tralac’s Daily News Selection
Diarise: World Bank Group's Fragility Forum 2020 (2-4 March, 2020):
The Forum will focus on implementation: the concrete approaches that are needed to maximize our collective impact and more effectively respond to dynamic, multidimensional, and global challenges affecting countries around the world. The Forum’s sessions - selected through a global Call for Proposal - will focus on five themes:
FDI flows to developing economies, largely unaffected by repatriations, remained relatively stable at an estimated $342bn, a decline of 2% compared to 2018H1. Flows were 2% lower in Africa and developing Asia, and 4% lower in Latin America and the Caribbean. Three of the top 5 recipients of FDI in the world were from developing countries.
FDI flows to Africa in 2019H1 were an estimated $23bn, a decline compared to 2018H1. Subdued global economic growth, persistent trade tensions and political instability in a few countries on the continent are acting as dampeners for investment in Africa in 2019, despite the recent coming into force of the AfCFTA agreement. In terms of sub-regional groupings, East, West and Southern Africa registered upticks, while North and Central Africa had lower flows compared to 2018H1. Egypt continues to be the largest recipient of FDI on the continent, attracting $3.6bn in 2019H1; a significant number of new investment deals have been announced. FDI flows to Nigeria - the largest economy in Africa, picked up significantly, possibly driven by reforms in regulations for oil and gas companies, including lowering mandatory public ownership requirements.
FDI flows to South Africa dropped from $4bn in 2018H1 to $2.6bn in 2019H1. However, indications of several large deals in the third quarter could put the country on track towards higher FDI flows for 2019 as a whole. Ethiopia also experienced a moderate slowdown in FDI in the first half of this year with inflows amounting to $2.1bn, a decline of about 20% compared to 2018H1. In contrast, inflows increased by almost 75% in Uganda to nearly $1bn on account of increased Chinese investment as well as some progress in the development of the country's oilfields. Mozambique and Zambia also experienced rising inflows in 2019H1, with investments in oil and gas and copper fields, respectively.
Financing Africa Industrialization: AU validation workshop
The AUC Department of Trade and Industry successfully hosted a high-level stakeholders validation workshop (24 October, Abuja) for the study it undertook earlier this year. The workshop capped the Department’s RECs strategic interface mission that was focused on the ECOWAS region, and delivered from 21 - 25 October. Participants at the validation workshop noted the need for tailor-made financial products targeting the peculiar needs of SMEs, given the critical role they have towards advancing Africa’s industrialization agenda. It was further noted that SMEs constituted 90% of Africa’s industrial ecosystem, hence the need to afford them more attention in designing interventions to boost their viability, and survival. Thus, it was noted that the banking sector had to design SMEs financing products that were aligned to address the challenges of this strategic sector, if the continent was to create employment, and boost incomes for the populace.
Whilst acknowledging the importance of SEZs and industrial parks across Africa as a catalyst for upscaling industrialization in the continent, participants highlighted the need to ensure that this production model also accommodates the need to grow local industries. The participants, further noted the need to mainstream digital industrial policy and financing of investments in that sector to enhance the continent’s capacity to tap into the benefits of Industry 4.0, the current global high-tech centred industrial production wave. Cross-border and regional integrated industrialization projects were encouraged to strengthen the continent’s prospects to deliver balanced and shared industrialization benefits, as well as to improve the risk profile of most member states in the continent.
Richard Baldwin: Globalisation, robotics and pathways to development (EIF)
TfD: Least developed countries have young and rapidly growing populations. As discussed, wages will become less important in global manufacturing and the sector may no longer offer its historical pathway for poor nations to create jobs and develop through labour-intensive and productivity-enhancing activities. How best should these countries prepare tomorrow’s workforce for the future of work?
RB: This is something that needs to be thought through hard because the traditional development route is being shut off by automation. There is simply no way that human wages – as cheap as they are in countries like Burkina Faso – will compete with robots in mass manufacturing. It may not be in ten years, but most manufacturing will probably be automated within forty years at most. So policymakers need to prepare for the challenges and opportunities ahead. However, I do not think that preparing the workforce for service exports is any different to preparing them for the jobs of the future. They must be literate, healthy and connected. When looking at robotics and pathways to development, I am combining two strands in the literature. The first is that manufacturing’s contribution to employment and growth will change because of automation. The second is that service exports offer an alternative route. In fact my argument is stronger: there will be no more Chinas. Not because of trade restrictions but automation. The service-led development path will become the norm and that is what we need to think about. [Related: Trade4DevNews - Aid for Trade & LDCs (pdf)]
Guy de Jonquières: The WTO struggles to remain the world’s trade rule-maker (Prospect Magazine)
When the WTO was founded in 1995, its first director-general, the late Peter Sutherland, described it as “the pre-eminent institution for managing global economic integration.” That phrase captured the widespread sense of optimism at the time that the organisation would be steward of a more harmonious world order based on increasing cooperation, shared values and common rules. A quarter of a century later, that optimism has evaporated amid growing global tensions and instability. Today, the WTO looks less like the herald of a bright new era than a monument to a fast-fading vision of a future that has failed to arrive.
Roberto Azevêdo: Regional and multilateral efforts are key to Africa’s integration strategies (WTO)
Meeting with ministers and senior officials in Ouagadougou, WTO Director-General Roberto Azevêdo discussed the importance of regional and multilateral trade efforts to help drive Africa’s economic integration, growth and development. During his visit, the Director-General met with Burkina Faso's President Roch Marc Christian Kaboré. He also met with the President of the West African Economic and Monetary Union, Mr Abdallah Boureima, at the group's meeting for trade ministers, attended by Mr Harouna Kaboré, Minister of Trade and Industry (Burkina Faso); Mrs Shadiya Alimatou Assouman, Minister of Industry and Commerce (Benin); and Mr Iaia Djalo, Minister of Trade and Industry (Guinea-Bissau). At the WAEMU gathering, the Director-General discussed how work at the multilateral level, including at the WTO, could complement the economic integration efforts spearheaded by WAEMU countries. He gave a round-up of ongoing initiatives by the WTO to help build trading capacity in the region, and highlighted discussions in Geneva aimed at making the organization more responsive and agile, including on issues where WAEMU members have shown great interest, such as agriculture, cotton, fisheries subsidies and e-commerce.
Women cross-border traders: Uganda - South Sudan Elegu OSBP (EAC)
The EAC Secretariat, supported by GIZ-AUBP and GIZ-SEAMPEC, in collaboration with the South Sudan Women Entrepreneurs Association (SSWEA), convened a three-day training programme for women cross-border traders between Uganda and South Sudan (16-18 October) at the Elegu One Stop Border Post. It was attended by 25 women cross-border traders from Uganda and South Sudan. The women learned how to engage in cross-border trade, making use of the economic opportunities provided by the EAC without suffering from harassment and other challenges at border crossing points. Using the ‘EAC Simplified Information Package for Micro and Small-Scale Women Cross Border Traders and Service Providers in the EAC’, the women learned how to apply the EAC trading rules.
Nigeria’s border closure has implications for Africa’s economic integration (The Conversation)
Border closures are not new in Africa. But Nigeria’s actions raise important concerns about the seriousness and prospects of regional integration in Africa. African countries have different economic configurations and strategic priorities. The huge number of diverse countries within the free trade area isn’t going to make things easy. Indeed, free trade has its benefits, but it also has costs. Nigeria’s bid to protect a declining rice farming industry and save foreign exchange has led to protectionism that defies the principles of a free trade area. The African Union (AU) has been muted on the issue of the border closures. This might be because it does not yet have detailed institutional arrangements for settling disputes within the free trade area. Another factor might be that it has been quiet because Nigeria is involved. As Africa’s largest economy, the AU courted it earnestly to sign. The agreement needs Nigeria, arguably at whatever cost. [The author, Tahiru Azaaviele Liedong, is attached to the University of Bath]
Informal trade along the borders is carried out by hawkers of assorted goods such as textiles, footwear, alcohol and non-alcoholic beverages. There is also trade in food, fuel, transport services and foreign currencies. The poor in Nigeria typically don’t engage in large-scale smuggling. They lack the means of acquiring, transporting and warehousing large volumes of smuggled goods. Some poor unemployed Nigerians may engage in petty and innocuous smuggling, as a means of survival. But they are paying the price for the border closure, while those responsible for the worst cases of smuggling live comfortably. Apart from its domestic implications, the border closure is also inconsistent with the spirit of regional economic integration. Nigeria spearheaded the establishment of the Economic Community of West African States (ECOWAS) 44 years ago with the major goal of a “free trade area” among member countries. Nigeria’s unilateral decision reinforces the general notion that the regional bloc has not been successful at freeing up the movement of goods, services and even people within the sub-region. If that were the case, Nigeria would have coordinated its efforts at curbing smuggling with other member states. [The author, Stephen Onyeiwu, is attched to Allegheny College]
Bad bilateral trade deals haunting Africa (The East African)
According to Nicomedes Kajungu, secretary general of the National Union of Mines and Energy Workers of Tanzania (Numet), the growing number of legal suits that multinational companies are bringing against Tanzania and other African countries is a major concern. Mr Kajungu told The EastAfrican that most of these suits stem from bilateral investment treaties (BITs) signed between countries over the past three decades. “So far, African countries have signed 568 BITs and free trade agreements with investment provisions, mainly with other countries outside Africa,” he said. Mr Kajungu dismissed claims that BITs guaranteed greater foreign direct investment inflows into a country. “Huge FDI flows have been registered in countries like Brazil which do not have a single BIT in force,” he said. Numet are calling for an overhaul of the country’s 1997 Investment Act in the wake of a recent order against the government by the International Centre for Settlement of Investment Disputes.
In direct response to Liberia’s overarching development challenge, the main objective of the Bank’s CSP 2019-2023 is to tackle key drivers of fragility and to strengthen the country’s resilience, in a selective manner and in close alignment with the Bank’s corporate strategic framework and Liberia’s development priorities as spelled out in the PAPD. To achieve this objective, the CSP will support private sector driven economic diversification and strengthen economic governance. Accordingly, the CSP is articulated around the following two priority areas for Bank support: Priority Area 1: Economic diversification through improved transport and energy infrastructure; and Priority Area 2 –Improving economic governance and enhancing private sector development.
Liberia's external sector: Liberia has faced various external shocks in recent years, including the Ebola crisis in 2014 to 2016, commodity price shocks, and a significant reduction in economic activity resulting from the United Nations Mission to Liberia withdrawal in March 2018. The current account balance as a percentage of GDP averaged -22.7% in the last 6 years and it is projected to remain around that level in the next two years. The year 2014 was an outlier due to the response to Ebola crisis as large foreign aid flows supported remediation of the Ebola epidemic. Minerals (iron ore, diamond and gold) and rubber account for 90% of total export value of which 55% is from the minerals sector. Total exports for 2018 are estimated at $490m - an increase from $279m in 2016. In terms of imports, food imports account for 25% of import value followed by machinery and transport equipment (24%), petroleum products (15%) and manufactured goods (15%). Total imports value for 2018 was estimated at $1.0bn - a marginal increase from %0.99 billion for 2017. The over reliance on imports is not sustainable as the trade balance continues to grow hence the need for economic diversification to high value exports.
Regional Integration and Trade: Liberia ranks below average with an index of 0.31 against an Africa average of 0.39 on the Africa Regional Integration Index. At ECOWAS level, Liberia is the second bottom out of the 15 member countries. This shows that non-tariff barriers to trade are significant and these include poor infrastructure for regional connectivity and their limitation to trade facilitation beyond its bounders. The Liberian Parliament passed the ECOWAS Common External Tariff and ECOWAS trade liberalization scheme in September 2016. The Government of Liberia has signed on to the treaty connecting Liberia to the West African Power Pool (WAPP).
Since the Article IV consultation, in a context of intensifying economic challenges, the Liberian authorities and IMF staff have now agreed on an economic and financial program that could be supported by Fund resources. A key element of the program is the FY2020 budget recently approved by the Legislature that constrains expenditure to available resources, and avoids inflationary and reserve-depleting borrowing from the CBL. This budget is underpinned by important reporting and institutional safeguards aimed at preventing slippage and avoiding the re-occurrence of domestic payment arrears. The budget faces tight financing constraints at a time of significantly reduced fiscal buffers and will therefore need to be strictly implemented. Importantly, this budget retains its intended pro-poor orientation. It protects essential social spending, while providing enough resources to allow the CBL to use monetary policy aggressively in the fight against the inflation that has been so damaging to the living standards of the most vulnerable members of society.
Staff welcomes the Liberian authorities’ determination to restructure the wage bill. This is a key policy reform needed to free up fiscal space and make a credible and viable budget possible, while also increasing transparency, accountability, and equity. It is noteworthy that all three branches of Government participated, and that the process yielded a progressive outcome, in that the burden was borne by the higher paid employees with the poorest benefiting from salary increases, including among teachers, health workers and line security forces.
Solving the Indian export puzzle (East Asia Forum)
The finance minister’s announcement flagged the most critical area for exports — complying with international standards. Market access barriers have shifted from the conventional instrument of tariffs to standards compliance and this has hurt Indian exporters. The inability of domestic producers to meet exacting standards in international markets is a well-established fact. Sitharaman’s proposed roadmap for the adoption and enforcement of standards seems to be the way forward. The issue of standards has been discussed by the Department of Commerce on several occasions in the past. The critical issue now is to examine the non-implementation of past recommendations and to identify bottlenecks, particularly at the institutional level. Standards must be enforced in every sector and yet the finance minister has focussed solely on the engineering sector. This appears inadequate given that exports of agricultural and agro-processed products are among the worst-performing in terms of standards compliance. In 2018, the government announced the Agriculture Export Policy that noted India’s inability to export its horticultural products was partly due to a lack of uniformity in quality and standardisation. [The author, Biswajit Dhar, is attached to Jawaharlal Nehru University; Asean trade facilitation instrument for trade in services fully operational
Mauritius wants to sign FTA with Eurasian Economic Union "in near future"
EAC explores potential for Russo-EAC cooperation
South African businesses in Uganda hold forum on strengthening bilateral trade
ECOWAS Commission, UN Women partner on gender mainstreaming
UNCTAD kicks off eTrade for Women masterclass series
China unveils new cross-border trade, investment facilitation measures
The October Commodity Markets Outlook: prices revised down as global growth weakens and supplies remain ample