Second Trade Policy Review of Angola: Minutes of the Meeting
The second Trade Policy Review of Angola was held on 22 and 24 September 2015, providing a good opportunity to assess the evolution of its socio-economic, trade and investment policies since its last Review in 2006.
Members commended Angola on its impressive recovery from its civil war and on its economic performance that has put it on track to graduate from LDC status. Economic growth has been supported by significant public investment in infrastructure (including utilities) and by high world prices for its main exports, crude oil and to a lesser extent diamonds. However, growth has slowed down since 2009 due to a less favourable international environment.
Noting that Angola’s dependence on oil renders its economy highly vulnerable to external shocks, Members encouraged it to continue with its diversification efforts by identifying sectors of promising growth. On the business environment, Members praised Angola for the steps already taken but expressed concerns about its restrictions on payment transfers, its visa issuance system, and its opaque regulatory and investment procedures.
Members commended Angola on its active participation in the WTO. The recent adoption of several trade facilitation measures by Angola, including the elimination of pre-shipment inspection and the revamp of fiscal administrations, was generally welcomed. Members encouraged Angola to submit its Category A notification and ratify the Trade Facilitation Agreement. Members also urged Angola to submit other outstanding notifications on, inter alia, SPS, TBT, subsidies and state-trading enterprises, with a view to further improving transparency.
Opening Statement by the Representative of Angola
H.E. Minister Rosa Escórcio Pacavira De Matos
Since its first Trade Policy Review in 2006, the Republic of Angola has continued to experience remarkable economic growth. At the political, economic and social, the country adopted, in 2010, a new Constitution that ensures political and economic stability, based on respect for individual freedom and collective citizens as well as the promotion of free economic and entrepreneurship and economy market based on the principles and values of healthy competition, morality and ethics.
During the preparation of its trade policy review, thirteen Members addressed more than a hundred and forty written questions to the Government of Angola, we appreciate the interest in particular to know the current situation of my country and thus take this opportunity to inform that the Government of Angola has already formulated their writing.
The worldwide trading activity has shown a slowdown, justified by the volume of the drop in exports of goods and services from 3.6% in 2013 to 3.3% in 2014, despite the slight increase in exports in developed economies (3.1% in 2013 to 3.3% in 2014) most notably the United States.
On the other hand, there was a slight increase in imports of 3.3% in 2013 to 3.4% in 2014, explained by the combination of import growth in advanced economies (2.1% in 2013 to 3.3% for 2014) and weak demand for imported products in emerging and developing economies (3.7% in 2014).
Several factors contributed to the weakening of trade and production in 2014, the fall in commodity prices, the decline in imports in Latin America, the slowdown in exports in Asian markets, including the continuing impact of the recession in the Eurozone.
Overall, the poor performance of world trade must be registered to trade in emerging and developing markets, which led to the maintenance of current account imbalances worldwide.
When it comes to global inflation in 2014, low commodity prices, such as crude oil and its derivatives, as well as food contributed to the recent decline of the change in the price index, positioning itself at 3.2 % for emerging economies, according to IMF data. In advanced economies, inflation is below expectations over the long term (1%), settling at 0.7%.
During 2014, the relevant inflation measures had an impact on the decrease of this indicator, having a core inflation advanced economies prowling rates of less than 0.7% against the 1.3% recorded in 2013 despite continued declines in the rate unemployment.
Compared to 2013, inflation in the euro zone has fallen, from 1.3% to 0.9% in 2014, causing global inflation and core inflation (excluding unprocessed food and energy) fell below 1%, positioning itself at 0.2% at the end of 2014 while emerging and developing economies have seen their inflation rate reduced from 4.5% in 2013 to 3.2% in 2014.
The economies of sub-Saharan Africa (where Angola is positioned) inflation rate rose slightly, justified by the reduction of investment in infrastructure and its consequence on agricultural production leading to shortages of commodities.
In regard to interest rates, according to the IMF, deposit reference rates (London Interbank Offered Rate - LIBOR), six months in U.S. dollars were fixed at 0.3% in 2014. In addition, according to BBA (British Banker’s Association), interest rates showed a stable behaviour, and in the euro area and Japan, the rates were fixed close to zero (0.2% on average).
According to the latest data of 2014, the non-oil sector increased by 8.2%, while the oil marked a decrease of 2.6%. In this perspective, it is estimated that the nominal GDP has reached AOA 12.462,3 billion.
The good performance of non-oil sector was heavily influenced by the importance of the fisheries (19.1%), energy (17.3%) and agriculture (11.9%). Preliminary data points out a non-oil nominal GDP of AOA 8,158 billion, i.e. an increase of 11% compared to 2013.
In the year 2014, the oil sector was strongly affected by the decrease in physical production levels of crude oil, at about 2.7%, changing from 626.3% million bbl. to 610.2 million bbl., aggravated by price drop early in the second half of 2014, at which point it reaches its highest point of the year (US$115/barrel) until settling at around US$55.81 in December. During this period, the oil nominal GDP decreased about 11.9% from AOA 4,817.8 billion in 2013 to AOA 4,304.3 billion in 2014.
The diversification of the economic structure, expected to be achieved, will result on the gradual decrease in importance of the oil sector, the increase of the non-oil tax revenues, and the growth of non-oil exports through programmes aimed at stimulating domestic production, creating of priority clusters, as well as the creation of a strong national business community, particularly in terms of micro-, small- and medium-sized enterprises that generate employment and wealth to Angolans.
In this context, the Government has made investments focusing on the rehabilitation and development of infrastructure and the creation of a favourable macroeconomic environment for private investment in non-oil sector, and the implementation of a support to the development of policy across sectors the national economy.
Among the measures taken to promote entrepreneurship and private investment stand out the New Private Investment Law (Law No. 14/15 of 11 August), the Law on Public-Private Partnerships (Law No. 2/11 of 14 January), the Regulation of Law 30/11 of 13 September on the Micro, Small and Medium-sized Enterprises, the Small Business Support Program (PROAPEN), and the implementation of the Single Window Entrepreneurship (BUE).
In this regard, the Government has created programmes to facilitate the access of the productive sectors of the country to finance the costs to enable the economic viability of investments through the creation of an interest relief fund for micro-, small- and medium-sized enterprises, a fund guarantees to credit, and a venture capital fund for competitive projects at an early stage as well as the institutionalization of a credit insurance agency oriented management and control of credit risk in domestic and foreign markets.
In the medium and long term, an important element for the sustainability and ensuring strong money supply to local banks lies on the success of the diversification process of the national economy and the relationship between Angola and abroad within the competitive insertion of its economy in the international context since Angola almost only exports crude oil, which puts at risk the country’s international reserves taking into account the volatility of the price of crude oil in the international market.
The supply of foreign currency to commercial banks is guaranteed by the central bank, the main provider of foreign exchange market and regularly conducts foreign currency sale, to meet the needs of economic agents. However, due to the reduction in country foreign exchange assets, as a result of the oil price fall, the capacity to timely respond to all demand, a situation which has contributed to some operations, has extended their time of execution.
Aware of this situation, the Central Bank has made adjustments on the foreign exchange market to gauge the supply and demand.
The increase of the country’s foreign assets is another of the initiatives that the Government is taking over with emphasis on the use of other sources of external financing.
Foreign direct investment
In this context, the Angolan Agency for Investment and Export Promotion (APIEX) was recently created, whose mission is to promote the potentiality, the legal framework, the business environment as well as the investment opportunities in the country.
The APIEX will be in charge of promoting and attracting investment as well as exports promotion. The performance of private investment will be at sectorial level. Each Ministerial Department will be in charge to review and approve investments of its area of activity.
In order to facilitate the conditions of access of investors and stimulate private investment, it has been created the Law on Public-Private Partnerships and the new Private Investment Law. And in this context, the Government has created several programmes designed to foster the emergence of micro-, small- and medium-sized enterprises, among which we highlight the Angola Invest Program, the Entrepreneurship Promotion Program, the Credit Access Facilitation Program, the Support Program for Emerging Economic Activities, the Conversion of Informal Economy Program, and the Support Program to large companies and their integration into Enterprise Clusters.
In terms of foreign direct investment in Angola, there was an increase by about 8% corresponding to US$15.538 million in the year 2014, given that for the year 2013 the country registered a value of US$14.345 million, the year 2014 value is divided into US$12.026 million related to capital inflows and US$3.512 million related to reinvested earnings.
This flow, which was essentially no-financial private, relates to the execution of projects mainly linked to the oil sector.
The outflow of capital, both by the Angolan investment abroad as the foreign direct investment recovery from Angola, stood at US$20.318 million, a decrease of 11% compared to the year 2013, where the country had a flow of US$27.510 million.
As far as the new Private Investment Law (Law No. 14/15 of 11 August) is concerned, there is a distinction in terms of equal treatment. One big difference that stands out immediately is the fact that foreign investors are not conditioned to a lump sum to invest in Angola. However, the new Law provides tax incentives for private investments starting at US$1 million, while domestic investors to take advantage of these incentives will have to invest the amount equal to or greater than KZ 50.000 million (Article 2 of the new Private Investment Law).
Another difference relates to the establishment by the new Private Investment Law of binding partnerships between foreigners and nationals for certain business sectors (electricity and water; hotels and tourism, transport and logistics, construction, telecommunications and information technology and media) where nationals must hold at least 35% of capital and effective participation in management (Article 9 of the new Law of Investment Promotion).
The new Private Investment Law does not change the provisions on the profits’ repatriation. The profits and dividends transfer or repatriation abroad is a right granted to foreign investors under the combined provisions of Article 22 of Law No. 14/15 of 11 August - the Private Investment Law and Articles 239 and 326 of Law No. 1/04, of 13 February - the Companies Act, which is subject to the prior authorization of the National Bank of Angola, in accordance with Article 2 of the Notice No. 04/2003 of 7 February.
Article 22 of the Private Investment Law refers to transfer of profits and dividends clarifying that after implementing the project of private investment and on proof of their execution is guaranteed the investor the right to transfer abroad:
a) The dividends or distributed profits;
b) The proceeds of liquidation of its investments including capital gains, after payment of taxes due;
c) Claims product; and
d) Royalties or other compensation income from indirect investments associated with the transfer of technology.
The SADC Trade Protocol was adopted in 1996 and entered into force on 25 January 2000. The Republic of Angola signed the SADC Protocol on Trade in 2002, ratified it in February 2003 through the Resolution of the National Assembly No. 5/03 of 25 February, and has deposited its instrument of ratification to the Executive Secretary of SADC. In the same year, Angola has also signed the 2007 amendments and the 2008 SADC Protocol on Trade clarifying certain aspects of rules of origin and safeguard measures, incorporating new annexes on the resolution of disputes between Member States and the sugar trade.
This is why we created a technical working group to negotiate the implementation of the SADC Protocol on trade that produced a road map for implementation of the SADC Free Trade Area by 2017.
Regarding the SADC Protocol on Trade in Services adopted in 2012, the Republic of Angola signed the 18 August 2015 at the Summit of Heads of State and Government of SADC in Gaborone, Republic of Botswana.
With the European Union, Angola has been preparing the general basis for the signing of the Economic Partnership Agreements (EPAs). In this context, it made up a Memorandum of Understanding called “The Joint forward Angola-European Union” which sets guidelines in various fields among them the question of economic growth and sustainable development as an important step in the context of the signature of these instruments.
The European Union has supported the National Development through the European Development Fund Plan (EDF) in key areas such as sustainable agriculture and vocational training. Both parties agreed to maintain an ongoing dialogue of high level with the next meeting scheduled later this year in Luanda (Angola).
Regarding the preservation of heritage and material, there is an ongoing process of accession by the Government of Angola to the Convention of Rome on the protection of the rights of performers, producers of phonograms and broadcasting organizations and the Berne Convention concerning the protection of literary and artistic works. It is expected that the accession will take effect in 2016.
Angola, who is a Member of the WTO since 23 November 1996, reaffirms its commitment to the Multilateral Trade System and to the trade liberalization, which deems beneficial to the growth, development and well-being of the population. However, it underlines the urgent and imperative that these benefits are shared equitably among all countries of the world.
We believe that the WTO can play an important role, not only in the reputation of the trade liberalization process in order to make it more organized, diversified and flexible, but also in implementing a framework based on the rules of world trade.
It was against this background that Angola joined the WTO and actively supported the launch of the multilateral trade negotiations round at the fourth WTO Ministerial Conference held in Doha (Qatar) in November 2001.
Angola underlines the importance of special and differential treatment as a fundamental component of the negotiations, which reflects the recognition of the diversity of WTO Members, the asymmetry of the economic importance of each Member and the need to make the economic benefits of the trading system are well distributed among all Members.
In this respect, the provisions on special and differential treatment should be reviewed in order to strengthen them and make them more effective in accordance with the mandate of the Doha Ministerial Conference of 2001. The rules should be improved to ensure that flexibility in the WTO does not become invalid due to the obligations imposed by other organizations.
Angola calls upon all Members to engage more, showing flexibility where it is possible, to obtain a satisfactory outcome for all in the next Ministerial Conference scheduled in December 2015 in Nairobi (Kenya).