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tralac’s Daily News Selection

tralac’s Daily News Selection

06 May 2019

2019 Draft Joint OECD/WTO Aid for Trade at a Glance: OECD posts the abstracts for the nine chapters (pdf)

This seventh edition of the Aid for Trade at a Glance publication seeks to explore the implications of economic diversification and empowerment through trade and aid and aid for trade. The joint publication is prepared in collaboration with the Enhanced Integrated Framework, ITC, UNCTAD, UNIDO and the WBG. Secretary-General Gurría will launch the publication at the seventh Global Review to be hosted by the WTO on 3-5 July 2019.

Diarise: Kenya’s transport sector – measuring its value chains and exploiting its potential (14-15 May, Nairobi). This seminar, part of the UNCTAD-UNECA project on services trade in Africa, will sensitize key national stakeholders of transport services about the importance, tools and roles of stakeholders in measuring target value chains, and how this supports Kenya’s capacity to design policies which promote a higher degree of integration into RVCs.

Kenya:  pdf AfDB’s Country Strategy Paper 2019-2023 and Country Portfolio Performance Review (2.14 MB)

Kenya’s private sector continues to be vibrant but remains characterized by a dichotomous structure: a formal business sector, which is relatively healthy and productive but concentrated in a few firms, and a massive, informal, low-productivity small business sector, which contributes 83% of employment in the private sector. Kenya’s private sector has not reached its full productive capacity, mainly due to persisting infrastructure deficits, increased perception of corruption, relatively weak regulatory environment, and a shortage of appropriately trained workforce. This notwithstanding, the 2018 Doing Business indicators show Kenya moving upwards to rank 80 in 2017 from 92 in 2016 and 108 in 2015. Annex 18 summarizes other planned policies, legal and institutional reforms by the government to support manufacturing.

The performance of the Bank Group’s portfolio in Kenya is assessed satisfactory with an overall assessment of 3.03 (on a scale of 1-4) in 2018. This performance is the result of enhanced dialogue and engagement with the GoK, which has resulted in reducing implementation delays. As of end-2018, the Bank’s portfolio in Kenya is composed of 38 operations (26 public and 11 private) with a total commitment of UA 2.38 billion. The portfolio is composed of energy (27%), transport (26%), water supply & sanitation (24.4%), finance (12.3%), agriculture (6%), social (4%), and multi-sector (0.3%).

Extract from Annex 20: Sector briefs. pdf Para 23: Regional Trade (2.14 MB) : In 2016, three of Kenya’s top 10 export destinations were EAC Partner states (Uganda, Tanzania, Rwanda) and approximately 18% of Kenya’s total exports were the EAC region. Kenya enjoys a positive trade balance with the region indicating that the EAC contributes positively to its balance of payments current account position. However, the trade balance with the EAC has stagnated at a positive but relatively low level and exports to the EAC regional market are growing but at a slower pace compared to exports to the rest of the world. Challenges: (i) Regional development is constrained by inadequate infrastructure; (ii) EAC countries have a narrow basket of value-added exports and do not produce enough of what other countries want; (iii) Coordination challenges for regional projects such as LAPSETT between EAC countries as well within government ministries and departments, and between the public and private sectors. (iv) Persistence of non-tariff barriers Kenya is accused of imposing such as: cumbersome customs and administrative documentation procedures; cumbersome inspection requirements; police road blocks and weighbridges; varying trade regulations; cumbersome, and costly transiting procedures; duplicity in the functions of agencies involved in verifying the quality, quantity, and dutiable value of imports and export cargo; and business registration and licensing; (v) Non-implementation of regional commitments such as a lack of recognition of Rules of Origin certificates among EAC Partner States; (vi) Fragility issues around the EAC. Opportunities:

Anzetse Were: China made smart move on standard gauge rail financing (Business Daily)

The question is why? And what does this mean for Kenya? In my view this is good news and demonstrates a seriousness from the Chinese government that perhaps Nairobi did not anticipate. Firstly, Kenyans seem relieved by this development. The citizens have grown weary of what they view as a government with fundamental problems with corruption and fiscal accountability, continuing to secure massive amounts of debt. Secondly, it has given the Kenyan government pause for thought. When what has been profiled as an important diplomatic and developmental project fails to secure financing from the Chinese government, the Kenya government is being asked what went wrong? As a Kenyan economist, this signals that as far as China is concerned, it is not business as usual.


Creating markets in Angola: Opportunities for development through the private sector (World Bank)

The economic crisis in Angola has led to a rethinking about new sources of growth and has revealed the cost of past economic mis-governance. With limited oil reserves and prices unlikely to regain former heights, the public sector must relinquish its role as a core engine of growth. Since 2000, government spending and financial sector growth have been responsible for almost half of Angola’s growth, while consumption fed by higher oil prices accounted for nearly another 40%. Infrastructure and human capital development, however, contributed very little, despite large public spending. The presence of low-performing State-Owned Enterprises (SOEs) in productive sectors, and more generally the dominance of politically-connected interests, have not led to the expected diversification of the economy. In terms of external trade, Angola is one of the least diversified economies in the world, with 96.5% of exports in 2016 comprised of oil and diamonds.

Important segments of the economy remain dominated by state-owned companies and politically connected firms. Angola is home to Africa’s largest SOE, Sonangol. Despite several waves of privatizations in the late 1990s and 2000s, SOE assets in the portfolio of the Institute for Management of State Assets and Shareholdings (IGAPE]) represent 78% of the country’s GDP today. Sonangol’s revenues alone are equivalent to 25% of GDP, and its assets 40%.

On the other side of the spectrum, the private sector is overwhelmingly represented by sole proprietor firms, and firms are on average small. A majority (55%) are sole proprietorships, and altogether they employ a relatively small number of people (21 on average). Almost 60% of businesses are concentrated in Luanda. Several sectors have thrived during the oil boom years: construction and real estate, commerce, and distribution, as well as finance, are connected to oil cash flows and construction. To a lesser extent, telecoms and air transport have also benefited from the fast-growing economy. Together, the growth of these sectors has changed the face of the economy, now dominated by the services sectors. However, they have not contributed enough to put the economy on a sustainable growth path, as the private contribution to growth has been slightly negative. Spillovers from these sectors to the rest of the economy seem to have been modest at best. Agriculture and manufacturing, which have long been prioritized by the government for support and expansion, have failed to take off in spite of receiving large public investments.

Angola’s logistics sector significantly lags its regional peers both in terms of availability and efficiency. The aggregated Logistics Performance Index puts Angola at 160 out of 167 countries. The same is true for the quality of its air, port, rail, and road infrastructure (that is, 139 out of 144 according to the Global Competitiveness Report) despite the significant public investment in key transport infrastructure since the end of the war. The state is heavily involved in the sector with 15 SOEs in the operations of key transport infrastructure and services, including maritime transport, port management, terminal operations, airlines, airport management and services. Public companies have been performing relatively poorly, with $90m losses on average in the last two years of 2016–17; they have accumulated liabilities amounting to 3% of GDP.

Minerals account for a disproportionate share of Angola’s total exports (pdf). In 2016, oil products accounted for 9% of exports and diamonds for 7.5%, the later having grown in recent years (see figure 2.2). Other exported products include fish, stones, and wood, each accounting for between 0.1 and 0.15 percent of total exports, or between $30 and $40m. Exports of non-extractive products increased from $88m in 2012 to $311m in 2016. Unlike many SSA countries, Angola trades relatively little with Europe; China is Angola’s main trading partner. China (42%) and India (8.1%) are the main recipients of Angola’s exports. Overall, 61% of Angola’s exports go to Asia, 25% to Europe, and 10% to North America. On the import side, China and Portugal are the two main suppliers, followed by the United States, South Africa, and the Republic of Korea (see figure 2.3).

Mahindra to tap South Africa for business expansion into rest of the Africa (Devdiscourse)

Mahindra wants to make South Africa the hub of its exports into the rest of the Africa, a senior official of the company has said. Arvind Mathew, Chief of International Operations at Mahindra & Mahindra, joined Rajesh Gupta, CEO of the company’s local subsidiary, Mahindra SA, on Friday to launch two models in the 7500 series and three in the 6000 series of its tractors from its farming equipment range, which are very popular in India and several other countries. “Africa is the future agricultural base of the world,” Mathew told reporters and farming sector representatives at the event in the heart of the farming community in North West Province.

Advancing Gender Equality in Customs Administration: Mauritius hosts regional workshop (GoM)

The Mauritius Revenue Authority has launched a five-day regional workshop on “Advancing Gender Equality in Customs Administration” at the World Customs Organisation Regional Training Centre in Mer Rouge. The workshop (6-10 May) is the second workshop on “Advancing gender equality in Customs Administrations” and is being sponsored by the WCO, through the financial support of the Finland ESA Project II. Participants from nine different countries namely Eswatini, Kenya, Malawi, Mauritius, Rwanda, Seychelles, South Africa, Uganda and Zimbabwe are also attending.

EU releases proposal on new WTO rules for electronic commerce

The EU has made public its text proposal on future rules and obligations on e-commerce as part of WTO negotiations on e-commerce endorsed by Ministers in the margins of the Davos World Economic Forum in January 2019. The pdf EU text proposal (210 KB) will be discussed along with proposals from other participating WTO Members, on 13-15 May in Geneva. The EU is fully committed to advancing the WTO negotiations on e-commerce, which have just started. It will seek to negotiate a commercially meaningful set of rules on e-commerce with as many WTO Members as possible. To this end, the EU tabled initial negotiating proposals for a broad set of rules and commitments that would for instance:

India warns WTO about EU’s proposal for e-commerce rules (Mint)

India has expressed apprehensions about the EU’s proposal on Friday to create new e-commerce rules on grounds that the high standards being proposed could decimate both the goods and services tariff rules under the World Trade Organisation (WTO), impacting its domestic industry and job creation. Addressing the informal Trade Negotiations Committee of the Heads of Delegates on Friday, India’s permanent representative at the WTO J.S. Deepak said most developing countries including India are not ready for binding rules in e-commerce. “We fear the impact of some of the e-commerce rules being proposed under the Joint Initiative on e-commerce, on existing trade rules, particularly the General Agreement on Tariffs and Trade (GATT) tariffs, which protect our industry, and General Agreement on Trade in Services (GATS) schedules that provide us useful flexibilities. Both the GATT and GATS could wither away due to the onslaught of the so-called ‘high standard’ e-commerce elements,” he added. India has decided to hold an informal WTO ministerial meeting of select developing countries on 13-14 May in New Delhi to finalize a Delhi Declaration on development and WTO reforms including on e-commerce.

UK trade commissioner: “Post-Brexit Britain will be Africa’s largest G7 investor” (Africa Report)

The UK’s trade commissioner for Africa, Emma Wade-Smith, says Brexit is an opportunity not a threat, with Britain poised to improve on existing EU trade agreements and invest billions in African growth. “By 2022, our ambition is that the UK will be the largest G7 investor in Africa, with our private sector companies taking the lead in investing the billions that will see African economies growing by trillions,” Wade-Smith told The Africa Report in an interview, echoing Prime Minister Theresa May’s target set last year. Trade between Africa and the UK is growing, says Wade-Smith, a former diplomat who was appointed Her Majesty’s Trade Commissioner for Africa in June 2018. She has been based in South Africa since 2016, and set up the Department for International Trade’s pan-African regional trade team in April 2017.

Today’s Quick Links:

South Africa inks oil exploration deal with South Sudan

Financial Tmes: Jumia’s rise exposes challenges of online shopping in Africa

Kenya: Boost for Uhuru job creation plan as EPZ approves textile firm

UNCTAD’s Mauritius workshop: Empowering selected LDCs to upgrade and diversify their fish exports

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