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tralac's Daily News Selection

tralac's Daily News Selection

26 Sep 2019

David Luke, Phil Rourke: Canada, Africa and the inclusive trade agenda  (Canadian Foreign Policy Journal)

Canada's inclusive trade agenda has been put forward as part of the solution to ensuring more and better jobs for more people in both developed and developing countries. The agenda, however, remains a work in progress. Discussions have too narrowly focused on process outcomes through the promotion of a trade policy making process that is more consultative, inclusive, participatory and transparent. Canada's support for an inclusive trade agenda can have a real and meaningful influence globally if it is more clearly defined based on a common understanding on what elements are essential for trade and trade policy to yield real change and substantive benefits for all. Formal structures for consultations to take place alongside and to feed into and influence the trade policy making process are required. Africa is the best starting point for Canada to put such a policy into practice with real impact on the ground.

UNCTAD's Trade and Development Report 2019: Financing a Global Green New Deal

Extract: Making development wag the debt tail .  A brief overview of essential features of the current trading positions for three main developing country trade areas - MERCOSUR, ASEAN and SADC -  provides some preliminary insights into the feasibility and potential benefits the use of internal clearing mechanisms might provide. This, first, looks at the share of intraregional commercial trade in member states’ overall commercial trade. The higher the share of intraregional trade, the higher the scope for intraregional monetary arrangements to help expand this.  As figure 4.12 shows for three developing country groupings with a history of economic integration in Latin America, Asia and Africa, while this share remains relatively low overall, it has been rising steadily in both ASEAN and SADC, but less so in the case of MERCOSUR. Second, the net commercial trade balances within country groupings also matter, since the idea of a regional clearing union is precisely to use the extension of trade credits to participant deficit countries to replace covering trade imbalances through compensating external capital inflows. As figure 4.13 highlights, these intraregional dynamics are diverse.

By contrast, SADC presents a more difficult case: While SADC, with the exception of oil-exporting Angola, is a deficit region with the rest of the world, and intraregional clearing to reduce the need to cover trade imbalances through external capital flows and substitute these for the extension of intraregional trade credits would, in principle, be beneficial, the current intraregional trade dynamics are not favourable. Other than South Africa, most member countries are in surplus with the region, limiting the scope to which a wider number of member countries could benefit from internal clearing at present.

Thus, core features of current trading patterns provide a varied picture in regard to the benefits that could be derived from the use of regional clearing. While some regions (MERCOSUR, ASEAN) could benefit immediately, if to differing degrees, others (SADC) face more formidable obstacles. However, the purpose of such clearing arrangements is of course also to increase intraregional relative to extraregional trade, such that current trade patterns change. This, in turn, also requires political will. For regional clearing unions to function properly in the interest of freeing up own financial resources and policy space to pursue national development strategies, regional interests have to be prioritized, sometimes over immediate national interests, in the understanding that reverse priorities will, ultimately, undermine collective as well as national developmental goals.

Press releases:   Forget securitization, backing public banks is best for sustainable developmentUN ecalls for bold action to finance a global green new deal and meet the SDGsManaging capital could provide a $680bn annual windfall for financing 2030 agenda

Downloads by chapter (pdf):  Overview;  Chapter I:  Trends and challenges in the global economy;  Chapter II:  Issues at stake;  Chapter III:  A road map for global growth and sustainable development;  Chapter IV:  Making debt work for development;  Chapter V:  Making private capital work for development;  Chapter VI:  Making banks work better for development

The inaugural UN summit on the progress of the 2030 Agenda for Sustainable Development has closed.  Download country statements here, and/or the report of the Secretary-General on SDG Progress 2019 (Special Edition)

The AU's Legacy Project on Diaspora Investment, Innovative Finance and Social Enterprise in Africa (AU)

In 2012 at the Global African Diaspora Summit in South Africa, the AU Heads of State and Government agreed to the creation of a diaspora investment fund, as a legacy project. In September 2018, the AUC and GIZ commissioned GK Partners ‘to establish the design and implementation framework for the African Diaspora Investment Fund in accordance with the Action Plan of the Global African Diaspora Summit’. This ‘Strategic, Business and Operational Framework for an African Diaspora Finance Corporation’ is the result of the consultancy assignment.  Extract (pdf): 

It has not been possible to find any credible case study of a regulated diaspora mutual fund or similar products, run and subscribed by the diaspora, investing in debt and equity portfolio investment products in Africa. There is evidence that a range of different groups, organisations and institutions are discussing, designing or developing Diaspora Portfolio Investment (DPI) products, but there are hardly any products trading in the regulated African and international capital markets. In practice, DPI to Africa occurs at a relatively low level, through: remittance savings deposited in portfolio products; diaspora investment clubs investing in Treasury Bills; and specialist Diaspora Investment Accounts run by African banks. The great potential of using diaspora bonds to finance development in Africa has been argued by diverse studies and advocated by the World Bank, IMF, African Development Bank, diaspora organisations and a wide range of other reputable institutions. However, only four African countries have ever issued bonds package and targeted specifically for the African diaspora. Of the Diaspora Bonds issued by Ghana, Ethiopia, Kenya and Nigeria, only the 2017 Nigeria Diaspora Bond was fully subscribed. There is a big gap between the potentiality, declared enthusiasm and general rhetoric about diaspora bonds, and the actual reality in the marketplace.

For the purpose of business simplicity, operational feasibility, and commercial viability, it is recommended that an AU-backed African Diaspora Finance Corporation (ADFC) should focus on the delivery of a core diaspora investment programme comprising a small number of product classes, namely Bonds, Mutual and Endowment/Trust Funds. The DPI products go beyond remittances, and target diaspora savings and Innovative Finance contributions. The key elements of the investment strategy help define the framework for business implementation and operations, covering the essential topics of products, services, operational systems, processes, structures, governance, compliance and management. The proposed ADFC is not an opportunistic corporate venture; it is a continental social enterprise which will use business and market mechanisms to pursue public benefit and African development. As such, it lends itself to practical Diaspora Public Private Partnership (DPPP), Blended Finance and cross-sectoral collaboration with diverse strategic, institutional and operational partners. Together with policy advocacy partners, ADFC can be a ‘development activist’ investor and market marker, working to reduce market failure and sectoral dysfunction. ADFC shall work with a wide range of relevant African institutions, international development partners, multigenerational Diaspora, and Friends of Africa.

The AfDB has updated its 2008 report: Revisiting reforms in the power sector in Africa

This report updates previous AfDB and Association of Power Utilities of Africa (APUA) assessments of power sector reforms in Africa. APUA conducted a study in 2008 on reforms in the African power sector, focusing on 19 countries. The 2008 study examined the reasons, drivers, and triggers underlying reforms; actors promoting the reforms; the design and implementation of reforms; the impacts on utility performance; and the key success and failure factors of reforms. The 2008 study was complemented by a Compendium of best practices (2009), drawn from nine country case studies.  With this report, the AfDB and APUA examine African experiences to provide valuable lessons on the implementation and success factors of reforms. These lessons should guide the design of policies, programs, and regulatory frameworks to adapt to new challenges. Understanding the policy implications is essential to support efforts to catalyze Africa’s progress, or to facilitate a ‘leapfrog’ development with respect to other regions. This report also sharpens the focus on mapping and answering new needs and concerns that derive from recent technological trends, innovations, and transformations affecting the economy, politics, and power sector.  Extract:  

Managing  the  complex  political  economy  of  power  sector  governance  remains  a  challenge  for  many  African countries. The sector is economically central and therefore highly politicized, which creates a contested discussion around reforms.  Opening  up  capital  investment  flows  in  the  African  power sector is often at the forefront of reform goals. The fastest-growing sources of private sector investment in   the   sector   are   IPPs,   alongside   Chinese-funded   projects.  IPPs  are  now  present  in  over  30  countries,  with  270  operating  or  in  construction  totaling  over  27  GW  of  capacity.  These represent about $51.7bn in investments.  Transmission investments have  not  benefited  from  the  same  influx  of  private  investment  as  generation.  Only a handful of countries have some form of private participation in transmission. Private management has been introduced in the form of concessions, affermage, and full privatization programs in different segments of the power sector in several countries.  Occasionally, this has caused controversy and even contract reversal. The quality of governance—including  corruption  levels,  rule  of  law,  and  regulatory  environment—is  a  key  factor  to  support  transparency  and stability for private investment in the sector.

Mini-grids  and  off-grid  electricity  supply  models - especially those that harness small modular renewable generation  technologies - are  increasingly  attractive  and  cost-competitive  for  remote  communities.  Over half of study respondents (all in sub-Saharan Africa) report the existence of a mini-grid industry in the country. These industries are rapidly growing, especially with support from development institutions, notably the AfDB.

 

Trapped in illicit finance (Christian Aid)

Our estimates show that IFFs cause tax losses of $416bn in the global South. This is money that could enable governments to deliver much-needed public services, and bring us closer to a world where all experience dignity, equality and justice. As eminent economist Professor Jayati Ghosh stated in the report foreword: ‘Illicit financial flows – both illegal and legal – may be the major constraint to development and achieving human rights today’. World leaders have previously committed to fight IFFs. At the Third International Conference on Financing for Development (FfD) in 2015, participants agreed to ‘substantially reduce illicit financial flows by 2030, with a view to eventually eliminating them’. A similar commitment was made when the UN 2030 Agenda was agreed. However – and this is the crucial point – what has been missing until now has been a robust definition of IFFs. Governments of the global North insist on a legalistic definition that would only capture flows of money universally accepted as being illegal, eg, money laundering or corruption. However, we and many of our partners in the global South believe what matters is not whether flows of money or tax practices are legal, but whether they are abusive, harmful or limit governments’ ability to deliver on their human rights obligations.  For instance, this report (pdf) documents abusive practices that have harmed Nepal – a country that is still recovering from a major earthquake in 2015. The events outlined below shine a light on our broken economy and underscore the urgent need to stem the bleeding caused by IFFs. That’s why Christian Aid is calling for the debate around IFFs to shift towards a rights-based one. We want the definition of IFFs broadened to refer to ‘crossborder flows of money that are either illegal or abusive of laws in their origin, or during their movement or use’. It is not about whether it’s illegal, but immoral.