2019 Indonesia-Africa Infrastructure Dialogue: updates

1. Inka aims to secure Rp 7 trillion worth of order contracts from African, Asian countries. State-owned train manufacturing company PT Industri Kereta Api Indonesia (Inka) is expecting to earn Rp 7.2 trillion ($506.5m) worth of order contracts this year, including from exports of rolling stock to African and Asian countries. Inka president director Budi Noviantoro said on Monday that his company was expecting to seal deals to export rolling stock to African countries like Angola and Madagascar as well as to another Asian buyer, Sri Lanka. “Angola wants to buy 10 trains just like the ones used for the Jabodetabek commuter lines, but we are still discussing the delivery deadline,” he said at a press conference at the State-Owned Enterprises Ministry office.

2. Indonesia elicits AU special envoy’s support to solve trade issues. Coordinating Maritime Affairs Minister Luhut Pandjaitan has sought the support of the AU Special Envoy for Infrastructure Raila Odinga to settle some issues that have hampered trade relations with some African nations. The minister held a meeting with the AU special envoy on the sidelines of the IAID 2019 in Nusa Dua, Bali, on Tuesday. Pandjaitan had sought Odinga’s support to finalize the free trade negotiations with Mozambique and Kenya. Pandjaitan, concurrently head of the Indonesia-Africa Infrastructure Development Task Force, opined that the African Union can serve as an entry point for cooperation with its member nations.

3. During the dialogue, Indonesia proposed to negotiate Preferential Trade Agreements to boost trade with some African countries like Mauritius and Djibouti. These PTAs will reduce trade tariffs, which in turn will drive trades and contribute to economic growth.

4. IAID yields 11 business deals worth $822m. The majority of the business deals are infrastructure projects, such as construction of La Tour de Goree Tower worth $250m in Dakar; a housing construction project worth $200m in Songon, Côte d’Ivoire; and a bulk liquid terminal construction project valued at $190m in Zanzibar. The three projects are to be carried out by PT Wijaya Karya (WIKA) with funding supported by Indonesia Eximbank. Other business deals include a pharmaceutical project worth $1.5m by Dexa Group (Indonesia) with Bahari Pharmacy (Tanzania); a clove leaf oil production project valued at $2.5m by PT Indesso Aroma (Indonesia) with Zanzibar State Trading Corporation; and a pharmaceutical project worth $2.5m between Kimia Farma (Indonesia) and Topwide Pharmaceutical (Nigeria).

Ghana and the AfCFTA: Technical barriers to trade must be stepping-stones – Prof Dodoo

For the AfCFTA to succeed, countries must ensure that technical barriers to trade become stepping-stones rather than obstacles, Professor Alex Dodoo says. Speaking on the operationalising of the AfCFTA in Ghana and the role of the Ghana Standards Authority, Prof Dodoo said quality and compliance to standards requirements were key in all free trade areas. He said that under the AfCFTA, African countries would continue to be confronted with the main TBT issues because of state obligations under the WTO’s agreements. Professor Dodoo said governments would introduce more and more regulatory requirements to address, among others, health, safety or environmental issues in accordance with the WTO TBT Agreement and the rights and obligation of members. Besides, consumers will demand safety and quality assurance, while the private and public authorities will continue to scrutinize imported and exported goods for compliance. He said Ghana, as the hosts of the AfCFTA Secretariat, must have deliberate policies that are supported by resources: “Ghana simply has to mainstream standards, technical regulations and conformity assessment regimes into the national strategy in order to take maximum advantage of the AfCFTA.”

Uganda forms ministerial committee to fast-track penetration into African market after AfCFTA ratification

Amelia Kyambadde, minister of trade, industry and cooperatives, told parliament on Tuesday that the committee will strategize Uganda’s competitiveness in the market, among others. “With the integration of the African continent, Uganda stands to benefit from expanded markets, stimulation of increased productivity, increase in trade and services and employment. We are immediately targeting livestock products, coffee, tea, iron and steel, among others. Services will include education, tourism, business services and infrastructure services.” Kyambadde indicated that Uganda is targeting markets in Nigeria, Ghana, Cameroon, Morocco, Algeria and Tunisia.

DTI statement: South Africa sets up national AfCFTA committee

The engagement [last week at NEDLAC] focused on a number of key developments in the local and global economy, including the new industrial strategy outlined by President Cyril Ramaphosa during the State of the Nation Address in June, and the AfCFTA, which has been ratified now by 27 African countries, including South Africa. The NEDLAC parties agreed that a national committee with sector-level task teams should identify which products South Africa could export to other African countries and what steps needed to be taken to realise such exports. The teams should also point to products that are vulnerable and develop measures to strengthen such sectors. Government officials also provided updated presentations on South Africa’s export and investment promotion services, plans to improve the ease of doing business, development of special economic zones, changes to the Competition Act, empowerment and black industrialists programmes, and the trade dimensions of the digital economy. The engagement has now resulted in a number of working groups and committees, with constituents drawn from Government, Business and Labour. These include a Ministerial Export Promotion Panel that will be constituted shortly, a Special Economic Zone reference team and a Working Committee on trade policy and the digital economy. Working groups are expected to meet during August and September.

Kenya’s business lobbies call for India export push to bridge trade deficit (Business Daily)

Business lobby groups have called for a concerted effort to address the huge trade imbalance in favour of India against Kenya. The United Business Association and the Kenya National Chamber of Commerce and Industry said India enjoys a trade surplus with Kenya because local industries lack an avenue to penetrate the Indian market. KNCCI chief executive Angela Ndambuki said Kenya needs to encourage Indian firms to set up local manufacturing bases for exporting goods back to their countries, through incentives such as export processing zones. “Strengthened business ties are key to enhanced Kenya exports to India and this could be in form of manufacturing investments that support the Big Four agenda units or their enablers,” said Ms Ndambuki at the second International Indo-Africa Business-to-Business Trade Expo in Nairobi on Monday.

South Africa: The government is launching a major new website for businesses – here’s what to expect (Business Tech)

The Department of Trade Industry plans to go live with a new business portal by October 2019. Responding during a recent parliamentary Q&A session, minister of Trade and Industry Ebrahim Patel said that the portal will be the first of its kind and significantly improve the ease of doing business in South Africa. “The new business portal will allow domestic firms to get company registration, domain name registration, B-BBEE certificate and SARS registration online at the same time,” Patel said. “In addition, Invest SA is working with UIF and the Compensation Fund to integrate these processes into a single online platform which will be a first for South Africa.” Patel said that Invest SA, with the technical support of the World Bank, has prioritised five of the ten indicators based on the Doing Business report.

Mozambique to join African Export-Import Bank (Club of Mozambique)

The Mozambican government announced yesterday that it has authorised Minister of Economy and Finance, Adriano Maleiane, to sign the country’s accession to the African Export-Import Bank (Afrexim). According to the statement issued at the end of the weekly session of the Council of Ministers, Adriano Maleiane received from the executive the approval to formalize the entry of Mozambique in that pan-African bank.

Qatar to build new port in Somalia’s Hobyo (Aljazeera)

Profiled new World Bank research reports:

1. Revisiting the trade impact of the African Growth and Opportunity Act. This study examines the impact of the African Growth and Opportunity Act using the synthetic control method, a quasi-experimental approach. The novelty in the approach is that it addresses problems of estimation that are prevalent in nonexperimental methods used to analyze the impact of preferential trade agreements. The findings show that most of the eligible countries registered gains in exports due to the African Growth and Opportunity Act. However, the results are varied, and the gains were largely unsteady. Much of the gains are due to exports of petroleum and other minerals, while there are few countries that were able to expand into manufacturing and other industrial goods. The positive trade impacts were largely associated with improvements in information and communications technology infrastructure, integrity in the institutions of legal and property rights, ease of labor market regulations, and sound macroeconomic environment, including stable exchange rates and low inflation. Undue exposure to a single market, like the United States, or few commodities may have also restricted the gains from trade. Extract from the conclusion (pdf):

   On redesigning the next generation of AGOA and other PTAs or in reshaping existing ones, the US and other OECD countries should consider incorporating policy commitments along with preferential access. Commitments in reforms across a range of areas to create an enabling environment for private investment and trade could enhance export capacity. The study suggests that PTAs need to be reinforced with reform-based eligibility criteria. There is a need to integrate PTAs with other efforts to deepen trade and investment between SSA countries and the US. This includes integrating AGOA with foreign aid policy instruments to effectively address the structural challenges limiting export capacity. Efforts to ease supply constraints and support the integration of African economies to global trade requires augmenting the quota-tariff-free ‘preferential’ agreements with additional instruments to strengthen the capacity and competitiveness of firms in these countries. [The authors: Woubet Kassa, Souleymane Coulibaly]

2. Manufacturing in structural change in Africa. In this paper, we study cross-country patterns and trends in the share of manufacturing in national output and employment among sub-Saharan African countries. We investigate the extent to which countries differ in terms of the timing, causes, and consequences of industrialization or “deindustrialization.” Indeed, the fact that development policies are always framed, implemented and evaluated at the subregional and/or country levels suggests that the questions raised in this paper should also be addressed at finer geographic (aggregate) levels. Moreover, since countries are heterogeneous in terms of regional trade clusters, availability of skills, and natural resource endowment, it is important to exploit such richness and nuances to draw conclusions accordingly. More specifically, the analysis in this paper is organized around the following questions (pdf):

   Our key finding is that deindustrialization does not appear to be the common experience of the majority of Sub-Saharan African countries. Only the Southern SSA subregion appears to have deindustrialized over the period under study. We do not, however, find evidence that this deindustrialization of the southern subregion has occurred prematurely. We also uncover meaningful geographic variation in manufacturing experience across sub-Saharan Africa, and a potential role of the Dutch disease in understanding SSA’s manufacturing experience. Although analysis of the latter hinges on the sample size of oil-exporting countries and the availability of key variables such as non-oil GDP, which are limited in this study, it suggests that future research should account for the role of the Dutch disease in studying Sub-Saharan Africa’s manufacturing experience. [The authors: Pierre Nguimkeu, Albert Zeufack]

India: Finance ministry reviewing India’s free trade agreements (Economic Times)

The finance ministry has initiated a review of India’s free trade agreement framework to assess the impact of such pacts on the overall economy. The view has been gaining ground among policymakers and industry that these free trade agreements brought little tangible benefit to India, while helping the partner country. There is also a sense that FTAs have adversely impacted India’s manufacturing, which the government is trying to boost through ‘Make in India’. The review is being carried out by the department of economic affairs along with the departments of commerce and revenue, among others. The government is keen to ensure trade agreements don’t undermine its efforts to step up manufacturing. It aims to lift the share of manufacturing in the economy to 25% from about 16% (at current prices) by 2022. Additionally, the authorities have found that sometimes imports are being diverted from the normal domestic tariff route to FTAs after the government has raised customs duty. This has run counter to the government’s policy steps aimed at discouraging imports of a particular good.