News Archive June 2014

AU proposes $522.12 million budget for 2015

The African Union (AU) has proposed 522.12-million-dollar budget for 2015, the News Agency of Nigeria (NAN) reports.

According to documents made available to NAN in Malabo on Friday, the draft budget is expected to be adopted at the 23rd Ordinary session of the Assembly of Heads of States and Governments of the AU.

The 2015 budget proposal, which is 32 per cent higher than that of 2014, had already been discussed and debated at the Executive Council meeting of the AU earlier this week in Malabo.

Nigeria is responsible for about 17 per cent of the operational budget of the AU.

An overview of the proposed budget indicates that 142.6 million dollars was budgeted for operational cost and 379.4 million dollars for programmes.

It is proposed that the 54-member states of the AU would finance 28 per cent while their partners would be responsible for 72 per cent of the budget.

Some observers decried the AU’s over-dependence on partners to fund its budget, saying that it would expose the continental body to unnecessary control from external bodies.

The AU had constituted a Panel on Alternative sources of Funding presided over by former President Olusgeun Obasanjo.

The report of the panel was adopted since May 2013, and some of their recommendations to raise additional funds for the AU included hospitality tax on hotel bookings and tax on airline tickets.

However, the AU Ministers of Finance, who met in Abuja in March 2014, were not able to reach a consensus on the operationalisation of the recommendations of the Obasanjo panel.

A Nigerian diplomat, who is familiar with the recommendations of the panel, said many countries, especially those who are dependent on tourism, were working to derail a speedy conclusion of the consideration of the panel’s recommendations.

“Nigeria is demanding that the summit take a definitive stance on the report of the Obasanjo Panel. This is to enable it to give AU the independence, flexibility and ownership of its projects and programmes, devoid of unnecessary outside interference,” the diplomat said.

Status of Integration in Africa (SIA V)

The fifth edition of the Status of Integration in Africa report (SIA V) contains information on the implementation process of the integration agenda by the Regional Economic Communities (RECs) and the African Union Commission.

The overall objective of this report is to inform the political decision makers of the Continent on the status of integration in Africa and provide some recommendations on how to speed up the economic and political integration of the continent.

The RECs are undertaking various activities and programmes in many areas of integration. The report is intending to capture the progress made in key integration areas, such as, Trade, investment promotion, infrastructure, free movement of persons, macroeconomic convergence, agriculture and food security, peace and security, social affairs, tourism, industry and planning, monitoring and evaluation.

In this regard, analysis of the progress, the challenges and the future outlook of each of the abovementioned sectors are presented. The Report is also assessing the status of integration at Continental level, especially at the AUC level by capturing the progress made regarding the implementation of the key African Union Integration programmes and initiatives. 

Finally, some best practices and experiences in Africa need to be highlighted and major one is the EAC-SADC-COMESA Tripartite Arrangement. In this regard, the report looks at progress made in the tripartite negotiation process as well as implementation of various agreed programmes.

What is the status of integration in the Regional Economic Communities?

Trade

The African countries, as an economic bloc, occupy a very low position in the global economic classification. The African continent is home to 14% of the global population; it accounts for less than 3% of the global GDP and receives only 3% of foreign direct investment. As regards to global goods trade, the continent accounts for only 1.8 % of imports and 3.6 % of exports. These rates are even lower in the services sector: 1.7% and 1.8% of imports and exports, respectively.

Beyond the relatively unfavourable general positioning, the situation is quite mixed if the countries are considered on individual basis. Intra-African trade stands at around 12 per cent compared to 60 per cent, 40 per cent, 30 per cent intra-regional trade that has been achieved by Europe, North America and ASEAN respectively. Even if allowance is made for Africa’s unrecorded informal cross-border trade, the total level of intra-African trade is not likely to be more than 20 per cent, which is still lower than that of other major regions of the world.

The African Union recognises eight RECs, which consist primarily of trade blocs and, in some cases, involve some political cooperation. All these Communities form the 'pillars' of the African Economic Community (AEC). The RECs are moving towards implementing the Abuja Treaty with different rhythms. EAC is the most advanced Community which have launched its Common Market in 2010. COMESA has launched its Customs Union on June 2009. ECOWAS and SADC have made progress in building their FTAs. ECCAS have launched its FTA in 2004 but is facing enormous challenges in implementing it. UMA, CEN-SAD and IGAD are moving slowly and still in the stage of cooperation amongst their Member States.

Non-Tariff Barriers (NTBs)

Apart from the problems in implementing the agreed FTAs, RECs are also facing Non-tariff barriers to trade. In this regard, RECs have different approaches in dealing with NTBs. The three RECs composing the tripartite arrangement have adopted one programme on elimination of NTBs which is an internet based system for use by stakeholders in the Member States to report NTBs as well as monitor the processes of their elimination.

For example, the online system has been in place since 2009 and between that time and 2013, a total of 338 NTBs had been reported in SADC region, out of which 300 have since been addressed. ECOWAS has put in place National Committees to deal with problems of NTBs and complaint desks in the borders, whereas, the rest of the RECs are yet to establish such a system to eliminate NTBs.

One-Stop Border Posts (OSBPs)

Few RECs have elaborated competition policies and generally these are the Communities either moving towards the Customs Union and Common Market or have reached these stages. One of the main tools for trade facilitation is the initiative of One Stop Border Posts (OSBPs). The concept is used to minimize delays at cross border points on major transport corridors in the region, often as a result of poor facilities, manual processes, lengthy and non-integrated procedures and poor traffic flow.

Under the OSBP concept, all traffic would stop once in each direction of travel, facilitating faster movement of persons and goods, and allowing border control officers from the two Partner States to conduct joint inspection. The concept was first used at the Chirundu OSBP between Zimbabwe and Zambia which was judged successful. The establishment of the OSBPs is now widely adopted in various RECs such as, COMESA, EAC, ECOWAS, SADC and ECCAS.

Competition policies and investment promotion

Few RECs have elaborated competition policies and generally these are the Communities either moving towards the Customs Union and Common Market or have reached these stages. The COMESA competition Commission commenced its activity and aim to facilitating notification and acquisitions in the region. A COMESA Regional investment Agency has been created and is located in Cairo, Egypt. It has a role to coordinate and strengthen the activities of the COMESA national investment promotion agencies.

In addition, several COMESA investment fora were held, aiming at promoting COMESA as an investment destination and creating business linkages between COMESA and non COMESA business actors. The positive impact of the COMESA Micro Small and Medium Enterprises (MSMEs) Cluster Programme has contributed towards national and regional value chains and business partnerships among MSMEs. The COMESA had recently adopted the COMESA Micro, Small and Medium Enterprises (MSME) Strategy.

EAC has a model Investment Code in place and plans underway to upgrade it into an EAC Legislation/Protocol promoting EAC as an investment destination. The East African Business Council (EABC) is the apex body of business associations of the Private Sector and Corporates from the five East African Countries. The East African Business Directory is the first and the most comprehensive business directory in East Africa. SADC has finalized a Protocol on Finance and Investment in 2006 and entered into force in April 2010.

ECOWAS is working in three areas, namely: creation of the ECOWAS Common Investment Market (ECIM), investment climate promotion and financial market integration. ECCAS is working on putting in place a Regional Strategy on investment promotion and establishing a Small and Medium Enterprises (SMEs) Guarantee Fund.

Cotton development meeting focuses on regional efforts to make aid more effective

Regional African organizations are increasing their involvement in developing the continent’s cotton sector to ensure aid reaches farmers who really need it, and strengthen production from the field to the clothing market, WTO members heard in a meeting on the development aspects of cotton on 20 June 2014.

Presentations by several of these organizations were made as the WTO Secretariat reported a slight decline in assistance for cotton – current and future – as a number of projects have been completed.

And members were urged to be more active in consultations on reviving the stalled negotiations on reforming trade in agriculture and cotton. In his latest report, the negotiations’ chairperson, Ambassador John Adank of New Zealand, said “the level of engagement among members is still clearly not as advanced as it needs to be.”

Members have discussed the pros and cons of sticking to the current draft text (the draft “modalities”), which has been on the table since 2008, but no specific proposals have been made, he said. A meeting on the cotton in the agriculture negotiations was held that same afternoon.

Consultative framework. This meeting on development was the 21st in a series of consultations held regularly since 2004, formally called the WTO “Director General’s Consultative Framework Mechanism on Cotton”. The current chairperson is Deputy Director-General David Shark, on behalf of Director-General Roberto Azevêdo.

Although the official focus is primarily on development assistance, the meeting also receives regular updates on the separate negotiations on cotton, and the agriculture negotiations as a whole, and on world market trends.

South-South cooperation. “South-South cooperation continues to emerge as an important aspect of the implementation of the mandate on the development assistance aspects of cotton and our work in this forum,” chairperson David Shark said.

“There is wide recognition of this important dimension of our work. The significant contributions of Brazil, China and India as well as Pakistan, are acknowledged with appreciation. This is an area of the work which Members and participants are encouraged to continue to deepen and extend.”

He concluded: “Director-General Roberto Azevêdo will continue to place a full spotlight on the cotton issue, building on the momentum of this collaborative process, where all parties are engaging in partnership, enhancing the dialogue and improving the exchange of information. All this makes this process a positive example of constructive engagement in the development dimension of the work in the WTO.”

Regional efforts: presentations

The regional organizations presenting their work in cotton development were:

  • The Economic Community of Central African States (Communauté Économique des États de l’Afrique Centrale, CEEAC-ECCAS) (presentation in French)
  • The West African Economic and Monetary Union (Union économique et monétaire ouest-africaine, WAEMU or UEMOA) (presentation in French)

They presented in some detail the conditions in their regions and their approach to developing the cotton sector. These included policies to deal with the problem of poorer farmers not receiving aid, increasing productivity, boosting production further along the value chain so that countries no longer rely on exporting raw materials, and involving the private sector.

Development assistance

he value of completed development assistance projects benefiting cotton – directly or through broader agricultural or infrastructure assistance – has increased since the last meeting in October 2013 by about $369m, which partly explains the slight decline in actual and intended spending on current projects (see table below) – a fall that disappointed some African delegations.

Members heard that $489 million in development assistance has been disbursed specifically for cotton – $397m in completed projects and $92m in on-going activities. This is a slight increase over the $459 million total disbursement reported at the last meeting.

However, the amount spent so far on current projects that are specific to cotton is 28% of the $336m committed. Donors have in the past explained that the apparently low proportion is partly because of timing: when the commitments were made, how long the projects last, what stage they are in, and when payments are made.

A further $4.4bn – a $700m increase since October – has been spent on completed or continuing projects for agriculture and infrastructure, which also benefits cotton, in these cotton producing countries.

“The reason behind these figures is that new projects have been initiated and many others have been completed,” the WTO Secretariat observed. Improved reporting and the how the compiled data evolves “have resulted in an increase in the gap between commitments and disbursements” in programmes that are specific to cotton, it said.

“It is useful to note that the widening gap is a consequence, not only of new projects having been initiated, but also because we have not received any updates on long-standing projects from certain donors,” the Secretariat said, reminding the donors that the information is crucial to make the compilation as meaningful as possible.

Amounts committed and spent

Development assistance for cotton and agriculture, US$m

 

Active And Ongoing

Completed
  Committed Spent Committed Spent
Cotton specific development assistance US$335.6 US$92.5 US$420.1 US$397.4
Agriculture and infrastructure-related development assistance US$4,784.0 US$2,624.3 US$1,854,1 US$1,822.2
Total US$5,119.6 US$2,716.8 US$2,274.2 US$2,219.6

The information is compiled in a document that is regularly updated, an “evolving table” now in its 17th version (26 May 2014).

Market situation

In its latest assessment of the cotton market, the International Cotton Advisory Committee (ICAC) included an analysis of technological development and technology transfer, cotton logistics in Africa and world cotton production and stocks.

ICAC said the increase in yields in cotton has been slower than in other crops, and technology transfer has lagged behind developments in research. Despite that, farmers are receptive to learning new methods. Therefore a number of issues need to be tackled, ranging from training trainers and better communications to improved collaboration between the private and public sectors and a new focus on the interaction of inputs, it said.

On logistics, ICAC said inland transport and transit costs tend to be higher in Africa than in competing areas. The costs and transit time are the two key issues hindering the efficient movement of cotton and cotton products, and therefore further research is needed on these costs from farm to gin, ICAC said.

Meanwhile, in world markets, cotton prices have stabilized compared to the peak of 2010/2011. The high level of world cotton stocks, particularly in China are having an impact on global price, and world production continues to exceed mill use, ICAC said. The presentation is here.

Trade negotiations

Meanwhile, Ambassador John Adank of New Zealand, the chairperson of the negotiations on agriculture and cotton reported on consultations he has been holding on a number of issues in the agriculture negotiations before specifically addressing cotton. These are his speaking notes:

“As is customary, I will start with a brief state of play in agriculture in general.

As you are all aware, in Bali Ministers issued one declaration and four decisions on agriculture, dealing with: Export Competition, General Services, Public Stockholding for Food Security Purposes, Tariff Rate Quota Administration Provisions, and Cotton.”

At its January and June 2014 meetings, the regular Committee on Agriculture started discussing the implementation of the decisions on TRQ administration and on public stockholding. In the case of export competition, the first dedicated discussion foreseen in the Bali Ministerial declaration took place during the 5 June 2014 meeting of the Committee on Agriculture.

The Bali Ministerial Declaration also instructed the Trade Negotiations Committee to prepare within this year a clearly defined work programme on the remaining DDA issues. It is in that context that I have undertaken consultations in various configurations, including an open ended informal meeting of the Special Session on Friday, 28 March 2014. I circulated a report on 14 March that provides a summary of the feedback I received up to that date in my consultations along with my observations.

More recently, the Chair of the Trade Negotiation Committee summarized the state of play of the negotiations during the General Council of 12 May. Discussions have taken place in various formats since then, and the Trade Negotiation Committee scheduled on 25 June will be the next occasion to have an overall debate on the state of play of the post Bali negotiations.

Overall, my consultations have shown a general willingness to work constructively. However, there is still not yet sufficient engagement on concrete issues. The level of engagement among Members, or at least those whose interests are most directly involved, is still clearly not as advanced as it needs to be to have a clear understanding of both the issue and what members are seeking in regard to it.

As I already indicated several times, that will only come with further direct engagement between Members. And whether any agreed pathway forward emerges will again be dependent on the willingness of Members to consider options for dealing with these issues.

Let me comment briefly on the three pillars of the agriculture negotiations. Export Competition remains an area where I think the range of questions or concerns appears to be somewhat less than in other areas. This does not mean it is easy. However we do have agreed direction for ongoing work from Ministers at Bali, and my consultations have not shown any questioning whatsoever of the political commitment that Ministers have repeatedly reiterated to the “parallel elimination of all forms of export subsidies and disciplines on all export measures with equivalent effect”.

On Domestic Support, points that have come up in the consultations include: (i) the relationship of an overall agreement on domestic support to the work for a permanent solution to the public stockholding for food security issue which was mandated at Bali for decision by 2017; (ii) the changing patterns of domestic support and subsidisation in the years since the negotiations were last active, and particularly the increased role that domestic support now plays in some emerging economies. 

Concerning Market Access, some Members have indicated that they do not see the framework discussed in the past – in terms of the results arising from the formula and flexibilities provided under it – as delivering an acceptable landing zone in terms of improved market access.

More generally, some Members have indicated that a less complex approach, which accommodates appropriate ambition and flexibilities, would be desirable. Some other members insisted on the fact that, no matter the approach, it had to deliver real and significant improvement in market access. At this stage, no one has in fact come forward with a specific alternative here.

As against all of this, some other Members have indicated a concern to keep any focus on market access issues on the resolution of the “outstanding issues” identified in this area back in the Chair’s 2011 Easter report, including the unresolved issues around sensitive/special products and the SSM. There is now an urgent need to be moving into the less comfortable, but hopefully more productive, zone of testing each other’s – and our own – capacity to contribute to putting forward more concrete suggestions and proposals, with a view to agreeing on a clearly defined work programme by the end of the year.

I will continue to work in full respect of transparency and inclusiveness. I will schedule a further informal meeting of the Special Session at an appropriate time to report, and I remain available to any delegation that wishes to contact me in the meantime.

State of Play in the Cotton Negotiations

Let me now turn specifically to cotton. As you are all aware, thanks to substantive preparatory work with the participation of several key players, and based on a proposal tabled by the Cotton‑4, cotton was the subject of a specific decision by Ministers in Bali.

The Bali Ministerial Decision on Cotton addresses both the trade and development aspects of the WTO mandate on cotton, and constitutes a step in the right direction in our ongoing efforts to meaningfully reform cotton trade in the context of the DDA agriculture negotiations.

Indeed, Ministers reaffirmed their commitment to address cotton “ambitiously, expeditiously and specifically” within the agriculture negotiations and to increase Members’ work towards reform as per the August 2004 Decision, the 2005 Hong Kong Ministerial Declaration and the 2011 Ministerial Conference. While Ministers regretted the failure so far to reach an agreement on a final outcome, they remain committed to further work and progress in cotton, based on the above-mentioned frameworks, with the 2008 revised draft agriculture modalities providing a reference point for that work.

In this context, Ministers agreed to enhance transparency and monitoring in relation to trade related aspects of cotton. To that effect, Ministers agreed that twice a year, Members will discuss, within the special session of the Committee on Agriculture, trade-related developments for cotton particularly in the areas of market access for LDCs, domestic support and export competition. The dedicated discussions will be based on factual information and data compiled by the WTO Secretariat from Members’ notifications with, as appropriate, additional relevant information provided by Members.

As you know, the first such dedicated discussion is scheduled for this afternoon in this room. Hence my intention is to keep any discussions of the trade aspects this morning brief since we will have an opportunity to discuss in detail the trade aspects of cotton during our dedicated discussion this afternoon.

You will all have seen my invitation fax of 20th May and the proposed agenda contained therein namely: (i) Introductory Remarks by the Chairman; (ii) General Statements from Members; (iii) Discussion of Trade-related Developments in Market Access, Domestic Support and Export Competition for cotton (Background Paper by the Secretariat and Information and Submissions from Members); and (iv) Any Other Business. Please note that the Secretariat background paper was circulated to all Members in the 3 working languages on 10 June.

The dedicated discussion on cotton of this afternoon is the first concrete step of one clear deliverable from the Bali Ministerial outcome. It will therefore constitute an important event in the context of the wider post Bali agenda. Cotton will of course be an important element of the reflection on the possible way forward for our unfinished DDA business, and I will continue to reach out to concerned Members to see how best deliver on the cotton mandate within the framework of the Doha agricultural negotiations.

I thank you for your attention and look forward to seeing Members and Observers governments this afternoon for our First Dedicated Discussion of Cotton Trade-related Developments.

Manufacturing pharmaceuticals: An untapped opportunity

Ever since the high tech generic drug production facility, Cinpharm-Cameroon, was set up, it is relatively easier for Cameroonians to have access to medicines. Now a low wage earner can access a course of antibiotics at a lower price than a Kenyan counterpart. According to the World Health Organization a 7-day course of treatment with ciprofloxacin could cost in Kenya close to a month’s wages. Unfortunately, this scenario is not uncommon across Africa.  In Uganda, it could cost about 11 days of a household income to purchase a single course of artemisinin-combination therapy used  to treat malaria for an under five-year-old child. 

Africa carries 25% of the world’s disease burden but consumes less than 1% of global health expenditure. It manufactures less than 2% of the medicines it consumes. Over 70% of the world’s HIV/AIDS cases and 90% of the deaths due to malaria currently occur in Africa. In addition, the continent bears 50% of the global deaths of under five children mainly due to neonatal causes as well as pneumonia, diarrhoea, measles, HIV, tuberculosis and malaria. The tragedy is that these diseases are treatable: most related deaths could be prevented with timely access to appropriate and affordable medicines. 

Africa’s capacity for pharmaceutical research and design (R&D) and local drug production is amongst the lowest in the world. The problem of inadequate investments in this area, unfortunately, continues. Overall, thirty seven African countries have some pharmaceutical production, although only South Africa produces some active pharmaceutical ingredients. Where there is local production in Africa, normally there is a reliance on imported active ingredients. As a result, the supply of African pharmaceuticals remains highly dependent on foreign funding and imports.  The pharmaceutical market in Africa is now 70% imported. According to trade data, India alone accounted for 17.7% of African pharmaceutical imports in 2011. Estimates further suggest that more than 80% of antiretroviral drugs (ARVs) across the continent are imported.

The poor access and affordability of medicines is compounded by factors that include long lead times for international orders; infrastructure gaps such as poor logistics and storage capacity, as well as high transport and distribution costs. In addition, there have been scarce public finances and deficient public health procurement systems. It is estimated that there is scarcity of essential medicines both in the public and private sector. People are also often being forced to  buy medicines that may not be certified. 

Many African governments spend a disproportionate amount of their scarce resources on procuring medicines. For instance, in 2006, Mali and Burundi, spent 2.3% and 2.9% of their GDP on such imports. Trends now indicate that new health challenges facing the continent will generate for their demands. Non-communicable diseases, like heart disease, lung disorders, diabetes and cancer, are rising due to demographic and lifestyle changes. These conditions will account for half the deaths in Africa, surpassing those provoked by infectious disease.

An additional difficulty results from the excessive use of originator brands, with much higher prices than the lowest-priced generic equivalents. To add to this concoction, the poor quality of drugs and their regulation not only fuel illicit transactions but also contributes to health problems. It was not long ago that 64% of antimalarial drugs in Nigeria were found to be counterfeit!

The benefits of scaling up local production of medicines

To pave a sustainable path for Africa’s health systems , scaling up pharmaceutical production is essential. It can increase the share of population with access to vital medicines, including in rural areas at a lower cost. Better health is central for people’s opportunities and contributes for them to be more productive. The economic cost of disease is well known for families and the national economies. The direct and indirect impact of malaria alone is estimated at US $12 billion annual African income. Local production of medicines is possible and has become imperative.

With economic growth projected to keep growing and the continent pursuing an agenda for economic transformation, there is a huge market opportunity.  Local manufacturing would create modern jobs, stimulate economic activities and many ways increase productivity. 

The pharmaceutical industry involves legal, scientific, technical, fiscal and financial aspects. In order to step up their production capability, countries need to tackle challenges on a variety of fronts. These range from R&D and exploring the full utilization of the Trade Related Aspects of Intellectual Property Rights (TRIPS) flexibilities, tax and tariff policies, drug regulatory and registration systems and, of course, building infrastructure.  

In some pockets of the continent, predominantly in North Africa and in South Africa, the status of local manufacturing of pharmaceutical products has gained a sturdy foothold. For example, Egypt and Tunisia produce, most of their national requirements for essential medicines. Morocco, the second largest African pharmaceutical producer, after South Africa, has 40 pharmaceutical industrial units supplying 70% of domestic demand and exporting 10% of their production, particularly to neighbouring African countries. Significant production capacity is being developed and enriched in Tanzania, Kenya, Uganda, Ethiopia, Ghana, and Nigeria. Mozambique has just commissioned an ARV plant with the help of Brazil.

Africa hosts some of the leading global innovators and generic manufacturers. Starwin in Ghana, Saidal in Algeria, Universal in Kenya, Aspen in South Africa, or Cipla in Nigeria are home grown manufacturers. This just demonstrates that Africa is producing medicines that meet international standards.

In order to enhance the pharmaceutical industry, there is a need for fewer structures and harmonization of policies through regional integration. Intra-Africa trade offers the prospect of strengthening and better exploiting regional supply chains and expanding economies of scale. This would also make larger investments attractive.

To be able to generate wealth and give its future generations a chance, Africa must take ownership of its health.