Building capacity to help Africa trade better

tralac’s Daily News Selection


tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: DAA

Starting today, in Berlin: B20 Germany 2017 Summit. Featured preview

Underway, in Addis: IPCC meeting to draft Sixth Assessment Report outline

Featured tweets: (i) @AUTradeIndustry: The 2nd Meeting of the CFTA Technical Working Groups is still going on, 1-5 May, Sarova Panafric Hotel in Nairobi. Media are VERY Welcome; (ii) @markApriest: Moyale OSBP. Road and infra done on Kenya side, Ethiopia will finish in June. Exciting progress on the Nbo Addis corridor

Integration along the Abuja road map: a progress report (UNU-WIDER)

This paper reviews integration among the eight African RECs by comparing their characteristics and progress with three other South–South Regional Integration Arrangements. Three conclusions emerge: (i) slow progress towards meeting overly ambitious objectives; (ii) small changes in the destination of trade across all Regional Economic Communities, indicative of persistent high trade costs and few new manufactures products destined for geographically close markets; and (iii) compared with other South–South Regional Integration Arrangements, the RECs include a high number of provisions not covered in WTO negotiations, but these have low legal enforceability. From the conclusion (pdf): From a broader perspective, this progress report questions Africa’s ‘old regionalism’ approach where the building of RECs still continues to be built around an exchange of market access seeking to build vertically integrated production chains on a regional basis rather than participating in the growth of trade in tasks where integration takes place on a horizontal basis. With the worldwide reduction in trade costs and the subsequent horizontal fragmentation of production, logistics, and services, activities have become necessary to participate in the rapidly expanding exchange of intermediate goods (i.e. trade in tasks). Participation in ‘value chains’ requires not only access to imported intermediates at world prices, but also access to the services (transportation, accounting, ICT, consulting, financial) that are essential in the production of intermediate and final goods. [The analysts: Jaime de Melo, Mariem Nouar, Jean-Marc Solleder]

South Asia’s missing intra-regional trade (Mint)

The latest edition of the World Bank’s South Asia Economic Focus is well worth reading. Titled Globalization Backlash, the report examines whether South Asia stands to lose from the protectionist tendencies currently on the rise. It concludes, optimistically, that the region does not have much to lose from the turn away from globalization. How convincing is this claim? Exports currently constitute only around 10% of South Asia’s GDP. This is the lowest of all regions barring sub-Saharan Africa. In fact, the contribution of exports to GDP has come down across the region in recent years.

Tripartite Free Trade Area: EAC puts off ratification of tripartite trade deal (The EastAfrican)

The EAC has postponed ratification of the Tripartite Free Trade Area from March to December this year, after failing to agree on the contentious rules of origin and tariffs. “The Tripartite Ministers during the Nairobi meeting had agreed to complete the entire process by July this year while the EAC had agreed to ratify it by March. Given that there is still work to be done on rules of origin and tariff offers that are still outstanding, the EAC agreed to extend the deadline to December 2017,” said Dr Chris Kiptoo, Principal Secretary in Kenya’s State Department of Trade. “The other regional economic communities have not pronounced [their stand] on a new deadline but it is clear that it will go beyond June 2017,” added Mr Kiptoo.

West African Economic and Monetary Union: IMF staff report

The regional current account deficit (including grants) is estimated at 6.1% of GDP in 2016, about 0.3 percentage point of GDP more than last year, reflecting continued public investment efforts and less favourable terms-of-trade. The trade and service deficit increased by 0.7 percentage point to 9.6% of GDP, reflecting a decline in exports of goods - especially cocoa and uranium - and an increase in imports of specialized services. Current official transfers are estimated to have increased by 0.4 percentage point to 2.7% of GDP in 2016 compensating for slightly lower private transfers (e.g., dividend payments). The current account deficit is expected to gradually decline to 5.3% of GDP by 2021, assuming fiscal consolidation and improved external competitiveness.

Ghana: Trade liberalisation in West Africa important – Akufo-Addo (GhanaWeb)

With ECOWAS having been established some 42 years ago, and trade liberalization agreements being in existence for nearly 40 years, West Africa is yet to reap the benefits if intra-regional trade because, in the view of the President, “the political will to make ECOWAS a functioning reality is not there.” Statistics indicate that intra-regional trade between members of the EU and ASEAN amount to some 60% to 70% of GDP, whereas intra-regional trade in West Africa and the African continent amount to a paltry 10% to 11%.

Rwanda: Performance and learning review of the country partnership strategy, FY14 - FY18 (World Bank)

The PLR proposes a two-year extension of the on-going CPS to the end of FY20. This will allow time to fully anchor the new Country Partnership Framework in the EDPRS3, which will be published in January 2019. It will also enable the Systematic Country Diagnostic to be informed by the results of the 2018 fifth integrated household living conditions survey, and the 2019 Demographic and Health Survey. The World Bank will be one of the key development partners providing inputs to the EDPRS-3 including existing analytical work, an on-going Country Economic Memorandum and emerging lessons from the SCD work which is due to start in late FY18. Extract (pdf): Strong leadership and effective coordination of multiple stakeholders have been central to the successful implementation of reforms in Rwanda. Of the 54 Investment Climate Programs in place across Sub-Saharan Africa, Rwanda, together with Mauritius, has demonstrated particularly good progress since 2009. Key success factors include: (1) strong commitment to reforms at the highest level; (2) effective government coordination of teams involved; (3) an ability to understand changes in methodology, to own these and to put forward a solid work-plan; and (4) an ability to learn from the World Bank’s global and regional Doing Business teams and to take a lead role in the engagement.

Mozambique: Country partnership framework for the period FY17 - FY21 (World Bank)

Mozambique’s gas production prospects shape expectations for a recovery in growth to over 7% by 2020. Recent developments indicate progress with the Rovuma basin gas megaprojects, which bring the final investment decisions for these multibillion projects closer. In the meantime, ongoing projects are showing resilience and may benefit from a boost in the near term from an improving outlook for key commodity prices as coal, aluminum, and gas, three of Mozambique’s largest exports, are expected to begin recovering in 2017. This supports the prospects for a recovery in growth, but the challenge remains for Mozambique to ensure that future wealth from these sectors is deployed transparently to spur growth in the non-resource economy and lift the poor to prosperity. Extract (pdf): Mozambique is currently in debt distress. Almost two decades ago, Mozambique was among the first round of countries which proved itself as an economic reformer in return for debt relief. Under the HIPC initiative, the external debt stock reduced from 160% of gross national income in 1998 to a far more manageable 33% ten years later. Soon after the HIPC initiative, the stock of debt began rising again, coinciding with the Government’s plans to pursue an ambitions public investment program, and by 2016, revelation of hidden debt reversed Mozambique’s post-HIPC gains. The debt revelations pushed public debt to 127% of GDP in 2016 (of which 112% is external) and shifted the country to an unsustainable position. Public debt levels are now expected to exceed 100% of GDP until 2020. Total public debt service, which stood at 7.3% of revenue in 2012, is now estimated at 46% of revenue, of which 25% is external, and is projected to consume over 40% of revenue until 2020.

Botswana: Standard and Poor’s affirms Botswana’s A-/A-2 sovereign credit rating (Bank of Botswana)

We expect Botswana to maintain current account surpluses. We assume diamonds, constituting close to 80% of exports, will continue to dominate and the value-added from the diamond-cutting and polishing industry in Gaborone will increase. The 2016 current account surplus is now estimated higher at 13% of GDP against our previous estimate of 3% of GDP six months ago. This is mainly due to a combination of increased diamond sales as Debswana sold past stock levels on increased demand, and a marginal contraction of imports. We estimate the current account should remain in surplus through 2020, albeit at lower levels than in 2016. This is due to what we consider as a one-off increase in sales when Debswana reduced stockpiles, as international diamond prices and production have not significantly firmed up. Service exports, which constitute around 20% of total exports, are supported by tourism inflows. SACU inflows remain relatively stable although declining. The SACU formula, which is used to distribute customs revenues among the members, is unlikely to be changed in the medium term. We expect the country’s gross external financing needs through 2020 will remain above 50% of current account receipts and usable reserves. We anticipate Botswana’s net external asset position will average close to 60% of current account receipts over 2017-2020. [Download, pdf]

Reduce reliance on imports, says President Geingob (The Herald)

Visiting Namibian President Cde Hage Geingob yesterday implored African governments and the private sector to aggressively champion industrialisation in their economies and curb over-reliance on raw commodity exports. In his address to mark the official opening of the 58th edition of the Zimbabwe International Trade Fair in Bulawayo, President Geingob said the challenges facing the continent and rising youth unemployment could only be addressed by harnessing regional linkages and pursuing a robust regional industrialisation agenda anchored on value addition and beneficiation. He bemoaned the low intra-regional trade and reliance on imports from developed economies, which he blamed for the continued use of economic models that serve colonial interests. While Namibia recorded trade in goods worth about $13bn in 2016, President Geingob said his country’s trade with Zimbabwe in the same period was only $24m.

Nader Noureddin: Russia’s trade failures on Egypt (Ahram)

Egypt imports 11 million tons of its total imports of wheat per year at a price of $200 per ton, meaning that Egypt pays Russia $2.2bn a year for wheat alone. Egypt also imports yellow maize and edible oils from Russia and Ukraine. Last year, the country imported 8.5 million tons of maize from Russia, in addition to its imports of soy and sunflower oils, which means that Egypt pays Russia at least another $2bn a year for these goods, making Egypt’s volume of trade with Russia worth about $5bn a year. Russia would lose a lot if Egypt decided to diversify its sources of wheat, maize, edible oils and fish, as it did earlier with US imports. This should have made Russia keener on trade with Egypt, as the balance is in Russia’s favour. However, the opposite has been the case. [The author is attached to the Faculty of Agriculture, Cairo University], [Egypt exports up, trade deficit down 46% year-on-year in Q1 2017]

West Africa: Regional supply and market outlook, April 2017 (ReliefWeb)

Between 7 Feb and 18 March, a series of joint market assessments were conducted across West Africa. At the regional level (pdf), production is above-average, driven by a third consecutive year of favorable production conditions in key surplus-producing areas and a large supply response in Nigeria to favorable production and marketing conditions (high prices and government support programs). There are nevertheless localized instances of below-average production within Niger, Mali, and Burkina Faso (due to erratic rainfall) and northeastern Nigeria (due to protracted conflict and displacement). [Related: East Africa Cross Border Trade Bulletin, April 2017]

Southern Africa: Assessing the competencies of laboratories to support trade facilitation and regional integration (UNIDO)

UNIDO, in cooperation with the SADC Regional Laboratory Association, and with funding from the Ministry of Foreign Affairs of Finland, conducted a survey in 2016 (pdf) in 11 Southern African countries to assess laboratory competencies. From the 175 laboratories surveyed, the results clearly indicate that many laboratories require technical assistance in terms of developing physical and human capacity, test methods, management systems and overall business plans. In order to efficiently overcome the identified gaps, starting in May 2017 UNIDO will strengthen the Regional Laboratory Association; provide strategic support to the National Laboratory Associations to offer sustainable services for their members; and upgrade and strengthen the capacity of food and water laboratories.

ECOWAS ministers of Trade and Agriculture: meeting outcomes (Daily Observer)

The objective of the meeting was to present to the Ministries in charge of Quality and Agriculture the key proposals of the study on the operation of the ECOWAS Quality Infrastructure and the resolutions on cocoa and cashew for their approval. In addition, the ECOWAS Commission will establish an independent technical body to assist in the implementation of the decisions of the Community Quality Council. This body, known as the ECOWAS Agency for Quality, will serve as the Executive Secretariat of the ECOWAS Quality Infrastructure Scheme.

Uganda: Shs31bn logistics hub to be constructed in Gulu (Daily Monitor)

Government has secured funding for the construction of the first logistics hub at the Gulu Railway station, targeting the markets in South Sudan through Alegu and the DRC through West Nile. South Sudan and DRC are Uganda’s largest export markets. According to Mr Benon Kajuna, the director transport in the ministry of Works and Transport, the hub will be constructed on at least 24 acres - provided by the government. The project will cost $8.6m (Shs30.96b) of which $5.6m (Shs20b) is available with funding from DFID and TradeMark East Africa. According to Mr Mark Pearson, a consultant with TradeMark East Africa, that construction will not only require logistics services but will also promote logistics services in Uganda. He said that Uganda could even reach the markets as far as the Central African Republic if the hub is commercially viable.

India should be a standard setter, not follower: Nirmala (The Hindu)

Addressing the 4th National Standards Conclave in New Delhi, she called on the industry to produce quality products at an affordable price so that import of cheaper products can be contained. “India should be setting standards rather than following the standards which are being set,” Ms. Sitharaman said, adding that the country should have active participation in any global debate on setting standards. Launching a portal of standards developed jointly by the commerce ministry and industry body CII, Ms. Sitharaman said this website will be providing all the information relating to standards and conformity assessment.

Today’s Quick Links:

President Trump signs two executive orders on trade: the texts

Chicken issues should not mar trade relationship between EU and SA

Policy lessons for Uganda: Does oil revenue crowd out other tax revenues?

As India’s new BIT strategy sputters out, transparency is a must

FDI round tripping: What to do when foreign direct investment is not direct or foreign

OECD: Competition isssues in aftermarkets (pdf)


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