tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: Gilles Paire | Alamy

15 Dec 2017

Featured infographic, @TradeNewsCentre: Which 70 members have formed e-commerce group at WTO? Related: Too early to regulate e-commerce: Jack Ma

Project Syndicate commentary by UNIDO’s Li Yong: Africa’s must-do decade

Recommendations from the 2nd EA Business and Entrepreneurship Conference (EABC)

Arising issues from the deliberations include: (i) Lack of viable strategies, policies and systems of coherent laws and regulations to stir up industrialization; (ii) Failure to fully implement the EAC Customs Union and Common Market Protocols, (iii) Different investment incentives across the region leading to competition instead of cooperation; (iv) Lack of a regional local content policy. Highlighted recommendations (pdf): Creating an enabling environment for business to foster industrialization, innovation and investment in the EAC: (i) Diversifying the manufacturing base and raising local value add from existing rate of below 10% to at least 40%. This can be achieved through promoting the development and investment in strategic regional industries with sectors in which EAC has potential comparative advantage, (ii) Partner States should accelerate promotion of cross border investment and double their efforts to encourage East Africans to take advantage of regional opportunities to grow their businesses instead of over-depending on FDI outside the region, (iii) Create a credible, rules-based regional investment regime that enhance predictability for investment policies and laws with mechanism to resolve trade disputes and enhance awareness about and promotion the EAC region as a single investment destination, (iv) Transforming micro, small and medium enterprises capable of contributing up to 50% of manufacturing GDP from 20%. Towards a single EAC investment destination: (i) Implement fully the EAC Customs and Common Market Protocols, (ii) formulate an EAC Investment Policy and Strategy.

Namibia: Third Quarter Trade Statistics Bulletin (pdf, NSA)

Chart 1 depicts that from q4-2012 to q3-2017, the country experienced continuous trade deficits that averaged N$6,857m. The highest deficit of N$12,084m was recorded in q2-2015, while the lowest of N$1,002m was registered in q1-2016. The chart also shows an unsteady growth trend with the most significant growth of 773.8% recorded in q2-2016. On average, over a period of 20 quarters, the trade deficit grew by 54.6%. The persistent deficits are mostly driven by Namibia’s high demand for high-valued manufactured commodities and machinery from the rest of the world as opposed to exporting mainly primary commodities that are of low value. Namibia’s exports [in Q3] were mostly absorbed by African regional groupings and the EU, with SACU absorbing 43.8%, the EU with 18.7%, EFTA with 13.4%, and SADC-Non-SACU with 8.9% and BRIC with 7.9%. Equally, imports were also sourced from the same economic regions with SACU accounting for the largest share of 60.3% of total imports, EU with 22%, BRIC with 9.4%, COMESA with 4.2% and SADC-Non-SACU with 3.9%. .

South Africa Economic Overview: recent developments in the global and South African economies (IDC)

The Low Road scenario for the South African economy outlined in this report brings to the fore some of the potential consequences if politico-economic developments result in a more unfavourable growth trajectory than that presented in the IDC’s baseline forecasts. All sectors of the economy would face increased strain in such an adverse scenario. Many business enterprises would likely face serious financial difficulties, which could compromise their sustainability and employment. [Related: SARB Q3 Bulletin and tables; TIPS Real Economy Bulletin: Third Quarter 2017]

South Africa: Measuring shadow banking activities and exploring its interconnectedness with banks in South Africa (SARB)

Shadow banking entities or activities and its interconnectedness with financial intermediaries raise important policy concerns. However, research in this area in South Africa remains limited. Accordingly this paper maps the financial landscape in South Africa, focusing on non-bank financial intermediaries as well as the narrower ‘shadow banking’ measure for South Africa, measured in line with guidance provided by the Financial Stability Board. The interconnectedness between financial intermediaries in South Africa is also explored and key financial stability risks in the South African financial system are highlighted. One of the most notable risks currently is the lack of data. Whilst the shadow banking system in South Africa remains relatively small when compared to global peers, its assets under management are growing at a faster pace than those of banks. Furthermore, banks in South Africa obtain a relatively large portion of their funding from non-bank financial intermediaries and generally interconnectedness among financial intermediaries in South Africa is relatively high.

China-Africa Industrial Capacity Cooperation Exhibition: updates

(i) Kenya to China: Open your markets for our goods. Kenya has asked China to open up its market for Kenyan commodities in order to mitigate the widening trade imbalance in favor of the second largest economy in the world. Speaking while opening the three day China-Africa Expo on Wednesday at the Kenyatta International Conference Centre, Industry Trade and Cooperatives Cabinet Secretary Adan Mohamed welcomed Chinese investors to visit the country and sample Kenyan products needed in their markets. “China is a leading economic partner to Kenya, financing and overseeing landmark infrastructural transformation in the country. We have created a conducive investment environment for Chinese investors in the country and we hope that China will reciprocate and open its over 1.3 billion people market for Kenyan products,” said Mohamed. He asked Chinese firms to explore opportunities and invest in President Uhuru Kenyatta’s big four economic areas of food security, affordable housing, health and manufacturing. [China-Africa Development Fund, ITC, CCPIT roundtable: Africa eyes enhanced China ties to boost industrial growth]

(ii) Kenyan special economic zone to launch Chinese industrial park. A Kenyan special economic zone Tatu City is set to launch a Chinese industrial park to accommodate firms from the Asian nation, officials said Wednesday. Nick Langford, Country Head of Tatu City, told Xinhua that the city, located 15 km northeast of Nairobi, has so far attracted three Chinese firms into its industrial park. “Due to increasing interest by Chinese investors, we are seeking to set aside 50 acres out of the 900 acres of industrial park to Chinese firms,” Langford said. Tatu city is a 5,000-acre mixed-use city that will house over 150,000 residents when fully developed. [Chinese battery firm, Ritar Power and Kenya’s Chloride Exide sign MoU to promote renewable energy in East Africa]

At MC11, new research shows convergence on rules of origin is happening (UNCTAD)

Although deliberations on rules of origin weren’t on the agenda at MC11, the WTO has been dealing with the issue since the General Agreement on Tariffs and Trade was signed in 1947. “Despite multilateral attempts within the WCO, UNCTAD and, most recently, the WTO, it has proven impossible to reach consensus on a multilateral discipline on rules of origin for the last half a century,” Mr Inama said. Although progress towards convergence hasn’t been possible though formal negotiations at the WTO, the study shows that for some products it has “naturally” happened between the rules of origin contained in different free trade agreements. “We have to take this information to the public – that such progress exists and that we can build upon it. We have to break the kind of ‘curse’ that exists on rules of origin.” [Download: Rules of origin as non-tariff measures: towards greater regulatory convergence]

Global e-commerce policy work to continue despite no deal at WTO’s MC11 meeting (UNCTAD)

“The lack of progress on the digital economy negotiation at the WTO has been disappointing but we must not give up,” Sweden’s trade minister Ann Linde said. With the world on the cusp of a new digital economy in which e-commerce and automation will transform production, trade, investment patterns – as well as helping meet the Sustainable Development Goals – the need for new policies to be adopted is clear. “The gains of digitalization are not automatic and there will be major challenges for countries, enterprises and people to adapt, but we must start somewhere,” UNCTAD Secretary-General Mukhisa Kituyi said. “UNCTAD’seTrade for All offers an important platform to support policymaking in developing countries and to champion successful initiatives,” said Torbjörn Fredriksson, chief of UNCTAD’s Information and Communication Technology Analysis Section. “Increasingly, the contribution of digitalization to sustainable development will require a concerted, holistic, cross-sectoral and multi-stakeholder approach,” he said.

The global costs of protectionism (World Bank)

This paper quantifies the wide-ranging costs of potential increases in worldwide barriers to trade in two scenarios. First, a coordinated global withdrawal of tariff commitments from all existing bilateral/regional trade agreements, as well as from unilateral preferential schemes coupled with an increase in the cost of traded services, is estimated to result in annual worldwide real income losses of 0.3%, or $211bn, relative to the baseline after three years. An important share of these losses is likely to be concentrated in regions such as East Asia and Pacific and Latin America and the Caribbean which together account for close to one-third of the global decline in welfare. Highlighting the importance of preferences, the impact on global trade is estimated to be more pronounced, with an annual decline of 2.1%, or more than $606bn, relative to the baseline if these barriers stay in place for three years. Second, a worldwide increase in tariffs up to legally allowed bound rates coupled with an increase in the cost of traded services would translate into annual global real income losses of 0.8%, or more than $634bn, relative to the baseline after three years. The distortion to the global trading system would be significant and result in an annual decline of global trade of 9%, or more than $2.6 trillion, relative to the baseline in 2020.

ECOWAS Commission President pleads for prompt payment of community levy

Making the appeal on Wednesday at the opening of the 79th Ordinary Session of the ECOWAS Council of Ministers in Abuja, Mr de Souza indicated that the non-payment or delay of the Community Levy by member states remains a major challenge. He urged the Ministers to continue to plead with their respective governments to respect their primary obligation for the survival of ECOWAS. Marcel de Souza also provided update on the institutional reform in ECOWAS, noting that the collective commitment and resolve of the entire Commission would be required to successfully complete the reform within the shortest possible time, despite the opposition and challenges encountered at various stages of its implementation. [ECOWAS to delay discussion of Morocco’s admission until early 2018 at extraordinary summit]

Africa 2017 Forum sets strong development agenda (African Business)

Intra-African trade was on the agenda in almost every session at Africa 2017. A continent-wide trading zone has the potential to enhance export competitiveness, create employment, contribute to economic diversification and reduce vulnerability to global shocks. China-Africa discussions also featured heavily throughout the forum. With other Asian players entering the African market, it is clear China-Africa relations are changing and African nations and businesses are querying how to get the most out of Chinese investment and the One Belt One Road initiative. [African presidents draw strong consensus for inclusive growth at Africa 2017]

Egypt launches its first locally-built smartphone with China’s help

Last week, in a lavish ceremony President Abdel Fattah El Sisi was handed the first locally made smartphone called Nile X, which is designed for the Egyptian consumer. In his push for investment in the technology sector, Sisi’s administration has supported an Egyptian Silicon Valley in Assiut, deep in the country’s impoverished southern region, to jump start local manufacturing. SICO, the Egyptian firm behind the 4G enabled smartphone, has been eyeing a growing consumer base of tech savvy Egyptians. With a population of over 95 million, mobile phone subscriptions topped 99 million. Only 32% of Egyptians though have smartphone making it a burgeoning market that the firm would like capitalize on through affordable handsets. SICO is looking to expand in Africa with plans to build an East African regional hub in Nairobi and to expand to Mozambique, Nigeria and South Africa.

Mozambique: IMF Completes 2017 Article IV Mission

On the structural front, the mission urges the authorities to take decisive steps to strengthen the business environment and to restructure financially-weak SOEs that pose significant fiscal and financial sector risks. The mission commends the authorities for submitting to Parliament the SOE law and for approving a decree providing a regulatory framework to the issuance of public debt and guarantees. In this context, the mission encourages the authorities to continue developing their action plan to strengthen governance, transparency, and accountability. Regarding the follow up to the audit of Ematum, Proindicus and MAM companies, the mission reiterates the need to fill the information gaps in the audit report and takes note of the Government’s recommendation to wait for the outcome of the ongoing investigations by the Prosecutor General Office.

International commodity prices and domestic bank lending in developing countries (IMF)

We study the role of the bank-lending channel in propagating fluctuations in commodity prices to credit aggregates and economic activity in developing countries. We use data on more than 1,600 banks from 78 developing countries to analyze the transmission of changes in international commodity prices to domestic bank lending. Our results also show that there is no significant difference in the behavior of foreign and domestic banks in the transmission process, reflecting the regional footprint of foreign banks in developing countries.

Today’s Quick Links:

Could dropping of visas boost intra-continental trade?

Egypt-Mercosur free trade agreement meeting kicks off in Argentina

Domestic IPO by African issuers rises 19.5%, to $1.4b in 2017

Food trade and investment in South Africa: improving coherence between economic policy, nutrition and food security

Mombasa’s Green Port policy: ships to switch off diesel engines

Three reasons why maritime transport must act on climate change

Pathways to resilience in pastoralist areas: a synthesis of research in the Horn of Africa

Strengthening post-Ebola health systems: from response to resilience in Guinea, Liberia, Sierra Leone

Please note: This is the final Daily News Selection for 2017. Updates will resume in early 2018. Wishing our readers a wonderful festive season and a Happy New Year.

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