News Archive July 2015
tralac’s Daily News selection: 30 July 2015
The selection: Thursday, 30 July
An important question to be answered is whether this particular approach (merging existing RECs into inclusive FTAs) is workable and the appropriate route towards continental integration. Is the TFTA indeed a building block for continental integration? Will inter-REC negotiations not generate their own new difficulties? What do the TFTA negotiations and the Agreement adopted in June 2015 tell us? How can new challenges and technical difficulties be dealt with? What role do regional hegemons (such as South Africa) play? What are the lessons and the implications for the Continental FTA , for which the negotiations were officially launched on 15 June 2015? [The author: Gerhard Erasmus]
The world’s population is projected to reach 8.5 billion by 2030, 9.7 billion by 2050 and exceed 11 billion in 2100, with India expected to surpass China as the most populous around seven years from now and Nigeria overtaking the United States to become the world’s third largest country around 35 years from now, according to a new UN report. Moreover, the report reveals that during the 2015-2050 period, half of the world’s population growth is expected to be concentrated in nine countries: India, Nigeria, Pakistan, Democratic Republic of the Congo, Ethiopia, Tanzania, the United States, Indonesia and Uganda. By 2100, 10 African countries are projected to have increased by at least a factor of five: Angola, Burundi, Democratic Republic of Congo, Malawi, Mali, Niger, Somalia, Uganda, United Republic of Tanzania and Zambia.
In Zimbabwe the National Association of Non Governmental Organisations, on behalf of local civil society, is advancing the need for the state to ratify and domesticate all outstanding SADC protocols. In line with this initiative NANGO conducted a baseline assessment of the SADC Protocol Facilitating the Movement of Persons 2005, in order to harness the contextual benefits for Zimbabwe in ratifying this protocol. The study affirms that, the Protocol expresses the determination of member states within SADC to place intra regional movement at the heart of the regional integration process.
South Africa’s visa regime: a collection of links on the on-going debate about their impact
Hanekom vs Gigaba: When a law hurts the country (Daily Maverick)
SA’s new visa rules led to drop in tourism, says minister (Business Day)
Taiwan in talks with South Africa on changes to visa rules (Focus Taiwan)
China quickens visa applications (Zambia Daily Mail)
Private sector operators in the ICT sector from Kenya, Uganda, Rwanda and South Sudan recently came together seeking to be included in the ongoing Northern Corridor Integration Projects Initiative. Under the umbrella body Northern Corridor Technology Alliance, the operators are seeking to take lead of earmarked ICT projects without foreign involvement. The New Times’ Collins Mwai spoke to the coordinator of the alliance, Robert Ford, who also serves as the vice-president of the Private Sector Federation ICT chamber. Excerpts:
West African states prepare MOU on nuclear cooperation (World Nuclear News)
The newly created West African Integrated Nuclear Power Group (WAINPG) prepared a draft memorandum of understanding and three-year action plan at its first meeting, held last week in Niamey, Niger. The heads of delegations from Benin, Burkina Faso, Ghana, Mali, Niger, Nigeria and Senegal will take the MOU document to their respective governments for signature, which will commit them to proceeding with the initial planning for a regional nuclear power program. Djibo Takoubakoye Daouda, director of nuclear power at NAEHA, told World Nuclear News yesterday that the MOU will take effect upon the signature of four of the parties.
Zimbabwe: Trade deficit widens to $1,8bn (The Herald)
Zimbabwe’S trade deficit in the six months to June rose to $1,83bn from $1,76bn last year, according to latest data from the Zimbabwe Statistics Agency. Imports amounted to $3,06bn and exports were at $1,23bn. South Africa continues to be the leading trading partner with total trade between the two countries for the month of June being $314,5 million representing 42% of total trade of $747,9 million. Zimbabwe imported goods and services worth $203,3 million from its southern neighbour while the country exports were $111,2 million. Total trade with SADC countries, including South Africa, was $432 million or 57,8%. Zimbabwe’s trade with Zambia is in deficit with the country consuming more of its northern neighbour’s products than it is exporting.
The World Bank convened non-state actors in its office in Maputo to jump start discussions aimed at preparing the institution’s Systematic Country Diagnostic, known as SCD from its English acronym. The SCD represents a key knowledge product whose findings inform the preparation of a new WBG operational strategy for Mozambique for the coming years, called Country Partnership Framework. The participants raised a number of interesting discussion points and made important suggestions for the Bank’s consideration, including the following:
SA stuck in low growth trap, Nene warns ANC (Business Day)
Finance Minister Nhlanhla Nene sketched a bleak picture of the country’s economy to the African National Congress (ANC) lekgotla at the weekend and warned of several risks. His forthright presentation listing a range of concerns echoed his message to the ANC’s January lekgotla when he acknowledged that the government was partly responsible for eroding SA’s growth potential. Last weekend’s presentation offered a grimmer picture of the economy than the January one.
Kenya: June diaspora remittances up 17% (Central Bank of Kenya)
Remittance inflows to Kenya picked up in the first half of 2015 by 9.2% to USD 754 million from USD 690 million in the first half of 2014. In June 2015, remittance inflows increased by 17.% to USD 136 million compared to USD 116.1 million in June 2014 and increased by 5.3% when compared to inflows in May 2015. The increase was largely driven by flows from North America.
Uganda: Contractors to be compelled to buy locally made goods (Daily Monitor)
In an attempt to provide market for local manufacturers, State minister for Industry James Shinyabulo-Mutende has said government is moving towards compelling foreign contractors to procure locally made products. Presently, foreign contractors are free to import everything they need despite the fact that some of the products are readily available here. And as a result, Mr Mutende said, the country finds itself struggling with foreign exchange volatility as well as employment questions which could have been dealt with if such resources were retained in the economy.
In December last year, trade and industry ministry set up an SMEs forum secretariat that brings together different key players from various sectors as one of the ways aimed at solving the challenges that SMEs face. The SMEs Forum secretariat has come up with various means through which issues facing SMEs will be examined and resolved, according to Kanimba. Some of the challenges the SME industry faces include lack of professionalism, innovation and access to current technology, according to the secretariat.
Nihal Pitigala: 'Traditional trade policy is alive and kicking' (World Bank Blogs)
With the growing importance of global value chains as a conduit for trade integration, much of the recent empirical analysis and other literature has focused on the impacts of non-tariff barriers, behind-the-border measures, and other transaction costs. Traditional barriers, tariffs in particular, have generally been dismissed as less disruptive to trade and, therefore, have fallen out of the policy debate. However, evidence is surfacing from developing countries that import taxes are on the rise, increasing protection, and their disruptive tendencies are often disguised. Along with the rising tendency to subsidize domestic industries, these additional taxes tend to further augment the inherent anti-export bias, which can be particularly detrimental to trade-led development strategies and policies in developing countries.
In what was hailed as a historic breakthrough in international law, a United Nations (UN) committee has unanimously adopted nine principles upon which new regulatory mechanisms could be built to tackle sovereign debt crises. UNCTAD, as the focal point for debt issues in the UN, has long advocated for international rules and mechanisms to better manage sovereign debt problems along the lines commonly found at the national level. UNCTAD was entrusted by the UN General Assembly with the task of sharing its expertise with the committee. The principles will form a resolution to be put to the vote at the United Nations General Assembly at its upcoming session and it is expected to pass.
A new lending and investment policy tool for financial institutions aims to reduce the deforestation risk caused by the unsustainable production, trade, processing and retail of soft commodities, especially soy, palm oil and beef. The study, entitled "Bank and Investor Risk Policies for Soft Commodities" highlights policies that banks and investors can adopt to help reduce deforestation and forest degradation risks resulting from unsustainable practices across agricultural supply chains that are major drivers of tropical deforestation.
Panama will lead Latin America and the Caribbean countries in economic growth that will average 0.5%in 2015, according to United Nations projections which note that to reverse the region’s economic slowdown, more investments are needed to boost growth and improve productivity. Launching the Economic Survey of Latin America and the Caribbean 2015 in Santiago, the UN Economic Commission for the region forecasts that South America will contract -0.4%, Central America and Mexico will grow 2.8%, and the Caribbean will expand just 1.7%.
This paper assesses the state of Brazil’s infrastructure, in light of past investment trends and various quality and quantity indicators. Brazil’s infrastructure stock and its quality rank low in relation to that of comparator countries, chosen amongst main export competitors. We provide evidence that infrastructure affects domestic integration by analyzing price convergence of tradable goods across major cities. The government’s concession program will narrow part of the infrastructure gap, however, governance reforms will be crucial to improving investment efficiency.
Nigeria spends $2.4bn on rice importation in 3 years – Emefiele (Premium Times)
Actions for inclusion amid rising inequality
Concerns over inclusion feature in 10 of the 17 sustainable development goals that are set to replace the Millennium Development Goals, which expire this year. Such a focus on inclusion is vital for Asia and the Pacific where inequality has risen some 20 percent in the past two decades, and around 1.4 billion people live under $2 a day.
All can agree on the societal merits of lessening inequality. Beyond that, rising inequality can also stifle growth and minimize the impact of growth on poverty reduction. Simply put, the greater the ability of lower-income groups to gain education, remain healthy, and accumulate human and financial capital, the greater are their economic contribution and the possibilities for broad-based and more lasting growth.
Economic globalization may have raised the relative returns to capital and given a premium to skill differentials, accentuating inequalities. Technological change can sometimes create winner-take-all contests for incomes. The return to capital relative to labor in manufacturing output is estimated to have risen between the mid-1990s and the mid-2000s in China and India. An individual country, however, may have little control over the effects of globalization.
On more actionable aspects, inequality in incomes has had roots in disparities in education, health and other components of human capital, and unequal opportunities more generally. Government spending on education and health as a share of gross domestic product in Asia has generally been lower than in comparable regions. Furthermore, weaknesses in the workings of the labor markets and policies that favor capital over labor are proximate factors too.
But efforts that seek to reduce inequalities do not automatically have payoffs. History is replete with examples of redistribution efforts – from credit subsides to labor market restrictions – that were highly inefficient and did more harm than good. The crucial question is what policy responses promise to lower income inequality without hurting economic efficiency. Three directions, in particular, look promising.
First, a key area for action is reducing disparities in human capital, but in ways that do not hurt macroeconomic stability. Higher investments in education and health can provide growth enhancing returns, when the emphasis is not just on quantity and access but also on quality and productivity.
Education spending is particularly important both to increase access to schooling and to improve learning outcomes, which is what matters in the labor markets. Livelihood and skills training too is not just about access; it must be relevant and calibrated to the needs of local markets and local employment situations. Furthermore, the increasing role of technology advancement in raising productivity and automation of processes requires an increase in the level of skills set of the population.
South Korea provides experiences in raising the quantity and quality of education through spending both in the public and private sectors. The fast pace of expansion of secondary education (enrollment rate of 97 percent) and then tertiary education (enrollment rate of 98 percent) as well as a high premium on research and development enabled South Korea to have high human capital to support its transition from middle to high-income status, helping to avoid the so-called middle-income trap. South Korea allocates some 7.6 percent of its GDP to education (2010) compared with a 6.3 percent average for the Organization for Economic Cooperation and Development.
Second, social protection and social safety nets can aid investments in human capital development of the poor. They also provide coping mechanisms against adverse shocks such as periodic food price rises or recurring natural disasters. In Brazil, Mexico or the Philippines, conditional cash transfer schemes have provided annual grants to poor families who meet conditions linked to education and health.
Conditional cash transfer programs in these countries have gained considerable ground in reaching a large number of poor and providing socio-economic benefits. Evaluations find that the Philippine program has produced strong socio-economic results that include increasing enrollment rates among children 3-11 years of age, encouraging poor women to use maternal and child health services, and promising improvement in the employability of the poor.
Third, labor market reforms can support job creation for the lower-income strata. These include job matching and information systems, and policies that support labor mobility and flexibility. Thailand’s Tonkla Archeep addressed joblessness due to the global economic downturn that started in 2008. This program combined a skills development and training program with that of unemployment insurance. The program extended financial support to several companies to postpone layoffs.
Related is information and technology, facilitating better functioning of markets. Improving access to information, especially for micro, small and medium entrepreneurs, can help make often fragile businesses less vulnerable. A case in point is small farmers in India benefiting from access to free, real-time pricing and other key agriculture information from village Internet kiosks to improve the supply chain for its agribusiness exports (for example, the so-called e-Choupal program).
These three aspects – human capital, social protection and labor markets – are far from comprehensive, and there is no “one size fits all” for greater inclusion. But as inclusion assumes a big part of the SDGs, learning from the experience of programs for greater inclusion assumes urgency.
Sustaining Development is a three-month online series exploring the post-2015 development agenda hosted by Devex in partnership with Chevron, FXB, Global Health Fellows Program II, Philips, Pfizer, UNIDO, U.N. Volunteers and the U.S. Council for International Business. We will look at the practical steps needed to move the sustainable development goals from concept to reality. Visit the campaign site and join the conversation using #SustainDev.
United Nations lays down clear principles in tackling sovereign debt
United Nations responds to sovereign debt crises by adopting principles, with UNCTAD support, that could underlie a new legal framework and regulatory mechanisms.
In what was hailed as a historic breakthrough in international law, a United Nations (UN) committee has unanimously adopted nine principles upon which new regulatory mechanisms could be built to tackle sovereign debt crises.
UNCTAD, as the focal point for debt issues in the UN, has long advocated for international rules and mechanisms to better manage sovereign debt problems along the lines commonly found at the national level. UNCTAD was entrusted by the UN General Assembly with the task of sharing its expertise with the committee.
The principles will form a resolution to be put to the vote at the United Nations General Assembly at its upcoming session and it is expected to pass, Sacha Llorenti, committee chair and Permanent Representative of the Plurinational State of Bolivia to the UN, told a press conference at the UN in New York on 28 July.
Mr. Llorenti said the move on the part of the General Assembly to tackle sovereign debt crises, such as those that have hit Argentina, Greece, Ukraine and Puerto Rico, was “unprecedented” and “historic”.
Carlos Alberto Bianco, Secretary of International Economic Relations at Argentina’s foreign ministry, said that he envisaged the principles as the basis for regulation of “vulture funds” with which his country is still in conflict.
Richard Kozul-Wright, UNCTAD’s Director of the Division on Globalization and Development Strategies, said that by adopting principles such as sovereign immunity and equitable treatment, the UN was the taking the first step toward plugging a “major gap in the international system”.
“UNCTAD, ever since the Latin American debt crisis of the early 1980s, has been advocating very strongly for an equivalent at the international level [to national bankruptcy rules] … and for clear, consistent and fair rules that allow countries that find themselves with problems of excessive debt to work through that problem in a way that does not excessively damage their people and prospects for future growth,” Mr. Kozul-Wright said.
“What has been achieved … marks a very important first stage in moving towards a more rational way of handling sovereign debt crises, from the very fragmented, unfair system that we have,” he added.
Denis G. Antoine, Permanent Representative Of Grenada, speaking on behalf of the President of the General Assembly, said: “The adoption of the report of the Ad Hoc Committee today at the conclusion of its work, for submission to the General Assembly, including the Chairs’ summary and its principles on sovereign debt restructuring, reaffirms the central role of the United Nations General Assembly in contributing to the review of the international financial and economic architecture. I convey my appreciation to the Secretariat, particularly UNCTAD, for supporting the Ad hoc Committee in its work.”
Principles on Sovereign Debt Restructuring Processes
A Sovereign State has the right, in the exercise of its discretion, to design its macroeconomic policy, including restructuring its sovereign debt, which should not be frustrated or impeded by any abusive measures. Restructuring should be done as the last resort and preserving at the outset creditors’ rights.
Good faith by both the sovereign debtor and all its creditors would entail their engagement in constructive sovereign debt restructuring workout negotiations and other stages of the process with the aim of a prompt and durable reestablishment of debt sustainability and debt servicing, as well as achieving the support of a critical mass of creditors through a constructive dialogue regarding the restructuring terms.
Transparency should be promoted in order to enhance the accountability of the actors concerned, which can be achieved through the timely sharing of both data and processes related to sovereign debt workouts.
Impartiality requires that all institutions and actors involved in sovereign debt restructuring workouts, including at the regional level, in accordance with their respective mandates, enjoy independence and refrain from exercising any undue influence over the process and other stakeholders or engaging in actions that would give rise to conflicts of interest or corruption or both.
Equitable treatment imposes on States the duty to refrain from arbitrarily discriminating among creditors, unless a different treatment is justified under the law, is reasonable, and is correlated to the characteristics of the credit, guaranteeing inter-creditor equality, discussed among all creditors. Creditors have the right to receive the same proportionate treatment in accordance with their credit and its characteristics. No creditors or creditor groups should be excluded ex ante from the sovereign debt restructuring process.
Sovereign immunity from jurisdiction and execution regarding sovereign debt restructurings is a right of States before foreign domestic courts and exceptions should be restrictively interpreted.
Legitimacy entails that the establishment of institutions and the operations related to sovereign debt restructuring workouts respect requirements of inclusiveness and the rule of law, at all levels. The terms and conditions of the original contracts should remain valid until such time as they are modified by a restructuring agreement.
Sustainability implies that sovereign debt restructuring workouts are completed in a timely and efficient manner and lead to a stable debt situation in the debtor State, preserving at the outset creditors’ rights while promoting sustained and inclusive economic growth and sustainable development, minimizing economic and social costs, warranting the stability of the international financial system and respecting human rights.
Majority restructuring implies that sovereign debt restructuring agreements that are approved by a qualified majority of the creditors of a State are not to be affected, jeopardized or otherwise impeded by other States or a non-representative minority of creditors, who must respect the decisions adopted by the majority of the creditors. States should be encouraged to include collective action clauses in their sovereign debt to be issued.
The gender gap in extractive dependent countries
Can we use the revenues generated from oil, gas and minerals to reduce the gender gap in countries with abundant natural resources?
We found a statistically significant negative correlation between our Extractives Dependence Index (EDI) that ranks countries on their dependence on the extractive sector (where 0 equals no dependence and 100 equals highest dependence) and the Global Gender Gap Index (where 1 equals equality and 0 equals inequality). The Global Gender Gap Index for countries with the highest dependence on the extractive sector is 0.60 while it is 0.70 for the lowest dependent countries.
We further examined the difference between women and men in leadership positions and employment. In countries with high dependence on extractives, women make up 8.7% of ministerial level positions; they take up 9.5% of seats in national parliaments and hold 18.4% of senior and managerial positions. In countries with low dependence on extractives, the numbers are almost twice as high at 16.9%, 17.9% and 32.7%, respectively.
In high extractive dependent countries, the average unemployment rate for women is 15% and 8% for men. In the low extractive dependent countries, there is parity in a bad outcome; the unemployment rates are 8% for women and 7% for men. Similarly, in high extractive dependent countries, the ratio between unemployed female to male with tertiary education is 4 to 1. In low extractive dependent countries the ratio is 1.3 to 1.
Women also populate the low productive sectors, making up 21% of the employment in the non-agricultural sectors in the highly extractive dependent countries. The figure is 38% in the low extractive dependent countries. Women account for about 35% of the professional and technical work force in highly extractive dependent countries and 52% in low extractive dependent countries.
The gender disparity results from the extractive sector being susceptible to high capital intensity, male domination, rent seeking and declining share of manufacturing in national income.
So what are the policy implications for tackling such inequalities? One way is to allocate the revenues generated from royalties, corporate taxes and various fees to specific social and economic sectors.
For instance, Mongolia’s Human Development Fund, financed by the country’s mining royalties and dividends, has been earmarked for social protection schemes. Comparably, Nigeria’s recent National Health Bill earmarks 2% of the country’s oil revenues to primary health care.
It is time to shift policy attention towards a gender sensitive fiscal expenditure in resource dependent economies. This means investing the revenues from oil, gas and minerals in women and girls so that they enjoy equal access to leadership positions and employment in fields where they are traditionally underrepresented.
Degol Hailu is a Senior Advisor and Chinpihoi Kipgen is a Research Associate at the United Nations Development Programme (UNDP)