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The EU’s EPA negotiations with the Southern African Development Community (SADC): July 2014 update
Current status
On 15 July 2014 the EPA negotiations were successfully concluded in South Africa. This ended ten years of negotiations and produced an Agreement that should replace the interim EPA signed by the EU and by Botswana, Lesotho, Mozambique and Swaziland in June 2009. That agreement was never ratified.
Next steps
The EPA is a comprehensive agreement with the whole SADC EPA Group including South Africa. The Agreement will now be “scrubbed” and prepared for signature.
Background
Economic Partnership Agreements (EPAs) are trade and development agreements negotiated between the EU and African, Caribbean and Pacific (ACP) regions engaged in a regional economic integration process.
The ACP EPA countries group themselves into seven regions: five in Africa, one in the Caribbean and one in the Pacific.
The Southern African Development Community (SADC) EPA group consists of Angola, Botswana, Lesotho, Mozambique, Namibia, Swaziland and South Africa. Botswana, Lesotho, Namibia, Swaziland and South Africa are also members of the Southern African Customs Union (SACU). Trade between the EU and South Africa is governed by the Trade, Development and Cooperation Agreement (TDCA).
The other six members of the SADC region – the Democratic Republic of the Congo, Madagascar, Malawi, Mauritius, Zambia and Zimbabwe – are negotiating Economic Partnership Agreements with the EU as part of other regional groups, namely Central Africa or Eastern and Southern Africa (ESA) groups. The countries in SADC are members of the World Trade Organisation (WTO).
The negotiating process with the SADC group was a rather complex process because of the special position of South Africa and its role within SACU. In particular, South Africa, being the dominant economic player in the region and a major and competitive exporting country, notably for agricultural products, would not get the total duty-free quota-free treatment offered to the other ACP countries.
Click here to read the statement from South Africa's Department of Trade and Industry.
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The DA welcomes the conclusion of the EU EPA negotiations
The Democratic Alliance welcomes the conclusion of the Economic Partnership Agreement between the SADC EPA group and European Union (EU).
With the agreement now making its way to Parliament for ratification, we will scrutinize it in detail to ensure that it improves terms of trade for South African exporters and that our remaining concerns are fully addressed.
We will also ensure that there is a public participation process that allows South African businesses, both importers and exporters, to share their views on the detail of the agreement.
We welcome particularly the EU’s commitment to reduce and eliminate agricultural subsidies on goods exported to the Southern African Customs Union. This is good for South African consumers who will now have access to cheaper European agricultural products.
Importantly, the agreement is set to improve market access for 32 South African agricultural products, including a more than doubling of the amount of wine we can export to Europe duty free.
Though the deal has succeeded in improving the terms of trade between the EU and South Africa, it is unfortunate that this new agreement has not achieved complete duty-free and tariff free trade for South Africa – unlike other SACU member states party to the agreement.
Questions remain over whether the agreement will allow new export taxes on certain minerals, and to what extent. The DA does not believe that the use of export taxes is appropriate for South Africa's economy.
Export taxes are trade distorting, creating an disincentive to international trade for domestic producers, and will only further widen South Africa’s trade deficit.
It also remains unclear how the concessions made in this agreement will impact on negotiations for the extension of the African Growth and Opportunity Act (AGOA), which are currently underway.
The DA remains concerned about the increasingly frequent use of sanitary and phyto-sanitary (SPS) trade barriers by the EU, as is the case with citrus black spot, which independent research has shown to pose little or no threat to European orchards.
The EPA should address concerns about the abuse of SPS measures transparently and with appropriate mechanisms to protect South African exporters from unfair barriers.
The DA is committed to the growth of South Africa’s exports as a key driver of economic development and employment creation.
Tripartite acts to ease movement of business people
The Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and the Southern Africa Development Community (SADC) have begun working towards facilitating free movement of business people in the east and southern African region.
This is being done through a Technical Working Group (TWG) constituting experts from the tripartite regional blocs.
COMESA Trade Expert Mrs Helen Kenani informed delegates attending the International Freight Forwards Association (FIATA) annual conference in Victoria Falls, Zimbabwe last month that the movement of business persons has remained a major hindrance to free flow of inter/intra-regional trade. It is also a key provision in the negotiations for a Tripartite Free Trade Area (TFTA).
The conference was hosted by the Shipping and Forwarding Agents of Zimbabwe, (SFAAZ) and the Region African and the Middle East (RAME) who invited COMESA to brief the delegates on the RECs initiatives to address Non-Tariff Barriers (NTBs) and the Tripartite Free Trade Area negotiations. It was officially opened by Senior Minister in the Office of the President of Zimbabwe Ambassador Simon Khaya Moyo.
In her presentation to the delegates, Mrs. Kenani observed that RECs formed an important stakeholder and presented big business opportunity for freight forwarders given the imminent increase in intra and extra-Tripartite trade”.
“As the TFTA deepens it is expected that it would spur both Foreign Direct Investments as well as regional cross-border investments as currently being witnessed in the COMESA integration process,” Mrs Kenani said.
The delegates noted that important stakeholders in the region were not aware of the efforts being made to fast track the reporting and subsequent resolution of NTBs specifically the Tripartite on-line based mechanism.
An incident that underscored the critical need to address the NTBs was cited whereby a past president of the RAME, Africa Chapter, was prevented from proceeding to the same conference. He was detained in one of the regional airports and then finally sent back to his country for not having a transit visa.
“The participants were therefore keen as details of the mechanisms for reporting NTBs were provided that ranged from accessing the internet, reporting as well as easy access to National Focal Points of a given Tripartite country as well as REC Focal Points for assistance”, Mrs. Kenani said.
The delegates recommended that COMESA and other RECs that impact on their sector should always be invited to their conferences to appraise the membership on the on-goings in the region as was done at the Zimbabwe Conference.
Mrs Kenani informed the Conference that COMESA would be glad to assist in terms of capacity building on trade facilitation instruments that have been put in place for their use such as the COMESA Yellow Card Scheme and the Regional Customs Trade Guarantee scheme.
The FIATA is a non-governmental organization based in Zurich, Switzerland representing an industry covering approximately 40,000 forwarding and logistics firms and employing around 8-10 million people in 164 countries worldwide.
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DDG Agah notes no acceleration of new restrictions, urges more trade transparency
Deputy Director-General Yonov Frederick Agah, in presenting the Director-General’s report on trade-related developments (mid-November 2013 to mid-May 2014) to the Trade Policy Review Body on 11 July 2014, said that “the pace at which new trade restrictions have been introduced has not accelerated during the period under review”.
He urged members to provide more trade information for the monitoring reports: “I am convinced, and the Director-General’s recent meetings with business groups have confirmed this, that members must accept their collective responsibility for promoting the transparency and predictability which importers and exporters demand”.
Statement by DDG Agah
Thank you, Mr Chairman.
Good morning, colleagues. Let me at the very outset express, on behalf of the Director-General, his regret of not being able to be here this morning. As you know, the DG attaches great significance to this monitoring exercise – as a transparency tool and as a platform for candid discussion of trade and trade-related developments among delegations. He has asked me to represent him today and to report back in detail on our exchange of views today.
The trade monitoring report for this meeting was circulated to Members on 27 June. As always, the DG presents this report under his own responsibility with the aim of providing Members with an assessment of the main trends in terms of trade measures implemented from mid-November 2013 to mid-May 2014. It is the DG’s hope that this report, like previous ones, contributes to enhancing the overall transparency of the multilateral trading system.
I would like to begin by briefly providing some background to the report before you today.
At our Ministerial Conference in December 2011 Ministers recognized the regular work undertaken by the TPRB on the monitoring of trade and trade-related measures; they took note of the work initially done in the context of the global financial and economic crisis, and directed it to be continued and strengthened. Ministers asked the TPRB to consider the monitoring reports in addition to the Annual Overview of Developments in the International Trading Environment. In addition, Ministers committed to cooperate with the Secretariat, duly complying with the existing transparency obligations and reporting requirements needed for the preparation of these monitoring reports.
I would like to thank the delegations who participate in the WTO’s trade monitoring exercise by providing relevant information on time and by ensuring the subsequent verification of reported measures. These inputs not only help expand the coverage of this report, they are crucial in ensuring the accuracy of the information contained in the report.
As has been the case in the past, information on the measures included in this report has been collected from inputs submitted by Members and Observers, as well as from other official and public sources. I am pleased to note that the rate of reply to the DG’s initial request for information for this report is up slightly from last year’s edition and now stands at 37% of the membership. The WTO Secretariat has drawn on these replies, as well as on a variety of other public and official sources, to collect information to be included in the report. All recorded country-specific information on trade measures was sent for verification to the delegations concerned. Requests for verification of information were sent to 50 delegations (counting the EU as one) and 56% of them provided replies in time for the finalization of the report. This represents a welcome ten per cent increase compared to the last report. As with previous reports, where it has not been possible to confirm the information, this is noted in the annexes.
This report, like the reports circulated in 2013, contains three annexes which provide information obtained on trade in goods from mid-November 2013 to mid-May 2014. Annex 1 lists the measures that clearly facilitate trade, annex 2 lists trade-remedy measures and annex 3 other trade and trade-related measures. During the period under review a total of 320 measures were recorded in these three categories.
Finally, and to wrap up the background to the report, it is worth noting that the country-specific measures listed in the annexes to the report are new measures implemented by governments during the period under review. For those of you interested in checking the compilation of all measures implemented before mid-May 2014 the Secretariat has put in place its Trade Monitoring Database which can be easily accessed from the Members’ website or from the WTO public website.
Allow me now to briefly turn to some of the key substantive observations of the document before you.
This report comes at a time where world trade and output have continued to grow inconsistently, with expansions in the fourth quarter of 2013 followed by setbacks in the first quarter of 2014. If the most recent GDP growth forecasts hold, it is expected that the volume of world merchandise trade will grow by 4.7% in 2014 and by 5.3% in 2015. On the positive side, this is significantly larger than in 2013. Yet, the projection for 2014 remains below the 5.3% average of the last 20 years and the 6% average of the 20 years leading up to the financial crisis. It will not come as a surprise to any of you that most of the risks associated with this trade outlook are on the downside.
Of the 320 trade and trade-related measures included in this report, 159 trade-remedy actions were recorded. This figure comprises 83 initiations of new investigations and 76 terminations of either investigations or existing duties. In line with previous reports, the majority of these trade-remedy actions were anti-dumping measures (119). In the category trade-facilitating measures, 86 measures were recorded during the period under review. Most of these trade-facilitating measures consist of a decrease or elimination of import tariffs, others relate to the streamlining of customs procedures. Regarding the final category of other trade measures, 74 cases were compiled, more than one-third of which consist of tariff increases. Twenty-seven per cent of the measures listed under this final category were applied to exports. Although Members have introduced new restrictions, the pace at which new trade restrictions have been introduced has not accelerated during the period under review.
In the area of services, a wide range of measures affecting trade in services has been introduced by several WTO Members in the period under consideration, but no clear sectoral or policy trend can be identified. Rather, policy developments in services seem to have responded to specific domestic contexts and objectives. There have also been some developments regarding the supply of services through the movement of natural persons.
From a substantive as well as process point of view, this report underscores the need for greater transparency regarding trade-policy measures. Importantly, and the Chair alluded to this in his opening remarks, the response rate for this report accounts for only 37% of the total membership of the WTO. Although this is broadly in line with previous reports, I think it will be important to increase the participation in and therefore the transparency of this exercise.
This report also shows that, while we appear to be picking-up the majority of the border measures, our ability to reflect “behind-the-border” measures, such as subsidies and other economic support measures remains weak. The information that has been made available by delegations on subsidies and economic support is very limited. As the DG has stated on previous occasions, the regular monitoring of this type of measure is a considerable challenge due to difficulties in obtaining relevant information. In the interests of transparency and predictability I would like to encourage delegations to be as forthcoming and cooperative as possible in sharing information on such measures.
Finally, this report also provides a quantitative snapshot of Members’ compliance record with their WTO notification obligations in a number of WTO areas during the period under review. In line with recent reports, the document before you shows that the record of members’ compliance with their notification obligations is patchy and far from satisfactory in areas such as agriculture, quantitative restrictions, subsidies, state trading enterprises and trade in services. This is an issue of systemic importance to which the DG attaches great importance – precisely because it is about transparency and predictability – and I would like to reiterate the DG’s call to Members to improve on this situation.
These, Mr Chairman, are some of the key observations outlined in the report before the TPRB today. I would again like to thank those delegations which continue to actively participate in this endeavour and at the same time urge others to assist us in continuing to make this a factual and credible exercise in transparency. I am convinced, and the DG’s recent meetings with business groups have confirmed this, that Members must accept their collective responsibility for promoting the transparency and predictability which importers and exporters demand.
Although this monitoring exercise was originally created to keep up surveillance of trade and trade-related measures in the context of the financial crisis which began in 2008, the regular monitoring of trade measures will continue to promote and improve transparency in the multilateral trading system – even as the world slowly emerges from the shadows of the crisis. This mechanism has helped us all to gain a better understanding of the emerging trends and to obtain up-to-date information on trade measures taken by Members and Observers. And equally important, this exercise continues to drive home the point that we have to remain vigilant in the face of the continuing accumulation of trade restrictive measures.
In conclusion, Mr Chairman, I am convinced that the multilateral trading system remains the best defence against protectionism and an important driver of economic growth, sustainable recovery and development. The successful outcome of the WTO’s 9th Ministerial Conference has provided an important opportunity to strengthen and reinvigorate the multilateral trading system. Implementation of the decisions reached in Bali, and developing a work programme by the end of this year on the conclusion of the Doha Development Agenda are the next steps in strengthening the multilateral trading system. This will deliver a boost to trade around the world and help to alleviate the concerns regarding obstacles to global trade flows. It will also help to deliver global growth, though protectionist pressures are bound to remain in a context of slow uneven recovery and persistent high levels of unemployment.
I look forward to hearing your views and assessments regarding the main recent trade policy trends outlined in this report. Thank you.
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The U.S.-Africa Leaders Summit: A focus on Foreign Direct Investment
The U.S.-Africa Leaders Summit blog series is a collection of posts discussing efforts to strengthen ties between the United States and Africa ahead of the first continent-wide summit. On August 4, Brookings will host “The Game Has Changed: The New Landscape for Innovation and Business in Africa,” at which these themes and more will be explored by prominent experts.
On the second day of President Obama’s three-day U.S.-Africa Leaders’ Summit, the U.S. Department of Commerce and Bloomberg Philanthropies will convene the inaugural U.S.-Africa Business Forum. This event represents an unprecedented occasion for U.S. and African heads of state to meet with business leaders and discuss ways of catalyzing new, continent-wide trade and investment opportunities.
As the summit draws closer, the Brookings Institution’s Africa Growth Initiative (AGI) has reviewed and compared economic relations between sub-Saharan African countries and some of their major commercial partners: the U.S., China, the European Union (EU) and Japan. In this second installment of the Africa Leaders Summit series, AGI examines the trends of U.S. foreign direct investment in the region and proposes potential topics of focus for the forum, to help inform the participants on the key investment issues.
Foreign Direct Investment in Sub-Saharan Africa: Trends and Highlights
FDI to sub-Saharan Africa has increased substantially, in part driven by China, but remains low compared to other regions.
Since 2000, global FDI stock in sub-Saharan Africa has increased dramatically, from over $33.5 billion to $246.4 billion in 2012. According to analysis of UNCTAD’s Bilateral FDI Statistics (2014)[1], the EU, China, Japan and the U.S accounted for approximately 54 percent of the stock of FDI in the region in 2012. South-South investment was also important and included partners such as South Africa (9 percent), Singapore (6 percent), India (5 percent) and Mauritius (5 percent).
The stock of FDI in sub-Saharan Africa from the EU, China, Japan and the U.S. grew by nearly five times between 2001 and 2012, from $27.2 billion to about $132.8 billion. This growth was primarily driven by China, whose FDI grew at an annual rate of 53 percent, compared with 29 percent for Japan, 16 percent for the EU and 14 percent for the U.S.
Five EU member countries – France (38 percent), the U.K. (31 percent), Germany (8 percent), Belgium (8 percent) – accounted for over 80 percent of the EU’s share of FDI stock in the region. While the EU is considered the largest of the four partners in terms of FDI stock, when the EU is disaggregated by country, the U.S. and France were the largest sources of FDI stock for sub-Saharan Africa in 2012 at $31 billion each, followed by the U.K. with $25 billion. Yet, even though the U.S. is one of the top contributors of FDI stock to sub-Saharan Africa, less than 1 percent (0.7 percent) of the U.S.’s global FDI stock abroad is destined for the region. The U.S primarily invests its $367 billion of FDI in Europe (55 percent), Latin America (13 percent), Canada (8 percent), and other developed countries such as Australia, New Zealand, Israel and Japan (13 percent collectively). Similarly, the EU and Japan direct only 0.8 and 0.2 percent of their FDI, respectively, toward sub-Saharan African countries abroad. China, on the other hand, invested 3.4 percent of its FDI stock abroad in the region in 2012.
FDI flows to sub-Saharan Africa are highly concentrated in only a few countries; South Africa and Nigeria are the top recipients of sub-Saharan Africa-bound FDI flows for China, the EU and the U.S. The top destinations for U.S. FDI flows in the region are Nigeria (37 percent), followed by South Africa (17 percent) and Mauritius (16 percent). For the EU, South Africa comprises 68 percent of its FDI flows to sub-Saharan Africa while for China, South Africa receives 35 percent of its flows. For Japan, South Africa is also the top recipient (with 68 percent of flows), but Mauritius (22 percent) and Liberia (7 percent) each receive sizable shares as well.
Predominantly resource-rich countries – South Africa with its precious metals and minerals as well as Nigeria with its oil reserves – receive a majority of FDI, indicating that natural resources remain a significant factor in attracting investors to the continent. For example, the main sectors in which the U.S. and China both invested in sub-Saharan Africa were the mining and extractive industries, comprising approximately 58 percent and 30.6 percent of each country’s FDI stock to the region, respectively, in 2011.[2] However, financial services, manufacturing and construction also received notable shares of FDI stock from both countries. China’s reported FDI composition was more diversified than the composition of U.S. FDI, with 19.5 percent in financial services, 16.4 percent in construction, 15.3 percent in manufacturing, and the remaining 18.2 percent in business and tech services, geological prospecting, wholesale retail, agriculture and real estate. U.S. FDI was concentrated 12 percent in finance and insurance, 5 percent in manufacturing and 25 percent in other industries. Despite this emphasis on mining and extractive industries in 2012, according to the World Investment Report of 2014, international investors are increasingly looking to new opportunities in consumer-oriented sectors (such as information technology, foods, financial services and wholesale retail) that target the region's expanding middle class.
Investors’ Pledge for Good Governance in Sub-Saharan Africa
Along with the appetite for mineral resources, energy and other returns that drew massive investment into Africa, we compared the status of the quality of governance in the countries where the U.S., Japan, the EU and China invested in 2012.
Investing in countries with relatively higher governance performance can reflect at least three concerns: (i) the investors’ level of risk aversion, (ii) the pursuit of democratic principles or non-ideological relationship based on non-interference, and (iii) the level of pressure from global consumers, who are increasingly scrutinizing their choices along the global value chains according to the respect of governance indicators, such as respect for human rights.
We used the World Governance Indicators[3] in 2012 produced by Kaufman, Kraay and Mastruzzi, which cover six dimensions of governance: voice accountability, rule of law, government effectiveness, political stability, regulatory quality, and control of corruption. The governance index ranges from -2.5 (weak) to 2.5 (strong governance performance). In 2012, Botswana and Mauritius top the list with a score of governance performance of 0.71 and 0.66 respectively, while Zimbabwe and the Democratic Republic of the Congo (DRC) are at the bottom with a respective score of -1.35 and -1.74.
Our computed levels of average governance indicators (weighted by the share of total FDI flows in the host countries between 2001 and 2012) are comparable across the EU, U.S. and China. Japan’s investment is concentrated in South Africa where the overall governance performance is high. When we disaggregated the EU by individual member countries, France has the largest share of investment in countries with the lowest levels of governance.
Given its focus on oil-producing countries with low governance levels, the U.S. is comparable to other regions. Importantly, however, the U.S. Dodd-Frank Act, requires public disclosure of payments at the project level from listed companies, involved in extractive industries. Other initiatives require companies to eliminate conflict minerals from their supply chains. For instance, the use of coltan originating from the DRC and neighboring countries is effectively banned. UNCTAD data actually show no record of U.S. investment stock in the DRC from 2007 onwards. The EU has a similar set of policies manifested in its Accounting and Transparency Directives. Furthermore, the U.S., along with China, the EU and Japan, is a participant in the Kimberley Process, which has banned the sale of “blood diamonds.” Other transparency initiatives supported by the U.S. include the Extractive Industries Transparency Initiative (EITI), the International Tropical Timber Organization (ITTO) and the International Chamber of Commerce (ICC) Rules on Combating Corruption.[4]
Engagement through Bilateral Investment Treaties
Bilateral investment treaties (BITs) are agreements signed between countries aiming to promote FDI by ensuring certain guarantees[5] – against expropriation, for example – for investors in unstable business environments. BITs are low-cost options to encourage business climate reform while simultaneously signaling investor commitment to host countries and providing them with policy space to design and implement their development agendas. These BITs and other international investment arrangements (IIAs) have proliferated widely over the past 50 years: the total number of BITs globally reached 2,902[6] in 2013 with the number of sub-Saharan Africa-specific BITs comprising at least 300 of these treaties.
Among sub-Saharan Africa's partners there is significant variation in the number and distribution of BITs with the continent. China has BITs with 27 sub-Saharan African countries[7], signing 10 in the past 10 years.[8] For the EU, member countries negotiate BITs bilaterally, and France has 18 in sub-Saharan Africa, the U.K. has 21 and Germany has 39. The U.S. has six, and Japan has only one. So why is the U.S. so far behind in the number of BITs it has enacted?
According to Benjamin Leo from the Center for Global Development, it is in part due to the U.S.’s limited “negotiating capacity” – it has only a few foreign commercial officers on the ground to negotiate these treaties, whereas the EU and China have distributed delegations of commercial attachés at offices and embassies in nearly all African countries. The U.S. has also focused its efforts on establishing trade and investment framework agreements (TIFAs) in the region, which provide a forum for engaging in discussions on trade and investment, but do not confer protections on investors or indicate a serious commitment to host countries since they are not legally binding. Furthermore, the U.S. Model BIT, which it uses in its negotiations, is a very dense and complicated legal document, which is difficult for many countries to review and discuss without adequate legal support (that some of them lack). These compounding factors hinder the U.S. from establishing mutually beneficial investment agreements with countries in sub-Saharan Africa.
Policy Recommendations
There is ample scope to expand the U.S.’s investment strategy with Africa. The U.S. funnels less than 1 percent of its FDI abroad toward the region, and it invests largely in only a few countries and sectors. While the perceived risks of investing in Africa have historically been high, rates of return have also proven to be high, averaging 11.4 percent on inward FDI for the period 2006-2011 (compared with 5 percent for developed countries)[9]. UNCTAD’s World Investment Report 2013 also reported that four of the top 20 economies with the highest rates of return on inward FDI in 2011 were in sub-Saharan Africa.
- One way in which the U.S. can increase FDI to sub-Saharan Africa is through the promotion of BITs. African countries are seriously engaging in the negotiation of BITs: Among the most active countries at concluding BITs (globally, in 2013) were Mauritius and Tanzania, which each concluded three BITs. The U.S. should reciprocate this engagement by focusing its efforts on implementing sustainable-development-oriented, legally-binding BITs[10] rather than TIFAs; providing technical assistance to reform business environments and reduce the cost of doing business; and establishing BITs with strategic countries like Nigeria. With China and the EU continuing to sign BITs, the U.S. risks being “locked out” of certain markets or industries.
- So-called “blended initiatives,” such as Power Africa, offer another useful model to increase investment through partnerships between the African private sector, U.S. government agencies, African governments, and other partners like multilateral institutions such as the African Development Bank.
At the same time, African policymakers should engage the U.S. authorities and its private sector to:
- Get more transfer of knowledge and skills from FDI. For example, policymakers can provide incentives for investors to include local businesses in the value chain and invest in education and training;
- Reduce illicit financial flows from tax evasion, the underpricing of concessions and trade mispricing; and
- Strengthen African common institutions. For instance, the NEPAD-OECD Africa Investment Initiative aims to raise the profile of Africa as an investment destination while facilitating regional cooperation and has led to a number of investment policy reviews in four South African Development Community countries (Mozambique, Botswana, Tanzania and Mauritius).
[1] The FDI data were collected from UNCTAD’s publically available Bilateral Investment Statistics database, 2014, which provides bilateral, geographically disaggregated data on stocks and flows from 2001-2012. Our analysis specifically focused on outward FDI or FDI abroad, originating from our selected partners and destined for sub-Saharan African countries. Data on the European Union was aggregated for all EU member countries (at time of accession).
[2] Figures based on Chinese White Paper on Economic Cooperation (2013) and a 2012 CRS paper entitled “U.S. Trade and Investment Relations with sub-Saharan Africa and the African Growth and Opportunity Act.” Data for the EU and Japan were not available.
[3] The Mo Ibrahim Foundation also produces governance performance indices specifically from sub-Saharan African countries that monitor changes in 182 indicators of governance from judicial process independence to equity of access to public services. Their index scores range from 0 to 100, where 100 is the best possible score. Mauritius (83) and Botswana (78) had the strongest governance performance while the Democratic Republic of the Congo (31) and Eritrea (32) had the worst performance.
[4] The U.S. is a candidate country for EITI and is also a supporting government stakeholder in the initiative, but is not yet on record as being an EITI compliant country.
[5] According to the Office of the United States Trade Representative, these include most-favored-nation treatment for investors, protection against expropriation and/or provision of adequate compensation, the right to transfer investment funds using market-based exchange rates, limitations on performance requirements, the authority to choose their top managerial personnel and access to international arbitration to settle investment disputes.
[6] Plus an additional 334 IAAs.
[7] Data on BITs are from UNCTAD’s country-specific list of BITs, however, the Chinese White Paper on Economic Cooperation (2013) states that China has signed more than 30 BITs.
[8] This includes Benin, Chad, the DRC, Equatorial Guinea, Guinea, Madagascar, Mali, Namibia, Seychelles (not yet entered into force) and Uganda.
[9] Figures based on statistics in UNCTAD’s World Investment Report, 2013, p. 33.
[10] Sustainable-development-oriented features include measures explicitly stating that that countries should not take measure to promote investment that would harm health, safety and environmental standards. They also ensure public policy space for host countries and minimize exposure to investment arbitration.
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Ejime: ECOWAS on path to regional integration
The Economic Community of West African States (ECOWAS), Africa’s flagship Regional Economic Community, deserves credit for surviving myriad political, security and socio-economic distractions and remaining focused on the principal goal of its founding fathers. This is largely due to the resolute political will and iron commitment of the community leaders and the undying determination of its estimated 350 million citizens.
At 39 this year, the Community through strict adherence to its zero-tolerance principle for ascension to power other than through democratic means has ensured that all its 15 Member States are governed by democratically elected governments.
Following the transformation of the organization from an Executive Secretariat to a Commission in 2007 and consistent with the spirit of inclusiveness and the region’s Vision 2020 for a citizen-oriented Community, the membership of the ECOWAS Commission, which coordinates the activities of all the Community institutions has been enlarged from nine to 15. This is part of ongoing institutional reform with the number of directorates/departments under each Commissioner now more manageable, better-focused and result-oriented. There have also been changes in the leadership of other Community institutions such as the West African Health Organisation (WAHO), the Inter-Governmental Group Action against Money Laundering in West Africa (GIABA) and the Community Court of Justice, where a new set of seven judges has been inaugurated. President John Dramani Mahama of Ghana has also taken over the rotating chairmanship of the Authority of ECOWAS Heads of State and Government from his Ivoirien colleague, President Alassane Ouattara, who had held the position for two years.
For more than two decades after its inception, ECOWAS was dogged by political crises. Pockets of those crises still persist while new ones have erupted despite the organisation’s best efforts in collaboration with partners. Indeed, the fragile political stability in the region has been rendered more vulnerable and volatile by a new wave of security challenges including terrorism, piracy, human and drug trafficking and other transnational organised crimes.
The result is that since assuming office in March 2012, the President of the Commission Kadré Désiré Ouédraogo and his management team, have hardly had any respite, shuttling between state capitals within and outside the region and working the phones in high-level consultations and intensive trouble-shooting diplomacy. At the same time, the team continues to coordinate regional efforts to deliver on the organization’s principal mandate of people-centred economic development and regional integration.
Whether acting autonomously or in concert with partners ECOWAS continues to demonstrate exemplary leadership in prevention, management and control of conflicts as shown in recent cases in Mali and Guinea Bissau. The transitional programmes/roadmaps facilitated by the organisation remain the inevitable template and reference point for the restoration of peace, stability and democratic governance in both countries in the aftermath of political and security crises that engulfed the nations including separate military coups in 2012. And thanks to the Community’s strict adherence to its zero-tolerance principle for the ascension to power other than through democratic means all the 15 ECOWAS countries are governed by democratically elected governments.
Equally noteworthy is ECOWAS’ collaboration with all stakeholders including the United Nations, the African Union, the Economic Community of Central African States (ECCAS) and similar organizations in an effective coalition to deal with the emerging security challenges posed by extremist/terrorist groups threatening to destabilize the region, particularly the Boko Haram sect, whose heinous violent activities have attracted global attention.
The Community’s sustained economic progress is captured in the 2013 and latest annual report of the ECOWAS Commission. Entitled “ECOWAS’ Adaptation to Climate, Security and Development Changes,” the Report provides a comprehensive account of the status of implementation of the Community Work Programme and outlines key challenges and prospects for the region going forward.
The Annual Report highlights positive growth forecasts for West Africa making the region one of the best performing regions on the continent, with a projected GDP growth of 7.1 per cent in 2014, up from 6.3 per cent in 2013 and 6.7 per cent in 2012. Eleven of the 15 ECOWAS countries with high growth rates in 2013 were (Benin, 6.5 per cent; Burkina Faso, 7 per cent; Cote d’Ivoire, 9.1 per cent; The Gambia, 8.5 per cent; Ghana, 8.0 per cent; Liberia, 6.8 per cent; Mali, 6.6 per cent; Niger, 8.2 per cent; Nigeria, 7.4 per cent; Sierra Leone, 14.0 per cent; and Togo. 6.0 per cent).
On monetary integration, the Report cited progress in the harmonization of economic and financial policies of Member States within the framework of the ECOWAS Multilateral Surveillance Mechanism as well as the monitoring of effective implementation of the roadmap for the ECOWAS Single Currency Programme towards the realization of the 2015 target date for the launch of the second West African Monetary Zone (WAMZ) and a regional single currency by 2020.
The Community has also made significant progress in the development of a competitive and enhanced regional investment climate for private sector development. Key achievements in this area include the completion of the draft ECOWAS Investment Policy (ECOWIP), finalization of report on ECOWAS Investment Climate indicators, commissioning of a feasibility study on the establishment of cross-border payment and settlement systems, establishment of the West African Market Integration Council and an Investment Guaranty Mechanism in ECOWAS.
Towards attaining the ECOWAS Customs Union, the region is moving towards the adoption of regulatory texts of the ECOWAS Common External Tariff (CET) with continued supervision of the implementation of the ECOWAS Trade Liberalization Scheme (ETLS); harmonization of direct and indirect taxes; and fiscal transition programme and the directives governing its implementation.
Five years has been fixed as the transition period for the application of Import Adjustment Tax while the CET is to become effective from 1st January 2015. To this end, the ECOWAS Commission has started putting in place a fiscal transition programme to mitigate anticipated fiscal revenue losses that could arise from the customs dismantling when the Economic Partnership Agreement (EPA), being negotiated with the European Union, comes into force.
The Commission is also undertaking a critical review of the region’s flagship Protocol on Free Movement to remove impediments to seamless implementation of the Protocol, which even as is, makes ECOWAS the only REC in Africa with a free-visa regime. The ultimate aim is for the introduction of a biometric identity card for intra-community travel to replace the existing travelling certificate and the abolition of the residency permit requirements for citizens.
In rendering the Annual Report, President Ouédraogo traced the progress achieved during the period under review to the commitment and determination of the Heads of State and Government coupled with the support of friendly countries and the international community.
The down side of the Report could be that the estimated 6.3 per cent economic growth rate in 2013 still falls short of the seven percent threshold necessary to create the best conditions to guarantee the attainment of the Millennium Development Goals (MDGs), particularly poverty reduction. There is also the impression that community citizens are still expecting the full impact of the impressive growth on the rising unemployment rate and the poor fiscal performance that resulted in a widening of budget deficit (excluding grants) of 4.3 percent of GDP in 2013 up from 3.6 percent in 2012. Some Member States are also still struggling with high wage bill and increasing demand for capital expenditure compounded by low revenue mobilization.
Nonetheless, going by the body language of its leaders, ECOWAS remains committed to intensifying efforts for the alleviation of poverty and resolving the issues related to fiscal performance and unemployment within the Community. Moving forward, and in line with its transformation from an ECOWAS of States to an ECOWAS of People, the regional organization has stepped up actions in all the vital sectors to adapt to the new circumstances with a view to achieving its major objectives.
For instance, through the Commission’s support and coordination, efforts are being intensified to ensure early delivery of the Lagos-Dakar Highway project, a 1,028-km road linking the region’s major capital cities and ports as part of efforts aimed at boosting trade as well as free movement of persons, goods and services in the region.
On energy, the Commission continues to work with regional institutions and agencies such as the ECOWAS Centre for Renewable Energy and Energy Efficiency (ECREEE), the ECOWAS Regional Electricity Regulatory Authority (ERERA), the West African Power Pool (WAPP) and the West African Gas Pipeline (WAGP) to address the challenges of energy availability and accessibility in the region.
Furthermore, under the coordination of the ECOWAS Peace Fund Unit, the Support to ECOWAS Peace and Development Project (PADEP), funded by the African Development Bank (AfDB), has continued to provide humanitarian support to hundreds of thousands of Community citizens displaced by conflicts. The Peace Fund is also being used to fund the ECOWAS Volunteer Programme under which young professionals are providing vital services to help consolidate peace, national reconstruction and recovery of post-conflict Member States.
In the same vein, the ECOWAS Youth and Sports Development Centre (EYSDC) through its Capacity-building programme for youth empowerment and employment has continued to provide ECOWAS youth with a wide range of vocational training and professional skills including in agriculture, air conditioning, refrigeration and motor mechanic among others fields, to enable them find or maintain gainful employment and sustainable standard of living.
Another major achievement is in the health sector through the ECOWAS Malaria Elimination Campaign. Aptly dubbed a War, the campaign has attracted the interest and support of partners resulting in a Tripartite Agreement by the ECOWAS Commission, Cuba and Venezuela for the construction of three factories in three ECOWAS Member States (Cote d’Ivoire, Ghana and Nigeria) for the production of biolarvicide product for massive anti-mosquito spraying across the region.
The ECOWAS anti-malaria war, which focuses on the strengthening of vector control strategy and environmental management, has the strong backing of the armed forces of Member States, which have been mobilized to rid the region of mosquitoes and malaria, working with national malaria control programme managers, civil society organizations and the endemic communities.
By and large, ECOWAS despite daunting challenges remains focused and continues to reposition itself for effective performance as it marches towards its milestone 40th anniversary in 2015.
Ejime is of the Communication Directorate, ECOWAS Commission, Abuja.
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Concerns mount over India’s stance on global trade pact
Eleventh hour negotiations to win Indian approval for a breakthrough global trade pact may not have succeeded in the end despite initial signs of progress, sources involved in the discussions said on Saturday.
India is the most prevalent among a group of developing nations angry at rich countries for failing to address their concerns about a deal on trade facilitation – struck by WTO member states in Bali last year – that must be detailed by a July 31 deadline.
Proponents believe the deal could add $1 trillion to global GDP and 21 million jobs.
But India’s Trade Ministry said on Wednesday it would “find it difficult” to support the protocol unless it was satisfied that adequate emphasis is being placed on negotiations about food security and other issues important to poor countries – sparking furious negotiations at the G20 Trade Ministers meeting in Sydney.
Three officials involved in the negotiations, speaking under the condition of anonymity in order to speak frankly, expressed exasperation with what they described as a history of erratic behavior on the part of the Indian trade team that made it difficult to trust.
India has not provided any clear description of exactly what changes it would like made to the agreement, they said, although it would not matter anyway because no concessions were on offer given how difficult the negotiations had proven to conclude the first time round.
The Indian demands appear to have shaken confidence in the new government of Narendra Modi, who came to power earlier this year with a pro-business agenda but now appears set to derail what several officials called the most significant global trade pact in two decades.
Australian Trade Minister Andrew Robb said assurances had been given to all of the signatories to the treaty that their concerns would be met and expressed optimism that it would be resolved before the deadline.
“There was strong resolution around the table that India’s issues to do with food security would and should and will be addressed as decided previously and I think there will be discussions about how to satisfy the Indians and they won’t be left behind,” Robb told reporters.
The row over subsidies has raised fears that the so-called “trade facilitation agreement”, the first ever global trade agreement under the World Trade Organization, will be derailed.
A deal was only reached after New Delhi extracted promises that its concerns related to food subsidies would be addressed.
India stockpiles food for its poor, putting it at risk of breaking current WTO rules. In Bali, WTO members agreed to give India a pass until 2017, while negotiating a permanent solution.
“We are focused on implementing the full Bali package that will deliver for every country involved,” said Michael Froman, the U.S. Trade Representative. ”Reinvigorating the multilateral system is too important to put at risk with any backsliding on commitments.”
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Speech by Namibian Trade Minister to Parliament on EPAs
Statement by C.H.G. Schlettwein
Minister of Trade and Industry
16 July 2014
Hon. Speaker
Hon. Members
I rise to provide an update on the negotiations between Namibia and the European Union towards the establishment of an Economic Partnership Agreement.
The Hon. Members will recall that we have been engaged since 2007 in an intensive process of negotiation towards a final Economic Partnership Agreement that would create a stable and reciprocal, but nevertheless asymmetrical, trading relationship between us and the EU. The Hon. Members would also recall that a number of important and strategic issues prevented Namibia from agreeing to the interim EPA that was concluded in 2007 and that Namibia in fact never signed this agreement. That decision was taken by my predecessors in this portfolio, notably the Hon. Immanuel Ngatjizeko and the Rt. Hon. Prime Minister Dr. Hage Geingob, and was based on an assessment that the demands from the EU would amount to an unjustifiable encroachment into our developmental policy space over and above our obligations in the WTO.
We should be proud of the fact that Namibia as a member of the negotiating configuration took strong and consistent policy stances during the negotiations despite the threat of isolation or exclusion from market access, and at the risk of insurmountable divisions within the negotiating group. Our resolve was that the unresolved issues must be addressed to avoid that they would constrain Namibia's future trade and industrialization.
These matters were principally:
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the Most Favoured Nation treatment that the EU insisted upon;
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the abolition of quantitative restrictions upon entry into force;
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the freezing of existing export taxes and the prohibition of new export taxes;
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a highly restricted use of infant industry protection;
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the limited nature of the bilateral safeguard mechanism proposed by the EU and the refusal of the EU to agree to a special safeguard mechanism for agricultural goods to be liberalized under the EPA; and in addition
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Namibia refused to accept the right-of-first-refusal that the EU insisted upon regarding the use of leased fishing vessels for the catching of fish from Namibia’s Exclusive Economic Zone for entry into the EU market duty free and quota free.
With regards to these matters I am very pleased to inform the Hon. Members that we have made important advances regarding all of them.
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As for MFN, we have negotiated that there is no automatic extension of the MFN treatment to the EU regarding any better treatment that we may in future negotiate with another major economy, thereby keeping options open for future South-South trading arrangements.
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Regarding quantitative restrictions our position prevailed that we remain entitled to use such restrictions on imports as long as they are compatible with our obligations under the WTO.
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As for export taxes, we achieved a significant reversal in that Namibia would be able to apply export taxes without major restrictions for economic purposes including infant industry protection and revenue needs, despite restrictions on the use of export taxes for industrial development purposes as such.
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With regards to the infant industry protection provision, we secured a permanent rather than a temporary duration of the option to implement this measure, as well as the entitlement to apply it according to the SACU agreement.
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We have also achieved improvements and greater fairness in the bilateral safeguard mechanism to shield us from sudden inflows of larger quantities of EU goods and importantly, the EU has agreed to eliminate all subsidies on the goods exported to Namibia. For newly liberalized agricultural goods a special agricultural safeguard has been established. A temporary safeguard mechanism was also created for sensitive products from the smaller economies in SACU, including Namibia.
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Concerning trade in marine products, we have established a transparent and predictable framework for the exports of fish products from our EEZ to the EU in recognition of Namibia’s fisheries management capacity. In addition, no right of first refusal is required any longer.
It is on the basis of these and other more technical but still important improvements which we have negotiated for since 2007 that our negotiating group has concluded the negotiations. Yesterday, the text was initialed in Pretoria, South Africa, marking the formal end of the negotiations and freezing the text. Hereafter the negotiated text, some 750 pages long, will be legally checked and verified. Following agreement on the final text, I will approach Cabinet to obtain concurrence on signature and thereafter its submission to this August House for ratification. If there would be any uncertainty or point of contention, the option remains to re-engage the EU at political level.
The time frame for these processes is not fixed and could extend to a year or more. I nonetheless wish to inform the Hon. Members that bilateral trade will not be affected. The EU had previously announced that middle income countries which had not entered into an EPA by 1 October 2014 would be excluded from the current transitional duty free quota free access to the EU market, a stance which we vigorously opposed. However, on the basis of the initialing of the agreement, the current market access will continue on duty free and quota free terms until the agreement has been ratified. Similarly, on the basis of the current Trade and Development Cooperation Agreement between the EU and South Africa, exports from the EU to SACU will continue and also enter our market because of the SACU trading arrangements. Once the EPA agreement is in force, all external tariffs will be harmonized within SACU regarding the EU.
Finally Hon. Speaker, allow me to thank my counterparts in the Ministries of Finance, Agriculture, Water and Forestry, Fisheries and Marine Resources, as well as the Attorney General and the Director General of the National Planning Commission, our negotiating team and all other staff members who participated and supported this process and who were able to obtain important improvements from the interim agreement. I also wish to thank the private sector who provided important input into the process and who stood together with us through thick and thin.
I thank you.
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Conclusion of the Economic Partnership Agreement
After ten years of preparations and negotiations, the Economic Partnership Agreement (EPA) between the SADC EPA Group and the EU was ‘initialed’ by the Chief Negotiators on 15 July 2014 in Pretoria, South Africa. The initialing of the Agreement signals that the negotiations are concluded. The timing is significant because it pre-empts the 1 October 2014 deadline imposed by the EU after which Botswana, Namibia and Swaziland would have lost preferential access to the EU market for their exports of beef, fish, sugar on which their economies depend heavily. The EU has assured us all that the act of initialing ensures that the current market access will continue until the agreement enters into force.
South Africa had two central objectives in the EPA negotiations. First, we sought an outcome that would preserve coherence in the Southern African Customs Union (SACU) in terms of maintaining the common external tariff that is at the core of the Union. Second, we sought to improve our access to the EU market over and above what currently obtains under the bilateral Trade, Development and Cooperation Agreement (TDCA). More specifically, we sought improved access for South Africa’s agricultural products.
The EPA outcome achieves these objectives. It preserves SACU’s functional coherence, particularly in regard to maintaining the common external tariff, although the EU continues to provide the other Members of the SADC EPA Group better access to its market than it offers South Africa. Nevertheless, the outcome marks an improvement for South Africa over the TDCA in important ways. South Africa has achieved improved market access for 32 agricultural products, with a significant improvement in our access to the EU market for wine (110 million liters duty free), sugar (150,000 tons duty free) and ethanol (80,000 tons duty free). There is also improved access for our exports of flowers, some dairy, fruit and fruit products. These tariff concessions go some way to re-balancing the TDCA in our favour.
Furthermore, the EPA rules of origin improve on the TDCA as they will facilitate intra-regional trade and industrialisation across in southern and eastern Africa in particular. The new rules also contain provisions that will encourage South African clothing exports. Several other restrictive trade rules under the TDCA have been eased under the EPA. The EPA provides a degree of greater flexibility than the TDCA to deploy export taxes on eight products for a period of 12 years with some exception for exports to the EU. In addition, we obtained an agreement that the EU will eliminate export subsidies on agricultural goods destined to SACU, as well as more effective safeguards to address damaging surges of imports.
South Africa agreed to negotiate a Protocol on GIs because we have an interest in protecting the names of the many South African wines we export to the EU, and we have a growing interest to protect the names of specialised South African agricultural products (such as rooibos and honeybush). The outcome of the GI negotiations will not affect the product names currently being used by producers in South Africa and importantly, for our stakeholders, we established a mechanism to address non-tariff barriers that inhibit trade in wine.
In terms of the process and timeframe for entry into force, the Agreement will first be subjected to a two-month legal vetting process. Thereafter, the Agreement can be presented to the Cabinet and, if approved, submitted to the South African Parliament for ratification. Once ratified, the Agreement may be signed, and it will enter into force once all Parties have concluded their own respective national approval processes. The timeframe for this process is likely to be around eight months.
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UN officials urge greater investment to boost Africa’s development prospects
United Nations officials today stressed the need to harness the necessary resources to take Africa’s progress to the next level, calling for increased investment to boost the continent’s development prospects.
“Africa needs to bridge a huge financing gap,” John Ashe, President of the General Assembly, said at the thematic debate on the promotion of investment in Africa. “Innovative financing must come from within the continent and from greater private sector investment, as well as public-private collaborations.”
Mr. Ashe said that over the past decade, there has been considerable investment in many African countries, including those with the highest growth rates. Foreign direct investment (FDI) towards the continent has steadily increased since 2000.
However, he added, much of this investment has been related to resource extraction and exports, and has not led to the enhancement of productive capacity and/or much-needed job creation. Similarly, despite considerable natural resource endowments, there has not been equitable distribution of the benefits of the revenues earned from their extraction, nor have such revenues been used to boost industrialization and development strategies.
“As a consequence, critical financing gaps remain, particularly with regard to agriculture, industrialization and infrastructure development,” said Mr. Ashe.
Secretary-General Ban Ki-moon told the meeting that his travels in Africa have given him a first-hand look at the dynamism and promise of the continent. The UN estimates that Africa’s overall growth will exceed 5 per cent in 2015, driven especially by domestic demand and solid commodity prices.
“But, this positive performance must not let us become complacent,” said Mr. Ban, adding that serious obstacles still exist to more inclusive and sustainable economic and social development.
He said that to end extreme poverty and provide inclusive prosperity, Africa needs enabling environments that promote investment and reduce risk, as well as the wise management of the proceeds so they support sustainable development.
“Investment is essential, and when it is the right investment, it can be effective, benefitting people, businesses and governments alike,” the Secretary-General said.
It is essential, he stressed, to harness all sources of investment and finance – public and private, domestic and external – and ensure they complement each other.
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World Bank Group at the G20 Trade Ministers Meeting on July 19, 2014, Sydney, Australia
Trade-related reforms will be at the center of the agenda as G20 Trade Ministers gather for a critical meeting July 19 in Sydney. These reforms are vital – not only to the G20’s ambitious target to boost global growth by 2% over the next five years, but to the development prospects of those outside the G20, and to the future of the global trading system. These reforms will require cooperation between countries within and outside of the G20 and the political commitment to follow through. No one has said these reforms will be simple.
We at the World Bank Group know well the complexity of the tasks at hand. We have been working with many G20 members to help map out what measures will have the greatest impact on their competitiveness and trade performance. Improving trade-related infrastructure and streamlining border management are obvious priorities, but for many economies, improving the efficiency of the services sector, increasing competition in the domestic economy, and addressing non-tariff measures that unnecessarily raise the price of imported inputs are equally important. We already have strong partnerships with countries like Turkey and Indonesia to further enhance their competitiveness, and will continue working on these issues with the G20 in the future.
But beyond these efforts by G20 members, many reforms that are essential to raising global welfare will need to take place in some of the world’s poorest countries. The G20 Ministers’ discussions provide an excellent opportunity to consider how trade-related reforms can stimulate growth in economies outside the G20. The links between trade and economic growth are central to the World Bank Group’s long-standing commitment to the “Aid for Trade” agenda – providing assistance to developing countries to boost their competitiveness and trade performance. The World Bank Group, the largest multilateral provider of Aid for Trade, has provided support in this area to the developing world of over $10 billion with clear returns and increasing client demand. But while trade costs in developing countries have fallen steadily, this has happened more slowly than in advanced economies, and the challenges ahead are considerable. The G20 has the chance to increase Aid for Trade and boost assistance to developing countries as they institute global best-practices to reap the benefits of connecting to the global market.
Ministers will also take stock of progress made in the multilateral trade negotiations since the historic outcome at the Bali Ministerial Conference in December 2013. WTO Members face important deadlines this year, including a July 31 deadline for finalizing the legal process for implementation of the Trade Facilitation Agreement, and a December deadline for a work program to negotiate the remaining elements of the Doha Round. There is also a need to consider progress in the other decisions taken at Bali, including those promoted by Least Developed Countries before the Ministerial.
The Bali outcomes generated new confidence in multilateral negotiations that had stalled for many years; the December conference delivered the first major, hard-won victories so far. Among these is the ground-breaking framework in the Trade Facilitation Agreement that allows WTO Members to customize implementation of the Agreement according to their capacities and technical assistance needs, along with a better support structure to help target, monitor and coordinate implementation.
The benefits of the Trade Facilitation Agreement itself have been widely communicated, but they bear repeating. In Africa, for example, the measures would help support greater integration into manufacturing value chains, as WTO Director-General Azevêdo reminded an African Union meeting earlier this month. Trade facilitation would also boost African agricultural producers, with the continent standing to gain an extra $20 billion in annual earnings if the barriers to regional agricultural trade are addressed. Indeed, trade facilitation has become central to the economic agenda of every region. Of course, trade facilitation alone cannot meet a country's economic and development needs – it can be only one element in a wider strategy – but it is clear that it helps countries participate in higher-value-added trade and attract investment. The Trade Facilitation Agreement provides an important new tool in support of these efforts, and helps countries attract greater assistance for achieving their goals.
The Sydney meeting needs to give a clear message that the Trade Facilitation Agreement and post-Bali agenda for the multilateral negotiations remain on track. A strong message of support for implementation of the Bali outcomes was delivered by BRICS Trade Ministers earlier this week when they met in Fortaleza, Brazil. Ministers in Sydney also need to send a clear signal that the international community is addressing concerns about technical assistance to implement the Agreement. For our part, the World Bank Group is formally launching a new Trade Facilitation Support Program at the Sydney meeting that will make immediately available $30 million in technical assistance. It will complement the more than $5 billion we provide annually for trade facilitation-related activities.
Since Bali, the World Bank Group has been working directly with our clients in national capitals and with their representatives in Geneva to identify what assistance they will need to implement the Trade Facilitation Agreement. Every Member’s situation is unique, and the challenges for some are considerable. But we have heard strong commitment from officials on the ground to moving forward with the task ahead. Not once have we heard that implementing the Agreement is an insurmountable challenge – with the benefits associated with reducing trade costs and facilitating connections to global markets enticing many Members.
We welcome the momentum that is gathering for the WTO Secretariat to play a greater role in sharing information on trade facilitation assistance and ensuring any gaps are addressed. The World Bank Group would support an effort like this, designed to complement the comprehensive reform and support programs underway at the national and regional levels. It would also help us, as members of the development community, to coordinate more effectively in delivering our trade facilitation assistance.
The Sydney meeting provides an excellent opportunity to engage on these issues. It should send a clear signal that the Trade Facilitation Agreement will be implemented, with support from the international community, and it should also show that the will remains to deliver on the other important elements of the Doha Round. The World Bank Group stands ready to step up its support for these efforts.
New joint report from the Organisation for Economic Cooperation and Development (OECD), World Trade Organisation (WTO) and World Bank Group (WBG)
Global Value Chains (GVCs) are a dominant feature of the world economy that impact growth, jobs and development, but numerous challenges remain to ensure that all countries and all firms have the opportunity to participate and benefit.
Global Value Chains: Challenges, Opportunities and Implications for Policy, presented on the eve of the G20 Trade Ministers Meeting in Sydney, argues that success in international markets depends as much on the capacity to import high-quality inputs as the capacity to export: in an increasingly inter-connected global economy where more than 70% of trade is in intermediate goods and services, integration into GVCs today will determine future trade and FDI patterns as well as growth opportunities.
The report outlines how the rise of GVCs has produced a new “trade-investment-services-know-how nexus” encompassing trade in intermediate inputs, the movement of capital and ideas and the growing demand for services to coordinate dispersed production locations. It highlights how interconnected economies are today, while pointing out the risk of policies which inhibit participation in GVCs, such as various forms of trade and investment restrictions. It also underscores the need for complementary policies, such as those that boost education and skills, to improve the ability of firms, and in particular those in less developed economies, to participate in and benefit from GVCs.
“Trade, investment and the development of GVCs are constrained by barriers in the manufacturing and agriculture sectors, a lack of progress in opening service markets, a range of behind-the-border restrictions and the still-unfinished work on trade facilitation,” OECD Secretary-General Angel Gurría said during the launch of the report with Australian Trade and Investment Minister Andrew Robb.
The report identifies a number of priority actions for G20 governments:
- Implement and ratify the WTO Trade Facilitation Agreement, reached during the late-2013 ministerial meeting in Bali, Indonesia, as quickly as possible. OECD work on Trade Facilitation shows that simpler, speedier and more reliable border processes making it easier for goods and services to cross international borders will drastically reduce trading costs. Every 1% reduction in trade costs would generate benefits of 40 billion USD, with 65% of these gains accruing to developing countries.
- Improve services sector efficiencies, in recognition that services are essential elements in competitive manufacturing sectors, and thus vital links that forge GVCs. The new OECD Services Trade Restrictiveness Index allows the world’s major services suppliers to benchmark their performance and to identify opportunities to improve it.
- Reinforce the standstill commitment against protectionism and wind back any restrictive measures implemented since the crisis, with a particular focus on non-tariff barriers. The OECD-WTO Trade in Value Added database clearly illustrates how much firms rely on access to world-class inputs to improve productivity growth and competitiveness.
- Continue structural reforms and well-designed complementary policies to accompany trade and investment opening. Participation in GVCs is not automatic: some less-developed countries and smaller firms worldwide are at risk of being left behind. Effective flanking policies will vary by country, by stage of development, by resource endowment and other factors. In all cases, however, countries should focus on investments in people, in education and skills, in active labour market policies that match labour supply and demand, and in adequate social safety nets for those facing difficulties adjusting.
- “Getting the policies right on GVCs is an essential step toward building a strong, balanced and sustainable framework for more inclusive growth, jobs and development,” Mr Gurría said.
Download the report below.
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EU wants EPA initialled by the end of July
The issue of export duties with regards to the signing of the Economic Partnership Agreement (EPA) between the Southern African Development Community (SADC) EPA Group and the European Commission (EC) has been resolved, but a local expert warns that if the EPA is not signed and there is a trade disruption, it will have a detrimental effect on producer prices.
Rejoice Karita, Senior Trade Advisor at the Agricultural Trade Forum (ATF), attended the negotiations in South Africa and reports that most of the issues that hadn’t been concluded at previous negotiations, like the export duties and agricultural safeguards, have now been resolved. Karita states in her report that where export duties are concerned, the EU indicated that they would require an initialled agreement from the Namibian Cabinet for them to undertake the necessary internal procedures to avoid disruption in trade for current exports to the EU before the October deadline. The EU indicated that they would need the initialled agreement before the end of the month.
“Industries should thus note that there may be a disruption in trade if the text is not initialled on time,” she says.
Resolving the issue was achieved after the two groups met in South Africa recently for a joint negotiation session to try and conclude the negotiations before the set deadline of October 1.
Namibian beef producers currently enjoy access to the EU without paying duties and without any quota limitations.
This allows Namibian cattle and beef production systems to be competitive in the European market. Should Namibia not sign the EPA, Namibian beef producers could lose this free market access and any exports to the EU will require export taxes to be paid for such products.
According to Karita, something else that emerged at the recent negotiations is that although export duties have essentially been resolved, a final agreement is dependent on further negotiations to take place between South Africa and the EU.
Following the conclusion of these negotiations at a date that is yet to be announced, a video conference will be arranged between the SADC EPA Group and the EU as a whole to provide feedback on the consultations.
She says the outcome of the video conference will then pave the way forward, including possible arrangements for initialling and signing of the EPA text by all parties.
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ECOWAS single currency take-off date no longer feasible
Facts have emerged that the January 1, 2015 take-off date for the use of a single currency under the West African Monetary Zone is no longer realizable.
The development was confirmed on Wednesday by the Governor of the Central Bank of Nigeria, Mr Godwin Emefiele, during the opening session of the 31st meeting of the Committee of Governors of the Central Banks of the West African Monetary Zone.
The six countries that made up the WAMZ are Nigeria, Liberia, Sierra Leone Gambia, Ghana and Guinea.
The single currency-Eco was first planned to be introduced in 2003, but this was postponed several times, to 2005, 2010 and 2014.
At a meeting of the Convergence Council of Ministers and Governors of West Africa on May 25, 2009 the start of the currency was rescheduled to 2015 due to the international economic crisis.
Emefiele said, “The launch of the monetary union by January 2015 is unlikely at this time. Despite this disappointing update, we need to use the new period created by this to redouble our efforts towards the final realisation of this objective.
“In this regard, there is need for the intensification of efforts toward meeting the laid down convergence criteria in sensitisation of all stakeholders in the ratification of various WAMZ protocol and in their consequence its implementation.”
The inability of some of the countries to meet up with the criteria had made the ECOWAS authority of Head of State and Government to approve the reduction of the macroeconomic convergence criteria from 11 criteria (four primary and seven secondary criteria) to six criteria (three primary and three secondary criteria).
The three primary criteria that would now be used are a budget deficit of not more than three per cent; average annual inflation of less than ten per cent with a long term goal of not more than five per cent by 2019; and a gross reserves that could finance at least three months of imports.
The three secondary convergence criteria that have now been adopted by the ECOWAS authority are public debt/Gross Domestic Product of not more than 70 per cent; central bank financing of budget deficit should not be more than ten per cent of previous year’s tax revenue; and nominal exchange rate variation of plus or minus 10 per cent.
But Emefiele, who was also named as the new Chairman of WAMZ explained that over the years, the appraisals have continued to show that the level of macroeconomic convergence in the zone remained inadequate relative to the set targets.
For instance, he said “Since 2009, no two countries satisfied all the four primary convergence criteria consistently for two consecutive years.
“Accordingly, we have missed several launch dates for the monetary union. This may have informed the decision of the Heads of State and Government to approve the Modified Gradualist Approach to monetary integration by 2020.”
He said as a result of this development, the role of the group, therefore, is to honestly appraise the directive of ECOWAS head of state and government and design strategies to ensure a sustainable monetary union in the zone.
He said, “In doing this, we may have to think outside the box, realistically assessing and providing innovative options as well as the costs and benefits of implementing the MGA.
“Our efforts should also continue to focus on effective co-ordination between fiscal and monetary policies to support our price stability mandate, as well as create the appropriate macroeconomic environment conducive for intra-regional trade and economic development in the Zone.”
Speaking on the status of member sates as regards compliance with the macroeconomic convergence criteria the Director-General, West African Monetary Institute, Dr Abwaku Englama, said Nigeria had been the only country that met all the four primary criteria.
He said while Liberia and Sierra Leone satisfied three each, Gambia, Ghana and Guinea met only two criteria each.
“Inflation and fiscal deficit continued to be the more challenging criteria for member states to comply with, while central bank financing and gross external reserves were the more frequently satisfied criteria,” he said.
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BRICS Business Leaders Pledge Cooperation to Increase Trade and Investment
The Second meeting of the BRICS Business Council took place yesterday, 15 July 2014, on the occasion of the Sixth BRICS Summit in Fortaleza, Brazil.
The meeting was Chaired by Mr José Rubens de la Rosa, Chairman of the Brazil and BRICS Business Council and attended by Mr Patrice Motsepe, Chairman of South Africa BRICS Business Council, Mr Ma Zehua, Chairman of China BRICS Business Council, Mr Onkar Kanwar, Chairman of India BRICS Business Council, and Mr Sergey Katyrin, Chairman of Russia BRICS Business Council.
The BRICS Business Council was established on 26-27 March 2013 during the Fifth BRICS Summit which was held in Durban, South Africa to strengthen and promote economic, trade, business and investment ties amongst the business communities of the BRICS countries and to ensure that there is regular dialogue between the business communities and Governments of the BRICS countries.
The BRICS Business Council submitted the BRICS Business Council 2013/2014 Annual Report to the BRICS Governments which highlighted areas of cooperation and commitment to cooperate and work in partnership with the Business communities in the BRICS countries to:
- create a dedicated BRICS Business information exchange platform (BRICS Business Portal)
- host and support the holding of sector specific trade fairs, exhibitions and forums within the BRICS nations
- launch a special section on the website of each BRICS Business Council country to post all BRICS business related information and updates and commercial proposals from business and potential joint venture partners and
- exchange business, trade, investment and manufacturing related best practices amongst Businesses in the BRICS countries.
The BRICS Business Council proposed that the BRICS Governments should:
- make special arrangements on visas to facilitate and encourage BRICS people-to-people exchange
- accelerate the establishment of the New Development Bank (“NDB”) to promote trade, business, investment and manufacturing ties amongst the BRICS countries and to mobilise resources for infrastructure and sustainable development projects in the BRICS countries and other emerging and developing economies and
- create a favourable environment to promote trade, business, investment and manufacturing ties amongst the BRICS countries and treat BRICS businesses, corporations and investments similar to local businesses, corporations and investments.
The BRICS Business Council also recommended that the BRICS Governments should undertake initiatives and measures with the BRICS Business Council and business in the BRICS countries to:
- enhance logistics and connectivity amongst the BRICS countries
- promote cooperation in infrastructure development amongst the BRICS countries
- promote the elimination of export subsidies in agriculture
- promote cooperation in mining, minerals beneficiation and adding value to minerals, energy and green economy, pharmaceuticals, agro-processing, services including financial, Information and Communication Technology (ICT), transportation, healthcare and tourism, value added manufacturing development, small, medium and macro-enterprise development, sustainable development, skills development and the transfer of technology and
- promote and increase value-added trade and manufacturing amongst the BRICS countries and between the BRICS countries and Africa.
Each of the BRICS Business Council Chapters identified key industries/sectors and projects that it wants to promote and advance in its trade, business and investment ties with the other BRICS countries and with Africa.
The BRICS Business Council also identified barriers and bottlenecks to promoting trade, business and investment ties amongst the BRICS countries and made recommendations which are aimed at eliminating these barriers and bottlenecks.
The Fifth edition of the BRICS Business Forum provided valuable opportunities for matchmaking and for in-depth discussions on promoting and increasing trade, business, investment and manufacturing ties amongst the BRICS countries and emerging economies as well as other global partners.
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Sadc Summit: Zim’s golden opportunity
Zimbabwe is emerging from years of a myriad challenges mainly caused by illegal sanctions imposed by Western countries as punishment for embarking on the land reform programme.
No one would have imagined that after so many years of being persecuted by Western countries and being deliberately segregated against, the country would survive the onslaught and still stand up as a powerful member of Sadc and the African Union.
A visitor to Zimbabwe six years ago would be forgiven for believing in miracles if he returned today and witnessed the peace and stability in the country. Beyond its borders, Zimbabwe is reclaiming its rightful place on the international scene with much vigour.
The 34th Sadc Summit to be hosted in Victoria Falls in a few weeks from now will be a giant step by the country to demonstrate its resilience in the face of adversity.
The summit will put Zimbabwe at the helm of the regional body with President Mugabe as its chairman.
That alone is evidence of how the region has never lost confidence in Zimbabwe and the leadership of President Mugabe, despite attempts by Britain and its allies to influence them to turn their back on the country.
Zimbabwe has much to offer to the region, especially in driving programmes to economically empower marginalised populations. Its central location also makes it the hub of regional trade.
As the country takes over the chairmanship of the regional body from Malawi on August 17, many will be keen to figure out how Sadc will fare under Zimbabwe’s leadership.
While the handover-takeover of the chairmanship will be a formality characteristic of all such occasions, it is the programme of action going forward that many in the region will be eager to hear, especially among the poor.
The event will mark a transfer of leadership that many have been waiting for, mainly because of the pro-poor policies deliberately pursued by Zimbabwe to empower its people.
You cannot get it wrong in the developing world when you push programmes that are aimed at uplifting the majority, especially when you have a history of colonial discrimination and domination behind you.
This means that from August 17, every move by Zimbabwe will be watched by millions of people from the region and beyond who are itching for a voice to speak on their behalf on issues of empowerment and resource nationalism.
Not that other leaders in the region have not been advocating for the empowerment of their populace.
They have been doing so, but not with such vigour as Zimbabwe has been doing it for the last 15 years, especially on being consistent in pushing the empowerment agenda forward.
That agenda has been anchored on the land reform programme which benefited hundreds of Zimbabweans and the current indigenisation and economic empowerment that has resulted in the people claiming a stake in major corporates. Land reform and economic empowerment are not peculiar to Zimbabwe.
Land is an emotive issue in the entire Southern Africa where several wars were fought as people sought to reclaim their birthright that had been stolen by colonialists.
Zimbabwe’s stance on land and economic empowerment will make many in the region sit up and notice when the country takes over the mantle to lead Sadc.
This also explains why some are already doing permutations on how Sadc will conduct its business on a higher level with Zimbabwe at the helm. It will be time when Zimbabwe ceases to speak for itself, but for the region. So, every word uttered by the Zimbabwean Government will be weighed against the expectations of the majority in Sadc.
What is also important about the Sadc Summit being held in Zimbabwe is that it is an endorsement of Zimbabwe’s system, both politically and economically.
If Zimbabwe was pursuing anti-democratic systems, even if it were its turn to host the summit, leaders in the region would have resisted and taken the summit elsewhere.
What makes the summit special to Zimbabwe is that it is coming a year after the holding of the harmonised elections in July last year, which were endorsed by Sadc and other international bodies as free and fair following a resounding ZANU-PF victory.
Zimbabwe’s hosting of the summit is, therefore, a further approval from the region and it will open up new avenues of regional integration and co-operation.
The interest in the summit has already been heightened, with a record more than 700 delegates expected to descend on Victoria Falls starting from as early as August 5.
Foreign Affairs officials indicate that all 15 Heads of State and Governments in Sadc could attend, including five former presidents and at least 11 specially invited guests.
The onus is now on the summit’s National Steering Committee to work diligently to ensure that the region and the world see that Zimbabwe deserved to host the high level summit.
The Council of Ministers meeting will be held from August 14 – August 15 and there will be a meeting of the Standing Committee of Senior Officials from August 10-12 as well as a meeting of the Finance Sub-Committee between August 7 and 8.
Zimbabwe will relinquish the chairmanship at the next summit next year, but will remain a member of the equally important Sadc Troika until August 2018.
Last year, the Sadc Summit was held in Malawi and came up with various resolutions that were expected to move the region forward.
Sadc started from humble beginnings as the Southern African Development Co-ordination Conference (Sadcc) in 1980 and was established with the participation of nine countries – Angola, Botswana, Lesotho, Malawi, Mozambique, Swaziland, Tanzania, Zambia and Zimbabwe.
The regional body has since grown to include the Democratic Republic of Congo, Namibia, South Africa, Seychelles, Mauritius and Madagascar.
Sadc has not departed from its original objectives, which are still as relevant today as they were when it was founded:
- Achieve development and economic growth, alleviate poverty, enhance the standard and quality of life of the people of Southern Africa and support the socially disadvantaged through regional integration;
- Evolve common political values, systems and institutions;
- Promote and defend peace and security;
- Promote self-sustaining development on the basis of collective self-reliance and the interdependence of Member States;
- Achieve complementarity between national and regional strategies and programmes;
- Promote and maximise productive employment and utilisation of resources of the region;
- Achieve sustainable utilisation of natural resources and effective protection of the environment;
- Strengthen and consolidate the long-standing historical, social and cultural affinities and links among the people of the region.
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2014 BRICS Joint Statistical Publication
The Fifth Joint Statistical Publication of the BRICS Countries is the result of annual joint efforts of National Statistical Offices (NSOs) of Brazil, Russia, India, China and South Africa since 2010 to disseminate several social and economic data statistics about these countries.
The select data was an issue agreed at the BRICS Leaders Meeting, held in Pretoria, in November 2013 and in the 6th Technical Meeting of NSOs in Rio de Janeiro, in February 2014. This work is a challenge and each year the BRICS Countries get advances in the project to achieve its goal which is the harmonization of statistical information about the group.
Brazil will be host the first meeting of the second cycle of BRICS Summits and responsible to implement the activities of the Action Plan of the group for 2014-2015 period. Therefore the National Statistical Office of Brazil (IBGE) assumed the role of compiling, printing and distribution of the Fifth Joint Statistical Publication of the BRICS Countries and development a collaborative system to disseminate the statistics of the BRICS based in the publication in this first moment.
The present publication was published during the Sixth BRICS Summit that was held on 15 July 2014 in Fortaleza City, Brazil. The BRICS National Statistical Offices are certain that the joint development work will be an important tool for public policies and researchers.
Download: BRICS Joint Statistical Publication 2014 (PDF)
The BRICS and trade union action: issues for discussion
A related publication was prepared for the Sixth BRICS Summit by Central Única dos Trabalhadores (CUT) Brasil. Below is an extract from the Presentation by João Antônio Felício, International Relations Secretary:
The 6th Summit of Heads of State and Government of BRICS (Brazil, Russia, India, China, and South Africa), held in Brazil, launches the second cycle of high level meetings of this bloc of countries. Since it appeared in 2001, as a concept linked to the financial market, which at that time underscored the growing weight of the so-called emerging economies of the BRIC (then still without the inclusion of South Africa), a steady process of coordination between these countries was established. According to the market view that gave rise to the term, BRIC was solely an economic, and not political, group because of the great heterogeneity of its members.
At the governmental level, however, the development of new diplomatic concepts and strategies was already being envisaged by some of these governments translated into intergovernmental mechanisms like the IBSA (India, Brazil, and South Africa) and the BASIC (Brazil, South Africa, India, and China). We may say that, at least in the case of Brazil, since 2002 the Brazilian government was already trying to step up its relations with several countries in Africa (through the opening of new embassies), and with China and Russia, with the aim of building new trade and development strategies that did not rely so much on the United States-European Union-Japan axis.
The adhesion of South Africa to the bloc in 2011 was the turning point for the financial market’s economically- biased perspective, since from a strictly economic point of view South Africa is not at the same level as the other BRIC countries. South Africa’s adhesion signaled a clear political position toward the creation of a new South-South counter-power axis, boosting the BRICS political and geoGraphic representation before the other countries of the Global South, as the BRICS established a much closer relation with the African Continent.
While the political coordination between the member countries increased somewhat rapidly, intra-BRICS trade e flows are still relatively low today, with a clear prevalence of each of its member’s trade with China. The fact that this flow is low is one of the main arguments used, especially by the big media, to criticize the BRICS. Yet, it is worth highlighting that, as trade financing and science and technology exchange, direct cooperation, mechanisms are set in place, this setting is bound to change.
The progress we have made so far cannot be underrated. Now we have arrived at the 3rd BRICS Trade Union Forum with unity-driven actions and a document, plus a better mutual understanding of our trade union centers than we had a couple of years ago. Still, we can advance much more. The demand for an official labor participation space in the BRICS will surely provide us with a common platform of understanding, which, once consolidated, will open up new prospects for the deepening of our relations in the near future. We must work together so that the BRICS does not become yet another international initiative that fails to listen to the workers. On the contrary, we are fully convinced that that with our active participation n in and specialized contribution to the debate regarding the development of the BRICS countries we will be able to help build a bloc that does actually represent a sustainable development model, socially just, and a counter-hegemonic alternative to the problematic international order in place since the post-war period.
Download: The BRICS and trade union action: issues for discussion (PDF)
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State to build one-stop border posts
Government will soon construct one-stop border posts at Victoria, Kazungula and Katima Mulilo border posts in Southern and Western provinces to enhance revenue collection in the country, Minister of Finance Alexander Chikwanda says.
Mr Chikwanda said the move by the government will also help to ease congestion and reduce transit times for traders and transporters as well as promote efficient flow of goods resulting in increased trade.
The minister said this in parliament yesterday in response to a question from Katombola Member of Parliament (MP) Derick Livune (UPND), who wanted to know how much money the Zambia Revenue Authority (ZRA) collected from Victoria Falls, Kazungula, Katima Mulilo and Chirundu border posts in 2012.
“We are happy with the revenue collections coming from Chirundu, for instance in 2012 alone, over K2 trillion was collected because of the one stop border post and this is the concept that we want to replicate at Victoria Falls, Kazungula and Katima Mulilo so that we can enhance our revue collection,” Mr Chikwanda said.
He said the one-stop border posts will ease the movement of the goods and human traffic between Zambia and other countries in the region.
Mr Chikwanda said the need to construct one-stop border posts has come at a critical phase when Zambia is in a hurry to facilitate effective trade in the region and beyond.
He said Zambia cannot continue to do business without the complete overhaul of infrastructure and harmonisation of trade policies.
Mr Chikwanda said government is also happy that Chirundu border post has served as a model for other one stop border posts in the region.
He said the establishment of a one stop border posts at the three border posts will stimulate economic activity and smoothen traffic on both sides.
Meanwhile, deputy minister of Agriculture and Livestock Greyford Moonde said his ministry has received a grant of US$115 million from the World Bank to support the implementation of the irrigation development support project in the country.
Mr Moonde said the grant will help farmers acquire productive equipment and assets as well as stimulate the establishment of micro-enterprise in and around irrigation schemes.
And deputy minister of Transport, Works, Supply and Communications Mwimba Malama said government will soon expand the Great East Road from Kabwe roundabout to Airport roundabout from a four lane to a six-lane road.
Mr Malama said the Road Development Agency (RDA) is currently carrying out feasibility studies and will come up with a detailed design that will facilitate the commencement of the expansion exercise.
And Mr Chikwanda has commended the British government for its continued support to Zambia’s economic growth.
Speaking when visiting UK Secretary of State for International Development Justine Greening paid a courtesy call on him yesterday, Mr Chikwanda said the UK has been of great support since Zambia independence 50 years ago.
He said Britain’s allocation of 250 million Pounds to Zambia between 2011 and 2015 has been very useful as it has covered all sectors of the economy and that it has also helped government to plan.
“The aid covers health, education, good governance, and budget support among others. As for good governance and education, they are essential for any development of the country,” Mr Chikwanda said.
He also described the country’s bilateral relation with Britain as smooth.
“We have had very few hitches since Britain handed over independence to Zambia. We have worked together to resolve some of the problems in our neighborhood, we have interacted very closely and worked together to overcome all the hindrances that were in the way of our neighboring country Zimbabwe getting their independence,” Mr Chikwanda said.
He however pleaded with the British government to support other countries in Southern Africa like Zimbabwe over its economic brink.
“Our economies in Southern Africa are inter-linked. If there is a problem with one neighboring country, they tend to spread over into other countries,” Mr Chikwanda said.
Ms Greening said Britain will continue to work with Zambia.
She committed Britain’s continued to help Zambia in the education and health sectors.
Meanwhile, the British Government and Common Market for Eastern and Southern Africa (COMESA) have signed a 3 million Pounds memorandum of understanding (MoU) on improving the policy on climate change.
Speaking during the signing ceremony, COMESA Secretary General Sindiso Ngwenya thanked the British government for its support to various projects.
Ms Greening said the UK is keen to unlock COMESA’s great potential in economic development.
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Economy expected to grow by 5,4% in 2014
The local economy is expected to grow by 5,4% this year compared to 4,4% in 2013, the Bank of Namibia says in its economic outlook for 2014-2016.
“Growth will be supported by domestic economic activities, such as the construction of some relative mega projects in the mining sector, public sector programs and the energy sector that will spur domestic consumption and investment. Growth is expected to moderate in 2015, as some mining projects near completion,” the outlook says.
The central bank says global economic growth is expected to strengthen in 2014 and 2015, whereas the domestic economy is expected to strengthen in 2014 before moderating in 2015.
The economic outlook based on IMF projections highlights that the global economy is expected to strengthen between 2014 and 2015. Global economic growth is expected to improve from 3% in 2013 to 3,6% and 3,9% in 2014 and 2015, respectively.
The expansion in global output is supported by invigorating growth in all type of economies: advanced, emerging and developing, as well as those of Sub-Saharan Africa.
The Sub-Saharan Africa region continues to expand at a solid pace from 4,9% in 2013 to 5,1% and 5,9% in 2014 and 2015, respectively.
Much of the growth is underpinned by sizeable investments in infrastructure and mining, coupled with maturing investments.
“South Africa is a notable exception where growth could be lower than the projected 2,3% and 2,7% in 2014 and 2015, respectively. The country is marred by labour issues alongside a still fragile external environment,” the central bank says.
The outlook says risks to growth are tilted downwards. On the global front, risks from low inflation and protracted low growth due to large output gaps, especially in the Euro area, are emanating. Among emerging economies, commodity export growth would be affected by a lasting and stronger-than-projected deceleration of the Chinese economy, while international terms of trade would deteriorate as prices of raw materials remain depressed having consequences on the export-led sectors in the domestic economy.
“Moreover, reversal of capital flows, depending on the timing of the normalisation of the US monetary policy, could weaken the domestic currency and put upside pressure on the Namibian inflation,” the report says.
The central bank says risk to domestic growth mainly stems from the recently introduced stringent conditions by South Africa on the export of livestock and may further slow down the volume of livestock marketed and weaken growth in the livestock sector than under the baseline scenario.
“If the above risk is prolonged, the domestic economy under the downside scenario is expected to slow to 5% in 2014. Other risks include further moderation of growth in the Namibian economy on account of depressed mineral prices, particularly of uranium with consequences for future investment and economic growth,” the outlook says.
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BRICS build new architecture for financial democracy
The BRICS alliance (Brazil, Russia, India, China and South Africa) launched the New Development Bank (NDB) and Contingency Reserve Arrangement (CRA) during its sixth summit, institutionalising a new financial architecture for the emerging powers.
Two other agreements, one for Cooperation among Export Credit and Guarantees Agencies and another on Cooperation for Innovation among national development banks, complete the structure established Tuesday Jul. 15 by the five heads of state in the northeastern Brazilian city of Fortaleza.
The BRICS Summit concludes Wednesday with a meeting between the five leaders and the presidents of the Union of South American Nations (UNASUR) held in Brasilia, as well as several bilateral meetings.
The NDB and CRA are not being created “against anyone,” but as a “response to our needs,” said the summit host, Brazilian President Dilma Rousseff, at a press conference after the meeting with Vladimir Putin (Russia), Narendra Modi (India), Xi Jinping (China) and Jacob Zuma (South Africa).
BRICS leaders reject interpretations that the mechanisms have been created in opposition to or as alternatives to the World Bank and the International Monetary Fund (IMF), part of the Bretton Woods global financial system established in the 1940s.
The NDB will complement existing multilateral and regional financial institutions, whose lack of resources constrain financing of infrastructure projects in developing countries, according to the summit’s final declaration, signed by the participating heads of state.
The CRA, a mechanism through which the five countries make available a total of 100 billion dollars from their reserves, is a currency pool that provides financial security for its members, without departing from the IMF, summit speakers said.
If one of the BRICS countries wishes to borrow more than 30 percent of the sum it is entitled to, in order to overcome threats to its balance of payments, it will have to face questions from the IMF about conditions of payment, said the Brazilian finance minister, Guido Mántega.
Brazil, Russia and India can withdraw up to the value of their contributions of 18 billion dollars each. South Africa may take out twice the five billion dollars it will contribute to the mechanism, and China up to half its 41 billion dollar commitment.
The new institutions “consolidate” the BRICS alliance, Mántega said. Before they become operational, they must be ratified by the countries’ parliaments, he said.
The bank and the reserve fund are so constituted as to prevent aspirations of dominance, Rousseff said. The countries will have equal shares in the NDB, of 10 billion dollars each, and equal voting rights. The capital may later be doubled.
Bank presidents and its governing councils will be appointed on a rotating basis.
China will contribute 41 percent of CRA funds but decisions will be taken by a broader majority, reaching consensus for the negotiation of larger loans, Mántega said.
But the NBD headquarters will be located in the Chinese city of Shanghai, and it will be difficult to avoid the economic and monetary weight of the Asian power from translating into greater decision-making power for Beijing.
The NDB’s composition avoids inequalities at the outset, but equal participation is only a formality as “in practice the future trend will be towards greater Chinese influence,” according to Carlos Langoni, former president of the Brazilian Central Bank.
To be effective, the bank will have to increase its initial capital of 50 billion dollars, recruiting new financing resources, and in this as well as in crises the “dominant role” of the country offering most capital and guarantees is an influential factor, added Langoni, who is the present director of the World Economics Centre at the Getulio Vargas Foundation.
China is interested in diversifying its investments, in multilateral and regional institutions as well as bilaterally. In recent years it has become the largest investor in Latin America.
It already participates in several regional financial mechanisms, such as the Chiang Mai Initiative, similar to the CRA and involving countries of the Association of Southeast Asian Nations, and it is seeking to establish the Asian Infrastructure Investment Bank, as an alternative to the Asian Development Bank in which Japan has decisive influence.
Langoni believes that the BRICS, with the CRA resting on “mega-economies” with their enormous currency reserves, will in the long term be able to “grow faster and have more weight than the IMF, which is already facing difficulties raising funds because of its rules.”
However, the IMF will remain the most powerful multilateral financial body over the next decade, he said.
The rise of the BRICS reflects a multipolar world, as the alliance includes military powers like Russia and China, nuclear powers like both these countries and India, and “moderators” without military ambitions like Brazil and South Africa.
Progress in strengthening and institutionalising the group at its Fortaleza summit could help reduce border tensions existing between China and India, or between Russia and the West, Langoni said.
In his view, what cements the group is its “frustration over the action of multilateral bodies, particularly the IMF,” in the face of the financial crises. These institutions are very complex and made up of a large number of countries.
The BRICS countries can operate with greater ease with their own financial instruments, which can also supply their urgent needs for investment in infrastructure, especially in Brazil and India, he argued.
The BRICS “found their identity” by working with the Group of Twenty (G20) industrial and emerging countries to defend the stimulation of growth, rather than recession-inducing austerity, after the 2008 global financial crisis, Mántega pointed out. Later they came to demand reform of the IMF, which spearheaded response to the crisis.
Some reforms to grant emerging countries greater participation in IMF decision-making were approved by the G20, but then stalled because they were rejected in the U.S. Congress.
The IMF is regarded as extremely undemocratic, because the United States has power of veto and some countries of the industrial North have a majority of votes, in contradiction with the present correlation of economic forces and the weight of emerging powers.
The absence of reforms “negatively impacts on the IMF’s legitimacy, credibility and effectiveness.” The reforms must lead to the “modernisation of its governance structure so as to better reflect the increasing weight of emerging markets and developing countries (EMDCs),” says the Fortaleza Declaration, signed by the five BRICS leaders.
Download the Fortaleza Declaration and Action Plan from the Sixth BRICS Summit below.
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AfDB Independent Development Evaluation releases Transport Issue of eVALUation Matters
The June 2014 issue of the African Development Bank’s (AfDB) quarterly knowledge publication, eVALUation Matters, was released on July 11. This issue focuses on the transport sector in Africa, a sector that has long languished behind that of other world regions. The publication of this Transport Issue comes on the heels of the recent discussion by the Bank’s Committee on Development Effectiveness (CODE) of an independent assessment of the AfDB’s transport sector operations entitled: Independent Transport in Africa – AfDB’s Intervention and Results for the Last Decade. The evaluation summary report and a host of background papers and reviews will soon be published.
With contributions from the African Development Bank, which publishes the magazine, the Japanese International Cooperation Agency, and the World Bank, this issue delves into the reasons for Africa’s slow progress with road systems, railways, ports, and cross-border commerce, as well as the continent’s ongoing efforts to improve the situation.
The issue poses seminal questions throughout the 92-page investigation into transport in Africa. How many days does it take for a typical 20-foot container to reach the most accessible port from Bangui? From Ouagadougou? Why does Africa, which has only two per cent of the world’s vehicles, account for 16 per cent of traffic fatalities?
Part of the problem with transport in Africa is that the sector has not received the attention it deserves. “Transport does not feature as a specific goal, because it is regarded as a means to an end, rather than an end in itself,” says Rakesh Nangia, Evaluator General of the African Development Bank’s Independent Development Evaluation (IDEV). If a farmer increases her maize yield 100 per cent but has no decent road to the nearest market, her surplus could rot in the silo. If one country produces a bumper crop of a commodity in demand in a neighbouring country, but cannot get it there because the old bridge was washed out, or because the only ferry is awaiting spare parts, or because the customs officials are corrupt, nobody wins.
The African Development Bank’s focus on transport is neither new nor minor. Since 2000, Bank expenditure on the sector has risen steadily from a 14.5 per cent share of total Bank Group commitments in 2000 to a high of 33.7 per cent in 2010. This prioritization of transport is unique among development banks, and it needs to be. The people of Africa need many things, but none more than good roads, efficient rail systems and ports, and expedited border crossings. The latter necessity is worth underscoring: Africa is only two-thirds the size of Asia, yet it has 16 more countries. In Asia, produce can be freighted over enormous distances without encountering an international border. In Africa, cross-border commerce is virtually unavoidable.
It is arguable that transport is Africa’s number one problem, and that solving it would lead to improvements in other sectors: agriculture, health, education, gender parity, governance. In making transport the focus of this issue of eVALUation Matters, the African Development Bank has shone light on a development priority that has been left in the dark for far too long.
eVALUation Matters is a knowledge product of the African Development Bank’s Independent Development Evaluation (IDEV).