace and security; conflict resolution and mediation; migration; infrastructure, energy, mining and transport; culture, tourism and education; media, information and communication technologies; environment; and youth and employment.
The two sides are expected to review progress made since the first summit, address the issues of how to accelerate implementation of projects and programmes agreed upon, and plan together on the vision as well as challenges of the future and how to overcome them.
As they deliberate and make recommendations for the future, the leaders will be conscious of the changing realities that have taken place since the first Summit of the Africa-Turkey Cooperation forum. For example, over the past five years, Africa has consistently posted 7 out of the world’s 10 fastest growing economies. In the same period, Africa has seen the emergence of the world’s fastest growing consumer class. More children are in school and girls’ enrolment has increased considerably. At the same time, Turkey’s footprint on the continent has grown, with the establishment of more diplomatic and consular offices as well as stronger air links among other major developments
AUC Chairperson announces sms campaign to mobilise resources to fight Ebola
But amidst the positives, there have been challenges, which the continent is taking concrete steps to resolve:
“More recently, we have been grappling with an outbreak of the Ebola pandemic. Our continent is seized with efforts to extinguish it”, said African Union Commission Chairperson Dr Nkosazana Dlamini-Zuma when she addressed the summit’s opening ceremony. She announced the launch, on December 1st, of a platform by telecommunication’s companies, through which every citizen may contribute to the fight against Ebola by sending an SMS, and called on Turkey to partnerwith Africa on this initiative.
The AUC Chairperson thanked African Heads of State and Government who heeded the AU’s call for human and other resources. She extended the Union’s gratitude to the African business community that has so far come up with nearly $33 million to support the AU’s intervention through its African Union Support to Ebola Outbreak in West Africa (ASEOWA), and encouraged all Africans to do the same at all levels of society.
Dr Dlamini-Zuma reported on the main issues that were raised on her mission to the Ebola affected countries in October. Specifically, she referred to the isolation they felt, with the restrictions that have been imposed by some countries on air and shipping transportation. She called on Africa not to stigmatise affected countries and their peoples.
In the context of Agenda 2063, Dr Dlamini-Zuma explained that Africa’s top most priority is investing in its people, over half of whom are women. Further strides have to be made, she said in terms offood security; infrastructure; development of the blue economy; manufacturing; tourism and peace and security.
The Chairperson acknowledged the “tremendous work that has taken place bilaterally between Turkey and a number of African countries”. She however cautioned that “that much remains to be done”.
The opening ceremony was also addressed by the Chairperson of the African Union President Mohammed Abdel Aziz of Mauritania, who also called for strengthened efforts against the Ebola epidemic. President Aziz called the meeting to a minute’s silence in honour of those that have lost their lives in the epidemic. He expressed hope that the partnership with Turkey will lead to an improvement in the lives of both peoples.
President Teodoro Nguema Basogo of Equatorial Guinea who is the summit host, said this summit should give added impetus to the cooperation between Africa and Turkey. “This partnership is indispensable”, he said, adding that the number of partnerships with Africa show the continent’s strategic importance.
Turkish President Mr. Recep Tayyip Erdogan encouraged the two parties to move the partnership forward and also pledged his country’s support in the fight against terrorism.
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New Voices in Investment: How emerging market multinationals decide where, why, and why not to invest
Emerging market multinationals (EMMs) have become increasingly salient players in global markets. In 2013, one out of every three dollars invested abroad originated from multinationals in emerging economies.
Up until now, we have had a limited understanding of the characteristics, motivations, and strategies of these firms. Why do EMMs decide to invest abroad? In which markets do they concentrate their investments and why? And how do their strategies and needs compare to those of traditional multinationals from developed countries?
In a book we will launch on 20 November 2014 at the World Bank, “New Voices in Investment,” we address these questions using a World Bank and UNIDO-funded survey of 713 firms from four emerging economies: Brazil, India, Korea, and South Africa.
We designed our survey to go beyond previous efforts to study foreign investors – by also including potential cross-border investors. These are firms that considered investing and decided not to, or companies that never considered establishing a foreign presence. As Hausmann and Velasco once quipped, asking only camels about the living conditions in the desert will give you a completely different concept than asking hippos.
Our survey addresses this problem, by interviewing these potential investors – the hippos, in this scenario – in their countries of origin. Doing so reveals differences in incentives and obstacles faced by investors, potential investors, and non-investors. These are distinctions that matter enormously, particularly in identifying the binding constraints on foreign investment that eventually led some firms not to invest.
A number of findings emerge from the study. First, a clear pattern of regional concentration is unveiled by our analysis, particularly in investment in the services sector. While some analysts have stressed the greater geographical dispersion of the recent wave of outward foreign direct investment (FDI) flows from emerging economies, we find that firms in our sample invest more heavily in neighboring countries, where they face lower informational costs and cultural barriers. Yet, there is cross-country heterogeneity. Firms from India appear to be more globalized than their counterparts from Brazil, South Africa, and Korea, investing more heavily in East Asia and Europe than in the South Asia region.
Second, much like developed-country multinationals in previous waves of FDI expansion, emerging market investors are market and efficiency seeking. When we asked firms in our sample about their main motivations for investing abroad, 70 percent said they sought to access new markets and another 20 percent of investors were motivated by lowering production costs, thus gaining efficiency. Less than 5 percent of firms invested abroad to gain access to natural resources.
EMMs’ concern with taking advantage of opportunities for market and business expansion in developing countries was also evident when analyzing the factors that influence their location decisions. Almost 36 percent of investors selected the size of the domestic and regional markets as the top factor influencing the choice of an investment destination. For 30 percent of the firms surveyed, the presence of a variety of potential business counterparts was the most important location factor. A sizeable proportion of respondents (12 percent) worried primarily about the cost of labor. By contrast, EMMs seem less concerned about non-economic factors, such as political risk and cultural affinities, when deciding where to invest (Figure 1).
Does this mean that EMMs are relatively immune to political risk or regulatory uncertainty? It has been argued that multinationals from EMMs have an “adversity advantage” due to being exposed to those conditions in their home countries in the first place. But when comparing the importance attributed to political risk by actual and potential investors, a different picture emerges. While only 6 percent of investors and 10 percent of those considering investing abroad ranked political risk and cultural factors as top location factors, more than 20 percent of non-investors identified these as the main considerations influencing the decision not to invest. Political risk and cultural dissimilarities thus appear to constitute binding constraints that deter some emerging-market firms from investing in developing markets. Far from being immune to political risk and cultural uncertainty in host markets, those firms that are more averse to these conditions seem to self-select out of foreign investment.
These findings have implications for policymakers seeking to increase inflows of FDI. By deepening integration in the global marketplace through trade and investment and expanding opportunities for participation in regional production networks, governments of developing countries can help increase investment by existing firms, that is, promoting investment growth along the intensive margin.
Yet, attracting new firms, that is, promoting investment growth along the extensive margin, requires addressing other binding constraints, such as poor governance, a weak regulatory and legal environment, and high informational and transaction costs associated with cultural specificities. A progressive reduction of transaction costs and political risk could make potential investors cross the line into actually investing.
» Download the book here (11.2MB)
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Kenya, Uganda sugar row tests spirit of integration
Officials from the Ugandan Ministry of Trade and the Kenya High Commission in Uganda will make a joint verification visit to Malaba border post in the coming week as they try to defuse an escalating dispute over sugar exports.
The visit follows a crisis meeting held on November 13 between the two parties.
Through their umbrella organisation, the Uganda Sugar Manufacturers Association (USMA), sugar millers announced that they had given up on efforts to access the Kenyan market, citing anti-free trade practices by the Kenya Sugar Board (KSB), the Kenya Police and the Kenya Revenue Authority.
Speaking in Kampala on November 18, USMA chairman Jim Kabeho accused the three agencies of blocking Ugandan sugar from reaching the Kenyan market.
“We are stopping all sugar exports to Kenya until the two governments resolve the issue of continued blockage of our export consignments to Kenya. Kenyan products, including sugar, enter the Ugandan market without hindrance. However, despite assurances to the contrary, our efforts to export sugar to Kenya continue to encounter numerous obstacles,” Mr Kabeho said.
According to USMA, the Kenya Sugar Board subjects Ugandan sugar to import permits, a requirement that is defunct under the EAC Common Market Protocol.
Securing the permits is a protracted and expensive process; licensees are required to pay Ksh100,000 ($1,162) for each consignment, but even that is no guarantee that the sugar will get through.
“After KSB issues the permits, the consignments are either blocked by KRA, which disputes the valuation used on the invoices, or the police, who impound the trucks saying Ugandan sugar is not allowed into Kenya,” said Mr Kabeho.
This leads to additional costs in the form of demurrage charges for the additional time the trucks are held at the border.
James Onen, Permanent Secretary at the Ministry of Trade, said efforts are underway to resolve the impasse.
“Kenya allows the imports, but the challenge is the non-tariff barriers that delay the consignments at the border. Last week, we met the Kenyan High Commissioner to Uganda who had the full mandate of his government to handle the issue and we agreed to send a joint team to the border next week to ascertain what really happens on the ground,” Mr Onen said.
However, the manufacturers are not placing much faith in the latest initiative, saying that Kenyan delegations have always promised to act on the complaints but nothing changes.
The latest meeting on the issue was held in Kampala on July 21 between the Uganda Revenue Authority, KRA, KSB, Rwanda Revenue Authority, USMA and the respective ministries of trade.
USMA presented three issues – the lengthy clearance and authorisation Ugandan sugar exports are subjected to by KSB, the lack of progress towards resolving the issue despite several meetings, and Rwanda’s sugar imports, which are far above the annual deficit for that country.
As KSB outlined the procedures for importing sugar into Kenya, it acknowledged that quota restrictions were not applicable to sugar originating from the EAC.
The meeting agreed on eight points for immediate action, among them a reduction of red tape for clearing sugar imports from the EAC by the KSB, clearance of sugar for direct consumption under the Single Customs Territory framework, and KSB to work closely with USMA to facilitate legitimate sugar imports. Four months later, there has been no action on any of the points, USMA claims.
USMA now blames powerful sugar cartels in Kenya that are keeping consumer prices artificially high.
According to USMA’s calculations Kenya is a sugar-deficit country, producing only 500,000 of the 800,000 tonnes consumed annually. Despite this deficit of 300,000 tonnes, preference is given to imports from outside the region. This has kept the retail price for sugar in Kenya at Ksh130 ($1.4) for a kilogramme compared with Ksh89 ($1) in Uganda.
Expansion
USMA says that on the basis of this deficit and anticipating a liberal trade regime, Ugandan manufacturers invested $200 million in capacity expansion over the past three years, taking the industry’s combined production past the national demand of 320,000 tonnes last year.
The industry had budgeted for a surplus of 145,000 tonnes this year, but these plans were thrown into disarray by the outbreak of conflict in South Sudan last December, and the actions of the Kenya Sugar Board.
As a result, wholesale prices for sugar dropped 15 per cent in Uganda as manufacturers tried to free up warehousing space. Contract suppliers of cane also suffered price cuts and reductions in volumes sold as millers scaled down production.
With the Comesa Free Trade Area coming into force, the millers expect more issues.
“The tripartite agreement will complicate matters further because as we are failing to manage the EAC, the Comesa Free Trade Area will open our markets to sugar from countries with mature industries that have long recovered their cost of investment. Therefore, how we manage our integration is going to be critical,” said Raju Sareen, corporate marketing manager for Kakira Sugar Works.
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World is locked into 1.5°C warming and risks are rising, new climate report finds
In the Andes of South America and across the mountains of Central Asia, the glaciers are receding. As temperatures continue to warm, their melting will bring more water to farms and cities earlier in the growing season, raising the risks of damaging floods. Within a few decades, however, the risk of flood will become risk of drought. Without action to stop the drivers of climate change, most of the Andean glaciers and two-thirds of Central Asia’s glaciers could be gone by the end of the century.
These changes are already underway, with global temperatures 0.8 degrees Celsius above pre-industrial times, and the impact on food security, water supplies and livelihoods is just beginning.
A new report exploring the impact of climate change in Latin America and the Caribbean, the Middle East and North Africa, and Eastern Europe and Central Asia finds that warming of close to 1.5°C above pre-industrial times is already locked into the Earth’s atmospheric system by past and predicted greenhouse gas emissions. Without concerted action to reduce emissions, the planet is on pace for 2°C warming by mid-century and 4°C or more by the time today’s teenagers are in their 80s.
The report warns that as temperatures rise, heat extremes on par with the heat waves in the United States in 2012 and Russia in 2010 will become more common. Melting permafrost will release methane, a powerful greenhouse gas that will drive more warming in a dangerous feedback loop. Forests, including the Amazon, are also at risk. A world even 1.5°C will mean more severe droughts and global sea level rise, increasing the risk of damage from storm surges and crop loss and raising the cost of adaptation for millions of people.
“Today’s report confirms what scientists have been saying – past emissions have set an unavoidable course of warming over the next two decades, which will affect the world’s poorest and most vulnerable people the most,” World Bank Group President Jim Yong Kim said. “We cannot continue down the current path of unchecked, growing emissions.”
As governments gather in Lima for the next round of climate negotiations, this report and others provide direction and evidence of the risks and the need for ambitious goals to decarbonize economies now.
Turn Down the Heat
Turn Down the Heat: Confronting the New Climate Normal is the third in a series of reports commissioned by the World Bank Group from the Potsdam Institute for Climate Impact Research and Climate Analytics. The first report looked at risks globally if the world were to warm by 4°C. The second report focused on three regions – Africa, South Asia, and South East Asia – and the risks to food security, water security, and low-lying cities exposed to dangerous sea level rise and vulnerability to storms.
The new report comes on the heels of strong new warnings from the Intergovernmental Panel on Climate Change (IPCC) about the pace of climate change and the energy transformations necessary to stay within 2°C warming.
Latin America and the Caribbean
In Latin America and the Caribbean, the report warns of longer droughts, extreme weather, and increasing ocean acidification.
In the tropical Andes, rising temperatures will reduce the annual build-up of glacier ice and the spring meltwater that some 50 million people in the low-land farms and cities rely on. Heat and drought stress will substantially increase the risk of large-scale forest loss, affecting Amazon ecosystems and biodiversity, as well as the forests’ ability to store carbon dioxide.
Rising temperatures also affect food security. The oceans, which have absorbed about 30 percent of all human-caused carbon dioxide so far, will continue to acidify and warm, damaging coral ecosystems where sea life thrives and sending fish migrating to cooler waters. The result for the Caribbean could be the loss of up to 50 percent of its current catch volume.
Middle East and North Africa
People in the Middle East and North Africa have been adapting to extreme heat for centuries, but the report warns of unprecedented impact as temperatures continue to rise.
Extreme heat will spread across more of the land for longer periods of time, making some regions unlivable and reducing growing areas for agriculture, the report warns. Cities will feel an increasing heat island effect, so that by 4°C warming – possibly as early as the 2080s without action to slow climate change – most capital cities in the Middle East could face four months of exceedingly hot days every year.
Rising temperatures will put intense pressure on crops and already scarce water resources, potentially increasing migration and the risk of conflict. Climate change is a threat multiplier here – and elsewhere.
Eastern Europe and Central Asia
In Eastern Europe and Central Asia, the report shows how the impact of climate change will vary region to region. Melting glaciers and warming temperatures will shift the growing season and the flow of glacier-fed rivers further into spring in Central Asia, while in the Balkans in Eastern Europe, worsening drought conditions will put crops at risk.
Rising temperatures also increase the thawing of permafrost, which releases methane, a potent greenhouse gas many times more powerful than carbon dioxide at trapping heat. By mid-century, if temperatures continue to rise toward 2°C, the release of methane from thawing permafrost is likely to increase 20 to 30 percent in Russia, creating a feedback loop that will drive climate change.
Working to Lower the Risk
“The good news is that there is a growing consensus on what it will take to make changes to the unsustainable path we are currently on,” President Kim said. “Action on climate change does not have to come at the expense of economic growth.”
At the World Bank, we are investing in energy efficiency and renewable energy to help countries lower their emissions while growing their economies, and in clean transportation that can put fast-growing cities onto more sustainable growth paths.
We are also working with governments to design policies that support clean growth, including developing efficiency standards, reducing fossil fuel subsidies, and pricing carbon. It’s clear that the public sector cannot solve the climate challenge alone – private investment and smart business choices are crucial, but business leaders tell us they need governments to provide clear, consistent policy direction that reflects the true costs of emissions. We now screen our projects in 77 countries for climate risk and for opportunities for climate action. We are helping countries find opportunities in climate action and developing financial instruments to increase funding that can help them grow clean and build resilience.
“Our response to the challenge of climate change will define the legacy of our generation,” President Kim said. “The stakes have never been higher.”
What Climate Change Means for Latin America, Middle East & Central Asia (click to view full infographic)
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Background papers prepared for the Africa-China Poverty Reduction and Development Conference
China’s Industrialization: Overview – Implications for Africa’s Industrialization
Within a span of some six decades, especially the three decades after reform and opening up, China has been basically transformed from a traditional agricultural country to a modern industrialized state. The share of the population employed in the secondary industry to the total population increased from 7.4 percent to 30.3 percent from 1952-2012. The share of manufactured production value to total GDP in 2013 reached 43.89%, and the production value share was 19.8% to total global manufacture production value in 2012. China’s industrialization process should not just be examined from the time frame of the past six or three decades however, China’s development is a continuation of Chinese civilization. One also needs to note that China’s industrialization not only follows a universal path, but also has its own particularities in historical, political, cultural and social conditions. Despite this great achievement, China’s industrialization process has also resulted in huge problems, including high energy consumption from extensive industrialization and environmental degradation such as worsening water quality and air pollution as well as land contamination and social inequality.
This report does not intend to describe and analyze China’s industrialization process nor make comparisons between China and Africa systematically. Instead, it summarizes and introduces some of the factors that helped China industrialize its economy and which might also be important or relevant to African (we refer to Sub-Saharan Africa) conditions. It is intended to share those experiences with African countries to help better design their industrialization policies.
China’s industrialization can be roughly divided into three stages. The first stage spans from 1953 to 1978 when China prioritized heavy industry through the centrally planned economy, with the intention of accomplishing a great leap forward and catching up with the developed world. The second stage, the period of 1979 to 1999, witnessed a more balanced development to promote light industries. The roles of the market and private businesses in promoting industrialization were emphasized and encouraged. The third stage starts from 2000 when China saw the reappearance of heavy industrialization and more knowledge intensive sectors. The process has reflected virtual interaction among the state, market and society.
China’s industrialization success carries many experiences, such as how to grasp the opportunities provided by globalization, how to develop infrastructure to eliminate the bottleneck for industrialization, how to develop the SEZs to absorb foreign capital and technology etc. It has also provided negative lessons, for instance environmental damage and social inequality. However, we argue that China’s industrialization does provide a reference for African countries (we refer to Sub-Saharan Africa) in their industrialization process.
Certainly Africa cannot follow China’s industrialization path, but there is a lot that Africa can learn from the Chinese industrialization experience. The essence of China’s industrialization success has been largely driven by the state-led industry policy, i.e. to use the role of the state to eliminate barriers at each stage of development so that the country’s comparative advantage can be utilized. In this regard, African countries face the challenge of how to reshape the role of the state to better use the political advantages given that most African countries’ have checks and balances based on competing politics to avoid short run, low political equilibrium. To have a consensus based development priority is essential to concentrate resources to let industrialization take place. For most African countries, to develop their agriculture is far the most important condition for industrialization because without a well-developed agricultural sector, industrialization cannot be sustainable. This does not suggest any development sequence, but rather to suggest that for agriculture-based economies, a broad-based development strategy that can link agriculture, industries as well as the services sector for labor employment and capital flow is critical. African agriculture has grown about 4-5% over the last decade, but this growth largely derives from area expansion, rather productivity improvement. Given Africa’s high population growth, Africa needs to achieve higher agricultural growth rates to produce meaningful margins. Meanwhile, global industrialization transformation will provide a great opportunity for African countries to use their comparative advantages. This can be seen from the case of increasing cost of labor in the emerging countries, particularly China. It suggests that Africa’s industrialization strategy should not only look at the conditions inside the continent, but also needs to see how their strategies can reflect how to engage with other emerging players.
Overall, to strength the role of the states and to promote agricultural development in order to lay down the foundation for taking a great opportunity to jump-start industrialization will be a challenge for African countries to move towards inclusive development.
What can Africa Learn from China’s Experience in Agricultural Development?
Since the 1980s, poverty levels have not changed in sub-Saharan Africa and the incidence of poverty remains higher than 40 per cent. Agricultural productivity in both land and labour terms in sub-Saharan Africa has been stagnant since the 1970s, and over the last 40 years, sub-Saharan Africa has become a net importer of agricultural commodities and staple foods. Consequently, the literature on African agriculture has been largely pessimistic, and despite some more nuanced assessment in recent years, ‘Agro-Afro-pessimism’ continues to permeate the policy discourse.
By contrast, in China, during almost the same time period, and particularly from 1978-2009, China’s agriculture grew at an annual average rate of 4.5 per cent, total grain output at 2.4 per cent and population at 1.07 per cent. Agriculture and total grain output consequently outpaced population growth, which enabled China to feed a population accounting for 20 per cent of the world’s total from its limited arable land (11 per cent of the world’s total) using water resources equivalent to 25 per cent of the world average. The steady growth in agriculture and rural economy has been an important contributor to reducing China’s rural poverty.
The experiences and lessons of agriculture-led growth and poverty reduction in China have naturally attracted the attention of sub-Saharan Africa and the international community. However, we should be cautious in drawing on the experiences of China’s growth and poverty reduction strategies more broadly, given the two very different contexts. China has been a unified country despite its cultural diversity and vast territory, while Africa is a continent of 55 countries with diversified social, economic and environmental conditions. However, Africa can certainly draw experiences on how smallholder-based agriculture in China has been developed, and at the same time learn lessons on the range of problems associated with China’s agricultural development – such as the emergence of an unequal society with a strong urban-rural divide, unclear land rights for farmers and highly intensive farming, leading to pollution and the degradation of natural resources.
This article intends neither to compare agricultural development in China and Africa, nor to analyse China’s agricultural experiences, but to highlight some of the key conditions that enabled China to achieve its success in agricultural development and poverty reduction and to relate these where possible to the African context. This requires a clear account of the Chinese experience which, although unique in many ways, still affords some interesting potential examples for sustainable agricultural development in many parts of Africa. After briefly discussing the historical conditions that both China and Africa inherited, the article focuses on agricultural policy processes in China and Africa.
In conclusion, there is a focus on smallholder agriculture, arguing that this structural feature of the Chinese model has the most promise for African rural and agricultural development.
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African Development Bank Group Board approves new Regional Integration Policy and Strategy
The African Development Bank Group’s (AfDB) Board of Executive Directors approved on Wednesday, November 19 the new Regional Integration Policy and Strategy (RIPoS) for the period 2014-2023, with focus on creating larger, more attractive markets, linking landlocked countries to international markets and supporting intra-African trade to foster the continent’s development.
During the presentation to the Board, Sylvain Maliko, Director for NEPAD, Regional Integration and Trade, indicated that the RIPoS replaces the previous Regional Integration Strategy (RIS) and updates the Economic Cooperation and Regional Integration Policy of the AfDB. The RIPoS will guide the Bank’s support to countries and regional institutions in economic integration by leveraging the Bank’s role as a financier, catalyst and knowledge broker.
It places increased emphasis on enhancing trade and industrial development in order to create jobs and foster inclusive growth. It also places more focus on “soft” infrastructure issues such as trade facilitation, policy reforms and regional harmonization of policies and regulations related to infrastructure, trade and investment.
AfDB President Donald Kaberuka noted that investments in these “soft” infrastructure issues require fewer resources, but they can make regional infrastructure more efficient, thus enhancing integration, promoting economic growth and improving development outcomes.
The Regional Integration and Trade Department of the AfDB led the preparation of the strategy, in consultation with the Bank’s regional member countries (RMCs), Regional Economic Communities (RECs) and key continental bodies, namely the Africa Union Commission (AUC), the United Nations Economic Commission for Africa (ECA) and the NEPAD Planning and Coordination Agency.
There was also greater involvement of research institutions and think-tanks as well as private sectors bodies such as NEPAD Business Councils, transport corridor associations and development financial institutions. The RIPoS therefore reflects the views and has buy-in of a broad range of stakeholders.
The RIPoS will operationalize the pdf AfDB’s Ten Year Strategy (844 KB) , which reaffirms the Bank’s commitment to promoting regional integration in Africa by identifying it as one of the five core operation areas over the decade 2013-2022. To this end, the strategy focuses on two complimentary thematic areas for support:
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Supporting Regional Infrastructure Development: Regional infrastructure is a lynchpin for Africa’s economic integration and competitiveness. It is crucial for supporting regional and global trade, unlocking landlocked countries, promoting spatial inclusion and reducing energy and ICT costs, all of which are vital for Africa’s productive capacity. The AfDB will continue to lead the charge in the financing of transport corridors in Africa. It will also systematically consult local populations from villages within reach of transport corridors, on additional investments that can add value to the project and provide better distribution of the benefits (e.g. market stalls for traders, schools and water supply systems).
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Enhancing Industrialization and Trade: Several RECs have placed industrialization at the centre of their integration agenda and are looking to the Bank for support. The Bank’s Ten Year Strategy also acknowledges the need to support Africa’s transformation agenda, including “the development of industries that increase the impact of the existing sources of comparative advantage and enhance Africa’s global competitive position”. To achieve these goals, the AfDB will support measures targeting regional and global value chains development, tackling trade facilitation bottlenecks, facilitating regional payment systems and financial markets, and the implementation of strategic frameworks and programs for industrial development and improving trade and investment.
To support the execution of these two thematic areas, the strategy identifies a set of cross-cutting issues aimed at strengthening regional and country mechanisms and institutional capacities for implementation. It also proposes measures to improve effective monitoring and the communication of initiatives and results.
Moono Mupotola, Division Manager for Regional Integration and Trade, stated that her team is already collaborating with the United Nations Economic Commission for Africa (ECA) and the African Union Commission (AUC) to develop and implement a system of indicators to monitor regional integration in Africa. The Bank will also invoke a step change in the way it engages with regional bodies, RMCs, private sector and other partners for more effective implementation, dialogue and communication.
Beginning in 2015, the Bank will start preparing a new generation of regional integration strategy papers, which are the programming documents for implementing the RIPOS. These programming documents will spell out specific projects and resource requirements and entail greater selectivity in view of regional peculiarities across the continent.
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Egypt expects new African trade bloc in December: minister
Three African economic blocs will merge into a new 27-nation free-trade zone under an agreement to be signed in Cairo next month, uniting markets worth 58 percent of the continent’s economic activity, Egypt’s industry and trade minister said.
The deal will combine the Common Market for Eastern and Southern Africa (COMESA), the South African Development Community (SADC), and the East African Community (EAC).
Minister Mounir Fakhry Abdel Nour said Cairo is also pursuing trade agreements with the Eurasian Economic Community and the South American trade bloc Mercosur in order to win back foreign investors who left Egypt due to the political turmoil that began with a popular uprising in 2011.
The Africa initiative will create “one huge free-trade union” allowing foreign investors in Egypt to more easily reach 260 million consumers from South Africa to Ethiopia.
“It is going to happen immediately. We expect to sign, absolutely,” Abdel Nour told Reuters in an interview at his office overlooking Tahrir Square.
“The execution, like any free trade agreement is done in stages, for some countries quicker than others depending on their economic structure, their ability to compete. But it’s going to be done.”
South Africa’s Department of Trade and Industry said the deal had been long in the making. It is a “tripartate alliance” made up of the COMESA, SADC, and the EAC, it said. It had not been led by Egypt, it said.
Egypt, which relies heavily on imports of gas, wheat and other basic goods, posted a trade balance deficit of about $35 billion in the fiscal year that ended June 30. Abdel Nour said he expected the country’s position to improve slightly by the end of the current fiscal year to $32 billion-£33 billion.
President Abdel Fattah al-Sisi has put infrastructure mega-projects like the new Suez Canal at the top of his economic agenda, alongside long-awaited reforms to subsidies and taxes.
Abdel Nour said he would announce in a few days the result of a tender for drafting a master plan to develop a region in southeast Egypt, which the government considers rich in resources including gold, phosphate and quartz.
Cairo has for years touted the “Golden Triangle” as a potential mining investment, but little is known about the quantity of mineral resources in the area between the southern city of Qena and the Red Sea towns of Safaga and Qoseir.
Abdel Nour said the project could attract investments in mining, industry, agriculture and tourism, but did not provide a time frame for the project or a forecast for potential revenues.