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The tricky business of administering natural resource revenues
The International Monetary Fund and the World Bank recently released a first of its kind joint publication that focuses much needed attention on the administration of revenues from natural resources. The publication entitled Administering Fiscal Regimes for the Extractive Industries: A Handbook fills a void that previously was neglected. While ample research has been conducted on fiscal policies that best enable sustainable growth from its revenues, this is not the case for their administration. This gap is significant since a fiscal regime is only as effective as the administrative capacity of the public institutions charged with its collection.
“This joint publication is one of the first of its kind to address the complex challenges of managing fiscal revenues from the extractive industries,” said Katherine Baer, Division Chief, Revenue Administration Division at the International Monetary Fund.
The publication focuses attention on effectively administering revenues from natural resources. It provides policymakers and officials in developing and emerging market countries with practical guidelines to establish a robust institutional framework, organization and procedures for administering natural resource revenue. It also highlights the importance of transparency in the face of ever-increasing demands from both domestic and international constituencies for clarity and accountability in the administration of public revenues from natural resources. Lastly, it provides recommendations on how developing countries can strengthen their managerial and technical capacity to administer these revenues.
“This publication makes an important contribution to knowledge on best practices that can help direct extractive industry revenues towards poverty alleviation and boosting shared prosperity.”
Charles Feinstein
Director, Energy and Extractives Global Practice, World Bank Group
The Handbook offers suggestions on very practical challenges that developing countries face when trying to retain adequate staff and capacity to handle the complex nature of natural resource revenue administration. While government salaries rarely compete with those of the private sector, the Handbook recommends that in resource-rich countries staff dedicated to revenue administration must have relatively competitive salaries in order to retain personnel. To overcome resource obstacles, the Handbook also recommends tactics such as training, performance management and recruitment practices that can help the government retain the professionals needed.
The organization of tax administration and inter-agency cooperation in governments is also highlighted as a key component of success. Integrated administration within a tax department is cited as an effective structure due to its simplification and centralization of efforts into one government agency. On the other hand, the Handbook notes that there are many disadvantages of fragmented administration across different government agencies, such as duplication of work, lack of accountability and uncoordinated procedures, among others.
“Everyone wants a piece of the pie when it comes to revenue windfalls, so centralization of natural resource revenue administration can be politically difficult, but it is key to ensuring quality control, transparency and capable staffing,” said Jack Calder, author of the Handbook and former Deputy Director of the U.K. Oil Taxation Office.
Other challenges unique to natural resources that create special challenges for administration include the high uncertainty and risk inherent in the industry, huge variation in scale and profitability, substantial capital investment, complex commercial structures and long development periods, among many others factors. This long list of challenges and the vast revenues that the extractive industries generate give rise to major governance challenges, especially in a context of weak institutional capacities.
The complexities and perceived difficulties of extractive industries revenue administration mean they can get less attention than they deserve. Tax-related administrative reforms and technical assistance to date have focused more on general rather than extractive industries-specific administration – even where EI resources often provide the higher proportion of government revenue. For example, in countries like Nigeria where 75% of total government revenues are hydrocarbon related, extra attention to the complexities of hydrocarbon tax administration is necessary for improved internal revenue mobilization.
“Improved administration of revenue is a key component of effective governance of the extractive industries,” said Charles Feinstein, Director of the Energy and Extractives Global Practice of the World Bank Group. “This publication makes an important contribution to knowledge on best practices that can help direct extractive industry revenues towards poverty alleviation and boosting shared prosperity.”
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Africa loses $85bn in ‘illicit flows’ – Dlamini-Zuma
Africa loses more money in illicit flows from the continent than it gets in aid, and multinational companies were responsible for most of this, African Union Commission chairperson Nkosazana Dlamini-Zuma has said.
Dlamini-Zuma told delegates at the United States-Africa Business Forum in Washington DC yesterday that “Africa loses in excess of $60 billion (R645 billion) every year” due to that practice.
Multinational corporations were responsible for more than 60% of these illicit transfers, while only 30% was due to organised crime and 8% due to corruption.
“Put in context, the amount lost in illicit capital flight out of Africa every year is higher than development aid,” she said.
Dlamini-Zuma said Africa needed a growth of more than 7% “in order to double incomes and eradicate poverty in one generation”.
Over the last decade, the continent has recorded sustained growth of more than 5% in resources sectors as well as in infrastructure and consumer sectors.
She said the continent’s most precious resource “is its over one-billion population, the majority of whom are young, and more than half of whom are women”.
She said it was critical to invest in their health, education and access to basic services.
US Vice-President Joe Biden gave African leaders the assurance that the US was putting in place regulations that prevented the continent from being used to harbour money earned from corrupt practices.
“Africa’s riches shouldn’t be stolen under the cover of darkness, but the continent should be enriched under the rule of law,” he said.
Biden, who earlier met with President Jacob Zuma about issues such as the renewal of the Africa Growth and Opportunity Act, said he had joked with Zuma that, as a “30-year-old kid” when he was first elected into the US Senate, he was trying to get businesses from disinvesting in apartheid South Africa.
“Now I have to get them to invest in South Africa,” he said.
US President Barack Obama yesterday announced almost $33 billion of investments in the continent, mostly from private sector companies. He said this would help create jobs in Africa as well as America.
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Red tape, graft retard Maputo Corridor
Greater use by South African shippers of Mozambique’s main port in Maputo would boost the economies of both countries, the Maputo Corridor Logistics Initiative (MCLI) said on Wednesday. However, a myriad challenges, some infrastructural and some political, have hampered fuller utilisation of the port by South African exporters.
“Lack of rail service, port congestion that leads to delays and negative perceptions about Mozambique are factors for low utilisation of the port.
“South Africa had an election and Mozambique will have an election in October and the cabinet ministers are not considering policy changes during elections. This is hampering finalisation of a one-stop border service and other needed measures,” MCLI chief executive Barbara Mommen said.
The MCLI met Swaziland and South African members and Maputo Corridor users at Ezulwini in Swaziland on Wednesday for an annual review of the lacklustre developments over the past year.
The corridor runs from Gauteng through the Lebombo-Ressano Garcia border post to the port of Maputo, a distance of 630km through some of southern Africa’s most industrialised locations. Along the way are citrus growers whose use of the Maputo port once infrastructure issues are resolved would reduce travel distance and cost compared with usage of the port of Durban, which handles most of South Africa’s citrus exports.
The MCLI is a marketing and advocacy organisation funded by three primary players, Grindrod, which runs the coal terminal at Maputo, the Maputo Port Development Company and South Africa’s Department of Transport. Secondary funders include Mozambican ports and railway authority CFM, Swaziland Railway and Transnet Freight Rail.
Corruption endemic to Mozambican customs and other officials along the transport chain have made cargo haulage by road unpredictable. A so-called single electronic window for customs clearance of goods will eliminate petty bribery by allowing prepayment of fees and preapproval of documents. However, while progress has occurred, there is no clarity on when this window will be open.
Government consultation with shipping stakeholders and cross-border traders is essential but not yet practised, as shown by Wednesday’s stone-throwing riot at the border post. South Africa’s Department of Home Affairs imposed a R3 000 “guarantee fee” for traders passing goods through the border. The sudden imposition of a fee that might represent the net income of an informal trader prompted a violent response that temporarily shut the border crossing. Mommen met with Home Affairs officials as the disruption ensued, and the surety requirement was withdrawn.
“The top priority to maximise Maputo Corridor usage remains the transforming of the N4 border crossing at Lebombo-Ressano Garcia into an efficient, one-stop 24/7 operation. Although both governments signed up to this goal in 2007, the project hasn’t been fully realised, including legal complexities and infrastructure constraints,” Mommen said in a presentation to stakeholders.
Some improvements have resulted from MCLI advocacy, including the separation of trucks from general traffic to relieve congestion. While the main border crossing can be open sometimes up to 18 hours a day, around the clock service is an elusive but necessary goal.
MCLI seeks to adhere to a 2015 deadline to become a public-private partnership, which would increase funding for advocacy programmes.
Some causes of shipping delays that have discouraged South African exporters from using Maputo have been rectified, such as the redundancy of customs officials scanning cargo twice, once at the border and once at the port. Now only one scan is performed, at the border unless border post congestion necessitates the customs scan is done at the port.
Incoming goods offloaded at Maputo port would boost corridor usage considerably if carried on the delivery trucks’ return “backhaul” trips to South Africa. At present, transport firms find that the problems associated with corridor usage are too great a hassle, and after offloading cargo at the port their trucks return across the border as soon as possible.
Mommen said: “One-directional trade is not good for anybody. If a truck is coming back empty it is bad for the environment, it snarls up the border crossing and it makes prices higher as costs have to reflect both legs of the journey.”
Nevertheless, traffic on the N4 from Gauteng to Maputo saw a double-digit increase last year. On average 800 trucks pass through the border post daily.
Increased use of the corridor would benefit more than local shippers, Mommen believes.
“There is a human side too, (including) benefits to the communities along the Maputo Corridor. Komatipoort is doing a feasibility study on setting up a special economic zone, for example. It has a strategic location on the Maputo Corridor and would create jobs and businesses.”
Read a statement from MCLI here: Maputo Corridor Traveller’s Held to Ransom by the Implementation of New Legislation
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Results from FinScope Malawi consumer survey 2014
FinMark Trust released the results of its 2014 FinScope Consumer Malawi survey today. The survey measures the current levels of financial inclusion in Malawi and tracks the changes in financial inclusion since the launch of the 2008 survey. In the past five years, the financial sector in Malawi saw a number of reforms and the survey also examines the impact of these reforms on the level financial inclusion in Malawi.
Levels of financial inclusion in Malawi
According to the survey, interventions from both the public and private sectors have contributed to enhanced financial services access resulting in an increase in financial inclusion from 45% in 2008 to 54% in 2014. The results indicate that the banked population increased by 14% in the last five years and the growth has been driven by transaction products (public employees that are paid through bank accounts, savings accounts with ATM cards, remittances and the innovative Makwacha PIN protected debit card).
The level of borrowing from formal (regulated) credit providers (mainly banks), has dropped slightly. This trend in borrowing could point to the challenges with either the demand appetite or financial providers’ low appetite for risk taking. The study indicates that 49% of those who are not borrowing fear debts and 27% are scared that they would not be able to pay back the money borrowed.
On the other hand, other formal credit providers (including MFIs) have steadily increased the number of people accessing financial services with an increase from 231 591 in 2008 to 276 366 currently borrowing in 2014. According to the survey, a further 400 000 Malawians claimed to have previously borrowed money from MFIs. The majority of these borrowers borrow from Village Savings Loan Association (VSLA).
Landscape of Access is driven by savings
The landscape of Access of the included population (i.e., transaction products, credit, insurance, remittances and savings) in Malawi is driven by savings products. Of those who are included, savings has increased from 53% in 2008 to 58% in 2014. Saving through banks increased from 14% in 2008 to 17% in 2014. Further 1.2 million (16%) adults save through Village Savings and Loan Associations while those putting money into livestock, farming and/or business as profit making investment has declined sharply since 2008.
Is insurance growing?
The insurance sector in Malawi continues to be a small but growing sector (in absolute numbers). The FinScope survey shows that insurance products in Malawi largely target the needs of those who are salaried, with large disposal incomes and with higher levels of education. Insurance products that are offered on a large scale are the types that would allow low-income individuals and households to better cope with health and funeral expenses and other livelihood risks.
The study shows that illness/medical emergencies) and funeral were the most costly events reported by Malawians, with 1.4 million (19%) individuals from households that experienced one or more deaths in the past 12 months prior to the survey. Microinsurance is an opportunity that could be pursued in this sector as alternative insurance products that would allow low-income individuals and households to better cope with health and funeral expenses and other livelihood risks.
Generic barriers to financial inclusion
The biggest barrier to the uptake of financial products and services is affordability, i.e. insufficient/low/irregular income and fear of having debt or the inability to pay back borrowed money. The lack of knowledge/awareness is another barrier to financial inclusion. Low levels of penetration in the areas of insurance, credit and mobile money uptake occur due to the lack of product education which could change people’s behaviour or attitudes.
Payments system
The payments system in Malawi has undergone significant developments in recent years. The infrastructure support programs reformed the functioning of the financial sector, for example, through Malswitch (a frame relay-based national network infrastructure and transaction) Malawi has managed to link all commercial banks and discount houses onto a common network platform providing a number of electronic-based payment, clearing and settlement facilities. The survey shows that while there has been an increase in the number of adults with the Malswitch card from 35 969 (3%) in 2008 to 216 530 (9%) in 2014, there has been low usage of electronic-based payment through the Malswitch cards – compared to about 500 000 individuals who used Makwacha PIN protected online debit cards to buy goods at the merchant stores.
Mobile money
The analysis indicates that mobile money has a strong potential to become an enabler for financial inclusion in Malawi. However, the lack of information (unawareness) of the mobile money facility poses a challenge. The survey indicates that eight in ten (80%) adult Malawians are unaware of mobile money. Out of 20% (1.5 million) who are aware of mobile money, only 22% (325 000) use it. The majority (43%) of those who are aware of mobile money do not have enough information to be able to use it. Malawi’s enabling regulatory environment and cellphone access rate of 72% (adult individuals) presents a huge opportunity to empower large segments of the cash-based society in Malawi. Mobile money usage (transactions) is similar to that of most other developing countries with use mainly for remote payments (purchase airtime 32%) and remittances (26%). Consumers are using mobile money where there is a very clear, simple value proposition and the differences in the rate of adoption of mobile money services across markets are dependent on what the user regards as being of value.
Livelihoods
Farming and ganyu (piecework) are two livelihoods strategies that are often related to low levels of income with about two in five adult Malawians earning less than MK10 000 (US$23.8) a month. The survey indicates that Malawians save and borrow for similar reasons; i.e. mainly for living expenses, farming and medical expenses. Evidence from FinScope surveys suggests that this is often the reason why people resort to informal mechanisms. The challenge for the formal sector will be to find ways of leveraging the informal sector (e.g. through providing services to savings groups) without creating usage barriers for those who depend on these mechanisms.
Low levels of financial literacy
The survey results show that low levels of financial literacy is one of many factors that contribute to the low levels of financial inclusion. The majority of adult Malawians do not have enough knowledge on most of the financial-terms used by financial institutions. The findings further reveal that adult Malawians would like to know more (desired financial education) about ‘how to keep money safe; saving products; how credit and interest rates work’. However, there is a gap between ‘the lack of knowledge about used financial terms, desired financial education and their current source of financial advice on how to manage the money. Two in five Malawians do not ask for financial advice, while 52% of those who seek advice on money management depend on family and friends. The usage of financial institutions and financial advisors is notably low. The findings also indicate low levels of education (78% have primary education or lower) among the adult population. The absence and/or poor state of financial literacy can lead to making poor financial decisions that can have adverse effects on the financial health of an individual.
FinScope
FinScope was launched in 2002 by FinMark Trust (www.finmark.org.za). Its purpose is to establish credible benchmarks on the use of, and access to, financial services. It is designed to highlight opportunities for innovation in products and delivery. The FinScope survey is a comprehensive and national representative study on financial inclusion, looking at how people source their income and manage their financial lives. It has been implemented in 18 countries (10 in SADC, 5 non-SADC Africa and 3 in Asia).
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EU launches new programme to support Africa’s continental integration
The European Commission has launched the first phase of a new programme that will foster Africa’s integration process at continental level – the first ever EU programme in development and cooperation that covers Africa as a whole.
The so-called Pan-African Programme will fund activities in a broad range of areas and offer new possibilities for the EU and Africa to work together. Today’s decision will launch projects for the period 2014-2017, with a total allocation of €415 million.
The President of the European Commission, José Manuel Barroso, said: “The challenges with which we are faced can no longer be tackled within national borders. This is as true in Europe as it is in Africa or elsewhere. This is why I have proposed to create a Pan-African programme to find solutions at regional and continental scale and support the process of African integration, where the African Union plays a critical role. The alliance between Africa and Europe is indispensable, today more than ever. This programme will make it even stronger”.
EU Development Commissioner Andris Piebalgs commented: “The major innovation of this programme is that it allows the EU to link up the cooperation it has with Northern Africa, South Africa and sub-Saharan Africa. It will also help us to achieve better policy coherence for development by building synergies between development cooperation and other EU policies.”
The Pan-African Programme, which was announced by President Barroso at the 4th Africa-EU summit in Brussels in April 2014, will amount to €845 million from 2014 to 2020. It will contribute, amongst others, to increased mobility on the African continent, better trade relations across regions and also better equip both continents for addressing trans-national and global challenges, such as migration and mobility, climate change or security. The first phase that was launched today will include projects ranging from sustainable agriculture, environment, and higher education to governance, infrastructure, migration, information and communication technology, as well as research and innovation.
Concrete projects will, for example, support election observation missions operated by the African Union in its member states or improve the governance of migration and mobility within Africa and between Africa and the EU. Some initiatives will benefit citizens directly, such as a student’s academic exchange programme or the harmonisation of academic curricula across a range of African universities facilitating the mobility of African students and academics.
Background
Africa’s continental integration has become a key priority for both the African Union and the EU. The Pan-African Programme will provide a major contribution to the EU-Africa Partnership, which the two continents established in 2007 to put their relations on a new footing and to establish a strategic partnership, responding to mutual interests and based upon a strong political relationship and close cooperation in key areas. The programme, which is financed from the EU budget will be a key instrument for the European Commission to implement, in close cooperation with African partners, the joint political priorities of the roadmap which was adopted by African and EU Heads of State and Government during the 4th EU-Africa summit in April this year.
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Washington summit considered major boost to U.S-Africa relations
After nearly a week of wheeling and dealing in Washington D.C., business leaders and policy makers from the United States and Africa are calling the first ever U.S.-Africa Leaders Summit an enormous success.
Recognizing African Development Bank President Donald Kaberuka by name for his role in helping to boost business ties between the U.S. and Africa, President Barack Obama said, “We’ve joined with African governments, the African Development Bank, and the private sector – and I will tell you, the response has exceeded our projections.” Obama went on to say that “projects and negotiations are underway that when completed, will put us nearly 80 percent of the way toward our goal. On top of the significant resources we’ve already committed, I’m announcing that the United States will increase our pledge to $300 million a year for this effort.”
It was all part of a gathering of American and African entrepreneurs, business leaders and remarkably, more than 40 Heads of State interested in harnessing the economic power of Africa, which is home to six of the world’s 10 fastest-growing economies.
“I’ve been to many summits where Africa has been discussed but I found this summit to be a discussion of mutual understanding,” said AfDB President Donald Kaberuka of the economic and development interests forged at the three-day meeting. “I want to commend President Obama for convening this summit, which is business oriented and seeks to look at Africa as a land of opportunity, with residual challenges of course, but a land of opportunity.”
The summit highlighted trans-Atlantic dedication to improving Africa’s security, along with human and democratic development through a series of public and private partnerships. The main events of the summit’s final day hit on regional peace and stability, governing for the next generation of Africans and investing in the continent’s future.
When it comes to Africa’s future, Kaberuka said going forward it is important that all sides work hard to ensure the agreements made at the summit are realized. One of the key projects Kaberuka said he has his eye on is the “Power Africa” program.
“The African Development Bank plays a big role,” Kaberuka said. “Inside the Power Africa program we’ve committed close to $3 billion to bring more electricity to African homes and businesses.” With fresh pledges made at the summit to the program, Kaberuka said the bank “will be working with the U.S. institutions to accelerate the programs related to trade and facilitation, logistics, moving goods and nationalize across the boarders inside the African continent because, as the president [Obama] put it very well, trade with the world begins with your neighbor.”
Other outcomes include The African Union Commission pledge to redoubling its efforts to advance educational opportunities through the Pan-African University. Benin has set up two business-type incubators and committed to recruiting 15,000 youths in 2015 to fill civil servant positions. Burkina Faso announced a youth investment project involving 46,800 young men and women who will be offered an opportunity to find sustainable jobs in the labor market.
But the betterment of the African continent will not come without challenges; one of the most pressing is health care. It was a topic in which Kaberuka made international news early in the week when he announced the AfDB made close to $60 million immediately available to fight the worst Ebola outbreak in recent history.
“These countries need structural support to build up their health systems,” Kaberuka told Reuters.
Whether it was powering the continent, shoring up health care, securing nations or educating the next generation of African leaders, fruitful negotiations and bilateral commitments this week led to more than $14 billion in commercial investment deals. That is a marked shift in the U.S.-African relationship, moving it from aid focused to trade focused.
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South Africa’s initial offer for the Transport Services Sector under the Southern African Development Community (SADC) Protocol on Trade in Services negotiations
Cabinet approved South Africa’s initial transport sector offer under the Southern African Development Community (SADC) Trade in Services Negotiations.
The objectives of the SADC Protocol on Trade in Services are to progressively liberalise intra-regional trade in services, create a single market for trade in services, enhance economic growth and development and improve the capacity and competitiveness of the services sectors of SADC State parties.
Cabinet Spokesperson, Minister Faith Muthambi said, “The services sector is critical to South Africa’s growth and job creation prospects, both as an intermediate input to merchandise trade and as a tradable in its own right.”
Intra-regional integration of transport services can generate commercially valuable market opportunities for South African service suppliers as well as investment across the transport sectors in the region.
“As income is generated by exporting services within value chains, South African companies could obtain commercial benefits at the same time as they contribute to the development of the regional transport sector,” said Minister Muthambi.
If these are accepted they will offer South African services exporters better terms of access to those markets than non-SADC countries.
Commitments include in Maritime, Internal Waterways, Air Transport, Space, Rail, Road, Pipeline, Cargo-handling storage and warehouse and Freight transport agency services.
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Asia-Pacific developing countries see ‘subdued’ growth for third straight year – UN report
Developing countries in Asia and the Pacific are experiencing yet another year of subdued economic growth, marking the third successive year of growth below 6 per cent, according to the annual flagship publication of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
“Developing countries in the region are forecast to grow at an average of 5.8 per cent in 2014, up from 5.6 per cent last year,” according to the Economic and Social Survey of Asia and the Pacific 2014.
“This marks the third successive year of growth below 6 per cent. By comparison, growth averaged 9.5 per cent in the pre-crisis years of 2005-2007 and over 7 per cent in 2010 and 2011.”
The Survey is the oldest and most comprehensive annual review of economic and social development in Asia and the Pacific, according to ESCAP.
This year’s report was launched today by Shamshad Akhtar, the Executive Secretary of ESCAP, in Bangkok, Thailand, where the Commission is holding its 70th annual policy session. The session, focused on the theme “Regional connectivity for shared prosperity”, opened Monday and closes on Friday, 8 August.
Among its other findings, the report notes the growing disparity in incomes and access to social opportunities is a dampener on economic dynamism in Asia-Pacific developing countries.
The estimates indicate that the poorest 20 per cent of people in 40 Asia-Pacific countries account for less than 10 per cent of national income. The net wealth of about 49,000 ultra-wealthy individuals in the region – with at least $30 million in assets – is 17 times the combined gross domestic product (GDP) of Asia-Pacific least developed countries.
Ms. Akhtar stressed the urgency for bridging gaps in infrastructure and development in the region and addressing environmental degradation in order to promote higher, well-balanced and sustainable growth. Another priority for ensuring the sustainability of growth is to better address climate change through improved climate finance.
“The constrained domestic growth prospects of the region have underlined the importance of productive counter-cyclical public spending to support inclusive growth and sustainable development,” Executive Secretary Akhtar said in a press release on the report.
She went on to say that developing economies in Asia and the Pacific are experiencing subdued growth for different reasons, including economic rebalancing and sustainability considerations in China, monetary tightening to fight capital flight and inflation in India and Indonesia, and the impact of geopolitical instability in the Russian Federation.
China, India, Indonesia and the Russian Federation are projected to grow at 7.5, 5.5, 5.4 and 0.3 per cent, respectively, in 2014, compared to 7.7, 4.7, 5.8 and 1.3 per cent, respectively, in 2013.
The group of 12 least developed countries in the region are forecast to grow at 5.6 per cent in 2014 – slower than the developing Asia-Pacific average.
Asia-Pacific countries are also coping with the fallout from monetary and trade policies in the developed world, according to ESCAP. The withdrawal of quantitative easing by the United States has jolted regional financial markets.
The 2014 survey estimates further financial market volatility, expected from the continued normalization of monetary policy in the US could cut annual growth by between 0.7 to 0.9 per cent in India, Indonesia, Malaysia, the Russian Federation, Thailand and Turkey.
Trade-restrictive measures in advanced economies outside the region may also have deprived Asia-Pacific developing countries of $255 billion in goods export opportunities between 2009 and 2013, translating into a cumulative decline of more than 1.6 per cent of regional economic output, the ESCAP analysis reveals.
ESCAP proposes the establishment of an Asia-Pacific Tax Forum of experts and officials which it would coordinate, to monitor tax legislation and regulations across the region, help develop regional best-practice, and address issues ranging from avoiding tax competition for foreign investment, to double taxation, and preventing the illicit transfer of funds.
“The 2014 Survey makes a valuable contribution to the development discourse underway in the Asia-Pacific region and beyond. It provides fresh data, new perspectives and policy guidance on issues which are critical to fostering more inclusive and sustainable development,” the ESCAP Executive Secretary said.
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Kenya lines up raft of mega-projects on the road to middle income status
A list of multi-billion infrastructure projects was released Wednesday that will be handed over to the private sector in a bid to make Kenya a middle-income status nation.
In a Wednesday advertisement the National Treasury said it had received approval for 59 projects that the government plans to execute through public/private partnerships.
The projects range from telecommunications, agriculture, health, energy, transport, real estate to water and sewerage.
More than a quarter of the projects involve construction of roads, railway, ports and railway lines, highlighting the government’s focus on improving transport to make it easy to do business in the country.
LONG-TERM SOLUTION
This is intended to improve the country’s business environment.
Treasury principal secretary Kamau Thugge said the public private partnership approach was long-term that could improve the government’s quest to realise a double digit economic growth rate.
“Kenya’s public/private partnerships is not as a series of independent projects. The national list of projects published here has been subjected to a series of sustainability checks and has been granted formal clearance by the Cabinet to proceed for development,” Mr Thugge said.
PROJECTS
Projects under the Ministry of Transport and Infrastructure include construction of major highways, maintenance of the green field terminal at the Jomo Kenyatta International Airport and development of container terminals at the Port of Mombasa.
Construction, operation and maintenance of a railway line proposed to connect Jomo Kenyatta Airport and Nairobi city centre is also lined up. In energy, the government will work with the private sector to develop up to 4,660 MW of power from geothermal, solar and coal in the next 25 years.
In tourism, a marina will be held at the Coast, a first class hotel at the Bomas of Kenya and conference centres in Mombasa.
Separately, the Kenya Urban Roads Authority invited bids for 40 projects involving the setting up, running and maintenance of roads in different urban centres and municipalities.
Implementation of the plans is expected to yield good fortunes for the local construction sector and result in creation of jobs for thousands of youths.
As part of the government’s plans to help create jobs, the Ministry of Education, Science and Technology has invited bids for the construction of 60 technical training institutes across the country. This project is fully funded by the government.
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New pact aims to expand trade between U.S., West Africa
The Economic Community of West African States (ECOWAS) and the United States have signed a trade and investment framework agreement (TIFA) aimed at expanding trade and investment between the United States and the 15 ECOWAS member states, and across the entire West African region.
U.S. Trade Representative (USTR) Michael Froman announced the pact’s signing August 5 during President Obama’s historic U.S.-Africa Leaders Summit, the largest event any American president has held with African heads of state and government.
This signing took place in conjunction with the White House’s announcement that major American companies have committed to invest $14 billion in Africa’s future.
“As President Obama’s U.S.-Africa Leaders Summit has illustrated, this is a tremendously exciting and formative time for U.S.-Africa trade relations,” Froman said. “Africa is an increasingly critical trading partner for the United States, and the signing of this Trade and Investment Framework Agreement with the 15 countries of the Economic Community of West African States is emblematic of our commitment to strengthening the economic bonds that connect America and the African community. Building on the launch of our campaign yesterday to renew the African Growth and Opportunity Act, the signing of this TIFA demonstrated that the United States welcomes Africa’s rise, and looks forward to ‘Investing in the Next Generation’ together as we work toward Africa’s regional integration.”
The new TIFA will play an important role in advancing President Obama’s U.S. Strategy toward Sub-Saharan Africa, which calls for more enhanced and focused engagement on trade and investment between the United States and sub-Saharan Africa, according to a USTR press release. The strategy recognizes that trade and investment is a critical engine for broad economic growth.
Total United States-ECOWAS trade (exports plus imports) was valued at $23.3 billion in 2013, USTR reports.
U.S. exports to ECOWAS members were valued at $9.9 billion in 2013.The leading categories were mineral fuel ($3 billion), motor vehicles and parts ($2.1 billion), machinery and parts ($1.2 billion), and wheat ($977 million).
U.S. imports from ECOWAS members were valued at $13.4 billion in 2013. The leading categories were mineral fuel and oil (crude oil) ($11.8 billion), cocoa and cocoa preparations ($1 billion), rubber and rubber products ($206 million), aluminum and titanium ores ($113.1 million), and edible fruits and nuts ($36.4 million).
Of this trade, ECOWAS’ exports to the United States under the African Growth and Opportunity Act totaled $11.0 billion – up substantially from $5.73 billion in 2001, the first full year of AGOA trade. Those exports included significant growth in non-oil products such as cocoa powder, cocoa paste, apparel, baskets, fruits, nuts, beans, yams, cassava and spices.
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Statement by the Chair of the U.S.-Africa Leaders Summit
Washington, D.C., 4-6 August 2014
I. Background
President Obama welcomed leaders from across the African continent to Washington, D.C., for a three-day U.S.-Africa Leaders Summit, the first of its kind. The largest event any U.S. President has held with African heads of state and government, the Summit strengthened ties between the United States and one of the world’s most dynamic and fastest growing regions.
The Summit advanced our shared interests in increased U.S.-Africa trade and U.S. investment in Africa and highlighted America’s commitment to Africa’s security, its democratic development, and its people. By enabling discussion of tangible actions that can be taken to deepen the U.S.-Africa partnership, the Summit fostered stronger ties between the United States and Africa.
The Summit theme, “Investing in the Next Generation,” reflected the common ambition that the people and government of the United States share with the people and governments of Africa to leave our nations better for future generations by making concrete gains in peace and security, good governance, and economic development.
Based on extensive consultations and reflecting shared goals, Summit events included sessions on trade and investment, development, peace and security, and governance. Other events enriched and informed the dialogue among heads of state and government, including the Young African Leaders Summit, the Civil Society Forum, the landmark U.S.-Africa Business Forum, and the African Growth and Opportunity Act (AGOA) Ministerial. These events included a range of U.S. and African civil society, youth and business leaders and – underscoring a tradition of broad, bipartisan support for U.S. engagement with Africa – participation by Members of the U.S. Congress. The Summit also included a day-long Spousal Program, hosted by First Lady Michelle Obama and former First Lady Laura Bush, that focused on the impact of investments in education, health, and public-private partnerships.
Leaders’ discussions centered on how to tackle shared challenges and accelerate progress in key areas: expanding trade and investment ties; creating educational and job opportunities for youth; accelerating and expanding our progress in promoting inclusive and sustainable development; intensifying cooperation on peace and security; and securing a better future for Africa’s next generation.
II. Investing in Africa’s Future
Leaders discussed Africa’s potential as a new center of global growth that is creating more opportunities for its people than ever before. Leaders also noted the challenge to ensure these gains are expanded and spread to benefit all of Africa’s people, which will create new markets and reinforce stability and democracy.
Leaders also agreed on the positive impacts that U.S.-Africa partnerships on public health have had on moving us closer to an AIDS-free generation, improving maternal-child health, dramatically reducing deaths from preventable disease, and moving people out of poverty. They committed to redoubling efforts to control the outbreak of the Ebola virus in West Africa and, critically, working together to share expertise, as Africa moves towards the realization of the African Center for Disease Control and Prevention.
President Obama welcomed the progress made under the New Partnership for Africa’s Development (NEPAD) Comprehensive Africa Agriculture Development Programme (CAADP) and the commitments made to continue Africa’s leadership on food security, including those made for the African Union (AU) Year of Agriculture to triple agricultural trade in order to end hunger. Leaders welcomed the announcement of new investment commitments to the New Alliance for Food Security and Nutrition, which has now mobilized more than $10 billion. They pledged that agriculture, nutrition, and food security would remain high on their shared agenda and to redouble efforts to promote resilience in order to increase the capacity of vulnerable communities to withstand the impact of external shocks, including climate change, and to promote climate-smart agriculture and value-addition.
Leaders welcomed the success of Power Africa, and decided to intensify joint efforts to double access to electricity in Africa, including within the African Union’s Programme for Infrastructure Development in Africa (PIDA) Framework. They emphasized the importance of regional power projects to fostering regional economic integration and the need to provide increased electricity through national grids and beyond the grid, particularly to remote and rural areas. President Obama pledged $300 million in assistance per year to expand the reach of Power Africa in pursuit of a new, aggregate goal of 30,000 MW, and announced that Power Africa has now mobilized more than $26 billion.
Leaders decided to intensify efforts to increase intra-African trade, including through trade capacity building, regional integration, enabling the adoption of the legal and regulatory reforms that break down barriers to the free flow of goods and services, and improving Africa’s capacity to meet international standards. President Obama announced the expansion of trade and investment platforms across the continent as well as additional trade capacity building assistance.
Leaders agreed on the importance of the prompt, long-term renewal of an enhanced African Growth and Opportunity Act (AGOA), and pledged to work together to increase its utilization by African countries. Leaders also agreed on the importance of increasing U.S. investment in Africa and welcomed the announcements made at the U.S.-Africa Business Forum, including over $14 billion in new private sector deals. President Obama announced $7 billion in new financing under the Doing Business in Africa Campaign that will support U.S. trade with and investment in Africa over the next two years. Leaders pledged to take action to drive further investment and industrialization.
Leaders affirmed the importance of working together to ensure that negotiations on the post-2015 development agenda focus on clear, measurable goals and reflect the rich experience and commitments of developing countries and the spirit of partnership between our countries. President Obama welcomed the commitment and sincerity conveyed by Africa’s decision to develop a thoughtful and substantive Common African Position and their long-term vision outlined in “Agenda 2063: The Africa We Want.”
III. Advancing Peace and Regional Stability
Leaders noted that, at the same time that Africa is growing economically, conflict, crime, and terrorism continue to threaten many communities and constrain the continent’s prosperity. Thus, Leaders resolved to address the root causes of conflict and to enhance conflict prevention mechanisms and capacity-building for peacekeeping. They also determined to confront an increasingly lethal and geographically expansive set of transnational security threats.
Leaders agreed that Africa’s complex security challenges demand increased state capacity and regional solutions. Various leaders noted the need to confront transnational threats, including terrorism, with holistic approaches employing development in addition to security tools, advancing religious tolerance and supporting community voices.
The Summit afforded President Obama the opportunity to laud African leadership in responding to crises while reaffirming America’s commitment to be a strong partner in confronting peace and security challenges. To further this cooperation, the United States committed to: a new initiative over the next three to five years to build the capacity of African militaries to rapidly deploy peacekeepers in response to emerging conflict; create a Security Governance Initiative to pursue a strategic approach to building capacity in partner military and civilian security institutions and match expanded investments with leadership to pursue reforms; and expand its work to support information sharing among regional partners.
IV. Governing for the Next Generation
The theme of the Summit, “Investing in the Next Generation,” represented recognition of the fact that Leaders have the opportunity and responsibility to ensure their actions pave the way for the freedom, dignity, and prosperity of their citizens. Leaders engaged in a forthright and constructive dialogue on critical issues of governance and pledged to sustain this dialogue.
Leaders agreed that efficient, effective, and transparent governance is vital to the well-being of citizens, to boost investor confidence, and to sustain economic growth. They recognized that an active, empowered citizenry can contribute most effectively to the prosperity and well-being of their nations, and discussed the role of civil society, volunteerism, and public service. They further agreed on the centrality of inclusive growth and protection of human rights that benefit all citizens and communities.
Recognizing the losses to the continent and its people from illicit financial flows and corruption, Leaders decided to establish a joint high-level working group to develop a plan of action for further work in this area.
V. Investing in Women for Peace and Prosperity
Recognizing that nations reach their full potential only when women and men enjoy equal opportunity and respect for their rights under the law, Leaders resolved to work toward fuller participation for women in government, the economic sphere, and civil society. They determined to seek expanded roles for women in forging peace and security, and to augment efforts to protect women and girls from gender-based violence. They decided to promote women’s economic empowerment by improving access to markets and capital and by strengthening legal systems to protect their rights and opportunities. And understanding that education is one of the most effective ways to expand opportunities and life choices for girls and young women, they decided to seek to close education gaps between boys and girls.
To advance these goals, the United States announced commitments to further support women’s participation in peacebuilding activities, increase efforts to help women entrepreneurs launch and expand their businesses, and support parliamentary efforts to promote women’s rights.
VI. Providing Skills and Opportunities to Youth
The “Investing in the Next Generation” theme provided Leaders with the opportunity to discuss how to create opportunities, promote skills development especially in science, technology, research and innovation, and generate jobs for youth so they can advance economic growth and build the strong civic and public institutions needed to achieve shared goals. Leaders discussed how Africa’s youth are already shaping political, social, and economic realities – and can be the driving force behind economic prosperity, good governance, and peace and security.
In anticipation of the Summit, President Obama hosted a town hall with participants in the Mandela Washington Fellowship for Young African Leaders to hear directly from young African entrepreneurs, civic leaders, and public servants. President Obama announced the expansion of his Young African Leaders Initiative (YALI) to create regional leadership centers on the continent, an online network of educational tools (including to support professional and vocational education), the doubling of the Mandela Washington Fellowship, and expanded resources for entrepreneurs to further support leadership development, promote entrepreneurship, and connect young leaders with one another and the United States.
Various African Leaders announced commitments to further expand their investments in youth. The African Union Commission committed to redoubling its efforts to advance educational opportunities through the Pan-African University; to carry forward the African Youth Charter by urging Member States to consider the African Youth Decade Plan of Action as a road map for implementation; and to propose for adoption by Member States a Declaration and Plan of Action on Employment, Poverty Eradication, and Inclusive Development, with a primary focus on youth and women, at the upcoming Extraordinary Summit of Heads of State and Governments of the African Union in Ouagadougou in September 2014.
Benin has set up two business-type incubators and committed to recruiting 15,000 youth in 2015 to fill civil servant positions. Burkina Faso announced a youth investment project involving 46,800 young men and women offered an opportunity to find sustainable jobs in the labor market. Burundi recently established the Youth Employment Agency, which helps high school graduates obtain jobs and internships. Cabo Verde will expand its current 20 youth centers to open one at each city and on every island in the country. The Republic of the Congo has instituted the “Corps of Young Volunteers and Civil Service Trainees” to promote community service and civic education activities. Cote d’Ivoire has declared 2014 a Year of Employment with special initiatives focused on youth, including a young entrepreneur’s competition. Gabon has supported the creation of the Central African Economic and Monetary Community’s (CAEMC) “Train my Generation” Fund, which aims to support the training and employment of young people. Guinea will host “The Guinea World Youth Congress” in December 2014. Senegal included young leaders in its delegation to the U.S.-Africa Leaders Summit and will do the same for the G-20. Seychelles will use a newly set-up fund to support young entrepreneurs to boost youth employment. Somalia will launch a youth empowerment framework with key initiatives in job creation and youth representation in the government. Tanzania announced the establishment of a “State House Fellows” program, modeled on the long-standing White House Fellows program in the United States, to identify, train, and provide high-level experience to the next generation of Tanzanian leaders.
VII. Conclusion
Leaders underscored their appreciation for the strong benefits and positive outcomes that deepened U.S.-Africa cooperation affords and reiterated the need for intensified cooperation to advance shared security interests and our common goals to increase prosperity for the United States and African countries and to advance the dignity, well-being, and freedom of our people.
Leaders underscored the importance of ensuring steady follow-up regarding the commitments made at the Summit and of further deepening the partnership between the United States and the people and governments of Africa, as well as coordination with the African Union. President Obama announced that the U.S.-Africa Leaders Summit will be a recurring event.
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President Obama engages with African leaders on final day of the U.S.-Africa Leaders Summit
President Obama and African leaders took part in three action-oriented sessions today [6 August 2014] as part of the U.S.-Africa Leaders Summit in Washington, D.C. The summit is the largest event any U.S. president has held with African heads of state and government, and builds on President Obama’s trip to Africa last summer.
In remarks at this morning’s opening session, the President explained the purpose of the event and noted the progress across the African continent – and what that means for America:
We come together this week because, even as the continent faces significant challenges, as I said last night, I believe a new Africa is emerging. With some of the world’s fastest-growing economies, a growing middle class, and the youngest and fastest-growing population on Earth, Africa will help shape the world as never before.
Moreover, Africa’s progress is being led by Africans, including leaders represented here today. More governments are embracing economic reforms, attracting record levels of investment. Gains in development, increasing agricultural production, declining rates in infectious diseases are being driven by African plans. African security forces and African peacekeepers are risking their lives to meet regional threats. A new generation of young Africans is making its voice heard.
Africa’s rise means opportunity for all of us – including the opportunity to transform the relationship between the United States and Africa. As I said in Cape Town last year, it’s time for a new model of partnership between America and Africa – a partnership of equals that focuses on African capacity to solve problems, and on Africa’s capacity to grow. And that’s why we’re here.
The President called the summit “an opportunity to focus on three broad areas” where the U.S. and Africa can make progress together: expanding trade that creates jobs; strengthening governance; and deepening our security cooperation against common threats.
“We are here not just to talk,” he said. “We are here to take action – concrete steps to build on Africa’s progress and forge the partnerships of equals that we seek; tangible steps to deliver more prosperity, more security, and more justice to our citizens.”
At a press conference this evening, President Obama thanked the African leaders for taking part in the summit, noting that today’s sessions were “genuine discussions – a chance to truly listen and to try to come together around some pragmatic steps that we can take together.”
Here’s what he covered at the press conference:
Expanding trade
Yesterday, the President announced $33 billion in new trade and investment commitments that will help spur African development and support tens of thousands of U.S. jobs. And as a result of new commitments to the Power Africa initiative, the U.S. now aims to bring electricity to 60 million homes and businesses across the African continent.
At the press conference, the President emphasized that Africa’s prosperity depends on the people of Africa:
Ultimately, Africa’s prosperity depends on Africa’s greatest resource – its people. And I’ve been very encouraged by the desire of leaders here to partner with us in supporting young entrepreneurs, including through our Young African Leaders Initiative. I think there’s an increasing recognition that if countries are going to reach their full economic potential, then they have to invest in women – their education, their skills, and protect them from gender-based violence. And that was a topic of conversation this afternoon. And this week the United States announced a range of initiatives to help empower women across Africa.
Our New Alliance for Food Security and Nutrition continues to grow, aiming to lift 50 million Africans from poverty. In our fight against HIV/AIDS, we’ll work with 10 African countries to help them double the number of their children on lifesaving anti-retroviral drugs. And even as the United States is deploying some of our medical first responders to West Africa to help control the Ebola outbreak, we’re also working to strengthen public health systems, including joining with the African Union to pursue the creation of an African Centers for Disease Control.
I also want to note that the American people are renewing their commitment to Africa. Today, InterAction – the leading alliance of American NGOs – is announcing that over the next three years its members will invest $4 billion to promote maternal health, children’s health, and the delivery of vaccines and drugs. So this is not just a government effort, it is also an effort that’s spurred on by the private sector. Combined with the investments we announced yesterday – and the commitments made today at the symposium hosted by our spouses – that means this summit has helped to mobilize some $37 billion for Africa’s progress on top of, obviously, the substantial efforts that have been made in the past.
Good governance
President Obama went on to explain that good governance is “a foundation of economic growth and free societies,” noting that while some African countries are making “impressive progress,” there are also “troubling restrictions on universal rights.”
Today was an opportunity to highlight the importance of rule of law, open and accountable institutions, strong civil societies, and protection of human rights for all citizens and all communities. And I made the point during our discussion that nations that uphold these rights and principles will ultimately be more prosperous and more economically successful.
In particular, we agreed to step up our collective efforts against the corruption that costs African economies tens of billions of dollars every year – money that ought to be invested in the people of Africa. Several leaders raised the idea of a new partnership to combat illicit finance, and there was widespread agreement. So we decided to convene our experts and develop an action plan to promote the transparency that is essential to economic growth.
Deepening our security cooperation
The President also detailed how the U.S. and Africa will deepen security cooperation, in order to “meet common threats, from terrorism to human trafficking.”
We’re launching a new Security Governance Initiative to help our African countries continue to build strong, professional security forces to provide for their own security. And we’re starting with Kenya, Niger, Mali, Nigeria, Ghana and Tunisia.
During our discussions, our West African partners made it clear that they want to increase their capacity to respond to crises. So the United States will launch a new effort to bolster the regions early warning and response network and increase their ability to share information about emerging crises.
We also agreed to make significant new investments in African peacekeeping. The United States will provide additional equipment to African peacekeepers in Somalia and the Central African Republic. We will support the African Union’s efforts to strengthen its peacekeeping institutions. And most importantly, we’re launching a new African peacekeeping rapid response partnership with the goal of quickly deploying African peacekeepers in support of U.N. or AU missions. And we’ll join with six countries that in recent years have demonstrated a track record as peacekeepers – Ghana, Senegal, Rwanda, Tanzania, Ethiopia and Uganda. And we’re going to invite countries beyond Africa to join us in supporting this effort, because the entire world has a stake in the success of peacekeeping in Africa.
President Obama then announced that, due to the success of this summit, U.S.-Africa Leaders Summits will now take place every four years “to hold ourselves accountable for our commitments and to sustain our momentum.”
“Africa must know that they will always have a strong and reliable partner in the United States of America.”
Meanwhile, at the Kennedy Center today, First Lady Michelle Obama partnered with former First Lady Laura Bush and the Bush Institute to host the day-long “Investing in Our Future” symposium on advancement for women and girls in Africa.
The symposium – which focused on the impact of investments in education, health, and public-private partnerships – brought the two First Ladies together with African first spouses from almost 30 countries, as well as leaders from nongovernmental and nonprofit organizations, private-sector partners, and other experts.
In her remarks kicking off the event, Mrs. Obama discussed the need to “lift up our young people,” as well as the importance of “bringing these young people to the table” and listening to their voices and views:
The question is, can we and our governments learn from them and follow their lead? Can we embrace their ideas and incorporate them into policies and strategies? And in our work as First Ladies, First Spouses, can we find new ways to be more inclusive of these young people and show them that we truly value their voices?
And so many of you are already embracing the young leaders in your countries through your work – whether it’s improving girls’ education, or fighting cervical cancer or HIV, or supporting microfinance. You all have the potential to inspire millions across the globe.
So it is my hope that today, we will rededicate ourselves to these efforts and commit to new efforts to lift up our young people. And I hope that you all will have a chance today to really connect with each other, and learn from each other, and hopefully be inspired by each other.
The symposium also included the announcement of more than $200 million in investments to support programs fostering improved education, health, and economic opportunity for more than 1 million Africans. Find out more about those investments here.
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Three reasons to worry about mega-regional trade deals
Trade liberalization has progressed with historically unprecedented speed in the 21st century: trade volumes are booming; and hundreds of millions have been lifted out of dire poverty.
The policy reforms that underpinned this liberalization were implemented by a tangled mess of regional trade agreements, unilateral reforms and bilateral investment treaties. The good news is that mega-regional trade deals, such as the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), will tidy up the mess – turning tangled spaghetti into lasagne plates, so to speak.
The bad news is that mega-regionals also threaten to undermine world trade governance, and the WTO in particular. Trade liberalization in the past decades has had three parts: regional trade agreements, bilateral investment treaties and unilateralism. Unilateralism is not a systemic threat to the WTO and bilateral treaties have long coexisted with the WTO. But regional trade agreements – and even more so mega-regionals – are likely to erode the WTO’s central place in world trade governance. The threat is not on the tariff-cutting front; it is on rules-writing.
There are three main reasons to worry:
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First, the basic WTO trade norms are almost universally accepted and respected, but this universality stems in large part from the way they were created – in multilateral negotiations where the WTO consensus principle held sway.
The new trade rules were promulgated in settings of massive power asymmetries between larger countries and small to medium-sized developing nations. The mega-regionals are slightly less asymmetric since more than one giant is involved in each, but the small member and third nations still find themselves at a huge disadvantage. Lacking the legitimacy that comes from multilateralism and consensus, it is not at all clear that the new norms will be universally respected.
For example, some emerging markets – China, India and Brazil – are large enough to attract foreign investment and technology without signing regional trade agreements, and have so far shunned them. China in particular may decide to reject the rules, creating something like a “Cold War of deeper trade disciplines”. This sort of distrust could spread beyond the new rules, especially if China, India and Brazil believe that the US is practising what Fred Bergsten calls “competitive liberalization”; that is, encircling them with trade deals in a way that could be seen as an ultimatum.
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Second, a world where the WTO is irrelevant to trade’s most dynamic developments is not a world that fosters multilateral cooperation on other issues.
Without a single forum for all trade and investment issues, it will be difficult to arrange the trade-offs necessary to make progress on trade-related policies that help with climate mitigation and adaption, food shortages linked to drought or floods, etc. US, EU and Japanese interests may be served in the short term, and the interests of small to medium-sized emerging markets will likewise be served (if not evenly), but where do Brazil, India and China fit in?
These countries are not in a position to set up their own systems of deeper disciplines for the trade-investment services nexus because they do not have advanced technology factories to offshore in exchange for host-nation reforms. By the time their multinationals are ready to make major outward pushes, the rules-of-the-road will have been written by the deep regional trade agreements of the US, the EU and Japan.
If the mega-regionals conclude, they will have been firmly embedded in international commerce; the members of TPP and TTIP account for over half of world trade. More precisely, they will be embedded in the domestic laws and regulations of all the host nations that the Chinese, Indian and Brazilian companies will be looking at. Like it or not, Chinese, Indian and Brazilian companies will have to play by the rules that are now being written by the mega-regionals.
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Third, the WTO’s adjudication function is still working well, but any dispute settlement system must “walk on two legs”.
The judges can connect the dots for particular cases, but the basic rules must be updated occasionally to match evolving realities. If the rules are being written in the mega-regionals, the only way to update the WTO rules is to multilateralize TPP and TTIP rules. That may be very difficult politically.
Mega-regionalism is not yet a disaster for the world trade system. The present trajectory, however, seems certain to undermine the WTO’s centricity – mega-regionals will take over as the main loci of global trade governance. Over the past 15 years, WTO members have “voted with their feet” for the regional trade agreement option. Without reform that brings existing agreements under the WTO’s aegis and makes it easier to develop new disciplines inside the system, the trend will continue, possibly taking it beyond the tipping point where nations ignore WTO rules.
In the best of cases, the WTO continues to thrive as the institution that underpins 21st-century trade flows. The Marrakesh Agreement would form a “first pillar” of a multi-pillar trade governance system. All the new issues would be addressed outside the WTO in a setting where power asymmetries are far less constrained. But this is not the only scenario. It is also possible that the WTO’s inability to update its rules gradually undermines the authority of the dispute settlement mechanism.
If the mega-regionals and their power asymmetries take over, there is a risk that the WTO could go down in future history books as a 70-year experiment in which world trade was rules-based instead of power-based. It would, at least for a few more years, be a world where the world’s rich nations write the new rules-of-the-road in settings marked by vast power asymmetries. This trend should worry all world leaders. In the first half of the 19th century, attempts by incumbent Great Powers to impose rules on emerging powers smoothed the path to humanity’s greatest follies – the two world wars.
Richard Baldwin is Professor of International Economics, Graduate Institute of International and Development Studies, Switzerland
Click here to download the new report: Mega-regional Trade Agreements – Game-Changers or Costly Distractions for the World Trading System?
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FG’s import policies responsible for NPA’s poor 2013 performance – NPA boss
The managing director of Nigeria Ports Authority (NPA), Mallam Habib Abdullahi, has blamed federal government’s fiscal measures that restricted some imports into the country and other sundry factors for the authority’s poor performance in 2013.
In the 2013 ports’ performance report released by the authority and signed by the NPA assistant general manager, Public Affairs, Mr Musa Iliya, the NPA boss blamed 2013 poor operations on government’s policies at discouraging importation of some goods to enable their local production and market viability.
In the 2013 scorecard released by the blue-chip parastatal, the Abdullahi also remarked that market forces were part of factors that limited the activities of the NPA in the year under review.
He said: “Recent research revealed that, generally, each port is being shaped by the market forces dictated by the commodity demand and by the particular port user.
“The decline experienced in some products can be linked to general economic factor. In dry bulk, for instance, there is ban on the importation of cement. Also, the increase in rice tariff has reduced the importation of the commodity to the country through Nigerian ports, but through smuggling by another route.”
The NPA boss also said the European debt crises gave birth to the decrease in Liquefied Natural Gas (LNG), noting that many of their industries had closed down which has led to a low demand for Nigeria’s LNG.
“They have also discovered an alternative means of production in the Middle East. The petroleum product liberalisation, growth in gross domestic product (GDP) and the transformation agenda of the President Goodluck Jonathan administration resulting in increase in construction works have had an unprecedented economic impact on the port industry,” he stated.
The performance report however, stated that, a cargo throughput, excluding crude oil terminals of 76,886,997 million metric tons (mt) was handled at all Nigerian ports in 2013, reflecting a marginal increase of 0.042.6 per cent over the 2012 figure of 76,855,754 mt.
A breakdown of the figure showed that container traffic amounted to 1,010,836 twenty-foot equivalent units (TEUs), reflecting a growth of 15.2 per cent over the 877,737 TEUs posted in 2012.
Also, a total of 291,824 units of vehicles were handled in the period under review, showing an increase of 8.9 per cent over the 268,026 units recorded in 2012.
LNG shipment handled in the period amounted to 19,341,663 metric tons, a drop of 12.7 per cent from the 22,146,908 mt posted in 2012.
On the other hand, refined petroleum shipment handled was in 2013 was 19,416,043 mt, showing an increase of 9.5 per cent over the 17,730,727 mt recorded in the previous year.
Dry bulk cargo handled at the ports in the reviewed period totalled to 9,537,447 mt, a decline of 6.5 per cent from the 10,205,339 mt posted the previous year, even as general cargo handled was 11,964,978 mt, indicating a 5.8 per cent drop from the 12,702,826 mt recorded in 2012.
“In year 2013, the total of 5,185 oceans-going vessels with a total gross registered tonnage (GRT) of 131,674,337 gross tons called at Nigerian ports,” the statement indicated.
Similarly, in the period under review, the Lagos Port Complex (LPC) recorded 34,466,291GRT, reflecting an increase of 9.4 per cent over the 31,513,987 GRT posted in 2012, even as a total of 1,498 vessels were handled at same facility in 2013.
While 1,725 ocean-going vessels were handled at the Tin Can Island Port Complex (TCIP) in 2013, the statement added that the port recorded 42,758,161 GRT, which is 23.2 per cent increase over the 34,703,547 GRT of 2012.
Unlike the two Western ports, the LPC and the TCIP, which both experienced increased GRT in 2013 over the 2012 figures, their Eastern counterparts, Calabar Port Complex, Rivers Port Complex, and Onne Port Complex, suffered drops in GRT in 2013, when compared to 2012.
The Calabar Port Complex recorded 2,792,488 GRT, a decline of 2.8 per cent compared to the 2,871,622 GRT of 2012with same facility recording 197 ocean-going vessels in 2013.
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Moody’s says local banks to lead EAC in growth
Well-funded Kenyan banks are set to lead regional lenders in business expansion over the next two years owing to larger capital bases and investment in mobile technology, a new report by consultancy Moody’s says. Moody’s says it expects the East Africa Community banking sector to have balance sheet growth of between 15 and 20 per cent in each of the next two years.
The growth will be driven primarily by robust GDP growth – forecast by IMF at between 6.6 per cent this year and 6.7 per cent in 2015 – the ongoing regional integration, and the mobile money revolution which is helping increase banking penetration.
“The large Kenyan banks are best positioned to benefit from growth opportunities, given their dominant, cross-border networks and advanced mobile technology capabilities.
“The integration process is creating new business opportunities for the region’s banks, mainly in trade finance (letters of credit, letters of guarantee), infrastructure project lending, foreign exchange services, as well as credit growth,” said Constantinos Kypreos, Moody’s vice-president and senior credit officer, without giving a breakdown of growth projections for the countries.
EAC’s 2013 banking sector assets totalled about Sh4.8 trillion ($54 billion), with those of Kenyan banks alone currently standing at Sh2.97 trillion. Local banks have been more aggressive than their regional counterparts in tapping the EAC market for additional business.
Leading lenders, including Kenya Commercial Bank, Equity Bank and Cooperative Bank, have opened multiple branches in Uganda, Tanzania, Rwanda and South Sudan.
“In instances where (Kenyan) banks are faced with financing demands such as those of infrastructure projects that are beyond the capacity of a single lender, there is room to syndicate the loans among different banks,” the report titled East African Community: Credit Issues for Banks says.
Kenyan lenders have also led in integration of mobile money services with their banking systems, taking advantage of the accessibility of services such as M-Pesa to reach clients without an expensive brick-and-mortar branch network and with low transaction costs. The M-Shwari product developed by Safaricom and Commercial Bank of Africa, for instance, saw the bank increase its loan accounts to 897,000 last year up from 89,000 in 2012.
KCB and Safaricom have recently launched a suite of mobile services targeting SMEs, including bank account opening, website domains as well as talk-time and text message services.
Equity Bank is also set to launch its virtual mobile network (MVNO) which will give the bank a bigger opportunity in the money transfer business currently dominated by Safaricom’s M-Pesa.
“Regional uptake of mobile money, for example in Rwanda, has been high but it has been from a low base,” said Standard Investment Bank head of research Francis Mwangi.
Profitability
In spite of the increase in balance sheet size, the banks are not expected to see a corresponding rise in profitability, as increased revenues are offset by declining interest margins, rising operating costs and high loan-loss provisions.
According to the Moody’s report, non-performing loans (NPLs) for regional banks currently range between five and 10 per cent (Kenya’s sector average is 5.7 per cent) and loan-loss provisioning coverage is at a low 40 to 80 per cent of NPLs.
The second quarter 2014 banking sector report by the Central Bank of Kenya shows that non-performing loans for local banks have risen to Sh100 billion, although this is in tandem with a rise in their loan books. This comes at a time when CBK is demanding an increase in capital cushion to mitigate risks.
“CBK in raising capital adequacy ratios is taking a precautionary measure to protect local financial institutions from external shocks and secure customer deposits in line with global trends following the 2008-2010 global financial crisis,” said Genghis Capital analyst Silha Rasugu.
Moody’s also raised concern on regional bloc’s relatively small capital bases which limit participation in the region’s growth, while shallow bonds markets constrain the ability of banks to raise long-term funding.
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South Africa’s Chairpersonship of BRICS – from Durban to Fortaleza
Speech by the Minister of International Relations and Cooperation, Ms Maite Nkoana-Mashabane, on the occasion of a Public Lecture on: “South Africa’s Chairpersonship of BRICS – from Durban to Fortaleza”
Institute for Global Dialogue (IGD)
Friday, 01 August 2014
It is a great honour and privilege for me to deliver this address today, in partnership with the Institute for Global Dialogue.
I must accordingly express my sincere gratitude to the IDG, in particular, Dr Siphamandla Zondi, for inviting us to give our perspective on South Africa’s chairpersonship of BRICS.
We at DIRCO have taken note of the work you do at IGD, and appreciate the volume of resources and sheer labour that goes into all your research and the many articles and books you produce. We thank you for sharing these resources with us – they will go a long way in helping us do our work smarter.
With such strong support from our alliance, we are hoping that this session will place us in a pole position to provide a much stronger, richer and vibrant account of the voyage we have covered with our BRICS partners from Durban to Fortaleza.
Programme Director;
Our journey from Durban to Fortaleza has not been an easy one, but it is from this journey that we have a good story to tell.
Amongst others, a good story worth telling is that we are proud members of an emerging group that represents 42,6% of the world’s population, 18% of global trade, attracts 53% of foreign capital, accounts for 20% of global GDP and generated 61% of economic growth in the world economy and has an estimated USD 4tr foreign reserves base.
Our own trade with BRICS countries increased from R297 billion (2012) to R381 billion (2013) – 20% of total South African trade. The BRICS Exchange Alliance is based on cross listing of shares from over 7000 BRICS companies with a total capitalisation of about $8 trillion.
When President Jacob Zuma addressed a session of business leaders from Brazil, Russia, India, China, South Africa (BRICS) member states on the side-lines of the BRICS Summit in New Delhi, India, he point out that our participation in this grouping of the world’s leading emerging economies is;
(I quote)
“designed to help us achieve inclusive growth, sustainable development and a prosperous South Africa”.
(Unquote)
Since New Delhi, we never looked back. To this day, we continue to strengthen the responsibility we have bestowed on ourselves to achieve inclusive growth, sustainable development and a prosperous South Africa, with Africa as our priority. We look at BRICS as a vehicle through which we could achieve some of our developmental goals.
Ladies and Gentlemen;
As you know, President Jacob Zuma has just returned from Brazil where he participated at the 6th BRICS Summit in Fortaleza.
At Fortaleza, South Africa ripped the benefits of its earlier engagements in Durban, where we successfully hosted the 5th BRICS Summit in March 2013.
In Durban, we had an opportunity to stimulate dialogue, and launch negotiations for the establishment of, namely;
- the New Development Bank (NDB), and
- the Contingent Reserve Agreement(CRA).
In Fortaleza, leaders agreed to move swiftly in order to process the Agreement on the New Development Bank (NDB); and the Treaty for the Establishment of a BRICS Contingent Reserve Agreement (CRA).
These are some, amongst the many, tangible outcomes of our BRICS chairpersonship – a legacy whose humble beginnings can be traced from Durban.
We are inspired by these outcomes. We have an urge to work twice as hard, and smarter. This is perhaps the reason why we want to continue our forward march, redouble our efforts to bring about more tangible and vibrant proposals, particularly on issues of common interest and mutual benefits within the field of development within emerging economies and like-minded states.
Programme Director;
The New Development Bank is by far the most powerful, single institution conceived by emerging economies for the sole benefit of their own development and prosperity. It has a solid vision inspired by ideals founded upon South-South Cooperation.
South Africa remains committed to these ideals that seek to position developing nations, and emerging economies, on a global map as key contributors to the global GDP, and overall growth and development.
Programme Director, having said that, please allow me to share with you and our esteemed guests some practical information on the proposed modalities and future operations of the New Development Bank. These are as follows:
- The headquarters of the Bank will be located in Shanghai, China;
- The establishment of the NDB’s first regional office will be in Johannesburg (the Africa Regional Centre) to be launched concurrently with the bank in Shanghai;
- The order of rotation of Presidents of the Bank who will serve for a five year term, non-renewable, will be India first to be followed by Brazil, Russia, South Africa and China;
- A Special Fund will be created within the Bank, with the participation of all founding members, for the purpose of helping project preparation and implementation;
- The first chair of the Board of Governors shall be from Russia; and
- The first chair of the Board of Directors shall be from Brazil.
At this stage, the only outstanding matter is for member states to ratify agreements for the New Development Bank and Contingency Reserve Agreement – we have made a commitment to give priority to this undertaking.
The Bank shall have an initial authorized capital of USD 100 billion and the initial subscribed capital shall be of USD 50 billion, equally shared among founding members.
South Africa will contribute USD 2 billion within a 7 year period, which is broken down as 7 instalments of USD 150 Million for the first 6 months, USD 250 Million for the 18 month period, followed by USD 300 Million for years 3, 4 and 5 and then USD 350 for years 6 and 7.
Ladies and Gentlemen;
It will now be the responsibility of the BRICS Central Banks to work with speed to conclude an Inter-Central Bank Agreement (ICBA) which will operationalise the Contingency Reserve Agreement (CRA).
What is this Contingency Reserve Agreement (CRA)?
The CRA is a virtual foreign exchange reserves pool modelled along the lines of the Chiang Mai Initiative Multilateralisation Agreement with a USD 100 billion reserve.
In order to ensure that the CRA is activated, members are expected to advance financial contributions, with China contributing the most part at USD 51 billion, Brazil, Russia and India USD 18billion and South Africa USD 5 billion. These contributions are aimed at forestalling short-term balance of payments pressures, provide mutual support and also provide additional and supplementary support and insurance for global financial stability.
The Parties shall be able to access resources subject to maximum access limits equal to a multiple of each Party’s individual commitment - for China 0,5% and for Brazil, Russia and India 1%while South Africa benefits with 2%. This means, therefore, that South Africa will be able to call on USD 10 billion. These transactions bear no immediate or direct financial implication. They will only be activated once a member makes a call for capital and according to the agreed share. Under this arrangement, transactions come with strict conditions of repayment.
Ladies and gentlemen;
In Fortaleza, President Dilma Rousseff of Brazil also extended an invitation to the leaders from eleven South American countries i.e. Argentina, Bolivia, Chile, Columbia, Equator, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela to meet with the BRICS Leaders on 16 July 2014. On 27 March 2013 when we hosted the 5th BRICS Summit, President Jacob Zuma also extended the same gesture to African leaders.
Leaders from South America warmly endorsed and welcomed the Bank initiative. They indicated that they had project proposals ready. They also added that there have been many attempts since the Second World War to launch such and initiative and that the Bank is a first tangible outcome in this regard.
Other agreements concluded include a Memorandum of Understanding on Cooperation among BRICS Export Credit Insurance Agencies, and the Cooperation Agreement on Innovation under auspices of the BRICS Inter-bank Cooperation Mechanism under auspices of the BRICS Inter-Bank Cooperation Mechanism to which the Development Bank of Southern Africa is the South African party.
The Summit outcome documents, the Fortaleza Declaration and the Fortaleza Action Plan strengthens the BRICS willingness to shape the global discourse through leveraging its amplified voice on issues pertaining to Growth and Development, Global Governance and Peace and Security.
We reflected pertinently that international governance structures designed with a different power configuration show increasingly evident signs of losing legitimacy and effectiveness as transitional and ad hoc arrangements become increasingly prevalent, often at the expense of multilateralism. We reiterated that BRICS is intended as an important force for incremental change and reform of current institutions towards more representative and equitable governance, capable of generating more inclusive global growth and fostering a stable, peaceful and prosperous world.
Ladies and Gentlemen;
As the only African country with membership of BRICS, our role is very key and strategic. Our geo-strategic importance and influence is of critical importance to other member state of BRICS.
The rationale for the establishment of BRICS was anchored upon a shared vision to pursue the restructuring of the global political, economic and financial architecture into one that is more equitable, balanced and rests on the important pillar of multilateralism.
As a result, we proposed to our BRICS partners that it was imperative that likeminded countries, more than ever before, pursue the ideal of a new world order whose multilateral structures would be more representative and legitimate. We are humbled that since inception, BRICS has focused on the reform of the global financial and economic architecture.
Programme Director;
It will be recalled that BRICS leaders have always articulated that they “are committed to advance the reform of international financial institutions, so as to reflect changes in the global economy”. We will continue to support and leverage the amplified BRICS voice to ensure economic gains and developmental space for emerging as well as poorest and most vulnerable countries.
Peace and security remains a sore point in our developmental aspirations as a country, and indeed for the region. Working together with the UN, and our BRICS partners, we can silence the barrels of guns in the continent.
Programme Director;
President Zuma again briefed and engaged our BRICS partners on collaboration with the AU Peace and Security architecture at the Fortaleza Summit. This move sought to garner support for the vision of the AU leadership and its ongoing commitment for a conflict-free continent by 2020.
We believe that in achieving lasting peace, conditions must be created that to support development and share prosperity with those who less privileged. Our BRICS partners’ support was obtained. What remains is for our leadership to engage further, and mobilise resources and operationalisation of the African Capacity for Immediate Response to Crises (ACIRC). It is envisaged that the ACIRC will be launched in October 2014, and will serve as an interim mechanism until the African Standby Force is launched
Ladies and gentlemen;
In the regional context, President Zuma once again utilised this occasion to engage the BRICS Leaders on the importance and significance of the New Development Bank for the aspirations of the African continent as the African leadership.
It could be recalled that the African Union Chairperson, the New Partnership for Africa’s Development (NEPAD) Chairperson as well as the AU Commission Chairperson had approached President Zuma in March 2012 to engage the BRICS Leaders on this initiative.
We are pleased to report that President Zuma has indeed successfully represented the mandate received from the African leadership in respect of the importance of the Bank for the continent’s own developmental aspirations.
When we consider that the aggregate price tag of the PIDA projects is estimated at USD 360-billion over the next 30 years, with at least USD 68-billion required by 2020 for 51 regional projects and programmes – and over 400 subprojects, the Bank is a timely response to these needs. Infrastructure and sustainable development projects will be the core focus of funding for the Bank.
The significant additional gain is that the regional office, which will be established in South Africa concurrently with the Headquarters in Shanghai, will pay particular attention to project preparation and implementation.
Programme Director;
Our country also has its own Infrastructure Plan. This plan requires funding beyond the means of our fiscus. This Bank will certainly bring complementary funding to facilitate the implementation of such projects, in line with our National Development Plan.
The Bank’s leverage to achieve impact will be multiplied by the multiplicity of currencies ranging from the Rand, Real, Rouble, Rupee and Renminbi investments made by the members.
Our contributions to the bank are in fact investments and not mere expenditure. It is expected that the Bank will function according to sound commercial terms with a view to obtain desired credit ratings. We have no doubt that its assets will grow and multiply over time as is the case with other similar Multilateral Development Banks..
Programme Director;
The BRICS Trade Ministers also met prior to the Summit, and welcomed the presentation of Joint Trade Study which was prepared during South Africa’s tenure. The latter made important recommendations for promoting value-added exports among our countries. Furthermore, it ensures that intra-BRICS trade is more sustainable and aims to foster economic cooperation and to promote trade and investment between the BRICS countries. The Ministers further highlighted the potential for forging closer links between the Micro, Small and Medium Enterprises (MSME) of the BRICS.
Your Excellencies;
The meeting of the BRICS Business Council and Business Forum took place from 14-15 July 2014 and attracted 700 business-persons. We were particularly pleased that the Council also focuses on promoting and increasing value-added trade and manufacturing amongst the BRICS countries and between the BRICS countries and Africa.
The proposed BRICS-Africa Council could add an additional dimension to augment trade and investment between BRICS and Africa, now the fastest growing region in the world. The UNCTAD’s World Investment Report of 2013 describes BRICS as significant investors in Africa. In 2010, the share of BRICS in FDI inward stock in Africa reached 14 per cent and their share in inflows reached 25 per cent. Most BRICS FDI projects in Africa are in manufacturing and services. South Africawas the fifth largest holder of FDI stock in Africa in 2011, with USD 18 billion.
Russia as the next Chair also highlighted priority focus areas for its tenure as from 2015, notably, BRICS Economic Cooperation proposal. The BRICS Sherpas will submit such a proposal by the next Summit.
On our part, we will continue to prioritise our domestic priorities, with a continuous review of our BRICS Strategy accordingly. We will continue to play a catalyst role to advance the required reforms of the global political and economic architecture. This commitment will ensure prosperity for all according to a new “win-win” global template, breaking with the previous zero-sum template.
The BRICS Leaders’ vision continues to resonate with the core foreign policy vision of South Africa.
Thank you.
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Acknowledging this, SADC Ministers of Trade approved a comprehensive Monitoring, Reporting and Evaluation (MRE) System on July 17th 2014. The decision had been preceded by two years of intensive preparations at the SADC Secretariat. SADC is furthermore establishing an Enforcement Mechanism to ensure the implementation of all SADC MRE systems.
The Trade Protocol Monitoring System is critical to highlight major issues regarding the implementation of trade commitments – or lack thereof. Member States will submit annual progress reports on a holistic set of indicators directly derived from the Protocol on Trade. The SADC Secretariat and Member States will administer the MRE System jointly to ensure its sustainability, with both a validation mechanism and impact assessment being integral parts.
By strengthening the results-oriented monitoring function and capacity in Member States, SADC Structures and the SADC Secretariat, organisational learning and accountability policies can be improved, in line with SADC’s Policy for Strategy Development, Planning, Monitoring and Evaluation (download below). However, the MRE system’s success hinges on Member States’ buy-in and their commitment to devote resources to its institutionalisation. Ultimately, the impacts of the SADC Protocol on Trade MRE system not only depend on its implementation, but on how its results feed into decision making processes at national and regional level.
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The government is likely to allow some US chicken imports into the local market at lower tariffs in exchange for continued participation in the lucrative African Growth and Opportunity Act (Agoa) preferential trade scheme.
President Jacob Zuma is leading a major charge by the government and business at the US-Africa summit in Washington this week to win renewal of Agoa, which allows almost 95 percent of South African exports into the US market at zero or greatly reduced tariff rates.
Yesterday Zuma urged the influential US Chamber of Commerce to support the renewal of Agoa for 15 years with South Africa’s participation when it expires next year.
Although President Barack Obama’s administration supports Agoa’s renewal, the decision will be made by Congress and some US business interests and legislators want South Africa to be “graduated” because it is an upper-middle-income country and because they say it is discriminating against US imports.
Tom Donohue, the president and chief executive of the US Chamber of Commerce, told Zuma that the chamber was lobbying Congress hard for a renewal of Agoa with South Africa in it. But he said South Africa needed to protect US intellectual property rights and trademarks, strengthen investor protections, repeal anti-dumping measures “and settle ongoing issues over ownership of foreign-headquartered firms”.
Officials said South Africa was responding to these complaints by considering the introduction of a tariff rate quota agreement, which would allow a quota of US chicken imports into the local market at lower tariffs.
And Trade and Industry Minister Rob Davies disclosed last week that his department was investigating complaints by the US government that restrictions on US pork and beef imports on health grounds were “unfair and unscientific”.
Zuma told the chamber that renewing Agoa would benefit not only South Africa, but also the US and Africa as a whole.
“Our message to you today is simple. South Africa is open for business, open for tourism and open for partnerships in many sectors,” Zuma said.
“There are many opportunities to be explored in our country and beyond.”
One of the key instruments that would help to expand trade relations with the US was Agoa, Zuma added.
“Agoa has transformed the economic landscape for many African countries and South Africa. It is the cornerstone of trade relations between the US and sub-Saharan Africa.
“Agoa has also greatly enhanced trade between the US and South Africa. Almost 95 percent of South African exports receive preferential treatment under Agoa. We advocate the renewal of Agoa for another 15 years with the inclusion of South Africa.
“We strongly believe that by endorsing the extension of Agoa, the US will be promoting African integration, industrialisation and infrastructure development.
“South Africa’s economic growth is inextricably linked to that of Africa as a whole. That is why we put great emphasis in developing, not only our country’s infrastructure, but that of the African continent too,” Zuma said, describing his work as champion for the AU’s project to build a North-South transport and trade corridor to link Durban via Dar es Salaam to Cairo.
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U.S.-Africa summit garners over $17 bln in investment pledges
African leaders on Tuesday called for a deeper economic relationship with the United States, hailing investment pledges totaling more than $17 billion at a Washington summit as a fresh step in the right direction.
U.S. and African companies and the World Bank pledged new investment in construction, energy and information technology projects in Africa at the U.S.-Africa Business Forum, including several joint ventures between U.S. and African partners.
“The United States is determined to be a partner in Africa’s success,” President Barack Obama said in a speech at the forum. “A good partner, an equal partner, and a partner for the long term.”
The U.S. president also urged African officials to create conditions to support foreign investment and growth.
“Capital is one thing, development programs and projects are one thing, but rule of law, regulatory reforms, good governance, those things matter even more,” he said.
African leaders said they were optimistic of becoming full partners in a relationship worth an estimated $85 billion a year in trade flows, as U.S. business leaders eyed opportunities in the region, home to six of the world’s 10 fastest-growing economies – even if they might be late to the party.
“We gave it to the Europeans first and to the Chinese later, but today it’s wide open for us,” said the chief executive of General Electric Co, Jeff Immelt, who on Monday announced $2 billion to boost infrastructure, worker skills and access to energy.
Tanzanian President Jakaya Kikwete said Africa wanted to move away from a relationship of “aid donor and aid recipient” to one of investment and trade.
Kikwete told the forum that with Obama and senior officials encouraging the business community “to take Africa seriously, I think this time we will make it.”
More than 90 U.S. companies participated in the forum, part of a three-day summit which has brought almost 50 African leaders to the U.S. capital, including Chevron Corp, Citigroup Inc, Ford Motor Co, Lockheed Martin Corp, Marriott International Inc and Morgan Stanley .
Many already have a foothold in the region, which is expected to have a larger work force than China or India by 2040 and boasts the world’s fastest-growing middle class, supporting demand for consumable goods.
The Coca-Cola Co said it would invest $5 billion with African bottling partners in new manufacturing lines and equipment, as well as safe water access programs, over six years, and the chief executive of IBM, Ginni Rometty, said the IT giant would plow more than $2 billion into the region over seven years.
Still, Aliko Dangote, the president of Nigeria’s Dangote Group, whose operations include cement making, flour milling and sugar refining, said nothing works without adequate power.
Dangote signed an agreement to jointly invest $5 billion in energy projects in sub-Saharan Africa with Blackstone Group funds, also calling for the U.S. Export-Import Bank to remain open to support African companies buying U.S. goods.
The World Bank, which committed $5 billion to support electricity generation, estimates that one in three Africans, or 600 million people, lack access to electricity despite rapid economic growth expected to top 5 percent in 2015 and 2016.
Obama took part in a discussion with corporate chief executives and government leaders at the event, also attended by U.S. Commerce Secretary Penny Pritzker as well as former President Bill Clinton and former New York Mayor Michael Bloomberg.
“These deals and investments demonstrate that the time is ripe to work together as partners, in a spirit of mutual understanding and respect – to raise living standards in all of our nations and to address the challenges that impede our ability to develop closer economic bonds,” Pritzker said.
African telecoms billionaire Mo Ibrahim encouraged U.S. businesses to invest in Africa and make money, but also said they should “pay their taxes.”
Remarks by the President at the U.S.-Africa Business Forum
Extracts from US President Barack Obama's speech at the U.S.-Africa Business Forum on 5 August 2014, Washington, D.C.
So we are here, of course, as part of the U.S.-Africa Leaders Summit – the largest gathering any American President has ever hosted with African heads of state and government. And this summit reflects a perspective that has guided my approach to Africa as President. Even as Africa continues to face enormous challenges, even as too many Africans still endure poverty and conflict, hunger and disease, even as we work together to meet those challenges, we cannot lose sight of the new Africa that’s emerging.
We all know what makes Africa such an extraordinary opportunity. Some of the fastest-growing economies in the world. A growing middle class. Expanding sectors like manufacturing and retail. One of the fastest-growing telecommunications markets in the world. More governments are reforming, attracting a record level of foreign investment. It is the youngest and fastest-growing continent, with young people that are full of dreams and ambition.
Last year in South Africa, in Soweto, I held a town hall with young men and women from across the continent, including some who joined us by video from Uganda. And one young Ugandan woman spoke for many Africans when she said to me, “We are looking to the world for equal business partners and commitments, and not necessarily aid. We want to do [business] at home and be the ones to own our own markets.” That’s a sentiment we hear over and over again. When I was traveling throughout Africa last year, what I heard was the desire of Africans not just for aid, but for trade and development that actually helps nations grow and empowers Africans for the long term.
As President, I’ve made it clear that the United States is determined to be a partner in Africa’s success – a good partner, an equal partner, and a partner for the long term. (Applause.) We don’t look to Africa simply for its natural resources; we recognize Africa for its greatest resource, which is its people and its talents and their potential. (Applause.) We don’t simply want to extract minerals from the ground for our growth; we want to build genuine partnerships that create jobs and opportunity for all our peoples and that unleash the next era of African growth. That’s the kind of partnership America offers.
And since I took office, we’ve stepped up our efforts across the board. More investments in Africa; more trade missions, like the one Penny led this year; and more support for U.S. exports. And I’m proud – I’m proud that American exports to Africa have grown to record levels, supporting jobs in Africa and the United States, including a quarter of a million good American jobs.
But here’s the thing: Our entire trade with all of Africa is still only about equal to our trade with Brazil – one country. Of all the goods we export to the world, only about one percent goes to Sub-Saharan Africa. So we’ve got a lot of work to do. We have to do better – much better. I want Africans buying more American products. I want Americans buying more African products. I know you do, too. And that’s what you’re doing today. (Applause.)
So I’m pleased that in conjunction with this forum, American companies are announcing major new deals in Africa. Blackstone will invest in African energy projects. Coca-Cola will partner with Africa to bring clean water to its communities. GE will help build African infrastructure. Marriott will build more hotels. All told, American companies – many with our trade assistance – are announcing new deals in clean energy, aviation, banking, and construction worth more than $14 billion, spurring development across Africa and selling more goods stamped with that proud label, “Made in America.”
And I don’t want to just sustain this momentum, I want to up it. I want to up our game. So today I’m announcing a series of steps to take our trade with Africa to the next level.
First, we’re going to keep working to renew the African Growth and Opportunity Act – and enhance it. (Applause.) We still do the vast majority of our trade with just three countries – South Africa, Nigeria and Angola. It’s still heavily weighted towards the energy sector. We need more Africans, including women and small- and medium-sized businesses, getting their goods to market. And leaders in Congress – Democrats and Republicans – have said they want to move forward. So I’m optimistic we can work with Congress to renew and modernize AGOA before it expires, renew it for the long term. We need to get that done. (Applause.)
Second, as part of our “Doing Business in Africa” campaign, we’re going to do even more to help American companies compete. We’ll put even more of our teams on the ground, advocating on behalf of your companies. We’re going to send even more trade missions. Today, we’re announcing $7 billion in new financing to promote American exports to Africa. Earlier today, I signed an executive order to create a new President’s advisory council of business leaders to help make sure we’re doing everything we can to help you do business in Africa. (Applause.)
And I would be remiss if I did not add that House Republicans can help by reauthorizing the Export-Import Bank. That is the right thing to do. (Applause.) I was trying to explain to somebody that if I’ve got a Ford dealership and the Toyota dealership is providing financing to anybody who walks in the dealership and I’m not, I’m going to lose business. It’s pretty straightforward. We need to get that reauthorized. (Applause.) And you business leaders can help make clear that it is critical to U.S. business.
Number three, we want to partner with Africa to build the infrastructure that economies need to flourish. And that starts with electricity, which most Africans still lack. That’s why last year while traveling throughout the continent, I announced a bold initiative, Power Africa, to double access to electricity in Sub-Saharan Africa and help bring electricity to more than 20 million African homes and businesses.
Now, we’ve joined with African governments, the African Development Bank, and the private sector – and I will tell you, the response has exceeded our projections. It has been overwhelming. Already, projects and negotiations are underway that, when completed, will put us nearly 80 percent of the way toward our goal. On top of the significant resources we’ve already committed, I’m announcing that the United States will increase our pledge to $300 million a year for this effort.
And as of today – including an additional $12 billion in new commitments being announced this week by our private sector partners and the World Bank and the government of Sweden – we’ve now mobilized a total of more than $26 billion to Power Africa just since we announced it – $26 billion. (Applause.) So today we’re raising the bar. We decided we’re meeting our goal too easily, Zuma, so we’ve got to go up. So we’re tripling our goal, aiming to bring electricity to more than 60 million African homes and businesses that can spark growth for decades to come. (Applause.)
Fourth, we’ll do more to help Africans trade with each other, because the markets with the greatest potential are often the countries right next door. And it should not be harder to export your goods to your neighbor than it is to export those goods to Los Angeles or to Amsterdam. (Applause.) So through our Trade Africa initiative, we’ll increase our investments to help our African partners build their own capacity to trade, to strengthen regional markets, make borders more efficient, modernize the customs system. We want to get African goods moving faster within Africa, as well as outside of Africa.
And finally, we’re doing more to empower the next generation of African entrepreneurs and business leaders – it’s young men and women, like our extraordinary Mandela Washington Fellows that I met with last week. And I have to say to the heads of state and government, you would have been extraordinarily proud to meet these young people who exhibit so much talent and so much energy and so much drive.