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tralac’s Daily News Selection
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Race for supremacy: India, Japan plan alternative to counter China’s OBOR (Business Standard)
Away from the glare of the multi-nation “One Belt, One Road” initiative at Beijing, India and Japan plan to soft launch their own Asia-Africa connectivity project this month. Like OBOR, the Indo-Japanese plan is also predicated on a race for supremacy in the Indian Ocean. The venue for its launch will be the upcoming annual meeting of the African Development Bank to be held at Ahmedabad from May 22. For both Japan and India, the meeting is a highly significant event to draw attention to their strength as partner nations in a project that demonstrates the same type of ambition as OBOR does. The partnership will initially “focus on countries on the eastern coast of Africa... In the initial phase, seven countries on the east coast — Ethiopia, Somalia, Kenya, Uganda, Tanzania, Mozambique and South Africa may be taken up”. [Uhuru seeks more billions for SGR extension to Kisumu]
SA ‘working on scrapping visa for all African citizens’ (News24)
According to the White Paper, South Africa “fully supports the vision of an Africa where its citizens can move more freely across national borders, where intra-Africa trade is encouraged and there is greater integration and development of the African continent”. It said the current status was untenable. “For instance, on average Africans need visas to travel to 55% of other African countries. They can get visas on arrival in only 25% of other countries. Finally, they do not need a visa to travel to just 20% of other countries on the continent.” But the White Paper, which moves South Africa’s approach to immigration from a purely administrative one to a security-based approach, warns that the scrapping of visas needs to happen with caution. South Africa’s risk-based approach “advocates for an incremental removal of migration formalities for frequent and trusted travellers including diplomats, officials, academics, business persons, students, etc.” The policy is envisaged as follows:
We have no intention of banning mitumba trade, CS Mohamed reassures (CapitalFM)
Industry, Trade and Cooperatives Cabinet Secretary Adan Mohamed has clarified that it is not the government’s intention to ban second hand clothes. Speaking on the sidelines of the Belt and Road Forum for International Cooperation in China, Mohamed said the government was simply working to revive and make competitive, Kenya’s textile industry. And if the mitumba trade falls casualty to the market forces, Mohamed said, then so be it. [Row brews as US-based NGO petitions EAC mitumba ban]
Kenya feels Brexit impact with fall in UK tea exports (Business Daily)
An industry performance report by the Tea Directorate indicates the volume purchased by Britain dropped from 5.4 million kilogrammes in March last year to 3.1 million kilogrammes in the same month this year. The directorate indicates that Britain is no longer buying same amount of tea from Kenya due to a reduced re-exportation market to other European countries who have been securing the commodity from the UK. “We can comfortably attribute this decline to Brexit, Britain has been a major buyer of our tea in Europe and it was buying for both local consumption and re-export to other European countries,” said Samuel Ogola, head of the directorate.
Infrastructure financing in Sub-Saharan Africa: best practices from 10 years in the field (AFC)
This report is a joint effort of BCG and the Africa Finance Corporation, focusing on the climate for infrastructure investment in Sub-Saharan Africa. The key chapters of the report cover the logistical, financial, and socio-political challenges of infrastructure investment in the region; key considerations and strategies for governments to take into account in pursuing such investments; and corresponding considerations and strategies for private investors to weigh in doing the same. The remaining material in the report consists of ten case studies of major infrastructure projects in the region, and appendixes containing lists of resources and projects for reference. Extract (pdf): The importance of understanding Africa’s diversity. While some generalizations are possible, it is essential to remember how diverse Sub-Saharan Africa is. This can create real differences for infrastructure investors. Countries have many differences in legal traditions, regulatory environment, levels of political stability, human capacity, financial sector maturity, historical background, cultures, languages, natural resources, climate, geography, and so on. The resulting complex mix of variables can significantly affect a country’s attractiveness to private investors. (See the following exhibit.) We used a mix of enabling environment and economic opportunity metrics to assess each Sub-Saharan country for infrastructure investment attractiveness. (See Appendix 3.) We reached a number of conclusions on the basis of that data: [Note: The report was prepared for the AFC conference, now underway in Abuja. Twitter: #AFCLive]
COMESA in strategic partnership with Islamic Solidarity Fund for Development
The Islamic Solidarity Fund for Development (ISFD) will provide funding for micro financing for enterprises in COMESA member States that are members of the Islamic Development Bank. This will be done once the ISFD receives a request from COMESA. This is one of the agreements reached during a meeting between the Secretary General of COMESA Sindiso Ngwenya and the Director General of the ISFD Dr Waleed Al-Wohaib. The meeting took place in Jeddah, Saudi Arabia. The two agreed on areas of strategic cooperation which COMESA will take the lead in bringing together national development banks, sovereign wealth funds and multilateral development banks in the Gulf Cooperation Council Countries to fund the COMESA regional programs and projects to realize economic transformation.
A new role for development banks? (World Bank)
Earlier this month, development banks from around the world took stock of where they stand and where they see their efforts having the greatest impact at a meeting organized by the World Bank and Brazil’s development bank, BNDES. Two themes characterized the discussion at the meeting: how to leverage private capital and create new markets. [Related: To close the infrastructure gap, Brazil needs to spend better – not necessarily more]
Rwanda: IMF completes 2017 Article IV Consultation, Review Mission. “Rwanda’s external trade deficit was lower than expected in 2016, following a strong pick up in goods and services exports, combined with reduced demand for imports. The IMF team observed that these developments reflected in part decisive government policies: to address pressures on the balance of payments and falling reserves, the government allowed the exchange rate to adjust, resulting in depreciation of just under 10% in 2016, supported by public spending restraint and prudent monetary policy. The government also implemented a “Made in Rwanda” policy to encourage domestic production of certain goods currently imported and promote export diversification, intended to foster external stability and growth in the medium term. These efforts should allow for a slight increase of foreign exchange reserves in 2017. The IMF team commended these policies, but underlined the importance of balancing tax incentives in Rwanda and domestic revenue mobilization objectives. To that end, the IMF team urged accelerated completion of revisions to income and fixed asset tax laws, and further analysis of the effectiveness of various tax incentives in promoting the competitiveness of Rwanda’s private sector.
Zimbabwe: IMF completes 2017 Article IV visit. “Restoration of confidence is essential for attracting the necessary dollar inflows to the economy. Refraining from central bank financing of the deficit and containing the issuance of debt and quasi-currency instruments is vital. Furthermore, the financial sector should restore its role of intermediating resources in the economy by channeling deposits to productive credit rather than financing fiscal operations. The team recommends taking action to unleash the potential of the private sector and ensure that growth benefits the most vulnerable segments of the population. Building on the progress already achieved, the government is encouraged to demonstrate that Zimbabwe is open for business.” [Gold reserves to anchor local currency]
World Trade Outlook Indicator (WTO)
The WTO’s latest World Trade Outlook Indicator suggests that global trade will continue to expand moderately in the second quarter of 2017. The latest reading of 102.2 is the highest since May 2011, but strength in the overall index is tempered by weakness in certain component indices.
Expert Group on trade finance: informal report by WTO Secretariat (WTO)
The objective of the March 2017 meeting was twofold: (i) to take stock of the current market situation (ii) to examine possible areas of cooperation between participants based on proposals by the WTO Director-General in his 2016 publication: “Trade Finance and SMEs”. Such proposals are: boosting trade finance facilitation programs, reducing the knowledge gap, improving synergies on capacity-building and gap detection. Extract: Representatives of multilateral development banks said that trade finance facilitation programs had been designed to support small trade transactions in the poorest countries. These countries cumulated poor country risk and a high perception of AML-KYC risk. MDBs could only do so much. The CEO of ITFC shared his concern regarding the poorest countries of the Organization of Islamic Co-operation. He emphasized the growth in ITFC’s portfolio, in particular towards SMEs. The ITFC had already stepped in, increasing its support to trade in the OIC by 15%. The African Development Bank was also making progress. The 4-year sunset clause regarding the African Development Bank’s trade finance facilitation program had been lifted, which meant that trade finance had become part of the normal operations of the bank. The AfDB welcomed risk-sharing agreements with partner institutions. [Note: The meeting was held on 29 March]
Pew Research Center: In US, support for free trade agreements rebounds modestly
As has been the case in the past, free trade agreements are viewed far more positively by younger people than older adults. Majorities of those under 30 (67%) and those ages 30 to 49 (58%) say free trade agreements have been good for the country. Among those 50 and older, just 41% say free trade agreements have been a good thing. By roughly two-to-one, both blacks (62% to 29%) and Hispanics (63% to 33%) are more likely to say free trade agreements have been good for the country than to say they have been bad for the country. By contrast, whites are divided in their views of the impact of free trade agreements (47% say they have been a good thing, 44% say they have been a bad thing). Those with postgraduate degrees view free trade agreements positively by about two-to-one (61% good thing, 29% bad thing).
China still wants to import commodities, not manufactures (CFR)
If you net out imported components for reexport, China really doesn’t import many manufactures: manufactured exports are about 12 percent of its GDP, and imports—net of processing imports—are just over 4 percent of GDP, leaving China with a large surplus in manufacturing trade. Exports as a share of GDP have come down after the crisis, but so too have China’s imports of manufactures for its own use. [The analyst: Brad Setser]
2017 Fragile States Index (Fund for Peace)
The Index assesses 178 countries across 12 social, economic and political indicators to identify potential risk of social and political turmoil and conflict. The United States ranks as the thirteenth-most worsened state of the year, while Ethiopia, Mexico and Turkey are the most worsened since the 2016 assessment. The 2017 Index also shows pressure continuing to mount in Brazil and South Africa, while Belgium, Italy, Japan and South Korea experienced upticks in fragility. Ethiopia: Along with Mexico, Ethiopia was the most worsened country of the past year, continuing a decade-long trend of increasing pressures. The most significant issues within Ethiopia are severe drought compounded by land competition and resulting tension between ethnic groups, both of which have been exacerbated by climate conditions. The FFP research team is tracking this trend more broadly and is currently assessing similar patterns elsewhere on the globe. South Africa: The economic engine of Africa, South Africa is the sixth-most worsened country of the past decade. Data this year indicates that conditions continue to decline, with a worsening economy and a crisis of confidence in the country’s leadership. Not only is this a serious concern for South Africa, but it could have a bearing on the region more broadly.
