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African countries need united action on infrastructure development – AU chairperson
AU Commission Deputy Chairperson, Erastus Mwencha, on Tuesday called on African countries to unite in implementing the continent’s approved programme for infrastructure development.
“We need to harmonise our vision and strategies and act together toward a common destination,” he told the first meeting of the Council for Infrastructure Development (CID), being held on the margins of the 22nd Ordinary Session of the AU Assembly.
Taking part in the meeting are ministers responsible for infrastructure development and transport as well as chief executives of regional economic communities.
Mwencha, who chaired the meeting, said that Africa’s infrastructure was one sector that has a huge deficit in terms of implementation and funding.
Underscoring the need for effective supervision of projects, he urged the CID to get involved in improving the connectedness of the continent, saying it should be seen as an action Council.
In 2012, African heads of state and government approved the Programme for Infrastructure Development in Africa (PIDA) with a resolution to undertake institutional reforms, conducive to the creation of a favourable business climate for private investment in infrastructure.
They also resolved to promote financing mechanism reflecting a commitment to speed up infrastructure development on the continent.
In the priority action plan for 2012 to 2020 of PIDA, 51 projects and programmes were identified, calling for a total investment of 68 billion dollars.
Of these ventures, 24 are in the transport sector, 15 for energy, nine for trans-boundary water and three for information, communication and technology (ICT) development.
The transport programme is aimed at linking major production and consumption centres, providing connectivity among major cities, defining the best hub ports and railway routes and opening land-locked countries to improved regional and continental trade.
According to the PIDA outlook to 2040, US$ 360 billion was required as capital cost for the development of 37,300 km of highways; 30,200 km of railways; port added ton capacity of 1.3 billion tons; 61 099 MW hydroelectric power generation; and 16,500 km power lines interconnection.
The trans-boundary water programme targets development of multipurpose dams and the capacity of lakes and river basin organisations so they can plan and develop their own water-based infrastructure, besides addressing food needs for Africa’s population.
Meanwhile, the ICT programme seeks to establish an enabling environment for completing the land fibre optic infrastructure and installing internet exchange points in countries that lack such.
Mwencha said that the one-day CID meeting was scheduled to set up an implementation mechanism for the PIDA projects and programmes toward attainment of Africa’s Agenda 2063 on the overall continental development.
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South Africa was continent’s top FDI recipient in 2013
Foreign direct investment flows to Africa increased nearly 7 percent to an estimated $56 billion last year, nearly a fifth of which went to top recipient South Africa, a United Nations report said on Tuesday.
Africa, along with Latin America and the Caribbean, helped drive FDI inflows to developing economies to a new high of $759 billion in 2013. That was more than half of global FDI, the United Nations Conference on Trade and Development said in its latest Global Investment Trends Monitor.
Sub-Saharan Africa’s robust economic growth, which the IMF expects to increase to 6.1 percent in 2014, from 5.1 percent last year, has made it an attractive destination for investors.
South Africa’s performance has lagged the rest of the region, however, with the IMF forecasting growth of 2.8 percent in the continent’s biggest economy this year, an increase from 1.8 percent in 2013.
Investors have also been unnerved by recurrent labour unrest, most recently a platinum mining strike that began on Thursday which has hit half of global output of the precious metal.
Despite these woes, FDI inflows to South Africa more than doubled to $10.3 billion in 2013, UNCTAD said, while other African countries like Nigeria and Ghana saw a decline in investment.
Most of the rise in FDI flows to South Africa was due to greenfield, or new investment, particularly in the consumer goods sector, said Masataka Fujita, head of UNCTAD’s investment trends and issues branch.
Mozambique, where companies like Brazil’s Vale, London-listed Rio Tinto and Italy’s Eni are developing huge offshore gas and coal deposits, was another strong performer, attracting inflows of $7.1 billion, up more than 30 percent from a year ago.
Inflows to Africa’s top crude oil producer Nigeria declined about 20 percent to $5.5 billion, the report said, largely due to asset sales by foreign oil companies such as Royal Dutch Shell and Chevron.
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Azevêdo calls Bali “a leap forward in favour of developing countries”
Director-General Roberto Azevêdo, in a speech at the Confederation of Indian Industry Partnership Summit in Bangalore on 28 January 2014, said that “besides being a boost to the WTO as an institution, what we delivered in Bali has tremendous economic significance and will improve the lives of millions around the world”. He said: “The work has only just begun – and we have the chance to make 2014 the year that the Doha round is put back on track. It will not be easy, but it is achievable. I hope that together we can capitalise on the success in Bali, and seize the opportunity that it has provided.” This is what he said:
Ministers,
Ladies and gentlemen,
I’m delighted to be here today.
When I addressed the CII in New Delhi, October last year, the future of the multilateral trading system was in doubt.
I’m happy to say that the outlook is very different today – and very much more positive.
I want to thank you for your help in delivering the success in Bali.
In October I called on you, as the Indian business community, to lend your support to the Bali package – and you did so.
I also want to welcome the excellent joint work that the CII has been doing with the WTO.
Our joint report: “India-Africa: South-South Trade and Investment for Development” was very well-received. And of course there is more that we can do.
India is an important global player, particularly in South-South development cooperation. This work could be made even more effective by increasing private sector involvement – and who better than the CII to do this.
I also want to give my sincere thanks to the Indian Government for their support in delivering the Bali package – and particularly Minister Sharma.
Minister Sharma played a key and positive role in Bali, ensuring not only that the package would deliver meaningful outcomes, but also that it would be balanced so that consensus could be found.
There is no doubt that Bali was a very significant achievement.
After 18 years without agreements, the WTO proved that it can deliver negotiated outcomes. And it moved the spotlight back onto Geneva.
But Bali has not finished the job – rather, it has provided us with the opportunity to make progress in other areas – and to conclude the Doha round.
However, this is not the only dimension of the Bali agreements. Besides being a boost to the WTO as an institution, what we delivered in Bali has tremendous economic significance and will improve the lives of millions around the world.
BALI – ECONOMIC IMPACT
This is especially relevant in light of the uncertainties of the post-crisis recovery endeavours. The global economic picture remains mixed and trade must do its part in providing development and job opportunities everywhere.
Of course India, like others, is not immune to the lingering effects of the crisis and to developments outside her borders. The Bali agreements came at a time of high volatility in transnational capital flows, slow growth, widespread inflation and deflation concerns, high unemployment in many countries, and far-reaching economic ripples triggered by monetary and fiscal policies in major markets.
The Bali package could not be more propitious.
Economists forecast that by speeding up and streamlining customs procedures the Bali package will provide a significant boost to the global economy. Some maintain that it is worth up to $1 trillion per year, with the capacity to generate up to 21 million jobs across the developed and developing world.
As businesspeople you will appreciate what a 10-15% change in import and export costs could mean for your margins.
In addition it could bring increased investment in trade-related infrastructure, particularly in the less developed nations. It will certainly support the rapid growth in India’s trade with Africa – helping to reach the US$ 100 billion mark by 2015.
The Trade Facilitation Agreement, a critical piece of the Bali deliverables, has important milestones for implementation over the coming months. Our ability to move the WTO agenda forward hinges on our ability to fulfil the promises contained in that agreement, especially in providing timely and effective technical assistance and capacity building wherever it is demanded in the developing world.
This is an important test for the system – and one which we must pass if we want to see these benefits made real.
We all have a role to play here in keeping up the momentum and the pressure that allowed us to reach a successful agreement in the first place.
I hope I can continue to count on your support in this effort.
BALI – DEVELOPMENT OUTCOMES
But, as you know, trade facilitation was just one part of the Bali package. WTO Members agreed to 10 texts altogether, many of them focused on issues of great interest to developing and least developed countries – the LDCs.
For example, Ministers agreed on a set of specific measures aimed at helping the least-developed countries to increase their exports and to better fit into the global patterns of production. The texts agreed in Bali establish:
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Further commitments to duty-free-quota-free market access,
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Guidelines for simple, transparent and flexible rules of origin for exports from LDCs, and
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Improvements in market access opportunities for service providers from the LDCs.
In addition, the Bali package will create a new mechanism that will monitor and improve the operation of provisions that grant special and differential treatment to developing countries.
This has been a longstanding demand of many developing countries – and India has been a leading voice.
Some have raised concerns about the non-binding nature of some of the texts of the Bali package.
But the Bali decisions are a first step – they are meant to be built on, as ministers themselves recognised in their declaration there. Besides, the Bali ministerial Declaration also determines that these non-binding decisions will be a priority in our post-Bali work.
Overall, Bali represents a leap forward in favour of developing countries, breaking new ground in the norms that underpin the multilateral system.
And this was clear in Bali. Developing countries fought for the package just as hard as anyone.
BALI – FOOD SECURITY
Of course, ministers took another very important decision in Bali – on food security.
This measure provides protection to developing countries from legal challenges at the WTO, arising over public expenditure incurred while stockpiling staple foods for subsequent distribution to the poor.
India fought hard to secure agreement on these food security provisions, which will provide important safeguards for India and other developing countries in pursuit of their food security objectives.
And I have no doubt that India will be a central player in the upcoming negotiations to find a permanent solution to this issue.
More broadly, I have no doubt that India will play a leading role in drawing up the post-Bali work programme.
POST-BALI – PARAMETERS
This work programme is not only about implementing the Bali outcomes. The Bali declaration also instructs us to get the talks going again and to prepare, by the end of 2014, a clearly defined work program on the remaining Doha Development Agenda issues.
In order to look forward, we must learn from the mistakes and achievements of the past. Bali offered us a number of good lessons in how to be successful multilaterally. But it will be very difficult to replicate the approach where we avoided the core issues – agriculture, industrial goods, services – and found harvests elsewhere.
Most likely, any future multilateral engagement will require outcomes in agriculture. This was a central pillar of the DDA and, if agriculture comes into play, so do the other two legs of the tripod: industrial goods and services.
We may even conclude that we’re not yet ready to properly tackle these three areas, but we can’t avoid the conversation.
Even though we can’t replicate Bali precisely, there are lessons learned that we must keep in mind. Our dialogue about the future is just beginning, but I believe that some parameters seem to be already framing this conversation.
I will talk through these parameters now – though I stress that this is not an exhaustive list, nor is it arranged in order of priority or importance.
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The first is that we must be realistic and focus on those things which are doable. Instead of abstract goals, let’s look at what we can do and set goals that are reachable. Members have to be honest to each other and to their domestic constituencies about what can realistically be expected from the negotiations. We must find a balance between ambition and realism.
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The second parameter is that the big issues in the DDA are interconnected, and therefore they must be tackled together. So, again, as it was in Bali, balance is key. We must find an approach in which all members contribute and all members benefit. But, again, no one is faced with impossible demands.
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Third, in order to make headway in these areas, we must be ready to be creative and keep an open mind to new ideas that may allow members to overcome the most critical and fundamental stumbling blocks. This creativity, however, has to be coherent with the DDA mandates, which are flexible enough to accommodate new paths.
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Fourth, we cannot forget that development has to be preserved as the central pillar of our efforts. Above all, we must have tangible results for the poorest members.
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Fifth, the process must continue to be inclusive and transparent, engaging all members at all stages of the negotiations.
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Sixth, our efforts must have a sense of urgency. This was an essential element of the success in Bali. We must be careful, however, not to rush recklessly into another cycle of failures due to bad planning.
Finally, I also think we should be open-minded about how far-reaching our next steps will be.
Of course what we want to do is to find a path towards conclusion of the round. It may be that it can be done in one step – or we may need more than one step. That is something that we have to discuss.
CONCLUSION
Bali announced to the world that the WTO – and the multilateral system – are back in business.
Like Minister Sharma, I have just been in Davos, and the number of references to Bali and to the work of the WTO surprised me.
There is political momentum and we must build on it.
The work has only just begun – and we have the chance to make 2014 the year that the Doha round is put back on track.
It will not be easy, but it is achievable. I hope that together we can capitalise on the success in Bali, and seize the opportunity that it has provided.
Thank you – I look forward to our discussion.
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Africa and India cultivate agricultural research ties
Africa and India are gearing up to further enhance cooperation in agricultural science, technology and innovation, and move beyond dialogue to a range of practical options from a virtual biotech platform to agribusiness centres, seed investments and even joint donor-aided projects.
Willy Tonui, chief executive officer of Kenya’s National Biosafety Authority, said that studying how India has resolved development problems could help overcome similar challenges across Africa.
“India has developed solutions to its unique environmental and cultural challenges. We could learn from it,” he told SciDev.Net at a meeting on science, technology and innovation cooperation between Africa and India in New Delhi last October.
The meeting, which included ministers, heads of biotechnology organsiations, seed industry representatives, officials and scientists, generated a slew of proposals to enhance agricultural collaboration. The ideas from the meeting will feed into a larger Africa-India summit slated for 2014 in Delhi.
S. R. Rao, an advisor to the Department of Biotechnology in India’s Ministry of Science and Technology, suggested creating an Indo-African, open-access biotechnology virtual platform that would offer a roster of experts and enable knowledge to be shared on a range of techniques and biotech-related sectors such as fisheries, horticulture and animal health.
Some other proposals that emerged from the meeting were to set up agribusiness centres to promote entrepreneurship and provide services, and to form joint agricultural projects to boost the chances of getting donor funding.
Diran Makinde, director of the African Biosafety Network of Expertise, which was set up to help the continent’s regulators make decisions on biotechnology products, told SciDev.Net that Africa would benefit from cooperation with India in several fields. These include: developing technological and professional competence; upgrading technology infrastructure; stimulating collaborative innovation and entrepreneurship; and providing an enabling science, technology and innovation environment.
Similar farming systems
As a partner, India is “handy because of the similarities in our farming systems”, Makinde said, referring to the smallholdings typical of both African and Indian agriculture.
Another useful insight for Africa is to learn how India has boosted the domestic production of seeds.
“Only about ten per cent of [African] farmers use hybrid seeds, which was the same in India some two decades ago, and this scenario may not enable us to achieve food and nutrition security in Africa, which is our top priority. In addition, there has been a lot of regulatory experience and data accumulated in India that may benefit African regulatory systems,” he told SciDev.Net.
The meeting in New Delhi was an offshoot of joint summits in 2008 and 2011. As a result of these, Africa and India are already implementing science and technology initiatives in: capacity building, development, and knowledge transfer and adoption in common priority research areas.
The initiatives cover: fellowships for African researchers to work in Indian science institutes; training African researchers in areas such as biomedical sciences, technological innovation, energy, environment and sustainable development; strengthening research institutes in Benin, Gabon and Tunisia; and the transfer and adoption of small- and medium-scale technologies.
Sachin Chaturvedi, a senior fellow at Research and Information Systems for Developing Countries, an Indian think-tank, tells SciDev.Net that various concrete proposals emerged from the meeting. These included agreement on setting up laboratory standards for seeds and other sources of genetic materials such as plant tissues; establishing seed incubator facilities for private-sector entrepreneurs in Africa; and building Africa’s capacity for seed research.
He says that India’s government has agreed, in principle, to fund agricultural cooperation, but the details must still be worked out.
Seeds challenge
A major challenge to African agricultural technology development is ensuring that seed production is of sufficient quality, and the availability and affordability of those seeds, says George Marechera, business development manager at the African Agricultural Technology Foundation, which promotes public-private partnerships to assist smallholder farmers in Sub Saharan Africa.
This is because most African seed production systems are still informal, farmer-based and low-yielding, he adds.
Despite the availability of several easily adaptable, high-quality, international seed production technologies – including improved techniques for seed selection, treatment and storage – there is a lack of coordination between producers, researchers and suppliers, Marechera says.
Similarly, there is no mechanism for linking these technologies with African seed companies that could roll them out.
Africa needs an innovative business model for seed access and delivery, Marechera says, adding that Africa and India could collaborate in seed production.
He suggests that India’s model of small seed companies, which require less investment, has potential in Africa.
Other joint efforts on seeds are under way. Africa and India are running trials under the Syngenta Foundation for Sustainable Agriculture’s India-Africa Seed Bridge project designed to link plant breeders with new seed production and distribution channels in emerging markets.
These include crops such as sorghum, millet, sunflower, tomato, onion and sesame, as well as maize that requires less water than traditional varieties, cowpea that is resistant to the pod borer moth, salt-tolerant rice and bananas that are resistant to the fungal ‘wilt’ disease.
And Bamidele Solomon, former director general of Nigeria’s National Biotechnology Development Agency, says biotechnologists from his country are meeting India’s agriculture ministry and seed company associations to build links with partners who could help Nigeria’s mission to grow genetically modified cotton, based on India’s success in the sector.
Nigeria and India could also increase collaboration in capacity building, technology transfer and the development of infrastructure such as modern laboratories in the agriculture sector, he says.
Links through international institutes
Several international research institutes are engaged in collaboration programmes between Africa and India. For example, the Nairobi-based International Livestock Research Institute is engaged in programmes focusing on animal genetics, animal feeds and animal health that involve Ethiopia, Kenya, Mali, Mozambique and Tanzania as well as India.
“India-Africa knowledge management should move beyond the movement of messages to technology dissemination tools and approaches, and linkages to agricultural education,” says Purvi Mehta-Bhatt, the institute’s representative for South Asia.
The two partners should develop joint projects to attract donor funding, set up institutional collaboration and document, monitor and evaluate their experiences, she says.
Similarly, New Delhi-based The Energy and Resources Institute is running collaboration initiatives including policy dialogues, policy research knowledge sharing, institutional capacity building and grassroots demonstration projects on areas such as biotechnology and sustainable development.
And the International Crops Research Institute for the Semi-Arid Tropics, whose headquarters is near Hyderabad, will use its Agribusiness and Innovation Platform initiative to help set up agribusiness incubators for farmers across Africa, along the lines of its networks of incubators in India.
BRICS build inroads into Africa
India’s engagement reflects the growing involvement by five of the major emerging economies – Brazil, Russia, India, China and South Africa (BRICS) – in agriculture across Africa.
“African agricultural policymakers are increasingly looking to the BRICS countries not only as investors and suppliers of technology, but also as sources of examples to be emulated, whether in large-scale commercial farming or in mass mobilisation to boost smallholder productivity,” notes a July 2013 bulletin by UK-based research organisations the International Institute for Environment and Development and the Institute of Development Studies.
The bulletin notes that the use of Brazilian technologies to improve soils and boost production is now seen by some as a model for Africa, and agricultural research collaborations between the two are growing. In addition, the bulletin says the continent is learning from China’s achievements in consolidating smallholder farms and developing large-scale mechanised farming.
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“Africa needs to speak with one voice”, says Commissioner Fatima Haram Acyl
The Commissioner for Trade and Industry of the African Union, Mrs. Fatima Haram Acyl, gave an assessment of the role of existing African Union trade and industry frame works for the economic integration of African countries, and underlined the need for African countries to speak with one voice. The Commissioner was speaking while addressing a press conference on 27 January 2014, at the AU headquarters in Addis Ababa, Ethiopia. She expressed concern that the inability of African countries to coordinate and adopt a coherent approach at international negotiations is obstructing their economic productivity. The Commissioner attributed the inability to agree on a coordinated economic effort to the unequal level of development amongst African countries.
Commissioner Acyl explained that dependency on commodity and unprocessed raw materials will not allow Africa to achieve its vision of an integrated, people centered, prosperous Africa. She underlined that, to realize this vision as part of Agenda 2063, there is a need for economic transformation of African countries and wealth creation for Africans. The Commissioner further explained that the road to realizing such objectives begins with implementing existing frameworks such as PIDA (Program for Infrastructure Development in Africa), CADDP (Comprehensive Africa Agriculture Development Program), BIAT/CFTA (Continental Free Trade Area), AMV (African Mining Vision) and AIDA (Accelerated Industrial Development for Africa).
The Commissioner for Trade and Industry reported that, with regards to trade and industry, in particular with the BIAT/CFTA, AMV and AIDA frameworks, the Commission has taken initiatives to enhance the impact in these areas. She added that, in terms of the CFTA the Commission is in the process of setting up an African Trade Observatory to gather and analyze trade and industry statistics, a CFTA secretariat to work with member states and regional economic communities and prepare for the CFTA negotiations in 2015, and an African Business Council to integrate private sector stake holders within the decision making process of the commission.
The Commissioner also advised the need to focus on investing in African people and introducing initiatives to take advantage of Africa’s increasing population. According to Commissioner Acyl, the suggestion comes in light of the expectation that 25 percent of the world youth under 30 years will be in Sub-Saharan Africa 10 years from now and considering the projection that Africa’s population will increase from 15 percent of the world population in 2013 to 23 percent by 2050.
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AU urges Africa to deepen economic integration to eradicate poverty
African Union Commission Chairperson Nkosazana Dlamini-Zuma on Monday called on Africa to deepen economic integration in order to eradicate widespread hunger and poverty on the continent.
Dlamini-Zuma made the call at the opening of the 24th Ordinary Session of the African Union Executive Council.
“We are today more convinced than ever, that we shall not succeed in eradicating poverty, disease, conflict and hunger and provide a better life for the peoples of our continent unless we have greater integration of our economies,” the AU Commission chairperson said.
She said mineral beneficiation, increased industrialization and agricultural production were also key to accelerating development on the continent.
With the upcoming 22nd Ordinary Session of the AU Assembly running under the central theme, “Agriculture and Food Security”, Dhlamini-Zuma said agriculture and agro-processing were critical to ensuring sustained and inclusive growth of 7 percent and higher in Africa.
The continent, she said, would in 2014 focus more on increasing agricultural investment and productivity; growing agro-business and value chains; expanding infrastructure; skills; and research for agriculture in pursuit of the Comprehensive African Agriculture Development Program (CAADP) goals.
Agriculture constitutes a large part of Africa’s gross domestic product.
Dlamini-Zuma said Africa should also take practical steps to ensure it has a greater say on the pricing of its agricultural products.
“In particular, we will take special measures to ensure that women, who are the largest part of the agricultural work force and food producers, have access to training and capital, and are supported to form cooperatives,” she said.
The chairperson of the Executive Council, who is also Ethiopian Foreign Affairs Minister, Tedros Adhanom Ghebreyesus told the same meeting that Africa needed to sustain its high economic growth trajectory over the coming decades in order to lift millions of its people out of poverty.
“That is why we need to bring about structural transformation by promoting economic diversification and industrialization with a view to ensuring inclusive growth and creating jobs for the unemployed,” he said.
Addressing the same meeting, Executive Secretary of the Economic Commission for Africa (ECA) Carlos Lopes lamented the fact that despite holding immense natural resources, Africa was the world’s most food insecure region.
Around 226 million people, or one out of every five people in Africa, were chronically food insecure, he said.
He bemoaned Africa’s inadequate funding to agriculture, saying the continent was yet to use the sector as a socio-economic transformation tool.
He pointed out that over 15 billion U.S. dollars had been spent on Africa’s agriculture over the past two decades and yet the continent was still grappling with the problem of malnutrition. Africa, he said, needed to undertake an agricultural revolution involving systematic improvements in production, processing, storage and use to take its people out of poverty, noting that countries that had succeeded in poverty alleviation had done so through agricultural revolutions.
He cited Brazil, China and India as examples.
Food security should be approached economically and not as a poverty reduction program, he urged Africa.
Lopes proposed the “6 R” strategy to transform Africa’s agriculture, focusing on reducing the vulnerability of small-scale farmers and remaining firm against unfair trade policies, among others.
He argued that agricultural subsidies offered by most developed countries distort international commodity prices thereby making farming by African farmers unprofitable.
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WTO members gear up for trade facilitation deal
A number of World Trade Organization (WTO) members agreed on Saturday to step up efforts to implement a trade facilitation deal that could add US$1 trillion to the global economy.
The commitment was achieved during a mini-ministerial meeting of the WTO attended by 22 countries, including the US, the European Union (EU), Australia, China, Japan, South Korea, South Africa, Nigeria, Switzerland and Turkey and WTO director general Roberto Azevedo, on the sidelines of the World Economic Forum (WEF).
Developed nations had expressed their preparedness to provide financial aid for technical assistance to developing and least-developed countries in order to implement the deal, said Trade Minister Gita Wirjawan.
“The next step will be to formulate the types of suitable assistance,” he said after the meeting.
The trade facilitation deal was one of the three accords achieved during the 160-member WTO ministerial meeting in Bali last December, marking its first-ever global trade deal since its creation in 1995.
The other two accords pertained to measures to enhance agriculture in developing countries, including temporary protection for food security programs and a reform of export subsidies, and to promote exports in least-developed countries through duty-free quota-free market access and simplified rules of origin.
Concrete actions to materialize from the so-called “Bali package” are expected to be completed in 12 months.
The trade facilitation agreement aims to simplify customs procedures and ease the flow of goods and services across nations, such as through uniform documentation requirements for the release and clearance of goods, reduce transaction costs.
It could create up to 21 million jobs and generate expansion of up to 10 percent in developing country exports and 4.5 percent in developed country exports, according to the WTO’s estimate.
A preparatory committee to formulate the technical details for the implementation of the trade facilitation agreement would be established soon, said Trade Ministry director for APEC and other international organizations Denny Kurnia.
The committee would lay out a protocol with July this year as the deadline to implement the agreement, he said.
“If the protocol is ready, it will be offered to member countries for approval,” Denny said, adding the trade facilitation agreement could come into effect when a minimum of two-thirds of the members had accepted the protocol.
Indonesia will have to issue a presidential decree to ratify the protocol and also change contradictory regulations, such as the Customs Law, according to Denny.
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Rules and tools for Africa’s growth
After several decades in the shadows, Africa has entered the spotlight as one of the best investment destinations since the economic crisis of the West. The tone has changed from dramatically negative in the 1990s to overly positive in the last five years. Indeed, Africa’s investment climate has improved, and many African jurisdictions have equipped themselves with new and adapted regulations, sometimes breaking radically from their colonial roots. Another key development is the recent regained momentum of regional integration and consequently improved regional legal and regulatory regimes.
Africa’s Investment Climate Has Dramatically Improved
African economies are showing impressive growth. With an average GDP growth forecasted to be 6.3 percent in 2013, Africa has become the fastest growing region in the world, and only a few Asian countries will continue to grow faster than the continent’s top performers. In addition, the debt to GDP ratio has reduced and become stable with an average of about 33 percent (in comparison to above 85 percent for the European Union and around 100 percent for the US). The times of sextillion percent inflation rates (which were the inflation rates reached in Zimbabwe in 2008 before it abandoned its own currency) are also gone. The average inflation in Africa is now around 8 percent.
The political environment is a lot more stable. Between the 1960s and the fall of the Berlin Wall, Mauritius was the sole African country where a ruling party or government was peacefully voted out. Since then, there have been more than 30 examples of democratic elections resulting in a change of power (such as Zambia and Kenya recently). Only four jurisdictions in Africa do not have a multi-party constitution. Coups still occur but they have become less the norm.
So, strong continuous growth, limited sovereign external debt, controlled inflation and more stable political environment constitute clear and compelling signals to investors. In addition, deep regulatory reforms are improving the legal landscape.
African Regulatory Reforms in Ebulltion
There is no doubt that laws have now become a priority for many African jurisdictions, and although most of them are simply modernizing the laws they inherited during colonization, a few countries are adopting fundamental changes. In many jurisdictions, the laws were “frozen” following the end of colonization. However, in the last two decades, thanks to improving political stability and increased investment, African jurisdictions have concentrated on updating their laws. For example, Libya, Zimbabwe and Egypt have recently adopted a new constitution. Malawi is in the process of revamping all its laws. Liberia, South Sudan and Somalia have started legislating for the first time in over 30 years. Rwanda, for example, switched from its 19th century Belgian civil law systems roots to common law a few years ago. Rwanda replaced French with English as its primary business language. These amendments, although partly politically motivated, were mainly put in place to improve Rwanda’s overall business environment. From 158th position in the World Bank’s 1998 Doing Business survey ranking countries according to their ease of investments, it jumped to 48th position in 2012. In fact, Rwanda was the first country in the world to voluntarily adopt a common law legal system.
The other popular change, which has been made by many African countries upon achieving independence was the rebalancing of property ownership. Although often contested by foreign investors, indigenisation laws and quotas have been introduced in some African jurisdictions. For example, in South Africa where almost 80 percent of the population is black, it was judged necessary to pass the Black Economic Empowerment Act in 2003 to readjust the inequalities generated by decades of apartheid. With respect to land, many countries removed the ability for anyone to own freeholds, leaving individuals with long leaseholds (such as Nigeria or Zambia). Some countries go further and discriminate between foreigners and citizens (for example in Kenya, last year, foreigners suddenly woke up one morning with their freehold having been converted into a 99-year leasehold). It may be worth highlighting that many Western and emerging countries have some property ownership restrictions (such as Switzerland, the Channel Islands or China). It is, however, interesting to note that Rwanda, one of the world’s biggest business reformers, refused to go down that route, and both locals and foreigners can own freehold properties.
However, despite all the recent economic, political and regulatory improvements and despite accounting for about 15 percent of the world population and representing more than 20 percent of the land area on earth, Africa’s GDP is still less than 4 percent of the world is total GDP. Indeed, the GDP of the all the 54 African countries is less than Brazil’s GDP and about one-quarter of China’s GDP. Africa will not be able to compete if it remains a legally and economically fragmented region (however good and competitive each individual state is). For this reason, regional integration has once again become a hot topic.
Regional Integration: A Regained Momentum
Dr. Mo Ibrahim urged the heads of state across Africa at the Dialogue on Africa in 2011 to prioritise regional integration as there are too many sub-scale African countries which are economically unviable. This statement reflects the focus on regional integration by not only governments, but civil society and business as well.
The East African Community (“EAC”), which regroups Kenya, Uganda, Tanzania and since 2009 Burundi and Rwanda, is a good example of progressive regional integration on several fronts. Although this organisation was created in 1967 as a result of long historical cooperation between Kenya, Uganda and Tanzania, it collapsed in 1977, and took more than 30 years to be revived by treaty in 1999 which came into force in 2000. However EAC now has a common external tariff, an internal trade and common customs procedures. It is also working hard towards a common currency. Nevertheless, this regional organisation is small with only 105 million people and represents a limited part of the African market. Also, EAC does not share the same business laws like OHADA.
West Africa, too, must be lauded for its progress. OHADA (which is an acronym for the Organisation pour l’Harmonisation en Afrique de Droit des Affaires) was created in 1993 and now (with the addition of the Democratic Republic of Congo in 2012) groups 17 African jurisdictions. OHADA is pioneering: it gives all its members one set of business laws, one Supreme Court, a council of ministers and a permanent secretariat. OHADA’s uniform acts are directly applicable in all the member states. However the number of OHADA uniform acts is currently limited to key business laws and does not deal with free movement of goods and common tariff like EAC. There are however two sub-groups of OHADA countries which have formed the only two common currency unions in Africa: Benin, Burkina Faso, Cote d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo share the West African CFA Franc and Cameroon, Central African Republic , Chad, Republic of Congo, Equatorial Guinea and Gabon share the Central African Franc.
There are various other regional organisations such as COMESA, SADC or ECOWAS. However the main issue is that many states belong to different overlapping organisations dealing with different priorities. A solution lies not only in the private sector promoting cross border trade, but also in development banks such as the African Development Bank, the Eastern and Southern African Trade and Development Bank (PTA Bank) and so on use development finance of infrastructure and trade to unite countries.
Conclusion
Africa has all the ingredients for success: growth, increased stability, improved regulations and focus on regional integration. Although the AU’s plans seem ambitious at present, one thing is clear: Africa is firming up its own legal structure. The use of cut and paste legacy laws is dwindling. In addition, the continent has diversified its trading partners and no longer relies solely on Europe, the U.S. or China. Intra African trade, though still less than 15 percent of the continent’s trade, will surely increase with improvements in infrastructure and increasing trade finance. Increased manufacturing and production value added goods (with improved trade facilitation measures, of course) will encourage greater internal consumption. The success of Africa’s integration will be based on the full cooperation between political leaders, citizens and a unified mission for sustainable and inclusive growth for all. The laws and regulations are increasingly in place, now action is left to the people.
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Circular economy can generate US$ 1 trillion annually by 2025
Over US$1 trillion a year could be generated by 2025 for the global economy and 100,000 new jobs created within the next five years if companies focused on encouraging the build-up of “circular” supply chains to increase the rate of recycling, reuse and remanufacture. This would maximize the value of materials when products approach the end of their use, according to a new report released today by the World Economic Forum, in collaboration with the Ellen MacArthur Foundation at the Annual Meeting 2014 in Davos.
The report, Towards the Circular Economy, analyses the economic benefits for businesses shifting towards a circular economy, which rethinks today’s consumption patterns of “take, make and dispose” to a more restorative process, where products are designed and marketed such that components and materials can be reused many times. The report also highlights a new Forum initiative, Project Mainstream, which could help businesses to shift towards a circular economy and as a result save US$ 500 million in materials and prevent 100 million tonnes of waste globally.
“The circular economy is an opportunity industry can’t afford to miss,” said Sir Ian Cheshire, Group Chief Executive of Kingfisher. “It can drive our next generation of innovation and business growth, cushion our business from price volatility, provide us with competitive advantage, and help us build better relationships with customers and suppliers.”
With commodity prices almost tripling in the last 10 years, businesses and governments are now recognizing this as an opportunity to manage input cost volatility, as this approach decouples economic growth from finite supplies of primary resources. Manufacturing industries, in particular, could see their costs reduce significantly by adopting a circular business model. For example, material costs of smartphones could be reduced by more than 60% by entirely rethinking the way they are made and disposed. The report also shows the benefits of innovative business models such as Airbnb and Zip Car, and suggests improvements for profitability throughout the supply chain.
Project Mainstream is a World Economic Forum initiative in partnership with the Ellen MacArthur Foundation and supported by McKinsey & Co, which aims to work with companies to tackle ways to enable the circular economy through materials management, information technologies and business model innovation. There are already many industry leaders that have committed to be part of this effort, including Philips, Kingfisher, Veolia, DSM and Indorama.
“Building on growing momentum around the circular economy, Project Mainstream will leverage the convening power of the World Economic Forum and bring together a group of business leaders capable of triggering widespread innovation and employment. It is about going beyond concept stage, it’s about turning proven potential into an economic reality,” said Ellen MacArthur, Founder of the Ellen MacArthur Foundation.
The 44th World Economic Forum Annual Meeting is taking place from 22 to 25 January 2014 under the theme The Reshaping of the World: Consequences for Society, Politics and Business. More than 2,500 participants from 100 countries are taking part in the Meeting. Participants include more than 30 heads of state or government and 1,500 business leaders from the Forum’s 1,000 Member companies, as well as Social Entrepreneurs, Global Shapers, Young Global Leaders and representatives from civil society, media, academia and the arts.
The Co-Chairs of the Annual Meeting 2014 are: Aliko Dangote, President and Chief Executive Officer, Dangote Group, Nigeria; Kris Gopalakrishnan, President, Confederation of Indian Industry (CII); Vice-Chairman, Infosys, India; Jiang Jianqing, Chairman of the Board, Industrial and Commercial Bank of China, People’s Republic of China; Joseph Jimenez, Chief Executive Officer, Novartis, Switzerland; Christophe de Margerie, Chairman and Chief Executive Officer, Total, France; Marissa Mayer, Chief Executive Officer, Yahoo, USA; and Judith Rodin, President, Rockefeller Foundation, USA.
About the circular economy
Restorative by design, the circular economy is built on the principle that stocks and flows of resources are rebuilt as opposed to degraded. This results in lower, and less volatile, costs, and holds huge potential for innovation and job creation. The circular economy aims to decouple economic growth from resource consumption. Project Mainstream can help mobilize this interest into an avenue for cross-industry action capable of taking the circular economy to the tipping point.
Click here for more information about the WEF Annual Meeting 2014.
Source: http://www.weforum.org/news/circular-economy-can-generate-us-1-trillion-annually-2025?news=page
Download: “Towards the Circular Economy: Accelerating the scale-up across global supply chains” (64 pages, 4.48 MB)
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West Africa, EU to resume EPA negotiations
West Africa and the European Union will resume their suspended Economic Partnership Agreement (EPA) negotiations for the creation of a free trade before the end of January.
This information is contained in a statement issued by ECOWAS Assistant Director of Communication, Mr Sunny Ugoh, in Abuja on Thursday.
The statement said that the resumption of the negotiations followed the directive by the ECOWAS extraordinary summit in Dakar in October 2013 calling for flexibility in the process.
“The summit also directed West Africa’s chief negotiators to expeditiously resume negotiations with their European partners with a view to concluding a regional agreement as soon as possible,’’ it said.
The statement said that negotiations were suspended in 2012 following divergences mainly over market access offer and the EPA Development Programme (EPADP).
It also described EPADP as a dedicated funding programme to enable West Africa cope with the cost of adjustment to the impending trade regime.
The statement said that initially, West Africa had offered to open 60 per cent of its market over 25 years which it later revised to 70 per cent over the same period.
It stated that the EU had maintained its original position of an 80 per cent market opening over 15 years.
The statement also stated that West Africa, comprising the 15 ECOWAS Member States and Mauritania, also asked for 15billion Euros in new funds for the EPADP.
It stated that the European Union insisted that the programme should be funded from existing bilateral and multilateral contributions.
The Dakar meeting would be led by Directors of trade of ECOWAS and the West African Economic and Monetary Union (UEMOA) Commissions.
“Others are the European Union officials and representatives of ECOWAS ambassadors in Brussels,’’ the statement added.
The Economic Partnership Agreement (EPA) is a scheme to create a free trade area between the European Union and the African, Caribbean and Pacific Group of States (ACP).
Source: http://businessdayonline.com/2014/01/west-africa-eu-to-resume-epa-negotiations/
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SD holds its breath
This week, Swaziland will attend crunch talks on the revenue-sharing formula under the Southern African Customs Union (SACU)
This week, Swaziland will attend crunch talks on the revenue-sharing formula under the Southern African Customs Union (SACU) and the outcome of the talks will have a huge bearing on the kingdom’s financial stability.
Termed as a ‘make or break’ conference, the talks will be held in Lesotho between 30 and 31 January.
Impeccable sources have revealed that the whole purpose of the talks borders on reviewing the SACU revenue-sharing formula.
Should the formula be reviewed – as is the wish of South Africa – Swaziland could be thrown into a financial crisis.
South Africa is the one that has pushed for the talks because it feels the need to drastically change the formula for its own benefit.
Finance ministers from SACU member states are the ones expected to attend the conference and Swaziland will be represented by Senator Martin ‘Gobizandla’ Dlamini, who is also the former governor of the Central Bank of Swaziland.
Dlamini has confirmed the meeting and that he will be the one attending it.
Impact
“The meeting is very important because it is where strategies for SACU are made. Should the revenue-sharing formula be reviewed, it will have a major impact on Swaziland,” Dlamini said.
The minister, however, did not want to preempt the outcome of the talks and only said the purpose of going there is to negotiate.
Swaziland is highly dependent on SACU receipts which account for almost 60 percent of the kingdom’s national budget.
The kingdom is expected to receive E7 billion as its SACU share for the coming financial year.
In an interview with the Sunday Observer last week, new Governor of the Central Bank and former Finance Minister Majozi Sithole expressed worry at the country’s “over reliance on SACU as a source of government revenue.”
During his tenure as finance minister, Sithole experienced an unprecedented financial crisis for Swaziland after a drastic drop in SACU dividends.
Should the formula be reviewed, therefore, Dlamini could be faced with a similar experience where government literally struggles to meet its financial obligations that include paying civil servants’ salaries, paying suppliers and contractors, financing capital projects and issuing of social grants.
Swaziland has a number of social grants that include paying school fees for orphaned and vulnerable children (OVC), funding of free primary education, meeting quarterly grants for the elderly and offering free medical care for citizens aged over 60.
The number of social grants is another worry that was expressed by Governor Sithole last week as he noted that there is “high dependence on government for many things by the public”.
Crunch
All focus will, therefore, be on the outcome of the SACU crunch talks as all the past challenges that came with the financial crisis could be relived.
Sources have also revealed that should the revenue-sharing formula be passed by the ministers, the only way for Swaziland to survive would be through the intervention of Heads of State.
While South Africa’s Cabinet is reported to be in favour of the revenue-sharing formula, President Jacob Zuma is however said to be against it because he does not want to leave a legacy of having contributed to the downfall of neighbouring countries’ economies.
South Africa is the dominant economy within SACU but feels that there are imbalances when it comes to the dividends.
South Africa’s Minister of Trade and Industry Rob Davies, said that South Africa currently pays about E48 billion to the customs union annually, which constitutes around 98% of the common pool of customs and excise duties shared amongst SACU members.
Of this revenue pool, 55% is distributed to Botswana, Lesotho, Namibia and Swaziland.
This is in line with the revenue-sharing formula agreed upon in 2002, which allocates customs revenue according to each country’s share of intra-SACU imports.
Allocated
There is also a development component, which is allocated according to a country’s GDP per capita in order to assist the less-developed SACU members.
There has been a demand by South Africa that a percentage of SACU revenue be set aside for regional and industrial development.
It is said that efforts to change the revenue-sharing arrangement so that money can be set aside for regional development would result in less money going into the coffers of Swaziland and other member states.
Currently, the money is received with no strings attached but South Africa, in case she does not pull out, is expected to introduce restrictions on how the revenue derived from SACU is supposed to be spent or utilised.
What is SACU?
The Southern African Customs Union (SACU) consists of Botswana, Lesotho, Namibia, South Africa and Swaziland.
The SACU Secretariat is located in Windhoek, Namibia. SACU was established in 1910, making it the world’s oldest Customs Union.
Historically, SACU was administered by South Africa, through the 1910 and 1969 Agreements. The customs union collected duties on local production and customs duties on members’ imports from outside SACU, and the resulting revenue was allocated to member countries in quarterly installments utilising a revenue-sharing formula.
Negotiations to reform the 1969 Agreement started in 1994, and a new agreement was signed in 2002. The new arrangement was ratified by SACU Heads of State.
The Economic structure of the Union links the Member states by a single tariff and no customs duties between them. The Member States form a single customs territory in which tariffs and other barriers are eliminated on substantially all the trade between the Member States for products originating in these countries; and there is a common external tariff that applies to non-members of SACU.
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EU-US trade and investment talks: Why they matter
Talks to free up more trade and investment between the European Union and the United States got under way early in 2013. A good agreement in 2014 would be a positive thing, and not just for the EU and the US. Here is why.
The gains on offer from the current round of negotiations between the US and the EU under the banner of the Transatlantic Trade and Investment Partnership (TTIP) are substantial. Indeed, if successfully concluded, TTIP would be the most significant bilateral free trade agreement (FTA) to date, covering approximately 50% of global output, almost 30% of world merchandise trade (including intra-EU trade, but excluding services trade) and 20% of global foreign direct investment (FDI).
The US and the EU are each other’s primary investment and trade partner. In 2012, 63% of US foreign direct investment went to the EU, and 44% of FDI inflows to the US originated from the EU. Bilateral investment flows between the US and EU generated a fifth of all international merger and acquisition (M&A) activity. The US accounts for 20% of EU exports and 20% of EU imports (excluding intra-EU trade), while the EU accounts for 28% of US exports and 24% of US imports.
These transatlantic trade flow numbers are even more important measured in value added terms than in gross terms (see chart). The US receives 23% of total EU exports and provides 21% of EU imports on a value added basis, while the EU accounts for 29% of US exports and 27% of US imports. In other words, the US is by far the most important destination of EU value added, and it is also by far the largest supplier of value added in EU imports.
Given that transatlantic trade barriers are already low, most of the benefits from an eventual agreement will come from easing impediments to trade and investment behind borders. For example, substantial benefits would be reaped if public procurement in both the United States and the European Union were opened, at all levels of government.
One OECD study estimates potential welfare gains to the EU and the US of as much as 3-3.5% of GDP; others range from 0.5% to 3.5% of annual GDP. One report even sees gains as high as 13% of GDP for the US and 5% for the EU. With both economies facing a long-term need for fiscal consolidation alongside persistently high unemployment, these gains are considerable, all the more so because no additional spending or borrowing will be needed to achieve them.
None of these estimates captures the potential dynamic effects of trade and investment liberalisation and resulting productivity growth. Many commentators believe that these are, in fact, the most important potential gains, but they have not been captured in any of the studies done so far.
Trade between the US and the EU is to a large extent of an intra-industry and intrafirm nature, suggesting that one effect of TTIP is more likely to be changes within existing value chains, such as where certain marketing services are carried out, rather than relocation of whole industries. This already high degree of market integration argues for an aggressive “problem solving” approach to remove all unnecessary and costly bottlenecks to trade and investment.
The resulting reductions in costs will, of course, benefit businesses and generate growth and employment in the US and the EU. And because more efficient regulatory regimes in the US and EU are, by their very nature, not discriminatory, they could benefit trading partners that are not direct parties to any eventual agreement.
That means wider overall benefits than purely what bilateral actions would suggest.
What about the multilateral trading system?
Still, TTIP is a bilateral process rather than a multilateral one, and such processes are generally thought of as “second best”. On the other hand, as the US and EU are principal export, import and investment destinations and sources for many third countries, an ambitious agreement could therefore benefit third countries as well. In fact, an agreement could conceivably become a “gold standard,” opening the way for deep and comprehensive global trade and investment integration.
By addressing a wider range of sensitive and complex issues that have so far eluded the WTO negotiations, the agreement would be a building block for future multilateral initiatives, in much the same way as today there is interest in “multilateralising” WTO-plus provisions of existing regional trade agreements. But if an agreement offers little new trade and investment liberalisation, at and behind the border, the TTIP would merely add one more deal to the hundreds of bilateral and regional arrangements that already exist.
The announcement of the TTIP negotiations by the United States and the European Union was appropriately ambitious, focusing on the remaining impediments to trade and investment both at and beyond their borders. At the same time, there was explicit recognition of sensitive and long-standing areas of difference. Mutually acceptable solutions may in some areas remain elusive in the short term, but innovative approaches to improving international regulatory collaboration, from mutual recognition agreements to joint consultative bodies, could mitigate differences over time.
Transparency will also be a key element. Given that regulatory matters are expected to be at the heart of any eventual agreement, transparency in the way regulations are made and implemented will allow other countries, not party to the agreement, to consider whether and how to “opt in”. Some regulatory measures, such as improved border procedures and more effective anti-corruption provisions, are nondiscriminatory by nature and offer benefits far beyond the borders of the EU and the US.
An eventual TTIP agreement could also be made open to other participants willing and able to agree to the provisions. In the investment field, the US and the EU are already bound by the most favoured nation (MFN) obligation under the OECD Codes of Liberalisation: any liberalisation measures which result from TTIP should be extended to other adherents to the OECD codes.
Extending mutual recognition of standards to third countries, with which either the US or the EU has already reached a comparable agreement, is another possible way forward.
The recent breakthrough at the multilateral trade talks at Bali in December is a boon for the WTO and for the multilateral trading system, and will generate large benefits, particularly for developing countries. Every effort must be made to ensure that progress continues. But governments will inevitably continue to pursue other avenues also. Fortunately, these second-best options can be supportive of an effective multilateral trading system if they are ambitious, break new ground in sensitive areas, keep participation as open as possible and are amenable to multilateralisation. With progress also being made in Geneva, it will be easier to ensure that regionalism and multilateralism are ultimately reconciled and become mutually reinforcing.
Another dimension to take on board concerns trade in value added (TiVA) and global value chains. The OECD’s work to date on these issues highlights that trade and investment openness are important components of comprehensive structural policy reforms that could contribute to strong, sustainable, balanced and inclusive growth. But much remains to be learned about the full range of policy implications for countries at different stages of development and for industries and firms of various characteristics, structures and sizes. Our goal is to integrate TiVA into the international statistical system; extend country, industry and indicator coverage; and expand our analysis across the full range of relevant policy areas. All of this work is expected to be carried out within an expanded network of partner institutions and governments.
Ken Ash is Director of the OECD Trade and Agriculture Directorate
Source: http://www.oecdobserver.org/news/fullstory.php/aid/4262/EU-US_trade_and_investment_talks:_Why_they_matter.html
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Pooling of strengths vital for integration – Hon Kandie
The Chair of the Council of Ministers, Hon Phyllis C. Kandie, has reiterated the need to collectively pool strengths together if the Community is to remain relevant in the fiercely globalized world. The Chair maintained that such a move may necessitate occasions where Partner States cede part of their sovereignty and place the same on trusted regional institutions.
In her maiden speech to the August House this afternoon, Hon Kandie, the Cabinet Secretary for East African Affairs, Commerce and Tourism in the Republic of Kenya, undertook to address as a priority, existing challenges and sensitivities involved in the implementation of the pillars of integration.
She remarked that as the region enters the Monetary Union and proceeds towards the Political Federation, moments of anxiety may occasionally be realized, leading to slower pace of implementation.
“The success or failure of EAC Integration is therefore going to be our collective responsibility”, Hon Kandie remarked.
The Cabinet Secretary hailed EALA and noted that it continued to be a unique mechanism through which the Community could maximize on the complementarities between the EAC Organs and institutions. She maintained that it was necessary for the Council and Assembly to collaborate further in order to smoothen the legislative process.
‘There is no doubt that one of the greatest challenges to implementation of the directives, decisions, Protocols and EALA Acts is the slow pace at which Partner States are moving towards the review, amendments and harmonization of national laws to conform to those of the Community”, the Cabinet Secretary stated.
“I do appreciate that for the Assembly to effectively engage in the process, we have to continuously review and strengthen the working relations between the Assembly and the Council, not just at the regional level, but also through the co-ordination of EALA activities at the country levels”, she added.
On the Single Customs Territory, the Chair urged the Assembly to support the Framework for the Operationalisation and a Roadmap on the Implementation of the Single Customs Territory whose commencement became effective on January 1st, 2014. At the last Summit of Heads of State, the EAC leaders directed that the Roadmap be fully operationalised by 30th June 2014.
On the Monetary Union, the Cabinet Secretary implored EALA to actively engage relevant national constituencies with a view to ensuring the ratification of the Protocol by 1st July 2014. This level of support Hon Kandie reiterated was vital for the strengthening of the integration process.
“I challenge you to actively engage in the implementation of these directives. In addition, I will be counting on you to support the on-going consultations on the revised model of the EAC Political Federation” the Chair of Council stated.
The Roadmap and Action Plan of the Political Federation is due for consideration when the Summit convenes in April 2014.
Hon Kandie took over as the Chair of the Council of Ministers from Hon Shem Bageine, Minister for EAC, Republic of Uganda on November, 30th, 2013.
Download: Statement by Chairperson of the EAC Council of Ministers – 4th Meeting – 2nd Session – 3rd Assembly
Source: http://www.eac.int/index.php?option=com_content&view=article&id=1464:pooling-of-strengths-vital-for-integration-hon-kandie&catid=146:press-releases&Itemid=194
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Bali Package – Trade Multilateralism in the 21st Century
In this column, Roberto Azevêdo, director-general of the World Trade Organisation (WTO), writes about the Bali Package of agreements reached in early December 2013.
At the Ninth Ministerial Conference of the World Trade Organisation (WTO), held in Bali Dec. 3-7, a series of decisions was adopted aimed at streamlining trade, allowing developing countries more options for providing food security, boosting least developed countries’ trade, and bolstering development in general.
The first pillar of the “Bali Package” is agriculture. This is the cornerstone of the Doha Development Agenda, which the WTO has been working on since 2001. Agricultural issues are very dear to developing countries, and the Bali Package delivered some important outcomes.
For example, it sets us on track for a reform of export subsidies and measures of similar effect, and it makes practical progress towards better implementation of the tariff quota commitments assumed in the Uruguay Round (1986-1994).
There is also a reaffirmation and a deepening of the political commitments assumed in Hong Kong in 2005 on trade liberalisation and the reduction of distorting support to cotton – a very important issue for the African countries that grow that crop.
The Package also provides temporary protection for food security programmes in developing countries, which allow for the stockpiling of grain for subsequent distribution to the poor. As we know, some of those countries could be exposed to legal challenges in the WTO for exceeding the limits stipulated in the Agriculture Agreement for certain types of domestic support.
So, in addition to the temporary protection against legal challenges, the Bali Agreement states that a permanent solution will be negotiated and concluded before the 11th Ministerial Conference in four years’ time.
The second pillar of the package is development. Here, a monitoring mechanism will provide for the review and strengthening of special and differential treatment provisions for developing countries, which are contained in all WTO multilateral texts. This achievement is vital for the equilibrium and efficacy of the multilateral system.
There are also a number of specific measures to support the least developed countries (LDCs). They include reforms that would enable services providers in LDCs to enjoy new export opportunities in developed country markets.
They also include steps to simplify rules of origin, which again will open up new export opportunities for those countries specifically.
Under this pillar we will also see improvements in trade preference arrangements which extend exemption from tariffs and quotas to LDC exports.
The third and final pillar is trade facilitation, which sets out to simplify and modernise customs procedures, and make them more transparent, thereby reducing transaction costs.
The Agreement on Trade Facilitation will be able to provide a significant – and today much needed – boost to the global economy, delivering growth and jobs. This could be worth as much as one trillion dollars per year to the global economy, generating up to 21 million jobs.
Significantly the Agreement also ensures the provision of technical assistance to support developing and least developed economies to implement these modernising reforms, and therefore help them integrate better into global trade flows.
Clearly estimates can vary, but once the Agreement is implemented, there could be an expansion in developing country exports of up to 10 percent – compared to a 4.5 percent expansion in developed countries.
It is true that the deal represents only part of the Doha Development Agenda. But there can be no doubt that this is a significant package that will provide a considerable economic boost and improve the lives of millions of people around the world – particularly among the poorest and in countries whose economies have stalled and are suffering high levels of unemployment.
In the specific case of the European Union and its member States, the conclusion of the Bali Package reflects that grouping’s chief negotiating objectives. With the Agreement on Trade Facilitation, opportunities for expanding trade will clearly increase.
The Agreement also offers potential to facilitate the internationalisation of small and medium sized enterprises, which are important drivers of job creation and income distribution in many European countries.
But of course these outcomes do not fully reflect achievement in Bali. There was a great deal more at stake. I said at the start of the Bali Conference that the very future of multilateral trading system hung in the balance.
In recent months there has been a lot of talk about regional and bilateral agreements. The Transatlantic Trade and Investment Partnership between the United States and the European Union is one such potential agreement. My view of this is the same as of other potential agreements of this kind: it is a positive initiative to be welcomed – but it can only ever be one part of the wider picture.
Agreements such as this cannot be sufficient on their own to ensure globalisable gains. The proliferation of regulations and standards tends to multiply rather than reduce costs.
The multilateral trading system was never the only option for international trade negotiations. It has always coexisted with, and benefited from, other initiatives, whether regional or bilateral. They are therefore not mutually exclusive alternatives.
The WTO disciplines also need to evolve to reduce the gap that will exist between multilateral regulations and the new generation regulations negotiated outside Geneva.
The two processes, multilateral and bilateral, must move forward together to reduce costs effectively and to curb protectionism. Otherwise, we could see results that are exactly the opposite of what we are seeking.
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Africa’s billions that the poor won’t touch
With its two-trillion-dollar economy, recent discoveries of billions of dollars worth of minerals and oil, and the number of investment opportunities it has to offer global players, Africa is slowly shedding its image as a development burden.
“While global direct investment has shown some decline, dropping by 18 percent in 2012, in Africa foreign direct investment rose by five percent,” Ken Ogwang, an economic expert affiliated with the Kenya Private Sector Alliance (KEPSA), which has a membership of over 60 businesses, told IPS.
Since 2012, Kenya has made a series of mineral discoveries, including unearthing 62.4 billion dollars worth of Niobium – a rare earth deposit. The discovery in Kenya’s Kwale County has made the area among the world’s top five rare earth deposits sites, and allows Kenya to enter a market that has long been dominated by China.
In 2012, Kenya discovered 600 million barrels of oil reserves in Turkana county, one of the country’s poorest regions. It was announced on Jan. 15 that two more wells struck oil, increasing estimate reserves to one billion barrels of oil.
But Kenya, East Africa’s economic powerhouse, is not the only African nation that has made fresh mineral discoveries.
“The recent boom in new mining discoveries in countries such as Niger, Sierra Leone and Zambia will attract billions in foreign direct investments. Other countries like Mozambique, Tanzania and Uganda will similarly attract billions due to petroleum discoveries there,” Antony Mokaya of the Kenya Land Alliance, a local umbrella network of NGOs and individuals working on land reforms, told IPS.
Last year, both Uganda and Mozambique discovered oil. In 2006, an estimated two billion barrels of oil reserves were discovered in western Uganda, but last year’s discovery brings Uganda’s total oil deposits to 3.5 billion barrels. Mozambique’s first oil discovery last year is estimated to be 200 million barrels.
Ogwang predicts that these discoveries will soon see African countries dominating the list of the 15 fastest-growing economies in the world.
“More African countries, Kenya being a model example in East Africa, now favour a market-based economy, which is highly competitive and the most liberal economic system.
“In this system, market trends are driven by supply and demand with very few restrictions on who the actors are. [It is] a favourable environment for foreign investors,” he said, referring to the local mobile phone industry, which has been dominated by foreign investors because of its favourable regulatory policies.
“As a result, growth in this sector is phenomenal. In the first 11 months of 2013, Kenya’s mobile phone money transactions were 19.5 billion dollars, which is more than the country’s current 18.4-billion-dollar national budget.”
Ogwang says that even more importantly, African countries are increasingly strengthening their partnerships with the East.
Statistics by the Africa Economic Outlook, which provides comprehensive data on Africa economies, show that China is the largest destination for African exports, accounting for a quarter of all exports.
Trade with Brazil, Russia, India and China – the economic bloc referred to as BRICs – now accounts for 36 percent or 144 billion dollars of Africa’s exports, up from only nine percent in 2002.
In comparison, Africa’s trade with the European Union and the United States combined totals 148 billion dollars.
But Terry Mutsvanga, director of the Coalition Against Corruption, an anti-corruption lobby group in Zimbabwe, cautioned that Africa will first have to rein in its corrupt politicians before its resources can enrich its own people.
According to the World Bank, some of the world’s poorest people live in Africa, with one out of two Africans living in extreme poverty.
“Without Africa dealing with the cancer of political corruption blighting the continent and robbing it of revenue from mineral resources through corrupt politicians receiving bribes from investors … the continent shall [continue to have] the worst poverty levels globally,” Mutsvanga told IPS.
Independent economic analyst Jameson Gatawa from Zimbabwe agreed.
“Underhanded dealings in the mining of diamonds and other rich minerals here have fuelled poverty. The rich are getting richer with the poor becoming poorer,” Gatawa told IPS.
For 54-year-old Sarudzai Mutavara, a widow who lives in the midst of Zimbabwe’s Marange diamond fields, poverty remains a daily reality.
Zimbabwe is one of the world’s top 10 diamond producers. But six out of every 10 households in Zimbabwe, a country of about 13 million people, are living in dire poverty. This is according to a 2013 poverty assessment report by the Zimbabwe National Statistics Agency.
“Here in Marange, the diamond wealth has not [helped] in any way to change our lives for the better, but rather for the worse as we have strayed further into poverty,” Mutavara told IPS.
The Democratic Republic of Congo (DRC) is another African country rich in diamonds, with its mineral wealth estimated in the trillions of dollars. But according to the United Nations, about 75 percent of its people live below the poverty line.
More than half of these have no access to drinking water or to basic healthcare. Three out of every 10 children are poorly nourished, with up to 20 percent of them predicted to die by the age of five.
While Ogwang says Africa’s best economic years are yet to come, it remains to be seen if the billions of dollars Africa has in natural resources will trickle down to people like Mutavara.
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Brics economies not crashing: Economist
The Brics economies are not going to crash but are facing another difficult year, Standard Bank economist Jeremy Stevens said on Wednesday.
“The Brics had a challenging 2013 and will have a challenging 2014,” he said speaking via video link from Beijing, China. “The situation is not dire… (but) there is a lot of work on the table for the leadership.”
Brics is an association of five major emerging economies: Brazil, Russia, India, China and South Africa. The biggest threat for Brics was coming from within because of China’s slow down.
Since 2008 gross domestic product growth had been the key focus for Chinese policy makers. However balance sheet scrutiny had not been done carefully, said Stevens.
Last year there was surging corporate debt in China. “As long as they (companies) are running and operating, they can continue to borrow.”
Cash flow was diminishing and it was unlikely that the debt was still serviceable, he said. “We are looking at a new China.” Growth in China was expected to slip from 7.6% last year to 7.1% this year.
Last year we estimated that Brics-Africa trade amounted to just less than US 350 billion.
Stevens said despite this it would be crazy for anyone to write off Brics, especially China and Brazil. The Brics contribution to global output had increased from 15 percent in 2009 to 20% last year and was well on track to account for 25% by 2019.
“All the changes that we expect in the pipeline over the next three to five years put the Brics on a much firmer footing,” he said.
Political economist Simon Freemantle said that despite this, trade between Brics and Africa continued to grow though at a softer rate than before.
“Last year we estimated that Brics-Africa trade amounted to just less than US 350 billion. This is a significant amount for Africa in relation to its other trading blocs,” he said.
This was up five percent from 2012. The growth was far slower but it was still growing, said Freemantle. Since the 2008 financial crisis the Brics output increased dramatically and now accounted for 20% of global output.
At the same time the Brics-Africa trade had lifted 70 percent in the last five years, which amounted to US140bn dollars. “So there has been US140bn dollars of new trade between Africa and Brics since 2008,” he said.
“China still accounts for the bulk of Brics-Africa trade.”
China’s share of the Brics-Africa trade last year was 61%, India 21%, Brazil eight percent, South Africa seven percent and Russia three percent.
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Private sector too slow at exploiting regional opportunities
The private sector are shying away from the business opportunities in the East African Community (EAC).
The commissioner for economic affairs in the Ministry for East African Community, Rashid Kibowa, said: “There is lack of enthusiasm by the private sector on EAC opportunities. There are trade negotiations that the private sector should get involved in.”
Kibowa was speaking at a consultative meeting on the Common Market for East and Southern Africa (COMESA)-Southern African Development Community (SADC)-EAC tripartite cooperation at Hotel Africana in Kampala recently. The meeting was organised by the Ministry of East African Community Affairs and attended by the private sector and civil society leaders.
The private sector, however, said they lack resources and capacity to take advantage of the emerging opportunities in the region.
They said the opportunities are being snapped up by better resourced Kenyans and Indian entrepreneurs in places such as South Sudan and Somalia where Ugandan soldiers are fighting for peace and stability.
Walusimbi Mpanga, the chairman of the Uganda Services Exporters Association, said Ugandans are contributing to regional peace, but are not gaining economically.
“The few Ugandans in these places are only doing petty business,” he said.
Shem Bageine, the minister for East African Community Affairs, said the political leadership of EAC, COMESA and SADC agreed to establish a Tripartite Free Trade Area in October 2008.
“The purpose of their effort was to support trade, alleviate poverty and improve the quality of life of the African people in line with the African Union goals.”
Bageine said the heads of states agreed during the second tripartite COMESA–EAC-SADC summit in Johannesburg in June 2012, on various key points to underpin the tripartite co-operation framework.
They include enhancing market integration (Free Trade Area), enhancing industrial development, promoting infrastructure development and promoting the movement of business persons.
A free trade area is a trade bloc whose member countries have signed a free-trade agreement to eliminate or reduce tariffs, import quotas and preferences on most goods and services traded between them.
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Enabling business environment key to sustainable and inclusive growth
Africa needs to create an enabling environment for domestic and foreign investment to realize its potential and ensure sustainable and inclusive growth for its population, panellists agreed at a session on Africa’s Next Billion, held on the opening day of the 44th World Economic Forum Annual Meeting. However, there are many challenges to overcome, including addressing the pervasive and growing inequality that is fuelling instability.
With the continent’s population expected to rise to 2 billion by 2050, the foundation for sustainable and inclusive growth must be laid now. “We need jobs, jobs, jobs,” said John Dramani Mahama, President of Ghana. “Economic and social inclusion is a top priority. We create space for the private sector and it’s one of government’s responsibilities to distribute the fruits of growth.” To build on the progress Africa has made so far, governments must continue to realize the democratic dividend of good governance, respect for human rights and rule of law, he added.
Goodluck Ebele Jonathan, President of Nigeria, pointed out that there is stability in most African countries today. “But before we could talk about economic growth, we needed political stability,” he said. Another key to unlocking Africa’s huge potential is security, Jonathan added. When addressing the issue of corruption in the extractive industries, in particular oil in Nigeria, the president told participants, “The simple answer to everything is corruption. Not everything is about corruption.”
Aliko Dangote, President and Chief Executive Officer, Dangote Group, Nigeria, and a Co-Chair of the Annual Meeting 2104, pointed out that the majority of foreign investors are too cautious in the lead-up to elections and during what could be the short-lived reign of political parties. “Today there is no government that will be against business, so go ahead and invest,” he urged.
Dangote added: “People always underestimate what Africa can be. By 2050 will have a united Africa with one common market… Can you imagine if we had sufficient power? Our GDP would be US$ 9 trillion by 2050. It can happen.”
Julian Roberts, Group Chief Executive, Old Mutual, United Kingdom, told participants: “Africa is on the move and it is moving forward. But we need to ensure we have an enabling platform for business.” Roberts said the continent will not succeed unless there is a “handshake between government and the private sector”.
Africa’s economic growth may be accelerating, but according to Winnie Byanyima, Executive Director, Oxfam International, United Kingdom: “The concentration of wealth and power is excluding and locking out millions of people, which is driving insecurity and instability.” So far, economic growth has been a race to the bottom, she said. “We need a race to the top so we have policies and regulation to protect human rights, the environment and reduce poverty.”
Doreen E. Noni, Creative Director, Eskado Bird, Tanzania, noted that young people in Africa are not trained from a young age to have entrepreneurial skills. Because of its huge young population, Africa’s workforce is set to burgeon by 2050. “We need to awaken our youth… and direct them to be entrepreneurial. We can only get our continent to have inclusive growth if we are educated and change our mindsets.”
More intra-Africa trade could boost economic growth, but today, it is negligible. “I feel ashamed that trade between our countries is only 11%. That is unacceptable,” said President Mahama. If the continent’s infrastructure bottlenecks can be overcome, particularly intra-African transportation routes, intra-Africa trade could flourish and create prosperity. “Our target should be 80% intra-Africa trade by 2050,” Roberts added.
The Annual Meeting 2014 is taking place from 22 to 25 January under the theme, The Reshaping of the World: Consequences for Society, Politics and Business. Participating this year are over 2,500 leaders from nearly 100 countries, including 300 public figures, 1,500 business leaders and representatives from civil society, academia, the media and arts.
The Co-Chairs of the Annual Meeting 2014 are: Aliko Dangote, President and Chief Executive Officer, Dangote Group, Nigeria; Kris Gopalakrishnan, President, Confederation of Indian Industry (CII); Vice-Chairman, Infosys, India; Jiang Jianqing, Chairman of the Board, Industrial and Commercial Bank of China, People’s Republic of China; Joseph Jimenez, Chief Executive Officer, Novartis, Switzerland; Christophe de Margerie, Chairman and Chief Executive Officer, Total, France; Marissa Mayer, Chief Executive Officer, Yahoo, USA and Judith Rodin, President, Rockefeller Foundation, USA.
For more information about the WEF Annual Meeting 2014, click here.
Related: “WEF: Davos investors are gazing south – Davies” (Sapa, 22 January 2014)
Source: http://www.weforum.org/news/enabling-business-environment-key-sustainable-and-inclusive-growth?news=page
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Supply chain reforms: the right path to increased global trade
Urgent implementation of the Bali trade accords and deeper behind-the-border reform is needed to sustainably meet world food demand, and foster industrial development, according to Enabling Trade: From Valuation to Action, a new report released today [21 January 2014] by the World Economic Forum, in collaboration with Bain & Company.
Government leaders need to step out of traditional ministerial silos to lead value-chain reforms and reap the benefits in domestic investment and global trade.
The report finds that supply chain inefficiency contributes significantly to the 1.3 billion tons of food lost each year. Attacking these barriers would help improve the livelihoods of billions of the world’s poorest people, and cut emissions, energy and water use. Lost or wasted food costs over $750 billion per year. Yet, agriculture and consumer policy remains focused on production and retail improvements, with insufficient action on supply chain and trade connections.
Major manufacturing investments could be unlocked by accelerating cross-border connectivity. Overcoming deep competitive differences, automotive executives align around the trade priority of faster and simpler border crossing. According to the report, roughly US$ 6 billion is spent each year by the automotive industry on inventory-carrying costs at borders. If redirected into product development, this could pay for up to 6 new car launches every year.
“The report highlights an important new opportunity for trade liberalization and economic growth, combining border and behind-the-border reforms to strengthen the competitiveness and job-creating potential of key economic sectors,” said Richard Samans, a Managing Director of the World Economic Forum. “Such a strategy has the potential to help countries and regions translate the recent WTO agreement on trade facilitation into tangible economic gains.”
The report’s call for implementing supply chain reform builds upon earlier Enabling Trade findings, that reducing supply chain barriers could increase global GDP six times more than eliminating all tariffs.
The report highlights bright spots of political will, including the Pacific Alliance in Latin America, where deeper economic integration and supply chain facilitation are being prioritized at the presidential level. Improved border management, a primary focus of recent negotiations at the World Trade Organization’s Ministerial Conference in Bali, is emphasized in the report’s call for accelerated co-development of e-logistics and smart customs systems.
“The WTO agreement announced in December in Bali was a tremendous step toward trade liberalization and efficiency,” said Mark Gottfredson, a Partner at Bain & Company and co-author of the report. “Now is the time for governments and businesses to take action on the detailed and difficult work ahead.”
The Enabling Trade: From Valuation to Action report is based on pilot agricultural programmes in India, Kenya and Nigeria, an automotive CEO dialogue requested by the WTO, and supply chain surveys and case studies conducted with business and customs administrations. It illustrates:
In poorer regions, 94 percent of food loss and waste stems from supply chain inefficiencies. Yet only 5% of agricultural funding goes to postharvest improvements.
Supply chain improvements increase flexibility and early-stage value for food – and cut loss.
Overly strict product standards, poor transportation infrastructure, border delays, and poor business climates are the main supply chain barriers for agriculture.
Border crossing processes are priorities for automotive trade reform. For example, pallets shipped wet from Western Europe need reweighing when dry at the Russian border.
Simplifying parts re-export is another automotive trade priority, notably for pooled equipment.
Consistent safety and environmental standards in the EU/US would save billions – an important goal for the TTIP negotiations.
The Pacific Alliance, representing Chile, Mexico, Colombia and Peru, promises to create a 200 million people, $2 trillion market, if supply chain reforms continue.
Better border management – “smart borders” – can dramatically improve supply chain efficiency. In Thailand and Kenya, process improvements have more than halved export times.
Each year, the World Economic Forum’s Global Enabling Trade Report series focuses on measuring whether economies have in place the necessary attributes for enabling trade and where improvements are most needed.
For more information about the WEF Annual Meeting 2014, click here.
Source: http://www.weforum.org/news/supply-chain-reforms-right-path-increased-global-trade
Download: “Enabling Trade: From Valuation to Action” (88 pages, 4.15 MB)
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SEC must stay with its mission – Protecting US investors
Swimming against the tide of expert and public opinion, the American Petroleum Institute (API) certainly has clever lawyers.
Somehow this lobby group, which represents the US oil and gas industry, managed to persuade a US District Court earlier this year that the public disclosure of payments by extractive companies to governments would put it at a commercial disadvantage.
It’s a slap in the face for millions in resource-rich countries who may miss an excellent opportunity to hold their governments more accountable.
The combined population of sub-Saharan Africa’s top three oil producers – Nigeria, Angola, and Equatorial Guinea – is about 230 million. And as this year’s Africa Progress Report reports – their respective state-owned oil companies all scored a zero on the reporting of anti-corruption measures in a 2011 survey.
The API arguments also contradict such widely-respected players as Statoil, investors representing more than US$ 5.6 trillion, and the impressive, former leader of BP, John Browne who say detailed public disclosure of payments by multinationals is good for citizens and investors too.
“In my experience, it is rare for a company to lose business by being too transparent,” wrote Lord Browne in an April 2012 opinion piece for the Financial Times.
“Payment disclosure regulations, such as Section 1504… play a critical role in encouraging greater stability in resource-rich countries, which benefits both the citizens of those countries and investors,” a group of investors wrote in a public letter to the SEC.
As if to prove the importance of transparency for investors, the share value of Cobalt International Energy lost US$900 million in April 2012, when it emerged that three of the most powerful officials in Angola had held concealed interests in the company.
The US had become a world leader on transparency issues in July 2010 when Congress passed Section 1504 of the Dodd-Frank Act, requiring companies to disclose publicly their payments to governments for access to natural resources.
But even as the US was receiving plaudits from around the world and prompting similar ground-breaking legislation in Europe, the API was doing its best to block the legislation.
In July this year, the API, whose members include Chevron and ExxonMobil, somehow persuaded a US District Court to block implementation of Section 1504, requiring the US Securities and Exchange Commission to review its implementation.
SEC workplans show no signs of urgency to fix this issue (here), but the SEC’s stated mission is to protect investors.
And until the SEC implements Section 1504, US investors face uncertainty, risk, and the possibility of nasty surprises – political risk or even the sudden and unexpected loss of share value.
So the SEC must finish the job to protect US investors and resource-rich communities alike, because justice requires transparency not clever lawyers.