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South Africa refers EU to WTO over threat to block citrus fruit
South Africa has referred the European Union to the World Trade Organisation over Brussels’ threat to refuse entry to South African fruit because of citrus fungal disease black spot, trade minister Rob Davies said on Thursday.
In a statement, Davies called the threat “protectionist”, saying there was no scientific consensus to support the EU’s claim that fruit from South Africa with the fungal disease could infect European orchards.
South Africa is the main source of oranges for the juice drunk by consumers in Britain, Germany and France during Europe’s summer. Southern European growers fear the fungus could take hold in their citrus groves.
Davies said the ban on South Africa’s citrus fruit was “aimed at restricting highly competitive citrus imports to the benefit of citrus producers in the EU”.
The EU did not immediately respond to request for comment.
About 45 percent of South Africa’s 8 billion rand-a-year citrus exports end up in the EU, but the presence of citrus black fruit in some shipments led to a ban of lemons, oranges and tangerines late last year.
In September, the Citrus Growers Association of Southern Africa said it would voluntarily suspend citrus exports to the EU in order to comply with the EU standards against the fungus.
Citrus black spot causes unsightly lesions on the fruit and leaves, reducing both harvest quality and quantity.
The African producers maintain fruits cannot transfer the disease and say banning their produce from all EU countries is unfair because there are no citrus groves in northern Europe due to the colder climate, meaning there was no risk of infection.
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Kenyatta, Kagame call for EAC member states to open borders
President Uhuru Kenyatta of Kenya and President Paul Kagame of Rwanda have challenged East African Community (EAC) member states to speed up reforms to allow free movement of labour across the region. The two leaders said continued fears that opening up domestic job markets to regional job seekers would erode opportunities for nationals were “primitive and unfounded”.
Speaking at the opening of the sixth East African Business Summit in Kigali, Rwanda, the two Presidents said political will is required to fully integrate the region.
“Let us be frank with each other, we have not been able to move fast because of national fears, a sense of insecurity, that if one opens up their people will be denied jobs and other opportunities,” Mr Kenyatta said yesterday, in a question-and-answer session with top business executives from across the region moderated by Kenya Commercial Bank chief executive officer Joshua Oigara.
“We must deal with these fears. We need to start talking about our people being the east African people. Kenya and Rwanda have made progress on this. We have been clear on opening up our labour market to take full advantage of the labour that is available in the region.”
Mr Kagame said besides allowing EAC citizens to work in the country and set up businesses, Rwanda’s bold steps in opening up are showing the opportunities of a free labour market.
“To increase trade, it is not only as a result of exporting raw materials but on basis on value addition. For the rest of the rest of World we sell raw and unprocessed materials. This is as primitive, in the same way people are looking at not allowing free movement of labour market,” Mr Kagame said.
“We do have unwarranted worries. We have experimented with this in Rwanda. When we opened our borders, removed restriction on work permits and visas, everyone benefited. We have benefited. Some Rwandans had worries but it is about leaders making decisions and involving the people.”
Trade between Kenya and Rwanda has grown from $44.8 million in 2001 to $160 million by 2011, two years after the country was admitted into the EAC, together with Burundi. Capital and labour flows between the two countries have continued to grow after both governments removed restrictions on work permits.
“If Rwanda doesn’t have to worry about Kenya why should other bigger countries worry about Kenya?” Kagame asked.
President Kenyatta, the current chair of the rotational EAC Heads of States Summit, applauded the “brave” move by his predecessor, President Mwai Kibaki, and Mr Kagame, to allow free movement of labour between the two countries.
“I don’t think Kenya and Rwanda are worse off for that position. I believe we are better off. Young people now move freely. I am told a lot of Kenyans now came through Kigali airport using just IDs,” he said.
“The United States was built by tapping the talent of the world,” Mr Kenyatta said. “We need to end the inward-looking mentality that we inherited from our colonial masters. Let us not be fearful of one another.”
Kenya has the lowest number of visitors to Rwanda from among the EAC member states but the figure doubled between 2009 and 2012, from 33,168 visitors to 63,222, according to figures from the Rwanda immigration authorities.
Need for speed
The two leaders told business leaders that they remain committed to investing in energy and transport infrastructure so as to reduce the cost of doing business in East Africa.
Mr Kagame, Mr Kenyatta and President Yoweri Museveni of Uganda have been at the heart of a rapid investment in key projects along the northern corridor and in the rest of the region, including the new standard gauge railway, refurbishment at Mombasa Port, as well as proposed oil pipelines and refineries from Uganda to the Indian Ocean coast.
Asked by a business executive in the audience about the delays in the railway project, Mr Kagame said, “the standard gauge railway is taking too long because we started too late”.
President Kenyatta and President Kagame emphasised the need for the region to hasten the pace of integration as well as the need for increased investments in infrastructure, energy, ICT, security and health.
“These are the areas that will propel growth within the region. We must exploit ICT which is our biggest competitive advantage unlike in the developed world where infrastructure development is their big advantage,” Mr Kenyatta said.
He said Kenya and the region must take full advantage of innovations in mobile money and new technologies to create wealth for its people.
Terror effects
Mr Kagame emphasised the need to strengthen regional peace and security. He said the governments are putting a joint force that can be deployed to intervene in any situation in the community together, pointing out that insecurity in Kenya, for instance, has a contagion effect on the rest of the community.
The leaders also called for greater partnership between government and private sector players in addressing challenges in health, education and talent development, mineral management among others.
“All the building blocks are there. All we need to do is to put the blocks in place and move faster,” President Kagame said.
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Africa can be its own ‘Switzerland’
Africa has the capacity to access at least 200 billion dollars for sustainable development investment but it will remain a slave to foreign aid unless it improves the climate for investment and trade and plugs illicit financial flows, development experts say.
“Africa is not poor financially but it needs to get its house in order,” Stephen Karingi, director of regional integration, infrastructure and trade at the United Nations Economic Commission for Africa (ECA), told IPS during the commission’s Ninth African Development Forum, which is being held in Morocco from Oct. 13 to 16.
“For too long we have allowed the narrative of Africa to be one about raw materials and natural resources coming out of Africa, yet Africa can take advantage of its own comparative advantages, including these natural resources, and become the leader in the value chains that require these raw materials.”
Research by the ECA shows that the total illicit financial outflows in Africa over the last 10 years, about 50 billion dollars a year, is equivalent to nearly all the official development assistance received by the continent.
“Africa is ready for transformation and we have the continental frameworks [for it],” said Karingi.
A combination of luring private equity investment, remittances and domestic resource mobilisation will help Africa unlock is financial resources to drive its development.
Sub-saharan Africa has one of the highest number of hungry people and has a growing youth population in need of jobs.
According to the McKinsey Global Institute, GDP growth has averaged five percent in Africa in the last decade, consistently outperforming global economic trends. This growth has been boosted by, among other factors, improved governance and macroeconomic management, rapid urbanisation and expanding regional markets.
Currently Africa is estimated to have a 100-billion-dollar annual funding gap for infrastructure development with about 45 billion dollars of this set to come from domestic resources.
Carlos Lopes, ECA executive secretary, said developing countries must strive to mobilise additional financial resources, including through accessing financial markets. He added that at the same time developed countries must honour the financial commitments they have made in international forums.
“The continent must embark on reforms to capture currently unexplored or poorly-managed resources,” Lopez said.
This is the first time that the Africa Development Forum has focused on the continent’s development.
Discussions focused on enhancing Africa’s capacity to explore innovative financing mechanisms as real alternatives for financing transformative development in Africa.
It aims to forge linkages between the importance of mainstreaming resource mobilisation and the reduction of trade barriers into economic, institutional and policy frameworks, and advancing the post-2015 development goals.
Macroeconomic policy division head at ECA, Adama Elhiraika, told IPS that the new sustainable development goals present an opportunity for Africa to excel by prioritising its development issues.
Elhiraika said Africa has all the ingredients to be a financial hub and investment magnet along the lines of “Switzerland” if only it can improve its investment and trade climate, tackle corruption and raise money internally.
“We need to get our policies right and allow for the kind of investments that people [can make] in Switzerland,” Elhiraika said.
“Given the size of Africa, there is need to promote free movement of capital, which is as important as the free movement of goods and services in boosting trade and investment.”
According to the World Bank, of the 50 economies that recorded improved in their regulatory business environment in 2013, 17 are from Africa, with eight of those economies being ranked ahead of mainland China, 11 ahead of Russia and 16 ahead of Brazil.
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Azevêdo says Bali impasse paralyzing WTO work, chairs report no progress in consultations
Director-General Roberto Azevêdo, as chair, reported to the Trade Negotiations Committee on 16 October that despite intensive consultations “we have not found a solution to the impasse” more than two months after the deadline on the Trade Facilitation Agreement had passed. “This could be the most serious situation that this organization has ever faced,” he said, and while members should keep working for a solution to the current impasse, “we should also think about our next steps”.
Good morning everyone – and welcome to the thirty-fifth formal meeting of the Trade Negotiations Committee.
Our meeting today comes at a very important moment. These are difficult days for our organization.
As you know, we reached a major impasse in July, related to the interplay between two of the Bali decisions – public stockholding on one hand, and the adoption of the protocol of amendment on the Trade Facilitation Agreement on the other. While there is no formal or legal linkage here – clearly an important political linkage has been made bringing the two together.
We made every effort to resolve the problem in July. But in the end our efforts came to naught. As a result we missed the deadline for the adoption of the protocol of amendment on the Trade Facilitation Agreement, which was the first deadline that Ministers set us in Bali.
I said at the time that I feared there would be serious consequences. I asked you to reflect over the summer and talk to each other about potential ways forward. And I carried on my own consultations as well.
To address the situation, I convened an informal Heads of Delegations meeting on 15 September, immediately after the summer break. That meeting marked the beginning of a period of intense and comprehensive consultations to break the impasse and move forward.
Since then, the Chairs of the relevant negotiating and regular bodies have been working hard. They have been taking stock of Members’ positions and discussing how we can move forward to implement all of the Bali decisions, and develop a post-Bali work programme.
Meetings have been held in a range of different formats and configurations. Members have been engaging with each other – both here in Geneva, and in capitals. I have spoken to a wide range of delegations and groups of delegations – as has the General Council chair, Ambassador Fried. I have also met with Ministers wherever possible. We have tried everything to resolve the problem.
We are now at the end of that period of intensive consultations. I promised that, at this stage, I would give you a clear assessment of the situation – based on your views and those of all Members. So that is what I will try to do today.
Statement by the Chairman of the General Council
Reports by Chairpersons of the Bodies established by the TNC
Having listened to those reports, and on the basis of my own consultations with Members, I will now make my formal statement as TNC Chairman, to provide you with my sense of how I see the current situation. I think it is my duty to give you my views – and to be honest and straight-forward in doing so. I stress that this is only my perspective – and that it is based primarily on what I hear from you.
As I see it the situation is clear as day:
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First, we have not found a solution for the impasse. The deadline on the Trade Facilitation Agreement passed more than two months ago. We are on borrowed time.
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Second, as I feared, this situation has had a major impact on several areas of our negotiations. It appears to me that there is now a growing distrust which is having a paralysing effect on our work across the board.
This is the situation. And I am not in a position to tell you that a solution for our impasse is in the making. Of course I encourage you to keep working and keep looking for a solution. And I will keep trying as well.
However, I have promised to give you my frank assessment, and it is my feeling that a continuation of the current paralysis would serve only to degrade the institution – particularly the negotiating function.
I think we have a responsibility to the people who sent us here to be realistic about the situation – and therefore to find ways to continue our work and to keep moving forward, while still looking for a way out of the impasse. In my view, this is our only option. We have to continue our work.
But, we all heard the reports a moment ago. They were not encouraging. Work on substance seems unlikely to advance. Therefore, I think our first step now should be to start a broader discussion about the basis on which we can overcome the current scenario of disengagement. I think we need to start a discussion about the future – a future which honours the aims of the Marrakesh Agreement, which is worthy of our role in international relations, trade and development, and which delivers for the people we are here to serve – particularly the poorest. It is time to face up to the undeniable problems we have in this organization and have an open and honest discussion about how we can move forward.
There are a numbers of layers to this discussion, each of which I think we must address. In order to better frame our dialogue, I suggest that we take a look at all these different layers. And in my opinion, the issues at stake fall into four concentric circles.
The first circle covers Trade Facilitation and Public Stockholding. Progress on the TF Agreement is stalled as we wait for progress on the adoption of the protocol of amendment. And public stockholding is stalled too, as the conversations have ground to a halt. So, how should we respond? Do we simply put these two Bali decisions on the shelf? Is there a way to move them forward?
On the Trade Facilitation question, this also affects the Trade Facilitation Agreement Facility, which will become operational once the provisions of the TFA are being implemented. Despite the current situation – or rather because of it – we need to work to keep the Facility alive and keep donors interested in the initiative. Of course donors have budgetary and time constraints – and so they need clarity about what is happening. And despite the state of affairs here in Geneva, I see a lot of support out there. On Friday I was in Washington to enhance the WTO’s cooperation with the World Bank on this issue. President Jim Kim and I announced a strengthened partnership, under which the WTO and World Bank would work closely together to ensure that support is available for all who need it under the terms of the Trade Facilitation Agreement.
Meanwhile, on Public Stockholding, it is my sense that there is a widespread positive disposition to negotiate an outcome – or a “permanent solution” as it has been branded. Nonetheless, there also seems to be an overarching reluctance to put other issues on hold while that “permanent solution” is sought.
So this all begs the question: is there any way for Members to move forward on these two issues in the context of the current paralysis and distrust that we are now seeing? That’s the first circle.
In the second circle are the other 8 Bali decisions, including agriculture, the monitoring mechanism and the package of measures for LDCs. Members must consider what is going to happen with these issues.
The LDCs, for example, have made clear that they are not preventing any other issues from progressing – so of course they ask, why should they be punished and their issues be held back as well? On the reverse side of this debate, others say that Bali was a package, and that we cannot easily separate off certain elements to take forward. This camp sees linkages among the Bali Decisions and is not ready to ignore them.
Despite these conflicting views, there is a clear appreciation from most of the logic that led to the different timeframes agreed in Bali for each specific issue. And I think it’s clear that what happens in this second circle is intertwined with what happens in the first. Our ability to implement the other Bali decisions affects our ability to move forward on Trade Facilitation and public stockholding – and vice versa. This is the second circle.
The issue in the third circle is the post-Bali work program. This task was mandated to us by Ministers with a deadline of 31st December this year. But realistically we have until the December meeting of the General Council. That gives us 8 weeks.
On the basis of the conversations we were having before July I was aiming at a very detailed and specific work program, which came very close to setting out modalities. As I said at the TNC meeting in June: if we prepare the ground properly, “we will be able to construct the clearly defined work program that we were tasked to deliver by the Bali declaration.” And I thought that if we could achieve that it would mean we were in a position to conclude negotiations on the DDA fairly rapidly.
I am very sorry to say that, in my view, such a detailed and precise modalities-like work program is now very unlikely to be ready by the end of the year. Of course, what happens is up to you. But I struggle to see how this can be achieved in the current circumstances. We have lost too much time due to the current impasse. And we have just heard from the Chairs’ reports that the engagement we need is simply not there.
Let me be clear that in saying this, I am not prejudging – this is very important so write it down! – I am not prejudging what can be achieved on the work program when the time is right. I am not commenting on the ambition, coverage and substance that it will have. All of this will be determined by you. I am simply commenting on the timing – and what I am saying is that in the 8 weeks we have until the December General Council, it seems very unlikely that a detailed, precise, modalities-like work program is possible. That’s all I am saying.
Therefore we have to ask, how are we going to deliver on the mandate we were given in Bali? If we are to deliver by December, as instructed, what shape will this work program have? That’s another conversation that Members need to have. And again, what happens in this third circle affects the first and second – and vice-versa. So that’s the third circle.
The issue in the fourth and final circle, which encompasses all of the others, is what does this mean for the organization itself?
Once again the negotiating track is stuck. Of course this is not new to us – deadlock has unfortunately become a familiar position. But that doesn’t make it any more acceptable. And it is not often that we have been able to overcome situations like this. We did so in Bali – and that gave us hope for a new WTO. Yet, now, we are here again. The lack of ability to find full convergence quickly leads to deadlock, and deadlock leads to paralysis. We have seen this situation too many times. So we can’t continue in such an inefficient and ineffective way that is so prone to paralysis.
Frankly, we know that Members have been talking about the other, non-multilateral options that are open to them. We may see these Members disengaging. We may see that these Members pursue other avenues. We may see that these Members explore other tracks – inside the WTO or outside.
So we have to think about the consequences of the situation we’re in – and consider how this organization can work. Again, this is something you have to talk about.
I will be here to facilitate this conversation. I will hold meetings with you. The chairs will convene meetings. And I urge you to talk to each other. As ever, we will need to engage in different formats and different configurations – including open-ended meetings.
This could be the most serious situation that this organization has ever faced. I have warned of potentially dangerous situations before, and urged Members to take the necessary steps to avoid them. I am not warning you today about a potentially dangerous situation – I am saying that we are in it right now.
So we have to move on. We should keep working for a solution to the current impasse, but we should also think about our next steps. I will be starting this discussion on what to do straight after next Tuesday’s General Council meeting – and all of you will have an opportunity to put your views forward on all of these issues.
As to the content of our discussion, I suggest that we try to answer the questions that are before us. Specifically:
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What should we do with the decisions on Trade Facilitation and public stockholding?
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What should we do with the other Bali decisions, including the LDC package?
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How should we respond to the Ministerial mandate to develop a work program on the post-Bali agenda?
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And how do we see the future of the negotiating pillar of the WTO?
I hope these questions will help to structure the conversation. I want to hear from you. Tell me what you want to do, what your priorities are, where the linkages lie – both legal and political. We often say that the WTO is a member-driven organization. It is you, the Members, who must now take control and find a way forward. You are the ones – the only ones – who can answer those questions. In short, I am extending to you an invitation for reflection. I hope you will accept it.
Thank you for listening.
This concludes my statement.
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Expert says EAC dragging feet on double tax system
East African Community (EAC) member States are to blame for the delay in the harmonisation and standardisation of the region’s tax system, an industry expert has said.
Ashif Kassam, the executive chairman of RSM Ashivir, says the regional trading block is losing time on the elimination of double taxes.
“Tax policies should be common to each of the partner States. It is important that governments move with speed to avoid losing time. Let us standardise our tax systems, ease movement of labour and eliminate double tax elements. Let us implement the double tax system,” he said at the sidelines of the ongoing East African Business Summit in Kigali.
Mr Kassam called for enhanced pace of integration, but warned that plans to establish a common currency should be carefully thought out to avoid mistakes that have happened in the European Union.
“We already have a Single Custom Territory. My concern is in the implementation of the Single Monetary Union. We are at different stages of development as a region. We have different tax collection systems and having a common currency will be a big risk like what happened in European Union and the economic recession. However, let us do the rest of integration quickly,” he said.
The tax expert emphasised that differences in tax regimes and particularly in the rates and how governments administer the levies needed to be addressed.
In Kenya Value Added Tax (VAT) is charged at 16 per cent while Tanzania, Uganda, Rwanda and Burundi charge the tax at 18 per cent.
Kenya has been under pressure to raise its VAT charges to 18 per cent but the tax expert says increasing the tax burden, especially on businesses, would not be conducive.
“Kenya’s tax collection stands at 25 per cent of GDP. It is among the world’s highest standards. Increasing tax in Kenya will mean he government will be taxing businesses more. Tanzania and the rest of the member states have to increase their tax base by widening the tax net rather than increasing VAT,” he said.
Mr Kassam said the region could still embrace a single VAT system even with the different VAT billing.
“We have double tax treaty of which is 10 years old. We need to create the will and policy around tax procedures.
“If huge companies both global and local are merging then we need to implement the tax system. If one country does not want to implement the double tax treaty, then the four others should move and implement it,” he added.
Mr Kassam noted that weak tax systems encouraged businesses and individuals to cheat.
“We need to link tax systems to businesses or personal PIN numbers. Tax authorities need to target wealth in bank accounts, real estate investments and the stock exchange and profile every tax payer through PIN number and ensure they pay right tax,” he said.
A single tax system, Mr Kassam said, would also eliminate goods in transit fraud.
“This is a good system to capture cheats. Large corporations are not complaining on the single tax window. Only those bending the law are complaining. People who want to sell goods in transit in Kenya are the ones complaining,” he said.
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Malawi losing US$50m due to illegal agric exports
Malawi’s Minister of Industry and Trade Joseph Mwanamvekha has disclosed that the country’s agro-based is losing about K20bn, equivalent to about US$50m, every year to illegal exports of crop produce.
According to the minister this is a worrisome trend for a country whose almost 80 percent of foreign exchange income is derived from agriculture as the amount being lost is enough to fund a full government department for a whole year.
According to the minister the problem has gone out of hand because most farmers are not aware of the existence of structured markets where they can sell their produce such as commodity exchanges.
Illegal exportation of agriculture produce is done in various ways including smuggling and failure by traders to remit tax on exports, the minister told reporters in Lilongwe when he toured Auction Holdings Limited Commodities Exchange trade house.
To try to curb the problem, Mr Mwanamvekha said the government has introduced a policy being implemented in liaison with the Reserve Bank and the Malawi Revenue Authority to stop renewal of export licenses for traders that do not produce evidence of that they remitted to the country the foreign currency earned from their previous agriculture commodity exports.
“We’re concerned about this and we are doing something about it. Most these traders buy produce from farmers direct from the field. So we have made it a point that any trader seeking renewal of their export licenses must produce evidence of their previous foreign exchange earnings remitted to the country”.
On another note, the minister expressed concern that vendors and middlemen are taking advantage of the ignorance of the farmers to buy from them at incredibly low prices and sell the same produce outside the country or at some formal markets at high prices.
“I will give you an example at the time of harvest farmers were getting an average of K 70 to K 100 for soya, but now the same crop is fetching up to K 500 at the commodity exchange. So you can actually see that the farmer who is producing the soya is getting very little.”
Mwanamveka said the government will embark on a national campaign to sensitize farmers on the need sell their produce through formal markets.
“We want to ensure that we give the farmer all the relevant information on prices for their produce. For pigeon pea, soya, all other products, they should be able to know what the price in Malawi is; the average price in the region and even beyond. By so doing they will be able to negotiate better.”
Financing the Post-2015 Agenda: Toward a shared vision
The 2014 International Monetary Fund-World Bank Group Annual Meetings provided the perfect opportunity for finance and development ministers, the private sector, civil society, and multilateral development banks (MDBs) to discuss how to strengthen and leverage their financing frameworks to support the post-2015 agenda, also known as the Sustainable Development Goals (SDGs).
With world leaders set to meet in September 2015 to agree on a set of goals to replace the Millennium Development Goals (MDGs), a great deal of energy is being spent deliberating on what the new goals should be. However, with the recent announcement of the Third International Conference on Financing for Development in July 2015 in Addis Ababa, world leaders have also started turning their attention to the critical matter of how to finance the post-2015 agenda.
The SDGs will be more ambitious than the MDGs, covering a broad range of interconnected issues, from economic growth to social issues to global public goods. To realize this vision, a just-as-ambitious plan for financing and implementation is needed. The magnitude of the SDG financing challenge far exceeds the capacity of any one organization and demands a strong partnership between governments, the private sector, and development organizations.
The flagship event, moderated by Mahmoud Mohieldin, corporate secretary and special envoy of the president at the World Bank, took place Oct. 10. It delivered a powerful message to development stakeholders: The MDBs are committed to working together to break new ground on financing for development issues. These include helping improve domestic resource mobilization, leveraging private investment, financing global public goods, providing long-term finance, and linking climate and development finance.
Government, private sector, and development partners agreed on the main pillars of financing post-2015. Domestic resource mobilization and official development assistance (ODA) are anchors of development finance. There was clear recognition of the responsibilities of countries to take ownership and mobilize resources, including having a fair and effective tax administration, a stable macroeconomic environment, and inclusive growth policies.
There was agreement that ODA needs to be modernized to become more efficient in delivering resources and results. Concessional funds should be better targeted to areas where private finance will not go and where there are significant public benefits. ODA could also be used more strategically to leverage other sources of finance.
Private sector solutions, including ideas, sustainable business practices, and finance, are essential. Development partners recognize the power of “distributive structures” such as small and medium-size enterprises to provide jobs and impact climate and social issues. These structures need support with better access to credit and engagement on sustainable business practices.
Reaching consensus on the approaches to financing development will be a critical step toward agreement on the SDGs and on climate change later in the year. A joint issues paper on financing for development by the IMF and MDBs will be presented at the Addis conference. The MDBs and the IMF acting together – while maintaining their unique mandates – can have greater impact. It will be crucial to validate that the international community can come together in 2015 to make the tough decisions needed to achieve the world we want by 2030.
UNCTAD calls for increased investment to close financing gaps in infrastructure and climate-change adaptation
A lack of investment and an absence of coordinated leadership to address critical financing needs in developing countries could threaten efforts to reduce poverty and tackle issues such as climate change, concluded a meeting of high-level government authorities, global CEOs and thought leaders at this year’s UNCTAD World Investment Forum in Geneva on 14 October.
UNCTAD, the UN body which hosts the biennial event, has been seeking to galvanize the global investment community to promote more investment in critical areas in the world’s poorest regions, as well responsible investing that contributes to sustainable development.
Opening the World Leaders Investment Summit, one of the Forum’s 50 events, UNCTAD Secretary-General Mukhisa Kituyi said: “Meeting the challenge of ending poverty and charting a transformative course for low-carbon growth will require commitment and investment on an unprecedented scale.”
“This year’s World Investment Forum is one of the first – and largest – opportunities the international community has to bring together the private and public actors who will need to join forces to get more money flowing into sustainable development projects,” he added.
The Forum comes at a time when countries and the international community are discussing a set of development goals to take over from the Millennium Development Goals (MDGs), which expire next year. The proposed sustainable development goals (SDGs) are set to be much broader in scope and presume a much greater funding effort on the part of governments and the private sector.
UNCTAD estimates that developing countries will face an annual investment gap of $2.5 trillion over the lifetime of the SDGs (2016 to 2030). Public resources cannot meet all SDG-implied financial demands. A stronger role for private sector investment is indispensable, and UNCTAD has identified a number of sources of capital within the financial system, such as pension funds or company cash holdings, that could be productively reoriented to sustainable investment projects in developing countries.
In the run-up to the SDG conference in New York next year, some countries are already questioning the level of ambition and the financing commitments the new goals imply. The Forum aims to explore how the private sector, but also other investors such as state-owned firms and sovereign wealth and public pension funds, could contribute to the achievement of the goals.
Summit participants discussed several ways that the investment community could help facilitate more investment, such as through financial market reforms, risk-sharing measures, and tools such as green bonds and specialized investment funds.
Mark Wilson, chief executive officer of insurance company Aviva, said there was the need for greater financial market reform to promote long-term investment.
“We want everyone in the investment process to think long-term. [We need] a vision of patient capital not hot money; I don’t believe the obsession with quarterly results is useful (and it’s getting shorter),” he said.
This was echoed by development economist and UN special adviser on the MDGs, Jeffrey Sachs, who said: “Wall Street works in nano-seconds, not decades.” Such “short-termism” could also be found in development thinking.
“We often hear about the need for shovel-ready projects. This is good, but, we have to be careful that it does not become just an expression of short-termism. We need long-term thinking and that needs complex solutions; not everything can be shovel-ready,” Mr. Sachs said.
Certain measures and funds have been in existence for some time, but the summit heard calls for governments and investors to increase the scale and impact of investment in the world’s poorest economies.
Towards this end, Prince Charles, heir to the throne of the United Kingdom, speaking in a video address, said he supported UNCTAD’s Action Plan for Private Investment in the SDGs. “UNCTAD has an excellent Action Plan to re-orientate finance towards investing in sustainable development,” he said.
His remarks were also echoed by Nestlé chairman, Peter Brabeck-Letmathe. “I believe that the Action Plan is doable and that it will have the support of the private sector,” Mr. Brabeck-Letmathe said.
At the close of the meeting, Dr. Kituyi said: “We do not have time to wait another 15 years [the proposed period of the SDGs] to end poverty or tackle climate change. It is our global responsibility to act now and increase the level and impact of investment where it is needed most.”
SA growing as legal outsourcing host
South Africa has become a preferred Legal Process Outsourcing (LPO) off-shoring destination as well as the staging ground of choice for international law firms seeking a jurisdictional foothold for sub-Saharan African business opportunities.
Named best “Offshoring Destination 2012” by the UK’s National Outsourcing Association (NOA), Winner of the European Outsourcing Association Awards last year, and Winner of the Skills Development Programme of the Year 2014 at the NOA Outsourcing Professional Awards, South Africa has risen to rank among the top three global offshore locations that can provide quality English language skills, and excellent writing skills, on a large scale.
A recent review of nine outsourced locations by the London School of Economics has positioned South Africa in second place after India.
The country’s English language alignment with the UK and Australia, however, in terms of accent, word-choice and cultural compatibility, is rivalled only perhaps by smaller UK nearshore jurisdictions such as Northern Ireland and Scotland.
As companies, and consequently law firms, in Europe Middle East and Africa increasingly turn to alternative legal service providers in offshore locations to find more efficient ways of handling their legal service requirements, South Africa offers a uniquely competitive combination of commercial advantages in terms of talent, cost and location.
Increasingly, corporate law departments have turned to legal outsourcing as a solution, which allows costs to be reduced while maintaining or increasing quality.
This process involves an organisation in the source jurisdiction, eg the UK, hiring LPO vendors in offshore jurisdictions to provide offshore lawyers at a lower cost than lawyers are available in said source jurisdiction.
So instead of hiring UK lawyers to perform contract drafting, transactional due diligence work, or document review work, the organisation finds quality Indian or South African lawyers to perform such services at significant cost savings.
In terms of service expertise, the country specialises in legal, financial services, and healthcare domains with a cost base which is – on average – 50 percent to 60 percent lower compared to primary source markets.
Coupling such talent and savings with a uniquely favourable time zone aligned with Europe while also overlapping with the Americas and Asia, and the underpinnings of South African success story, despite the growth of competition among offshoring locations, becomes evident.
Ideal location
In the past few years, the country has specifically emerged as an ideal location for the delivery of legal support services to corporate in-house functions and law firms based in the UK, Europe and Australia, with the US and Canada in the wings.
This support covers standard LPO services, such as drafting, negotiating and managing commercial contracts for corporate law departments, performing due diligence for deals (mergers and acquisitions) or for compliance reasons, and conducting document review in support of pre-trial discovery.
South Africa also hosts captive operations and outsourcers who administer high-volume transactions such as personal injury claims processing for the insurance industry and assisting with conveyancing transactions, for example title checks.
For organisations that have effectively leveraged this tool, legal outsourcing has also brought inherent scalability and flexibility to their operations, enabling them to cope with the peaks and troughs of demand.
There are a number of factors that make South Africa a leading outsourcing location, some of which have only recently crystallised in concert with broader developments in the international legal market place.
The most important attribute remains the country’s legal talent.
The product of a top-tier educational system and carefully monitored professional legal community, the country’s lawyers have the legal training, English legal writing skills and English language skills to function as seamless offshore extensions of their client base operating out of a range of source markets.
As legal outsourcing has gained acceptance, legal organisations now require offshore destinations that can handle complex, one-on-one, live communications that require an articulate and culturally in-touch lawyer.
That is precisely the kind of support a South African lawyer comfortably provides.
In addition to legal talent optimally suited for legal outsourcing, the country also provides material cost-saving over both source and most near shore jurisdictions, while narrowing the difference with competitive offshore locations such as India and the Philippines.
Incentive grants
The South African government, through the Department of Trade and Industry (dti), provides strategic support by way of substantial incentive grants to reduce operating costs for LPO service providers by 11 percent to 12 percent and spur LPO market development.
These incentive grants are calculated on the number of projected offshore jobs to be created based on a tapering scale and is awarded on actual offshore jobs created.
I will be travelling to London to launch the revised Business Process Services incentive scheme, one that looks to build upon the success of the previous scheme which led to the creation of 9 077 jobs on the back of financial disbursements of R587 million.
Besides financial incentives, the dti through Trade and Investment South Africa (TISA) offers a facilitation service for prospective and current investors which allows seamless entry into the country from an investment perspective.
Rob Davies is Minister of Trade and Industry
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Namibia wins new export markets for beef in Russia, China
Namibia is opening new markets for its beef in China and Russia as the country seeks to reduce its reliance on demand from consumers in the European Union and neighboring South Africa.
Namibia sent “a small consignment” of beef to Russia and the two countries are completing veterinary clearance steps before fully fledged exports begin, Calle Schlettwein, Trade and Industry Minister, said by phone in the capital, Windhoek, on Oct. 13. China has cleared Namibia to start beef exports, after completing health inspections, he said.
“Russia and China have potential, much higher than we can satisfy,” Schlettwein said. “This will help our industry move away from single-market dependency which we have with the EU and South Africa.”
The new markets will enable Namibia to reduce the number of live animals exported to South Africa and Angola, which is a relatively low-value trade, Schlettwein said. Namibia each year sends about 490,000 livestock to South Africa, its largest trading partner. Sales resumed in August after a four-month halt prompted by new veterinary requirements imposed by the South African Department of Agriculture.
Namibia also exports about 17,000 metric tons of processed meats to South Africa and about 9,000 tons of the best cuts of its beef to the EU, P.J. Strydom, general manager at the Meat Board of Namibia, said by phone yesterday.
Chinese demand for beef extends from the finest cuts of fillet steak to offal and “this diversification is much needed” for Namibian producers, Schlettwein said.
Discussions with Russia over meat exports began before the country banned imports of some food goods from the EU in retaliation for western sanctions imposed because of the crisis in Ukraine.
“Russia has said it wants to trade with Africa and it’s an excellent opportunity that we must take to trade with countries that we have good relations with,” Schlettwein said.
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Tracking Africa’s stolen billions
Illicit financial flows are a major drain on Africa’s resources for development. International coordination is needed to slow the flow of stolen assets.
Last week, Teodorin Nguema Obiang, the second vice president of oil-rich Equatorial Guinea, was ordered by a US court to sell $30 million worth of property, including luxury cars, real estate and his collection of Michael Jackson memorabilia. The US believes that Obiang, the son of Equatorial Guinea’s president, obtained the money through the proceeds of corruption.
The case is the first of its kind in the US and could, some observers say, mark a milestone in the fight against African capital flight and illicit financial flows, which cost the continent between $50 and $148 billion per year, according to the United Nations Economic Commission for Africa. The wide spread of the estimated cost of illicit financial flows is an illustration of just how difficult it is to track and identify where money escapes, but even at its lower bound, the number is the same order of magnitude as the foreign aid that flows into the continent.
The capital lost to illicit financial flows could be vitally important to development in countries that are trying to improve their mobilisation of domestic resources for investment in infrastructure and services. Slowing, stopping and reversing these illegal flows requires convincing and coordinating a complex mix of international, local and private sector actors whose interests are not always aligned.
The majority of illicit flows occur at the point of trade. Exporters under-report the value of their goods and overestimate the value of imports to avoiding paying duties; others disguise profits by using complicated webs of trust companies and service companies based in tax havens and offshore financial centres.
“Trade transactions are the area where you normally have very serious capacity problems and widespread corruption,” says Charles Abugre Akelyira, a Ghanaian economist and the African regional director of the United Nations’ Millennium Campaign. “As long as your customs services and the management of your customs regime is not strong or easily manipulated, it’s very easy for large corporations to take advantage of.”
The use of anonymous trust companies shields individuals responsible for illicit capital flows from attention or prosecution. Added to this, weak corporate governance codes have created space for transnational corporations to operate with a degree of impunity, Akelyira says.
“This laxity of corporate governance was largely created in the 1980s, 1990s structural adjustment programmes.
They date back to this period where, under the weight of indebtedness, the international financial institutions basically pushed these governments to dismantle strong corporate governance regimes in the name of encouraging private sector investments and expanding the market,” he says. “In that sense, governments or the elites that run the state also found a way to arrange these corporate governance structures around their petty personal advantages.
“If you want to see that’s what is actually facilitating this and making it difficult to keep a handle on these illicit flows, you have to take a look at the corporate governance regimes, the company codes in these countries, and their reluctance to tighten these codes in order to make clear who are behind these companies.”
The structure of many African economies, where natural resources are extracted and shipped out with minimal processing, lends itself well to systemic abuse.
Resource exports happen in bulk, while the imports of equipment and services tend to be capital intensive. Added to this, Akelyira says, is the tangled relationship between power, politics and resources.
“The politics of natural resource extraction means that it is difficult for governments to take a strong hand in managing the governance of natural resource import and export transactions,” he says.
Capital that leaves the continent illegally tends to end up in the international financial system, usually in banking centres known for their secrecy. There has been, however, a recent shift towards pressuring these havens to open up to scrutiny. The G8, G20 and Organisation of Economic Cooperation and Development have all made commitments to try to reduce the impact of illicit financial flows and tax evasion.
Akelyira is cynical as to their motives. “The Europeans and Americans, under the weight of the financial crisis, started to discover how this systematic network is creating fiscal crises in their countries, and they have started to claw back on some of these,” he says. “But they are not clawing it back globally and systematically. In order to bring discipline to corporate transactions globally, because some of them also do benefit from these flows of funds.
“It’s a very selective attempt to address the systematic nature of these largely illegal and mostly immoral ways which money is moving around the world.”
Despite high profile successes, such as the Obiang case, and the return last year of $700 million in assets siphoned out of Nigeria to Switzerland by the Sani Abacha administration, the proceeds of illicit financial flows are hard to recover.
A report by the World Bank’s Stolen Asset Recovery (StAR) programme found that, while nearly $1.4 billion in suspected corrupt assets were frozen in OECD countries between 2010 and 2012, less than $150 million was returned.
Jean Pesme, StAR’s coordinator, says that while there has been a step up in attention in financial centres, meaningful action is still slow.
“You are seeing an evolution, where [enforcement] is much less patchy than it was 10 years ago,” he says.
“We see a change in the approach, but again we are a long way to go before it translates to actual recovery. Although we’ve seen some change in trends and patterns, it’s still uneven, it’s still only a handful of countries.
“Some countries are very committed. Some countries are doing a lot of work, but not necessarily in a proactive way, more in a reactive way, when they are asked. They are providing assistance but they do not proactively go after corrupt assets. Some countries are less present in the discussion.”
Pesme says that there is a need for improved day-to-day coordination between financial centres and countries affected by illicit financial flows, but that sometimes unilateral action, such as that taken by the US against Obiang, is necessary.
“In criminal justice, usually you wait for the affected countries to ask you something,” he says. “But financial centres can be proactive, they don’t need to wait for the affected countries to ask them for assistance. They can open money laundering cases, they can use non-conviction based forfeiture. The concrete evidence of political will is proactive action from financial centres.”
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Kenya, EU sign EPA Agreement
Kenyan exporters can breathe a sigh of relief following a fruitful completion of a new Economic Partnership Agreement (EPA).
The Kenyan government and the European Union (EU) on Tuesday signed the EPA agreement after a two day deliberation in Brussels, Belgium.
Exporters eyeing the European market were expected to face a tax bill of up to 100 million Kenyan shillings per week if a new trade agreement was not signed. This deal will enable the East African country to save up to 150,000 jobs that would have been lost. However, the earliest that the EPA agreement will be implemented is January 2015.
This move has been welcomed by the Kenya Flower Council (KFC) which was going to be the most affected.
“Having resolved the contentious issues on export taxes, subsidies and good governance, paving way for amendment of the EU Market Access Regulation (MAR) 1528/2007, to include Kenya for duty-free, quota free status for all its exports to the EU market,” a statement by the council read.
The flower council said it would continue to urge the concerned EU parties to quicken the process as both parties continue with the process of ratification and finalisation of the agreement.
“The industry acknowledges the Government’s investment and support to the success of the whole process and also in promoting the flower industry abroad. The Ministry of Foreign Affairs and International Trade, through its economic diplomacy portfolio, is aggressively engaged in facilitating promotions in Europe, Eastern Europe, Japan, Asia and the USA which have been very successful.”
In 2007, the East African Community (EAC) member states signed an interim trade deal with Europe to warranty duty and quota-free access to the EU market after the expiry of the non-reciprocal trading arrangement to a waiver granted in 2001.
Emerging markets have tax free access to European markets under the EPA’s regime. The deal stands until the year 2020 when it will be renegotiated.
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UN biodiversity pact seeks to ensure fair, transparent use of world’s genetic resources
After decades of negotiations, the Nagoya Protocol on Access and Benefit-Sharing entered into force on Sunday, enhancing opportunities for the equitable sharing of benefits of the world’s biodiversity.
The Protocol, named after the Japanese city where it was agreed in 2010, establishes clear rules for accessing, trading, sharing and monitoring the use of the world’s genetic resources that can be used for pharmaceutical, agricultural and cosmetic purposes.
By establishing this framework, the Protocol, which falls under the United Nations Convention on Biological Diversity (CBD), seeks to ensure that genetic resources are not used without the prior consent of the countries that provide them, and that the communities that possess the traditional knowledge associated with the use of these resources also enjoy the benefits of sharing them with the rest of the world.
However, 50 Parties to the CBD had to ratify before it could enter into force. The Protocol received its final necessary ratification on 14 July 2014. It now has 54 ratifications. “The Protocol essentially offers countries a framework that allows them to regulate the access to their genetic resources and at the same time decide under which conditions this access will take place, and what benefits they will get from it,” said Viviana Figueroa, CBD Associate Programme Officer.
Benefits received in exchange for access to genetic resources can be monetary or non-monetary, including, for instance, technology transfer, joint research or capacity-building activities.
Establishing a clear path from the discovery of a genetic resource all the way to its commercialization can be a tricky and comprehensive legal process, one that involves various governments, local authorities, businesses and indigenous communities. The Protocol seeks to reduce uncertainty in this entire process by setting transparent and fair conditions throughout the whole value chain.
“On the one hand, many regions are rich in biodiversity and are therefore rich in genetic resources and traditional knowledge,” Ms. Figueroa explained in an interview with the UN News Centre. “This is the case of Latin America, Africa and the Pacific. On the other hand, more developed countries have the technology but not the genetic resources or traditional knowledge, which they need to access to develop new products such as medicine, food, etc. All of this requires a structured process with clear relationships between supplier and consumer countries.”
For example, the healers of the indigenous Maori in the Cook Islands possess a wide range of traditional medicinal knowledge, including applications for various plants such as the arnebia auchroma and hibiscus esculentus which are useful in the treatment of bone fractures and skin afflictions.
If a researcher wanted to further investigate and commercialize these genetic resources he/she would have to follow a number of procedures including obtaining consent from indigenous communities and the Government to use these plants. From the point of view of the indigenous group, they possess the traditional knowledge on this resource and are therefore entitled to benefits from its sharing and trading. The Cook Islands Government would also seek to ensure that it benefits from resources found in its territory.
In this case, Dr. Graham Matheson, a national of the Cook Islands, consulted both the Government and the Koutu Nui before doing further research into these plants in 2003. The parties successfully reached a benefit-sharing agreement and an incorporated company was created, with Mr. Matheson and the Koutu Nui equal shareholders.
But indigenous communities are not always involved in negotiations from the start and many times they may not even know that they are entitled to benefits derived from their knowledge.
Before the Nagoya Protocol there was no overarching international framework to document the use of genetic resources, and it is hoped that with its implementation there will be more legal certainty and transparency when researchers approach countries about using their genetic resources for various purposes.
“The Nagoya Protocol is the first international instrument to recognize that indigenous and local communities have the right to receive benefits from the resources found in their lands and knowledge that they have about these,” said Maria Eugenia Choque Quispe, from the Aymara people in Bolivia, who is also an Expert Member on the UN Permanent Forum on Indigenous Issues.
Ms. Quispe, along with many other representatives of indigenous communities around the world, was involved throughout the negotiations of the Nagoya Protocol, and sees the agreement as an instrument to empower indigenous people.
“Indigenous communities have been key to the Nagoya Protocol, and no other instrument gives them as much rights as this one,” said Ms. Figueroa, who, with CBD, travels to indigenous communities offering capacity-building workshops for indigenous communities in which their rights regarding genetic resources are explained.
The Nagoya Protocol and Sustainable Development
By helping to ensure fair benefit-sharing, the Nagoya Protocol will also create incentives to conserve and sustainably use genetic resources, increasing the contribution of biodiversity to development and human well-being.
“The implementation of the Nagoya Protocol represents a milestone not only for the Convention on Biological Diversity, but also in the history of global governance for sustainable development,” said Braulio Ferreira de Souza Dias, Executive Director of the Convention on Biodiversity, at the opening of the first meeting of the Parties of the Protocol, which is taking place concurrently with the 12th meeting of the Conference of the Parties to the CBD in Pyeongchang, Republic of Korea.
“The sustainable use of biological diversity plays a key role in poverty eradication and environmental sustainability, thereby contributing to achieving the Millennium Development Goals,” he said, referring to the eight largely anti-poverty targets, which come due in 2015.
One of the ways in which the Protocol seeks to increase transparency is through its Access Benefit-Sharing Clearing House (ABS-SH), which is an online platform for exchanging relevant information. Its goal is to enhance clarity on procedures for access as well as offering opportunities to connect users and providers of genetic resources and their associated traditional knowledge. With the Protocol entering into force, parties will be required to provide and regularly update information on the platform.
The way forward
Even though the Protocol has entered into force, it will take some time before it is fully operational, as many countries still need to implement national measures that comply with the accord’s terms of agreement.
“There is an imbalance of knowledge between the North and South, so for example, African countries requested the German and Dutch governments at the time to support them in the negotiation phase,” said Suhel Al-Janabi, co-manager of the ABS-Capacity Development Initiative, which supports countries and stakeholders in developing national Access and Benefit Sharing systems.
While the initiative began as a way to help developing countries in the Protocol negotiations, it has now drifted into providing support towards implementation.
“You cannot take the Protocol as a blueprint to be copied and pasted into national legislation because it’s a framework,” Mr. Al-Janabi said in an interview.
“Before legislation, countries have to know what they want to legislate, and many things need to be defined at national level. For instance, who will provide a genetic resource when it’s in the national park and there are indigenous communities around? Who will provide prior consent? Who will negotiate with the industrial sector? Is it the parks authority? Is it the chief of the local community? Is it the government? All these things need to be defined at a national level and these definitions need to take place before changing the law.”
Mr. Al-Janabi stressed that one of the key components of ABS systems is that they need to involve all relevant stakeholders to share benefits in an equitable way. “You need to have an inclusive process,” he said. “Stakeholder involvement is absolutely crucial so that you do not forget one important group in the setup of your ABS system.”
There are other details which are also essential such as finding out whether the genetic resource is also available in another country, and which terms of access and sharing have been established there.
The ABS-Capacity Development Initiative, which is managed by the German Development Corporation, is working with many countries who are in the process of ratifying the Protocol – 52 have ratified it so far – but will not do so until they have their national measures in place. For example, it is currently working with Cameroon to develop an ABS agreement with a French company that is interested in using a plant in the country as an ingredient for perfumes.
“We provided briefs to parliamentarians so they understood what the Protocol is about, there was support of many stakeholder groups, indigenous communities, science, the ministries in developing their national strategy. We also supported the development of interim regulation because the legislative process is long.”
The lengthy process however, could be fast-tracked if a genetic resource was found to be crucial in an emergency such as or a vaccine or for food security reasons. Article 8 of the Convention states that it will give special consideration in cases of “present or imminent emergencies that threaten or damage human, animal or plant health, as determined nationally or internationally.”
Overall, the Nagoya Protocol seeks to spread the benefits of the world’s genetic resources to people who need them. “Clarity between suppliers and consumers benefits us all,” Ms. Figueroa said. “New pharmaceutical products may lead to the cure of diseases, but if we don’t have clear rules mistrust is created and relationships between different stakeholders won’t last.”
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Trade and development leaders discuss the benefits of global value chains
A business processing center in Riyadh that is run by women.
An e-commerce company that helps farmers develop transport companies to deliver packages to remote, rural areas of China.
An airplane engine designed in Turkey, constructed in North America, and used all over the world.
Each of these innovations emerged from a modern trend in trade – global value chains – that was the subject of discussion Friday at “Transforming World Trade: Global Value Chains and Development,” a flagship event of the Annual Meetings hosted by the World Bank Group and the International Monetary Fund. At issue: what are the implications of this trend for poverty and development?
The panelists included World Bank Group President Jim Yong Kim, World Trade Organization (WTO) Director-General Roberto Azevêdo, General Electric Company Vice Chairman John Rice, and Colombian Minister of Finance and Public Credit Mauricio Cárdenas. Anabel Gonzalez, Senior Director of the World Bank Group’s Trade and Competitiveness Global Practice, moderated the discussion. The vantage points ranged widely, but all panelists seemed to agree: Global value chains hold promise for the poor.
“One of the things that I think is most exciting is what you see when you give poor people access to markets,” said World Bank Group President Jim Yong Kim, speaking to a packed room, overflow audience, and online listeners numbering over 700 people. He applauded the example of Alibaba, a Chinese e-commerce company sometimes likened to Amazon, for its efforts to boost market access deep in rural China.
Kim said that in today’s world, countries have no choice but to compete on a global market. And he said that a key role of the Bank’s Trade and Competitiveness Global Practice was to provide specifically tailored expertise and assistance to countries so that they can do that to the best of their abilities.
“The bottom line is, global market capitalism is the water we swim in,” Kim said. “What we’re really trying to do is, for every single country, come up with the best possible strategy for them to insert themselves into the water that they’re swimming in.”
Azevêdo said the link between trade and poverty is so obvious that it’s almost hard to talk about. He cited a recent study from the Pew Institute showing that support for trade comes from the smallest countries, with Africa being the biggest supporter of all the continents.
He mentioned research from Jeffrey Sachs that found that countries that were more to trade in the 1970s and 1980s grew faster. He said salaries are 15-20 percent higher in companies that import and export.
“The biggest winners are the blue-collar workers. They are the ones that are in the upper range – in the 20 percent,” he said.
Both Azevêdo and Kim underscored the importance of trade facilitation – and, specifically, the WTO Trade Facilitation Agreement – in making it easier for traders in poor countries to connect to value chains. Complicated rules and relationships between countries favor big companies, Kim said, pointing out that small firms stand to be the biggest beneficiaries of a simplified system. And Azevêdo emphasized the responsibility of organizations such as the World Bank and the WTO in helping developing countries to make border improvements and other trade facilitation reforms.
“We have to help them to get there,” Azevêdo said.
Cárdenas said that trade has been vital to his country’s increase in per-capita income over the last 15 years from $3,000 to about $8,500.
“We’ve been doubling our exports every five years and that’s part of a strategy – basically, a strategy that embraces free trade,” Cárdenas said, adding that the connection between trade and poverty-reduction is very important. “The more sustainable way to lead people out of poverty is by providing people with good jobs, formal jobs.”
Rice brought the private-sector perspective of a company that operates 170 countries. He said that GE has to “think of the world as our oyster.” He pointed out that not everyone is friendly to open trade.
“A lot of people think that trade is kind of a zero sum game where somebody wins and somebody loses – there’s an exporter who wins and an importer who loses,” he said, but added that companies like his have to often make the argument that the real “global currency” and basis for sustainable development is job creation. “If you don’t have job creation, you have nothing that’s sustainable and nothing that’s inclusive.”
Rice said that when GE is making investment decisions it looks at the size of the market, the education system, the skill sets, the governance structures, and the ease of doing business in a country. But there’s not necessarily a hard-and-fast formula. Rice described an unorthodox approach that GE took in Saudi Arabia, where the company opened a business process outsourcing center a few weeks ago that is staffed and run by women.
“The Saudi government and our partners in Saudi Arabia came to us and said: ‘We are educating a lot of women, we are graduating women from universities. The world’s largest university for women is outside of Riyadh. We need your help providing employment opportunities,’” Rice said.
At the event, Kim announced fresh collaboration between the Bank and the WTO on efforts to increase border efficiency in the world’s poorest countries, a key element of value chain participation. Kim also announced that the Bank and the WTO would collaborate on a study to examine the role of trade in reducing extreme poverty.
Food Price Volatility, Food Security, and Trade Policy Conference
In 2008, and again in 2011, global food prices reached unprecedented levels, posing serious threats to the food security of vulnerable people around the world. Such spikes in food prices are caused by harvest shortfalls, demand shocks, and global catastrophes. From September 18-19, the World Bank hosted the Food Price Volatility, Food Security and Trade Policy Conference, a far-ranging discussion of the policy challenges of mitigating the threats that these price shocks pose to the poor. Leading policy experts, practitioners and representatives of international organizations including Will Martin and Kaushik Basu (World Bank), Peter Timmer, (Harvard University), Ashok Gulati, (Indian Council for Research on International Economic Relations), and David Hallam (Food and Agriculture Organization) gathered to discuss the tradeoffs that policy makers face in trying to ensure food security for their populations, and to identify the policies that can increase livelihood security and food security.
Kaushik Basu, Senior Vice President and Chief Economist at the World Bank, drew on his own experiences as Chief Economic Advisor to the Government of India at the Ministry of Finance to illustrate the impact of the 2007 crisis in food prices. “For people who live on the brink, [food prices] can, in a matter of days, become a matter of life or death.” Highlighting the challenges that governments face in addressing food prices through trade policy measures, Basu cited research that Will Martin, Research Manager at the World Bank, has conducted on the effect that trade policy measures have on food prices. If countries respond individually there is a serious collective action problem, and “in the end you may achieve nothing but a slight worsening.”
Maros Ivanic (World Bank) discussed the complex impact of food prices on the poor, who can be both consumers and producers of staple crops. Ivanic coauthored a study with Will Martin, “Short- and Long-Run Impacts of Food Price Changes on Poverty,” that uses household models based on data from expenditure and agricultural producers to understand the effect of volatility in food prices on poverty in individual countries and globally. They found that in the short-term, increases in food prices exacerbate poverty because the poor spend such a large portion of their income on food. Over the longer run, however, the poor benefit from increases in wages and smallholder farmers benefit from higher profits. Ivanic concluded that “while the initial jump in food prices was a threat to the poor, their sustained high level appears to be poverty reducing.” Brian Wright (University of California at Berkeley) cautioned, however, that jumps in food prices of the type seen on several occasions in the past few years tend to be much more intense than price declines, with these food price spikes posing serious risks to the poor.
The challenge, then, is to determine the best policy, or combination of policies, to alleviate the shorter-run impacts of increased food prices on the poor, and to prevent the negative long-term health effects of malnutrition. Ruslan Yemtsov and Ugo Gentilini (World Bank) have analyzed data concerning the degree to which social safety nets support the poorest people, as well as evidence comparing cash to food transfers. They have concluded that the costs associated with cash and voucher transfers tend to be substantially lower and are an efficient way to provide help that targets the poor.
Christophe Gouel (INRA) showed that, in countries where policy makers are concerned about food price volatility, there is logic to the oft-criticized policies of varying trade policies to offset changes in world prices, and encouraging increased holding of stocks. A major concern that arises with the use of trade measures such as export restrictions and import duty reductions is the beggar-thy-neighbor nature of these interventions, which appear to have contributed close to half of the increase in rice prices in 2006-8. Research by Kym Anderson, Maros Ivanic and Will Martin concluded that, for this reason, this policy was not effective in lowering global poverty in 2006-8, even though it looked effective to individual country policy makers.
At the national level, policy experts discussed the experiences of India, China, Africa, and Indonesia. Speaking about the decades-long struggle of experts on political economy to bridge the gap between short-term and long-term prices, Peter Timmer summarized Indonesia’s rice price stabilization policy as “an effort to always change next year’s price so it’s closer to the world price.” He also advocated a global strategy to “find a way, country by country, to increase grain storage” in order to bolster food security. Madhur Gautam (World Bank) reported on a study of India’s grain policy that found considerable success in stabilizing domestic prices, but at a surprisingly high cost. Research on policies in African countries presented by Thom Jayne (Michigan State University) and on low-income net food importing developing countries by David Hallam reported that many of these countries have been unable to offset the impacts of higher food prices on their domestic markets, leaving many poor people vulnerable to higher food prices during the recent crises.
There was consensus among attendees that multi-faceted policy approaches that take into account regional and global, and not just national, food security are necessary. Specifically, Will Martin warned against trade policies such as export restrictions that have beggar-thy-neighbor impacts on other countries. Martin’s research has found that, while such national policies help the poor domestically, in the long run they may increase poverty. “We need to continue to worry a lot about the collective action problems that do so much to contribute to price spikes that can be so damaging to the world’s poor. Otherwise, we get back into the situation that we had in 2008, where the price keeps going up. We need to think about different ways of dealing with these problems. We have a really rich menu of possible options: from regional, to WTO, from strictly trade policy, to broader, more encompassing strategies.”
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Shippers oppose levy on transit goods introduced by Mombasa
Transporters are fretting over the introduction of a $2 per tonne tax on goods passing through the port by Mombasa County.
At a media briefing Tuesday, Shippers Council of Eastern Africa chief executive Gilbert Lang’at said the new levy will push up the cost of goods passing through the port.
The average annual cargo that goes through Mombasa is 18 million tonnes. This means that the county stands to collect up to Sh3.2 billion every year from the levy.
Mombasa has also imposed a health charge on trucks on the basis of environmental impact. “This is making the port un-competitive and then again, this is double taxing. We have been paying these levies to the bodies that handle them. They should sit with the national government and agree on a sharing deal that will not push up the cost of doing business,” Mr Lang’at said.
He said exports are likely to be the hardest-hit by these levies. “We do not want a ripple effect where other counties also impose levies on cargo passing through their areas,” Mr Lang’at said.
The council raised concern over new laws being enacted by regional governments for goods leaving the port heading upcountry, known as the northern corridor, saying they are hindering free movement of trade.
It said some areas have imposed levies that are increasing the cost of doing business in the country. “The most prominent of these are levies and the parking fees charged for trucks,” Mr Lang’at said.
The northern corridor passes through seven counties – Mombasa, Makueni, Machakos, Nairobi, Nakuru, Uasin Gishu and Bungoma.
County governments are supposed to raise revenue from internal activities.
“The port of Mombasa is a national asset. This is very clearly stated and, therefore, control in activities the levies and the income generated is within the national government,” Mr Lang’at said.
The council in May released a report citing potential non-tariff barriers emerging from county laws on transport.
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‘Nigeria mustn’t fear competition from Ghana, open up your markets’
Nigeria has nothing to fear from Ghana or her other West African countries, and so must open her markets to her neighbours without any prohibitions, ECOWAS Chair John Mahama has said.
According to the Ghanaian president, the yearly list of trade prohibitions published by Nigeria against Ghana and other West African neighbhours is counterproductive to the integration agenda of the sub-region.
“We need a West African clearing house where we can clear our LCs and trade instruments to be able to move goods across our countries without prohibitions, and I keep telling my friend president Jonathan that that prohibition list that Nigeria publishes every year is a thing of the past”, the president of the world’s second-largest cocoa producing country said when spoke as the Guest of Honour at the launch of First Bank of Nigeria (FBN) in Accra Wednesday.
The Nigerian bank recently, wholly, acquired Ghana’s International Commercial Bank (ICB).
Using the opportunity to campaign for increased trading between Africa’s biggest economy and the world’s major gold producer, President Mahama said: “Nigeria has nothing to fear from Ghana, you are the largest economy in Africa. You must learn to compete with Ghana”.
“…Tell your Manufacturers’ Association of Nigerian that you have nothing to fear from Ghana; competition is good for both our countries. Let us export the textiles into your country; let us export the processed good into your country; and you export yours into ours; and I think that it’ll make our two countries stronger”, Mahama said.
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China slump to be bigger than expected, threatening millions in Africa – new report
China’s economy faces a slowdown in Gross Domestic Product (GDP) to between 2.4% and 5% next year, well below the current 7% International Monetary Fund (IMF) estimate, unless the government takes more decisive policy action – warns a report from the Overseas Development Institute (ODI), the UK’s leading think-tank on development issues.
The report Developing Countries and the slowdown in China concludes that IMF forecasters are failing to fully take into account the risks in China’s financial sector at a time when its economy is already slowing down and its real estate market is in collapse.
Worryingly, this crisis would hugely impact poor countries that are highly dependent on exports of raw materials and other goods to China, threatening millions of jobs and livelihoods in Africa and other regions as exports, direct foreign investment and aid are lost.
Judith Tyson, ODI Research Fellow, said: “No country with such high levels of debt with respect to GDP as China has ever been able to avoid a banking crisis.”
“Chinese leaders are choosing to ignore mounting bad loans, anxious not to slow economic growth. But delaying facing up to the scale of problems by failing to tackle bad loans or even worse, reinflating the real estate market with “mini stimuli”, could throw the country into a prolonged slump.”
Non-performing loans (NPLs) at China’s top banks have already reached CNY 46.9 billion ($7.64bn) in the first half of 2014, double those in 2013. However, the report authors warn that bad debts may be understated and are continuing to pile up in the shadow banking sector which lies outside the regulated banking system.
Poor countries would be particularly hard hit by China’s slowdown, especially those exporting raw materials to the Asian giant. These include Mongolia (with 87% of total exports going to China), Mauritania (over 40%), Zambia (over 20%), Republic of Congo and Cameroon.
But other countries may also be affected. The Philippines, for example, is a major supplier of intermediate electronic products such as integrated circuits, processing units and chips to China. While Pakistan exports basic manufactured goods to China, its third-largest export market, including cotton yarn and fabric, leather goods and processed fish products.
The reports calls for African and other countries vulnerable to Chinese exports to take urgent measures including:
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Diversifying into other sectors such as tourism in sub-Saharan Africa, and clothing and footwear manufacturing in Asia and Africa.
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Expand alternative export markets, especially for primary commodity exporters, the majority of which are vulnerable to a Chinese slow-down.
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Push for greater inter-regional trade, efforts currently being led by international financial institutions such as the World Bank, the Asia Development Bank and the African Development Bank.
Corporate actions and targeted policies can support gender equality in developing countries
The potential positive impact of foreign investment on women’s empowerment through the creation of formal employment and business linkages is considerable, but the operations of transnational corporations (TNCs) also risk increasing women’s vulnerability in the workplace or exacerbating gender inequality, a new UNCTAD report has found.
Investment by TNCs and Gender, launched during a session on women’s empowerment at the UNCTAD World Investment Forum on 14 October, argues for targeted policies and corporate action to ensure that the activities of TNCs translate into real benefits for women in developing countries.
Investment by multinationals has been instrumental in creating job opportunities for women, particularly in labour-intensive, largely export-orientated industries. These include textiles, garment manufacture, electronics, agriculture, call centres and the hotel, catering and tourism industries, the report says.
As well as providing access to employment opportunities for women, multinationals often offer higher wages, employment stability, skills development and further career opportunities. In addition, such jobs are likely to be unionized and better protected under labour legislation.
But the report also identifies a number of risks, such as poor working conditions and limited access to training for women, especially when the jobs created are confined to low-paid activities or occur in the informal sector. Women employees are more at risk of being marginalized when firms upgrade or when low-cost, labour-intensive industries decline.
The report underlines the key challenges to maximizing the benefits of investment by TNCs for women's empowerment. A positive impact is not automatic, the effect can vary over time and it is country- and context-specific, the report says.
Legal and sociocultural impediments can prevent access to employment for women. For example, despite having access to education, legal restrictions often prevent women from participating in the labour market. Patterns of job segregation deeply rooted in social structures may restrict women's opportunities for employment, upgrading skills and career progression. Such impediments can also be reflected within businesses themselves.
The report notes that another important constraint is the paucity of data on women’s empowerment – such data would enable Governments to adopt targeted policies. There is also a lack of research into the specific impact of investment by TNCs on women’s participation in labour markets.
The report proposes a number of targeted policies and actions that Governments and foreign firms might undertake to address such challenges. Three key policy interventions were identified:
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Governments need a specific strategy for women’s empowerment that complements efforts to achieve economic and social development. The strategy should consider how different policy areas impact on each other: for example, how women’s access to education determines their employment opportunities or how support for women’s health needs directly affects their access to labour markets.
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Governments should also consider how foreign investment can support women’s equality, not undermine it. To achieve this, a number of actions can be taken to facilitate and protect women’s employment by multinationals and promote a “gender inclusive TNC value chain”. These include providing infrastructure and social protection, preparing women for work with TNCs, protecting women at work and promoting women's career development.
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Related to these actions, Governments should give particular attention to selected labour-intensive, export-orientated sectors and highly mobile sectors, where women are often strongly represented in the workforce.
For multinationals, the report proposes a set of guidelines on gender equality that should be included in their business models. These guidelines directly stem from the research undertaken for the report and recognize the role that foreign firms can play in supporting women’s empowerment. They include:
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Treating men and women equally
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Incorporating matters of gender equality into TNC investment projects and business models
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Gathering data on women’s participation in the TNC workplace
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Promoting women’s empowerment
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Respecting equal rights in collective bargaining
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Assessing the “gender impact” of divestment decisions and the development of “gender-sensitive” divestment models.
The report was launched at an interactive session during the UNCTAD World Investment Forum 2014 at which speakers discussed its key themes, highlighting their experiences of the impact of TNCs on gender, and considering avenues for policymakers to minimize risks and maximize benefits of TNC activities for women.
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Lopes: Africa needs a new aid paradigm
African governments need to find consensus positions so that continent’s voice is heard in international negotiations, says Carlos Lopes, the Executive Secretary of the United Nations Economic Commission for Africa.
Next year will be a critical point for international development assistance. The Sustainable Development Goals are set to replace the Millennium Development Goals; the third International Conference on Financing for Development will redefine the shape of overseas development assistance (ODA). The Paris Conference will look to set the terms for the international response to climate change, including adaptation funding.
“This is a time when the continent, thanks to its growth and its new narratives, has the opportunity to join the other regions of the world that have ‘liberated’ themselves from ODA,” Lopes says. “We have a unique opportunity to review completely what is the purpose of ODA, on one hand, and on on the other hand reach out to new types of partnerships – partnerships which are not ODA-centred.”
These partnerships, Lopes says, need to include the public and private sectors and need to focus on unlocking and leveraging Africa’s own resources through technical assistance, by helping to stem the tide of illicit financial flows out of the continent and by improving the investment climate.
Lopes is encouraged by the progress that has been made in formulating coherent positions in negotiations with the European Union over Economic Partnership Agreements. He is also impressed, he says, with the way that governments in several resource-rich countries, including Guinea, Gabon and Niger have aggressively renegotiated deals with mining companies which they viewed as exploitative, making difficult short-term decisions to achieve long-term gains.
“I think it is encouraging is that you have countries looking at their context with different eyes and being willing to pick a fight if they have not been respected,” Lopes says.
“The good news that in most cases where countries have gone into these kinds of negotiations, they have won big for their countries… In each case, they had to go through a very difficult period. It’s not a free lunch.”
In the long run, ending “predatory” relationships between the public and private sector makes for a more stable environment for both, Lopes says. Pragmatism is gradually winning out over the ideologies that pushed African governments to invite the private sector in at almost any cost.
“I really believe that these dichotomies are over,” he says. “We are in a period where countries need to be strategic, and being strategic means the best mix… The less ideological we are the less we are going to have hangovers of past discussions between market and state and so on, because it doesn’t make any sense anymore.”
Africa is also finding coherence as it addresses common challenges, such as regional economic integration and climate change.
“Africans are the first group of countries that have a committee at the head of state level on [climate change], chaired by President Kikwete. The blueprint that they are proposing is no longer the usual African position of just trying to get some compensation for adaptation, but rather saying that they are part of the solution, that they can industrialise and do it in a green and cleaner way,” Lopes says.
That coherence has not entirely translated into solutions, but there is definite progress, he believes. “We have to find the common denominators that are powerful enough and have the pulling effect that will allow for
“Africa to take advantage of a unified position,” he says. “I believe we have seen the baby steps in that direction. It’s not yet consolidated, but we are making huge progress in terms of forming African positions and getting Africa ready for a more assertive role.”
Click here for more from the Ninth African Development Forum.