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Africa’s growth dividend? Lived poverty drops across much of the continent
While adequate food and clean water remain daily challenges for millions of Africans, poverty at the household level – “lived poverty” – has declined in two-thirds of countries surveyed by Afrobarometer, newly released survey findings show.
In results published on 21 January 2016, Afrobarometer reports that in 22 of 33 countries across Africa, fewer citizens are going without enough food, clean water, needed medical care, enough fuel for cooking, and a cash income than three years ago. Lived poverty tended to decrease in countries that had made progress in developing basic infrastructure.
The report, titled “Africa’s growth dividend? Lived poverty drops across much of the continent,” is based on interviews in 2014/2015 with more than 52,700 citizens across Africa.
These insights into trends in lived poverty are particularly useful as governments, development partners, and activists forge strategies for achieving Sustainable Development Goals.
Key findings
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Lived poverty remains extensive in Africa. In 2014/2015, more than four in 10 survey respondents say they went without enough food (44%) or clean water (46%) at least once or twice in the year preceding the survey, and large proportions say the same thing with regard to needed medical care (49%), cooking fuel (38%), and a cash income (74%).
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Yet Africa can no longer be characterized as uniformly poor, as levels of lived poverty vary widely across the continent. Lived poverty is highest in Gabon, Togo, and Liberia and lowest in Mauritius, Cape Verde, and Algeria. Indeed, people in Gabon and Togo experienced shortages at approximately 18 times the rate of those in Mauritius, and four times as frequently as residents of Cape Verde and Algeria.
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Respondents in Central and West Africa encounter the most frequent shortages, while North Africans experience the lowest levels of deprivation.
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Compared to Afrobarometer’s Round 5 surveys in 2011/2013, levels of lived poverty declined in 22 of the 33 countries included in both surveys, with very substantial reductions in Cape Verde and Egypt.
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However, lived poverty increased in five countries, most steeply in Mozambique, Benin, and Liberia, and remained stagnant in five others.
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Longer-term, consistent declines in lived poverty have occurred in Zambia, Ghana, and Cape Verde, while sustained increases in lived poverty are reported in Madagascar and Liberia.
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Lived poverty tended to decrease in countries that had made the most progress in building various forms of development infrastructure in local communities, such as tarred/paved roads and sewage systems.
Afrobarometer
Afrobarometer is a pan-African, non-partisan research network that conducts public attitude surveys on democracy, governance, economic conditions, and related issues across more than 30 countries in Africa. Five rounds of surveys were conducted between 1999 and 2013, and findings from Round 6 surveys (2014/2015) are currently being released. Afrobarometer conducts face-to-face interviews in the language of the respondent’s choice with nationally representative samples that yield country-level results with margins of error of +/-2% (for samples of 2,400) or +/3% (for samples of 1,200) at a 95% confidence level.
Interested readers should watch for additional findings to be released over the coming months (see http://afrobarometer.org/countries/results-round).
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UN chief announces first-ever High-Level Panel on Women’s Economic Empowerment
United Nations Secretary-General Ban Ki-moon on Thursday announced the first-ever High-Level Panel on Women’s Economic Empowerment to provide leadership and mobilize concrete actions aimed at closing economic gender gaps that persist around the world.
“The empowerment of the world’s women is a global imperative,” said Mr. Ban in a press release, issued while he attends dozens of events at the World Economic Forum in Davos, Switzerland.
“Yet despite important progress in promoting gender equality, there remains an urgent need to address structural barriers to women’s economic empowerment and full inclusion in economic activity,” he added. “If the world is to achieve the Sustainable Development Goals (SDGs), we need a quantum leap in women’s economic empowerment.”
According to UN Women, the UN Entity for Gender Equality and the Empowerment of Women, the panel will provide recommendations for the implementation of the 2030 Agenda for Sustainable Development to improve economic outcomes for women and promote women’s leadership in driving sustainable and inclusive, environmentally sensitive economic growth.
It is backed by the United Kingdom, the World Bank Group and UN Women, with the President of Costa Rica, Luis Guillermo Solis, and the CEO of IKEA Switzerland, Simona Scarpaleggia, as the panel co-chairs. They will be joined by a diverse range of eminent gender and equality actors, economics experts, academics, trade union leaders, business and government representatives from all regions.
“Investing in girls and women isn’t just about basic human rights, it’s about fully unlocking the potential of half the world’s population,” said UK International Development Secretary Justine Greening, a founding member of the panel. “Strong economies need the contribution of everyone – including women – and this panel will spearhead a movement to put women’s economic empowerment on the global agenda like never before.”
World Bank Group President Jim Yong Kim, also a founding member of the panel, said “no society, community or economy can achieve its full potential – or meet the escalating challenges of the 21st century – until all its people can achieve theirs.”
The High-Level Panel will have its inaugural meeting during the 60th session of the Commission on the Status of Women at UN Headquarters in New York next March.
Meanwhile, the UN chief also announced the first members of the High-level Advisory Group for Every Woman Every Child who will help provide leadership and inspire actions for women, children adolescents’ health.
The group will advise the Secretary-General and guide the transition of the Every Woman Every Child movement and the newly launched Global Strategy for Women’s, Children’s and Adolescents’ Health.
Co-chaired by Chilean President Michelle Bachelet and Prime Minister Hailemariam Desalegn of Ethiopia, the group aims to end all preventable deaths of women, children and adolescents by 2030 and to support the achievement of the SDGs.
Also in Davos on Thursday, Mr. Ban and World Bank President Kim jointly announced their intention to form a new panel to mobilize urgent action towards the sustainable development goal for water and sanitation (SDG 6).
The announcement comes as countries experience water stress and water-related disasters that will grow worse due to climate change without better policy decisions, stressed a note issued by the UN Spokesperson.
“Water is a precious resource, crucial to realizing the SDGs, which at their heart aim to eradicate poverty,” said UN Secretary-General Ban Ki-moon. “The new panel can help motivate the action we need to turn ideas into reality.”
Co-chaired by the Presidents of Mauritius and Mexico, it will comprise a group of heads of State and Government from developed and developing countries.
“Achieving the water global goal would have multiple benefits, including laying the foundations for food and energy security, sustainable urbanization, and ultimately climate security,” said President Jim Yong Kim. “My hope is that this panel accelerates action in many countries so that we can make water more accessible to all.”
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Bank chief: The end of cash could happen within a decade
Cash could become history within a decade, thanks to new financial instruments, including virtual currencies, some of the world's leading bankers said during the World Economic Forum on Wednesday, 20 January.
The impact of technology, the overarching theme of this year’s meeting, will be very significant.
The evolution would be so significant that John Cryan, co-CEO of Deutsche Bank AG, predicted that, in ten years’ time, “probably” we would not see cash anymore. It is “terribly inefficient”, he added.
“Cash should be dematerialized,” he said in a panel on the future of finance- and governments “should be interested” in this process because it would make transitions “more traceable” and would help to combat illegal financing or money laundry.
Echoing his prediction, Dan Schulman, the CEO of PayPal, stated that “money is digitizing in front of us”. Although 85% of transactions (in number, not in volume) are made still in cash, “it is inexorable that this process is going to happen” although still “we have a long way to go”, he said.
For bankers, and even the International Monetary Fund, one of the most promising disrupters will be the virtual currencies powered by blockchain technology.
On Wednesday, the IMF published a report on virtual currencies.
The Fund’s Managing Director, Christine Lagarde, summarized the conclusions of the document by using the opening line of the novel, A Tale of Two Cities: “It was the best of times, it was the worst of times.”
On the positive side, she pointed out that virtual currencies could be “extremely beneficial” to reach out to people who live in very remote areas, for example.
However, these new currencies could also be “a great instrument for crime”, because the regulation remains inexistent. Moreover, if this technology develops very rapidly, it could become a “threat to financial stability” or even “disrupt monetary policy”.
But this new sector is still “too small”, she said. The total market value of virtual currencies is only $7 billion. And even if “we know very little” about virtual currencies, potentially they could disrupt the industry very deeply, she said. Thereby, authorities still have “a little bit of homework to do” on the regulatory front.
Big data
Virtual currencies are not the only change-maker spotted on the horizon. The other big engine for development will be the use of data in a more sophisticated way.
‘Big data’ represents a “fundamental” opportunity for the insurance sector, underlined Tom de Swaan, CEO of the Zurich Insurance Group.
From car insurances to assessing life risks, the use of big data allow the insurance firms to do their business “in a more granular manner”, de Swaan commented.
The fast pace of change would shake the financial sector in the next five years more than what we saw over the past three decades, predicted Schulman.
This revolution will be a joint effort led not only by disrupters like his firm Paypal, but also the ‘incumbents’ of the financial market and even the regulators, he said.
“Life at the top of a financial institution was not easy and will not be easy,” admitted de Swaan, as “it is difficult to predict the technology changes”.
In order to cope with them, he called for finding alliances with the disrupters, as both the newcomers and the traditional firms have strong incentives to join forces. “We should use them (the disrupters) to create new products and distribution systems,” he explained.
What kind of regulation?
In the years to come, the key issue would be how to regulate these new financial instruments.
James Gorman, CEO of Morgan Stanley, pointed out that regulators should get involved with issues related to cybersecurity, to address excessive concentration and therefore systemic risks, and to guarantee customer trust.
“Trust is at the heart of banking”, he stated.
Background
Described as one of the “greatest technological breakthroughs since the Internet”, blockchain is a decentralised public ledger (or list) that keeps a record of all transactions that take place across a peer-to-peer network. Users provide their computers to verify the transactions in real time, therefore cuting the need for a central third party to certify the transfer across the Internet.
One of the first applications of blockchain is the development of so-called crypto-currency (or virtual currencies), of which Bitcoin is the best-known example. Its disruptive potential goes beyond being a payment method, as it could also affect credit card transactions, bank-to-bank money transfers, or bond and shares management.
Some banks and credit card companies are starting to explore the potential with small projects. For instance, Visa is looking into the possibilities of using Blockchain as an alternative to conventional remittance processing.
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Urban resilience: Challenges and opportunities for African cities
Various city representatives gathered for a special breakout session during the recent Understanding Risk & Finance Conference to discuss resilience, the challenges and opportunities for African cities, and share experiences on strengthening resilience.
“Our cities are projected to play an increasing role in the economic transition,” said Mayor Ato Deriba Kuma of Addis Ababa. “Strengthening urban resilience to multiple shocks and stresses will therefore prove crucial to the success of this transition and to ensure improved living conditions for residents.”
Moderated by Dr. Ibidun Adelekan, senior lecturer in Ibadan University of Nigeria, the session saw an overwhelming response from an audience who not only engaged in lively discussions but raised many questions on understanding the meaning of resilience for African cities and how it can be achieved. Throughout the discussions, five overarching points emerged:
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Rapidly urbanizing environments in Africa present both a challenge and opportunity. Africa is the fastest urbanizing continent in the world. With an average urban growth of 3.4%, the continent’s urban population is projected to reach 1.2 billion by 2050. This means 60% of all Africans will be living in cities, up from 40%. Such rapid growth is commonly accompanied by challenges such as food and water shortages and inadequate housing and infrastructure. However, with such a large proportion of the urban environment yet to be built, African cities also represent an unparalleled opportunity to avoid past mistakes and embed resilience in policies and planning. Urbanization can either act as a driver of risk, or mitigate it.
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At the same time, the interdependence of urban risks requires an integrated multi-sectoral approach. Urban areas are complex with highly interdependent systems. Failing systems can result in cascading impacts that disrupt the availability of clean water, electricity, and communications. Such cascading events combined with a high concentration of populations and investments at risk can quickly result in catastrophic impacts. The drivers of urban risk are the result of a complex interaction of local, regional, and global pressures that often extend beyond the administrative bounds of a given city. Urban systems, therefore, demand special focus within a new framework that works in an integrated manner.
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Diagnostic tools that support a cross-sectoral, multi-stakeholder approach provide a first step in helping cities to efficiently identify and tackle existing risks, and unlock opportunities. New methods and analytical tools, such as The World Bank’s City Strength Diagnostic and UN-Habitat’s City Resilience Profiling Tool (CRPT), allow for systematic and evidence-based understanding of urban risks and planning for resilience. In Chókwè, Mozambique, city officials piloted UN-Habitat’s CRPT, which enabled local governments to identify multiple risks facing their city over short, medium and long-term horizons, and, critically, to understand the interconnected nature of these risks. Having a population of just over 55,000, Chókwè is a small city that is extremely vulnerable to flood and cyclone hazards. Large portions of the town were completely inundated by the 2013 floods. Mayor Lídia Frederico Cossa Camela, who participated in the session, emphasized that “the process of developing the City Resilience Action Plan has helped to empower local authorities, raise public awareness and enhance the participation of urban residents in decision-making to combat risk.”
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To put the resilience agenda into action, cities in Africa will need to mobilize resources from public and private sectors, domestic and international. The acute and cumulative effects of disasters generate major economic and fiscal losses on the individual, community to national level. These events can undermine hard-earned development gains, trap the most vulnerable groups in poverty, and exacerbate inequality. Teresina Brazil, Mayor Firmino Filho, mayor of Teresina, Brazil, provided the example of how this previously flood prone city of 844,000 residents was able to mobilize support for an integrated urban water management multi-layered project, which tackles urban flooding through drainage infrastructure. The program creates green areas to mitigate the effects of urban flooding, improves water supply, enhances sanitation services, and encourages the regeneration of urban areas to promote economic development and leisure opportunities. As a result of the investment, the city has seen land value appreciation and growth of the local economy. As cities move from diagnostic phases to implementation, they will need strong government leadership and coordination across the national to local level; scaling up of bottom-up, locally managed funds such as community saving groups; engagement of the private sector; and technical expertise to develop a range of innovative financial instruments.
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In an increasingly urban world, the major resilience challenges of this century – poverty reduction, natural hazards and climate change, environmental sustainability, and social inclusion – will be won or lost in cities. With commitment from leaders, partners, and citizens, African cities can lead the resilience agenda, and spearhead the economic and social transformations necessary for reducing poverty and boosting shared prosperity.
The 2016 Understanding Risk Forum will take place May 16-20 in Istanbul, Turkey.
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tralac’s Daily News selection
The selection: Thursday, 21 January 2016
Starting today, in Addis: 31st Ordinary Session of the Permanent Representatives Committee (AU)
The PRC will prepare the agenda of the AU Summit with appropriate recommendations for consideration by the Executive Council scheduled to take place from 27-28 January 2016. The meeting of the PRC will officially end on Saturday 23 January 2016.
Eastern Africa 2016 ICE meeting: Institutions, decentralization and structural transformation in Eastern Africa (UNECA)
This 20th ICE, to be held in Nairobi, 8-11 February 2016, will examine the role of institutions in promoting equitable growth in Eastern Africa. This will include a review of mechanisms that ensure the formulation of shared visions, enshrine good governance, strengthen public participation in decision-making and build social capital and cohesive pacts for transformational change. [The concept notes]
World of business must play part in achieving new Sustainable Development Goals – UN chief
“I ask all the CEOs here today [in Davos] to help us. Your advocacy and example can drive action to achieve a life of dignity for all people,” he told business leaders at an event on the Global Compact, a 15-year-old UN initiative to encourage businesses worldwide to adopt sustainable and socially responsible policies. You recognize that responsible businesses have enormous power to create decent jobs, open access to education and basic services, unlock energy solutions and end discrimination. I count on you to drive global progress,” said the Secretary-General.
A selection of Africa-related postings from the WEF: Extreme automation and connectivity: the global, regional, and investment implications of the Fourth Industrial Revolution (UBS), Rwanda keen on producing technology, says Kagame (New Times), Davos takes a fresh look at emerging markets (NYT), Is Africa still rising? Taking stock halfway through the decade (Brookings)
Namibia: Delinking from Rand easier said than done (The Namibian)
Delinking the Namibia dollar from the South African rand is easier said than done and entails numerous considerations, Namene Kalili, senior manager research and development at FNB Namibia said yesterday. Kalili said launching a new currency is a long term project, whereby countries need to show the global community that they are able to manage interest rates, inflation rates, balance of payments, government expenditure and economic growth, among other things. "Then the country must have adequate reserves to back the currency in circulation. Where our money gets printed and determinants of money supply become important considerations. We also need to consider our trade partners. Trade between Namibia and South Africa, our biggest trading partner, would become more complex as foreign currency translation now enters the equation. Therefore, this is not a decision to be taken lightly and has to be taken with a long-term view."
SADC: Credit information sharing project close out report (FinMark Trust)
A wide divergence exists in the level of credit information sharing across different SADC member countries as well as in the structure of the credit bureau sector and the corresponding regulatory environment. Harmonisation of regulations and approaches across SADC will contribute positively to increasing the level of credit information sharing and thus the goal of greater financial integration as stipulated in the SADC Protocol on Finance and Investment (FIP). FinMark Trust and GIZ identified credit information sharing between credit providers in the region (national and regional) as a strategic and critical area for SADC because:
Integration of EAC stock markets presents immense opportunities (New Times)
Global foreign direct investment hit eight-year high in 2015 (UNCTAD)
Global foreign direct investment flows rose by 36% in 2015, reaching their highest levels since the financial crisis, according to a report out today from the United Nations Conference on Trade and Development, which pegged the increase to a wave of cross-border mergers and acquisitions. The Global Investment Trends Monitor shows that foreign investment totalled some $1.7 trillion and that the increased FDI – investment made by a company or entity based in one country, into a company or entity based in another country – in developed countries was the main factor behind the unexpected spike, with industrialized nations accounting for 55% of global FDI inflows last year.
Extract: FDI inflows to Africa fell by 31% in 2015 to an estimated US$38 billion, due largely to a decline of FDI in Sub-Saharan Africa. Flows to North Africa reversed their downward trend as Egypt saw a rebound of investment from US$4.3 billion in 2014 to an estimated US$6.7 billion in 2015. Central Africa and Southern Africa saw the largest declines in FDI. The end of the commodity “super-cycle” had an impact on resource-seeking FDI. Flows into Mozambique were down 21% but still notable at an estimated US$3.8 billion, while Nigeria saw its FDI decline by 27% to an estimated US$3.4 billion as the country was hit hard by the drop in oil prices. FDI into South Africa fell dramatically, down 74% to US$1.5 billion. [Download]
Related: One Belt One Road sends Chinese outbound lending to 7-year high (Global Trade Review), Ibrahim Thiaw: address to the Islamic Development Bank (UNEP)
Silver lining to India's trade blues (Gateway House)
According to Commerce Ministry’s database on exports by region, in dollar terms, the three destinations showing maximum contraction in Indian exports (or areas that are buying much less from India than in the previous year) are Latin America (down by 36.73%), Commonwealth of Independent States (CIS) & Baltic region (down 32.4%) and Africa (25.59%). Clearly, India’s foreign policy practice and economic diplomacy needs to expend greater energy on these areas. Granulated regional data provides better insights. [The author, Rajrishi Singhal, is Senior Geoeconomics Fellow, Gateway House]
South Africa: Drought takes multi-billion rand toll on economy; emergency funding top priority (GCIS)
The Western Cape Government will this week table a report on the impact of the drought in our province at a meeting of the country’s agriculture Ministers. The drought may cost the country more than R2 billion in trade losses. “It has been estimated that we will need to import 750 000 tons of maize because of the decline in production. At the current maize price, this would result in a trade loss of R2.4 billion.” Minister Winde said the Unit’s analysis also estimated that national agricultural production had declined by more than 42%. This drop in production resulted in a 1.1% decrease in the country’s Gross Domestic Production.”
Related: Driest rainy season in 35 years in SADC (New Era), Zimbabwe to import maize till 2020 (Financial Gazette), Zimbabwe tobacco exports up on China demand, drought dims outlook (CNBC Africa)
Mozambique: “We must produce more” – but how? (SPEED)
Over the past 20 years government and business have engaged in dialogue about the business environment. Analysis of this dialogue shows that the same issues have been raised year after year. They have not been solved. The same issues arise again in CTA’s dialogue matrix, in the proposals for improved performance in the Doing Business indicators as put forward by MIC and the World Bank, in the Business Environment Improvement Strategy, in the Five Year Plan and in many sectoral plans and strategies. As a result of the lack of reform we are in the current predicament. The issues constraining production can be broadly categorized as follows:
Zimbabwe: Zim ranked 29th in UNTWO visa report (The Herald)
The United Nations World Tourism Organisation has ranked Zimbabwe as one of the top 30 countries that have made major efforts to reduce travel restrictions and allow free movement of tourists in the past seven years. In its 2015 Visa Openness Report released last week, the 157-member UNWTO, ranked Zimbabwe number 29 out of the top 54 member countries deemed to have made significant progress in relaxing tourist restrictions. [Download UNTWO's Visa Openess Report]
Zimbabwe: Scrapping travellers rebate retrogressive - ZIMCODD (The Herald)
The Zimbabwe Coalition on Debt and Development says the scrapping of the travellers rebate on public transport will effectively kill small businesses while it will fuel corruption at the border posts. With effect from January 1, 2016, Government revised the travellers rebate to $200,00 from $300,00 and removed rebate on travellers in public transport through Statutory Instrument Number 148 of 2015 (Customs and Excise (General Amendment) regulations (No 80). However, ZIMCODD has raised concern on the implications of the policy on informal sector, which is one of the key clusters to economic growth.
Tanzania: Shipping industry stakeholders warns against instability at TPA (IPPMedia)
Shipping industry stakeholders have warned that prolonged instability at Tanzania Ports Authority is undermining the competitiveness of Dar es Salaam port which may lose business to Mombasa and Beira ports.
Uganda: Government agencies ordered to stop awarding contracts in dollars (Daily Monitor)
In a 15th January 2016 letter to all government agencies and local governments, Mr. Keith Muhakanizi, the Secretary to The Treasury warned that the awarding of contracts in foreign currencies was piling pressure on the Uganda Shilling. [URA surpasses half year revenue target (Daily Monitor)]
Ghana: Letter of Intent, Memorandum of Economic and Financial Policies (IMF)
The government believes that the measures and policies set forth in the attached MEFP and the 2016 Budget are appropriate and sufficient to achieve the objectives of its program, and it stands ready to take any additional measures that may be necessary to that end. We will consult with the IMF on the adoption of such measures in advance of any revision of the policies contained in the MEFP, in accordance with the Fund’s policies on such consultation. The authorities will hold timely consultations with the IMF staff on the possible terms of a Eurobond and other nonconcessional external borrowing to ensure that such borrowing strengthens confidence in the program, does not jeopardize debt sustainability and is in line with the Fund’s debt limit policy.
Global supply chains and trade policy (World Bank)
How do global supply chain linkages modify countries' incentives to impose import protection? Are these linkages empirically important determinants of trade policy? To address these questions, this paper introduces supply chain linkages into a workhorse terms-of-trade model of trade policy with political economy.
World Bank Group launches new gender data products (World Bank)
The World Bank Group has relaunched its popular Gender Data Portal, comprising current and historical data on topics ranging from health and education to jobs, assets, and political participation—all broken down by sex. The Bank Group is also launching its Little Data Book on Gender 2016 alongside new online tables—to be updated quarterly—linked to the latest World Development Indicators, making it easier than ever to see how women and men are faring across a range of global indicators.
Diamond production in Angola expected to total 8.96 million carats in 2016 (Macauhub)
Khama saves Lesotho from SADC sanctions (Mmegi)
Mercosur can boost Brazil-Egypt trade (ANBA)
Mali notifies acceptance of Trade Facilitation Agreement, TRIPS amendment (WTO)
China-Ghana trade volume exceeds $6bn (BusinessGhana)
Africa to be major energy source for India: Dharmendra Pradhan (Business Standard)
Xi Jinping: 'Let China-Arab friendship surge forward like the Nile' (Xinhua)
Will Lagarde renew? IMF opens nominations for managing director (Daily Nation)
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Is Africa still rising? Taking stock halfway through the decade
That the first decade of the 2000s was Africa’s most economically successful period since the beginning of official statistics has been amply voiced. Between 2000 and 2010, sub-Saharan Africa (developing only) grew at over 5 percent per year, large enough to produce real gains even in the face of sustained population growth (of about 2.7 percent per year).
According to the latest estimates, poverty also decreased, from 58 percent at the turn of the century to 43 percent in 2012, and substantial progress was made on non-monetary dimensions of living standards. Africa’s performance in the first 10 years since the turn of the millennium gave birth to the “Africa rising” narrative, with the continent destined to keep on growing and developing fast in the decades to come, providing the next (and last?) frontier for high-return private investment, corporate profits, and global growth. “Africa has a real chance to follow in the footsteps of Asia,” The Economist wrote in 2011, and several more decades of sustained growth will all but eradicate the worst forms of poverty and the multitudes of deprivations many Africans face each and every day.
The reasons behind Africa’s reversal of fortunes have been hotly debated. Party-poopers tend to believe that Africa’s rise was simply a matter of favorable terms of trade, and that the structural changes needed to project Africa on a sustained higher growth path – mainly related to industrialization – are woefully absent. Granted, say optimists, commodity prices were sky-high during Africa’s rise, but even countries with limited exportable resources grew fast. What mattered at least as much as commodity prices were economic reforms and improved political governance.
Macroeconomic policies greatly improved since the late 1990s, political regimes on the whole somewhat liberalized, and competitive elections – though still wanting in many places – gave a voice to previously marginalized groups. Also important, 2000-2010 was a relatively peaceful decade in Africa, with many internal conflicts and civil wars that had wreaked havoc on countries’ economies in the 1980s and 1990s dying down (such as in Liberia, Sierra Leone, Burundi, and the Democratic Republic of Congo) and few fresh ones being started.
How is the “Africa rising” narrative holding up five years into the new decade? The answer, in the best tradition of economics, is two-fold: on the one hand, not too bad; on the other hand, not too good. Not too bad, as growth in sub-Saharan Africa remained solid until 2014. Not too good, as many of the perceived drivers of Africa’s performance, emphasized on both sides of the spectrum, have taken a turn for the worse. Commodity prices started declining after 2011, and tumbled in 2015, and with that economic growth (see Figure 1). In 2015, economic growth slowed to an estimated 3.4 percent, its lowest rate in 15 years except for the financial crisis and hardly higher than the rate of population growth.
Figure 1: Tumbling commodity prices since 2011, followed by a growth slowdown
Also, after a relatively peaceful decade, events in Cote d’Ivoire, the Central African Republic, Mali, Burundi, Nigeria, South Sudan and other places reminded us that violence, fragility, and civil wars are hardly distant memories, and both the number and intensity of violent conflicts have been picking up in recent years (see Figure 2 – the spike in battle-related deaths in 1999/2000 is due to the Eritrea-Ethiopia border conflict). The quality of country economic management, as measured by the World Bank’s Country Policy and Institutional Assessment, has slid back to where it was following an improvement between 2005 and 2010. The Ibrahim Index of African Governance, a composite indicator measuring the quality of governance in every African country, also suggests that progress in governance quality has been stalling since 2011.
Figure 2: Following a peaceful decade, conflict-incidence and battle-related deaths are on the rise
So where does that leave us? The drivers of Africa’s performance in the previous decade appear to have weakened or reversed, though of course the time series is too short to draw any firm conclusions. What we do know, however, is that growth is slowing, commodity prices are down, violent conflicts seem to be back with a vengeance, and improvements in political and economic governance are slowing, if not reversing. What does this mean for Africa’s fate over the five to 10 years to come? Will Africa continue to rise, or will the ghosts of the past come back to haunt us once again? Only time will tell.
Tom Bundervoet is a Senior Economist, World Bank, Rwanda
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Davos takes a fresh look at emerging markets
Many policy makers and corporate chieftains flocking to a village in the Swiss Alps now say that the rosy notion of a world powered by emerging-market growth needs to be reconsidered.
Ever since emerging markets became a major asset class in the early 1990s, a parade of potentates, policy makers and corporate chieftains have flocked to the stylish village of Davos in the Swiss Alps in the hope of becoming the latest global meme.
The growth revolution in China, the emergence of oil-driven sovereign wealth in the Middle East and Brazil’s economic miracle have all been celebrated, one time or another, by the global elites who gather at the World Economic Forum in Davos each January to ponder the world.
From 2000 on, the Davos boom and the emerging markets boom have been pretty much one and the same, a living ideal of globalization helped by central banks that have printed trillions of dollars of new money.
But now, as interest rates in the United States begin to rise, these dollars have begun to flow out of China, the Middle East and Latin America. Growth rates are stumbling, debt levels rising and geopolitical fears spreading.
Over the last year, the exodus has gathered pace, fed by worries that China will lose control of its currency, the price of oil will drop to $20 a barrel, and Brazil’s problems will worsen.
And many now say that this rosy, Davos-fueled notion of a world powered by emerging-market growth and innovation needs to be reconsidered.
“I have long maintained that the emerging-market hype was oversold when it was clear that what was going on was high commodity prices and cheap money,” said Dani Rodrik, an expert on globalization at the Harvard Kennedy School.
As for the World Economic Forum in Davos, he said that over the last 10 years it had become an echo chamber of sorts.
“What we are seeing now is lower growth and policy conflicts between the emerging and the developed world,” said Mr. Rodrik, who will not be making the trip this time around. “It is going to be a different type of Davos this year.”
Actually, the echo chamber has not been working as advertised. Since January 2010, emerging markets as an investment have produced a poor return. BlackRock’s benchmark exchange traded fund for emerging market stocks is down 25 percent, and most of that decline came in the last year.
Perhaps the biggest sign that global investors have lost faith is that for the first time since 1988 (when only the bravest souls invested in these countries), investors have pulled more money out of emerging markets than they have put in, according to research by the Institute of International Finance.
In an unusually blunt speech in Paris this month, Christine Lagarde, managing director of the International Monetary Fund, said that emerging nations needed a new model for growth after years of relying on easy money and high commodity prices.
“Growth rates are down, and cyclical and structural forces have undermined the traditional growth paradigm,” Ms. Lagarde said. Moreover, she warned, the dollar’s continued strength against just about all emerging-market currencies could well result in a new round of financial uncertainty, pushing commodity prices and global growth forecasts even lower.
Since mid-2011, the dollar has gained more than 100 percent against emerging-market currencies in Turkey, Brazil and South Africa. And over the last six months, following China’s decision to depreciate the renminbi, previously robust monetary units in Singapore, Korea and Taiwan have also started to lose value against the dollar.
“Our own estimates show that a slowdown of 1 percent in the emerging world would lower growth in advanced countries by at least about 0.2 percentage points,” Ms. Lagarde said.
Still, even with the gloom and doom surrounding emerging markets these days, there is little sign that standard bearers are forgoing their annual week in the Swiss mountains.
This year, more than 320 representatives from Brazil, Russia, India and China — the so-called BRIC community of emerging nations — will be in Davos — compared with 237 from these countries in 2010.
None of these representatives will be heads of state, though. In the past, Brazilian presidents and Vladimir Putin of Russia have led their countries’ delegations. This year, Russia is sending a deputy prime minister, Yury Trutnev, while China is sending a vice president, Li Yuanchao.
Two large emerging markets that have been under significant stress of late will be sending their leaders. Turkey, recently rocked by terrorist attacks, will be represented by its prime minister, Ahmet Davutoglu. And the South African president, Jacob Zuma, who has gone through three finance ministers in the last five weeks, is also planning to show up.
The president of Brazil, Dilma Rousseff, whose popularity polls have sunk to single digits, will not be making an appearance, but her recently appointed finance minister, Nelson Henrique Barbosa-Filho, is scheduled to attend.
Ready to engage in some damage control will be the top executives at BTG Pactual, the Brazilian investment bank whose former chief executive, André Esteves, is under investigation for corruption.
In terms of panels themed for developing nations, the World Economic Forum will be serving up the usual fare this year. One will explore how companies in emerging markets cope with laws that discriminate against lesbian, gay, bisexual and transgender workers. Another is more straightforward: What will the impact of higher interest rates in the United States be on emerging market growth?
But, as is always the case at the World Economic Forum, the meetings of genuine consequence will be the ones that you do not know are happening.
That could mean Laurence D. Fink, the chief executive of BlackRock, the world’s largest money management firm, sitting down with Jean-Paul Villain, an executive at the Abu Dhabi Investment Authority, or Fahad al-Mubarak, the governor of Saudi Arabia’s central bank and overseer of the country’s $650 billion foreign reserve stash.
As oil prices sink, rumors have been rife that Middle East sovereign wealth funds — and Saudi Arabia in particular — have been calling in the billions of dollars of cash that they have allocated to global investment firms such as BlackRock. And traders say that the withdrawal of these funds, much of which has been invested in American stocks and bonds, has been a contributing factor to recently volatile markets.
Or the chief executives of Goldman Sachs and JPMorgan Chase could wind up huddling with Fang Xinghai, the vice chairman of the China securities regulatory commission. The sharp swings in China’s stock market are having an outsize effect on markets in the United States, and the big American investment banks will want to hear what Mr. Fang’s strategy is for 2016.
But as central bankers, prime ministers and chief executives wrestle this week to make sense of it all, Ruchir Sharma, head of emerging markets at Morgan Stanley Investment Management, has a fairly simple explanation: The impact on the developed world of a slowdown in China and other emerging markets is going to be greater than most people realize.
“In 1997, the emerging world’s share of the global economy was 20 percent — now, it’s nearly 40 percent,” he said. “This is a big deal. What happens in China has an effect on the wider world, and I think that the Davos crowd has been slow to recognize this.”
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World of business must play part in achieving new Sustainable Development Goals – UN chief
Speaking at the Global Economic Forum in Davos, Switzerland, United Nations Secretary-General Ban Ki-moon today called on the world’s business community to play its full role in helping to achieve the ambitious 2030 Agenda for Sustainable Development, which seeks to eliminate poverty, hunger and a raft of social ills, all within 15 years.
“I ask all the CEOs here today to help us. Your advocacy and example can drive action to achieve a life of dignity for all people,” he told business leaders at an event on the Global Compact, a 15-year-old UN initiative to encourage businesses worldwide to adopt sustainable and socially responsible policies.
“You recognize that responsible businesses have enormous power to create decent jobs, open access to education and basic services, unlock energy solutions and end discrimination. I count on you to drive global progress,” said the Secretary-General.
Mr. Ban stressed that the UN has shown that multilateralism works when it comes to setting ambitious plans, citing Agenda 2030 and December’s Paris Agreement on climate change as “visionary and planetary,” with no time to lose.
“Our planet and its people are suffering too much. This year has to be the moment for turning global promises into reality. Governments must take the lead with decisive steps. At the same time, businesses can provide essential solutions and resources that put our world on a more sustainable path,” he said.
“I call Agenda 2030 our ‘declaration of interdependence.’ The world is coming to recognize more and more that problems in one country reverberate in another. A crash in one market can drive a crisis around the world. That is why it is so important to make the most of our collective strengths.”
Mr. Ban highlighted the vital need to engage with more companies to reach the Agenda’s 17 Sustainable Development Goals (SDGs), ensuring that every one of those companies is committed to universal values and principles.
“You are already members of the UN Global Compact. You understand that doing business responsibly is the first step for any company that wants to contribute to sustainability,” he added.
“The Global Compact is already starting to translate the SDGs into business action and innovation. It has 85 Global Compact Local Networks and signatories in more than 160 countries. Right there, I see enormous opportunity to mobilize action.”
The SDGs build on the earlier eight Millennium Development Goals (MDGs), which sought by 2015: to eradicate extreme poverty and hunger; achieve universal primary education; promote gender equality and empower women; reduce child mortality; improve maternal health; combat HIV/AIDS, malaria and other diseases; ensure environmental sustainability; and develop a global partnership for development.
But progress was uneven across regions and countries, leaving millions of people behind, especially the poorest and those disadvantaged due to sex, age, disability, ethnicity or geographic location. This is where the SDGs come in.
They stress everything from zero poverty, zero hunger, good health, quality education, gender equality, clean water and sanitation, and affordable clean energy, to decent work and economic growth, innovation, reduced inequalities, sustainable cities, responsible consumption, climate action, unpolluted oceans and land, and partnerships to achieve the goals.
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Recovery in foreign direct investment is unexpectedly strong, but lacks productive impact
Global flows of foreign direct investment jumped 36 per cent in 2015 to an estimated $1.7 trillion, their highest level since the global economic and financial crisis of 2008-2009, the latest UNCTAD Global Investment Trends Monitor reports.
A surge in FDI targeting developed economies (+90%) was the principal factor behind the global rebound. Strong growth in flows was reported in the European Union (EU) as well as in the United States where FDI quadrupled, although from a historically low level in 2014.
As a result, the pattern of FDI by economic grouping tilted in favor of developed countries which now account for 55% of global FDI inflows in 2015.
However, the growth was largely due to cross-border merger and acquisitions, with only a limited contribution from greenfield investment projects in productive assets. Moreover, a part of FDI flows was related to corporate reconfigurations involving large values in the financial account of the balance of payments but little movement in actual resources.
Developing economies saw their FDI reaching a new high of US$741 billion, 5% higher than in 2014. Developing Asia, with its FDI flows surpassing half a trillion US dollars, remained the largest FDI recipient region in the world, accounting for one third of global FDI flows. Flows faltered in Africa and Latin America and the Caribbean (excluding offshore financial centers) reflecting the plummeting prices of their principal commodities exports.
Barring another wave of M&A deals and corporate reconfigurations, FDI flows are expected to decline in 2016, reflecting the fragility of the global economy, volatility of global financial markets, weak aggregate demand and a significant deceleration in some large emerging market economies. Elevated geopolitical risks and regional tensions could further amplify these economic challenges.
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Mali notifies acceptance of Trade Facilitation Agreement, TRIPS amendment
Mali has ratified the new Trade Facilitation Agreement (TFA), becoming the 10th African nation to do so. Mali has also accepted an amendment to the TRIPS Agreement aimed at facilitating access to essential medicines in poor countries that was adopted in 2005.
Mali deposited its TFA instrument of acceptance with the WTO Secretariat on 20 January. On the same day, Mali deposited its instrument of acceptance for the 2005 Protocol amending the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
Mali is the 68th WTO member to ratify the TFA. The Agreement will enter into force once two-thirds of the WTO membership has formally accepted the Agreement.
Concluded at the WTO’s 2013 Bali Ministerial Conference, the TFA contains provisions for expediting the movement, release and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It further contains provisions for technical assistance and capacity building in this area.
In addition to Mali, the following WTO members have also accepted the TFA: Hong Kong China, Singapore, the United States, Mauritius, Malaysia, Japan, Australia, Botswana, Trinidad and Tobago, the Republic of Korea, Nicaragua, Niger, Belize, Switzerland, Chinese Taipei, China, Liechtenstein, Lao PDR, New Zealand, Togo, Thailand, the European Union (on behalf of its 28 member states), the former Yugoslav Republic of Macedonia, Pakistan, Panama, Guyana, Côte d’Ivoire, Grenada, Saint Lucia, Kenya, Myanmar, Norway, Viet Nam, Brunei, Ukraine, Zambia, Lesotho, Georgia, Seychelles, and Jamaica.
The TFA broke new ground for developing and least-developed countries in the way it will be implemented. For the first time in WTO history, the requirement to implement the Agreement was directly linked to the capacity of the country to do so. In addition, the Agreement states that assistance and support should be provided to help them achieve that capacity.
A Trade Facilitation Agreement Facility (TFAF) was also created at the request of developing and least-developed country members to help ensure that they receive the assistance needed to reap the full benefits of the TFA and to support the ultimate goal of full implementation of the new agreement by all members.
Implementation of the WTO Trade Facilitation Agreement has the potential to increase global merchandise exports by up to $1 trillion per annum, according to the WTO’s flagship World Trade Report 2015 released on 26 October. Significantly, the Report also found that developing countries will benefit significantly from the TFA, capturing more than half of the available gains.
The 2005 Protocol Amending the TRIPS Agreement makes permanent a decision on patents and public health originally adopted in 2003. That decision, adopted in the form of a waiver, was intended to make it easier for poorer countries to obtain cheaper generic versions of patented medicines by setting aside a provision of the TRIPS Agreement that could hinder exports of pharmaceuticals manufactured under compulsory licences to countries that are unable to produce them.
Once two-thirds of members have formally accepted the Protocol, the amendment to the TRIPS Agreement will take effect in those members and will replace the 2003 waiver for them. For each of the remaining members, the waiver will continue to apply until that member accepts the amendment and it takes effect.
Mali is the 13th African member to formally accept the Protocol and the 8th least-developed country from Africa to do so. More information on the issue of TRIPS and public health is available here.
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Namibia: Delinking from rand easier said than done
Delinking the Namibia dollar from the South African rand is easier said than done and entails numerous considerations, Namene Kalili, senior manager research and development at FNB Namibia said yesterday.
“Ever since the rand's nose-dive there have been questions and queries as to why the Namibia dollar should remain linked to the rand, especially as the rand seems to pull us down as well,” he said.
Kalili said the rand, to which the Namibia dollar is pegged has depreciated following the recent dramatic policy mistakes in South Africa.
He said the US dollar has appreciated against most currencies across the globe and the rand is not its only victim. “Essentially the depreciation will pass through in the form of higher prices for certain consumer goods such as consumer electronics and vehicles.”
FNB increased its inflation expectations to 5,8% in 2016 and rising to 6,1% in 2017.
“We expect faster interest rate hikes this year to contain inflation below 6% and reduce aggregate demand. It is possible for Namibia to delink from the rand, but I do not believe it will be in our best interest. Reason being, persistent dollar strength is likely to depreciate the value of the free float Namibian dollar. Current fundamentals suggest that the rand is undervalued and is therefore likely to recover from 2017 onwards.”
Given Namibia's limited foreign reserves, a free float Namibia dollar is likely to be more volatile than the rand.
“Event risks such as drought, an energy fiasco or 'struggle kids' unrest, would in all likelihood weigh down on the free float currency, leading to more depreciation.”
Kalili said launching a new currency is a long term project, whereby countries need to show the global community that they are able to manage interest rates, inflation rates, balance of payments, government expenditure and economic growth, among other things.
“Then the country must have adequate reserves to back the currency in circulation. Where our money gets printed and determinants of money supply become important considerations. We also need to consider our trade partners. Trade between Namibia and South Africa, our biggest trading partner, would become more complex as foreign currency translation now enters the equation. Therefore, this is not a decision to be taken lightly and has to be taken with a long-term view.”
He said Namibia does not have the market size to influence the price for the Namibia dollar and does not have the human capital to manage a free float currency.
“The rand will recover, it's only a matter of when, as the fundamentals point to an undervalued rand. So as traders take advantage of the price advantage, the rand will appreciate and normalise. Furthermore, markets have now factored in the Zuma effect into rand pricing and as soon as his term runs out, the currency should normalise,” he said.
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tralac’s Daily News selection
The selection: Wednesday, 20 January 2016
Profiled tweets, by Kenya’s @AMB_A_Mohammed: By hosting TICADVI, Kenya’s credentials as champion of devt in Africa and leader in integration and econ dev't will be greatly enhanced, Kenya will also host UNCTAD, the principal organ of United Nations General Assembly dealing with trade, investment, and development issues
Starting today: World Economic Forum Annual Meeting 2016. Profiled WEF sessions: Africa’s Next Challenge, The AfDB's New Deal for Energy in Africa
Profiled commentary, by Akinwumi Adesina: 'A new deal on energy for Africa: power, potential and partnership' (New Times)
There are already key players in the field, like the Africa Renewable Energy Initiative supported by the G7, the UN’s Sustainable Energy for All Initiative, and the US Power Africa Program. The private sector is a source of leadership as well as funding, for instance through the Africa Energy Leaders Group. The task is to point them all in the same direction. So the New Deal is an African-led initiative to mobilise political will and financial support to solve Africa’s energy challenges. What will it do? It has four – huge – targets:
Profiled publication launch: 'Factory Southern Africa? SACU in global value chains' (SAIIA)
Southern Africa, however, is only weakly linked into global value chains (excepting South Africa’s participation in the automotive chains and Lesotho's participation in the apparel chain). The question remains as to whether certain policy choices could open the door for such participation – and whether participation in value chains is even desirable. Another question is whether Southern Africa can develop its capacity to move up the ladder of value within the value chain. Traditionally, Southern Africa inputs at the lowest level, close to commodity extraction, rather than at the higher, more lucrative, end. With China upgrading to higher input levels, it is estimated that 80 million jobs could shift to Africa, but which countries in Southern Africa could capitalise on this opportunity, given high labour costs. The World Bank report has three core recommendations in order to promote SACU as a gateway for global value chain development in Southern Africa: [Launch: 21 January, Johannesburg]
East Africa's agriculture value chain: integrating 3000 smallholder farmers (UNDP)
Bidco Africa, a leading manufacturer of fast moving consumer products in East Africa, has joined the Business Call to Action (BCtA) with a commitment to integrate an additional 30,000 smallholder farmers into its agriculture value chain and create 60,000 entrepreneurs and jobs by 2019. BCtA is a global initiative that encourages companies to fight poverty through inclusive business models.
Can Southern Africa industrialize amidst energy crisis? (UNECA)
But, can the region industrialize among a crippling power crisis? Should SADC worry or take this as an opportunity to find a lasting solution? In light of the above, ECA Sub-regional Office for Southern Africa will convene two forums discussing the state and future of Energy in the region and the SADC Strategy and Roadmap on Industrialization. The 22nd Session of the Inter-governmental Committee of Experts meeting will discuss how to finance the industrialization strategy and roadmap from 10-11 March 2016 in Lilongwe Malawi. The ICE will be preceded by an Ad-hoc Expert Group meeting addressing the 'Energy Crisis in Southern Africa: Perspectives for the future' from 7-8 March, also in Lilongwe, Malawi. An issues paper on the same subject will form the main document for review and discussion. Recommendations from the meeting will be presented to the Conference of Ministers; an annual gathering of ministers responsible for finance and planning on the continent in March 2016, in Addis Ababa.
South Africa: Inter-Ministerial Committee on Investment Promotion appointed (GCIS)
The One Stop Shop concept requires support from all government departments. The President has thus decided to expand the current Inter-Ministerial Committee on Bilateral Investment Treaties to include a focus on South Africa's investment climate across all areas of government in a coordinated and cohesive manner. This reconfigured IMC on Investment will be chaired by President Zuma, assisted by the Minister of Trade and Industry. It will focus on:
India: Commerce ministry pushes embassies to pick up cues for Indian exporters (Business Standard)
Ghana: Ratify trade facilitation agreement to boost export revenue (GhanaWeb)
The Coalition for Trade Facilitation, a business-led initiative, says speedy ratification and implementation of the Trade Facilitation Agreement could raise the country’s export revenue. “The Alliance for Trade Facilitation with support from the Business Sector Advocacy Fund (BUSAC) has provided a unique platform to leverage business, and also to research into the current business processes in our domestic and international trade and lead reforms. It is important that business and the general trading public understands what the agreement provides for and how the implementation process can be influenced, hence the coming together with initial support from BUSAC.”
How the Trade Facilitation Agreement can help reduce trade costs for LDCs (E15 Initiative)
The West African Giveaway: use and abuse of corporate tax incentives in ECOWAS (ActionAid Nigeria)
This report examines corporate tax incentives and their impact in the Economic Community of West African States, with a focus on four countries: Nigeria, Ghana, Cote d’Ivoire and Senegal. The report finds that:
Related ActionAid report: ‘Leaking revenue: how a big tax break to European gas companies has cost Nigeria billions’
China’s investments in Africa: what’s the real story? (Knowledge@Wharton)
Three experts from the front lines of the China-Africa relationship [Wenjie Chen (IMF), Aubrey Hruby (co-founder of the Africa Expert Network) and Thomas Laryea (Dentons)] offered their views on this complicated issue at the Forum.
Related: More China-SA ‘in-depth’ co-operation ahead (News24), Decoding China's economic growth prospects under the New 13th Five Year Plan: implications for South Africa, Sino-Africa (HSRC)
Dar is better off relaxing laws against expats (The East African)
Within the region, Magufuli’s presidency will be assessed very much by the policies he pursues on the East African Community, especially when weighed against what has seemed Tanzanian wariness on the Four Freedoms. While the crackdown on foreign workers did not necessarily signal a retreat to isolationism, President Magufuli cannot escape the perceptions bound to have been created, and may have got his officials to quietly make reassuring phone calls to their counterparts in the region. Multinational corporations that in recent years have set up shop in Tanzanian in substantial numbers may also have asked for clarification. The lesson here is that making populist pronouncements is one thing, but implementation is quite another, especially when there are bound to be ramifications across borders.
Regional ports conference cancelled after sacking of Tanzanian officials (The East African)
The meeting was set for February 15-17 and was organised by the Port Management Association of Eastern and Southern Africa (PMAESA) and TPA. “The conference cancellation followed a move by the newly elected Tanzania President John Magufuli’s to relieve several TPA top managers including the director-general, of their duties and to dissolve the authority’s entire board of directors” George Sunguh, a communication officer at PMAESA said. This will be the first time for the annual PMAESA conference will fail to take place since its inception in 2007 in Seychelles.
10000 Nigerian freight forwarders “to lose jobs to foreign counterparts” (Premium Times)
The Shippers Association, Lagos State, said on Monday that 10,000 indigenous freight forwarders might lose their jobs as some foreign shipping lines had taken over freight forwarding business. The president of the association, Jonathan Nicol, stated this in an interview with the News Agency of Nigeria (NAN) in Lagos. He said the issue of dominance of Nigerian freight forwarding business came up in 2015 and was resisted by freight forwarders.
The usual suspects: mitigating risks in African public-private partnerships (World Bank Blogs)
All things being equal, African PPPs have to work harder to reach financial close than similar projects in other parts of the world. While the gap between the more mature markets in Australia, Europe, and North America and those of emerging markets is narrowing—and probably is not as great as people might think—it clearly still exists for many investors seeking long-term certainty. [The author: John Kjorstad]
World economic update: subdued demand, diminished prospects (IMF)
Growth forecasts for most emerging market and developing economies reveal a slower pickup than previously predicted. Growth is projected to increase from 4% in 2015 - the lowest rate since the 2008–09 financial crisis - to 4.3 and 4.7%in 2016 and 2017, respectively. But these overall numbers fail to do full justice to the diversity of situations across countries. India and parts of emerging Asia are bright spots, projected to grow at a robust pace, whereas Latin America and the Caribbean will again see a contraction in 2016, reflecting the recession in Brazil and economic stress elsewhere in the region, even as most other countries in the region will continue to grow.
World employment and social outlook: trends 2016 (ILO)
Despite falling unemployment in some developed economies, the global jobs crisis is likely to continue for at least the next two years, especially in emerging economies, topping 200 million by 2017, the United Nations labour agency warned today, calling for urgent steps to boost jobs. “The significant slowdown in emerging economies coupled with a sharp decline in commodity prices is having a dramatic effect on the world of work,” UN International Labour Organization Director-General Guy Ryder said of the latest report. Vulnerable employment is particularly high in emerging and developing economies, hitting between half and three-quarters of the employed population, with peaks in Southern Asia at 74% and sub-Saharan Africa at 70%. The report also shows that informal employment, as a percentage of non-agricultural employment, exceeds 50% in half of the developing and emerging countries with comparable data. In one-third of these countries, it affects over 65% of workers.
Related: Five million jobs by 2020: the real challenge of the Fourth Industrial Revolution (WEF), 2016 ECOSOC Youth Forum: Regional breakout session on Sub-Saharan Africa (New York, 1-2 February,OSAA), The Arab Youth Forum: an innovative approach to green growth and job creation (Alexandria, 31 January - 2 February, UNIDO), Ban names ‘eminent advocates’ to propel achievement of new Sustainable Development Goals (UN)
Sanjay Kathuria: Constraints to regional integration in South Asia (World Bank)
Intraregional investment in South Asia is still very low. Last year, India invested $10bn overseas. Of this, in South Asia it invested a miniscule amount. Why? Why shouldn't India play the role that Singapore played in ASEAN, being the regional prime investor and creating regional value chain? What is holding back large Indian companies that are going so far to invest? [The author is the lead economist in the World Bank's Trade and Competitiveness Global Practice]
SADC-Lesotho: Double Troika Summit on Lesotho: communiqué, Faced with SADC suspension, Lesotho changes its mind (AIM)
Consolidated action for development at the core of G20 Sherpa’s Meeting (UN)
Hannah Ryder: 'New horizons for the BRICS countries: inter-growth and integrated development' (UNDP)
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More China-SA ‘in-depth’ co-operation ahead
Future economic ties between South Africa and China will be based on even more in-depth co-operation, according to Gu Hailiang, deputy chair of the State Committee of Social Science of the Ministry of Education of the People’s Republic of China.
“I am optimistic about the two way trade between South Africa and China,” he said at the third annual China-Africa Dialogue on Tuesday. It was presented in partnership with the HSRC (Human Sciences Research Council).
He provided a closer look at China’s 13th 5-year plan, which will be implemented in March this year.
It includes the concept of establishing a “moderately prosperous society” on social and economic levels.
China’s gross domestic product (GDP) per capita has grown, for instance, from $300 in 1984 to $800 in 1990 and $1 000, despite many people questioning whether this would be possible, Gu pointed out.
“The living standards of the Chinese people have been upgraded tremendously since the first 5-year plan was implemented in 1984,” said Gu.
He emphasised that China also wants to contribute to the world.
“We will overcome challenges and be an example to other developing countries,” he added. “We want to overcome what we call the ‘middle income trap’. We put a lot of effort into addressing employment and health care, for instance.”
Income distribution is also a very important aspect of the plan.
“China faces severe problems of economic imbalances between regions, between urban and rural areas and between industry and agriculture. We want to address these over the next 5 years too,” said Gu.
Innovation is one of the main focus areas of the 13th 5-year plan. The aim is to use reforms and science and technology to meet the country’s needs. The development of talent is an important component of this focus area.
Another key focus area of the plan is coordination to find an economic balance, for instance, between the Eastern and Western regions of the country, between wealthier and poorer areas – including those inhabited by ethnic minorities – and between urban and agricultural areas.
Sustainability and environmental aspects form another key focus area of the plan.
The fourth key aspect of the plan is to open up China’s economy more and the fifth is sharing and co-building in order to provide jobs for the millions of Chinese who join the job market every year.
“At the end of this 5-year plan we will be able to announce to the world that we succeeded in having no-one in poverty,” said Gu.
The plan, therefore, introduces the concept of the “new normal”, which a move away from a high growth rate to the maintenance of a medium high rate of 7%, which Gu pointed out is indeed high for many countries.
An important aspect of the “new normal” concept is the upgrade of the country’s industrial structure and the application of advanced production and technology methods.
“We must combine and reinforce industrialisation, the application of information technology, agriculture and urbanisation in order to create a healthy and sound social structure,” said Gu.
“By the second half of 2016 we would have set the foundation for achieving the goals of the new 5-year plan and reach the Chinese dream. China is a large and complex country and there are more than 300 matters we want to address using the plan.”
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How the Trade Facilitation Agreement can help reduce trade costs for LDCs
The recently concluded Trade Facilitation Agreement (TFA) provides an ideal opportunity to narrow the scope of aid-for-trade (AfT) activities to heed the call for “Managing for Development Results” (MfDR).
This paper reviews the evidence on trade costs by different country groupings, distinguishing between least-developed countries (LDCs) and landlocked LDCS (LLDCs), including new estimates of time in transit for international parcel data that is measured relatively accurately. This review is accompanied by new estimates that provide support for allocating a greater share of AfT funds toward LDCs and particularly toward LLDCs, both groups showing higher trade costs than comparators and less progress in reducing trade costs since 1995.
On average, time in customs for imports and exports are also significantly higher for both groups than for their respective comparators. LDCs and LLDCs have systematically lower values for the components in the Organisation for Economic Co-operation and Development’s (OECD) new Trade Facilitation Indicators (TFI).
New estimates suggest that a successful implementation of the TFA, defined as moving halfway toward the frontier value of the TFI for the respective country grouping could reduce trade costs for imports of LDCs by 2.4 percent and by 4.5 percent for LLDCs. Estimates of time in transit for parcels sent by post are also higher for LDCs than for other developing countries.
Even though there is more to trade costs than customs management, monitoring implementation of the TFA would be part of the Istanbul Programme of Action for Least-Developed Countries (IPoA) and a stepping stone toward the concrete trade performance targets that have lacked in AFT activities so far. At the same time, the TFA should take on board the preservation of the environment by monitoring and preventing trade in endangered species.
Aid-For-Trade: Where do we stand?
The Aid-For-Trade (AfT) Initiative launched in 2005 was part of the Millennium Development Goals (MDGs) – goal 8 “developing a global partnership for development” – with as objectives, a rules-based, open, multilateral trading system; improved market access, including duty-free, quotafree (DFQF) market access for least-developed countries (LDCs); and above all reduce poverty by half in 2015 relative to the 1990 level, a target that has been reached in most countries. Now that the Sustainable Development Goals (SDGs) have been adopted by the United Nations (UN) General Assembly in September 2015, the main trade performance objective with a target is the doubling of the global share of LDC exports by 2020 – which was already part of the Istanbul Programme of Action (IPoA). Now that World Trade Organization (WTO) members have endorsed the TFA agreement signed in Bali in 2013, what is the role of AfT? In Melo and Wagner (2015), we focused on the tradeenhancing and poverty-reducing effects of AfT that were an objective of the MDGs. Here, we focus on the benefits from a successful application of the Trade Facilitation Agreement (TFA): a move toward results-based AfT and an evaluation of the benefits from reduced trade costs with a focus on LDCs and landlocked least-developed countries (LLDCs).
With approximately US$40 billion disbursed a year, AfT represents about 30 percent of official development assistance (ODA) financial flows to developing countries, and what is entered as trade facilitation in the Organisation for Economic Co-operation and Development (OECD) Credit Reporting System (CRS) accounts for only about 1 percent of AfT disbursements. In a recent paper, we find a lack of correlation between disbursements and the World Bank’s Doing Business (DB) data or with the OECD Trade Facilitation Indicators (TFI) of the functioning of customs discussed here. If anything, trade facilitation disbursements have been directed more often than not toward countries that are the closest to the TFA targets as captured by the OECD TFI index that covers all aspects of the functioning of customs. In addition, the geographical pattern of disbursements of trade facilitation assistance does not correlate significantly with any of the usual proxies for trade facilitation – DB time in customs or the Logistics Performance Indicators (LPI).
Together with new estimates, the evidence surveyed here suggests that a shift in trade facilitation disbursements toward LDCs and LLDCs would provide the highest returns for AfT funds. Successful implementation of the TFA would reduce uncertainty related to trade, streamline market access procedures, and provide greater transparency at customs, all factors leading to lower transaction costs. Higher trade volumes would then be an engine of growth and poverty reduction.
Implemented jointly by ICTSD and the World Economic Forum, the E15Initiative convenes world-class experts and institutions to generate strategic analysis and recommendations for government, business, and civil society geared towards strengthening the global trade and investment system for sustainable development.
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A new deal on energy for Africa: Power, potential and partnership
Africa needs a new deal on energy, and now it has one.
US President Roosevelt’s post-Depression New Deal of the 1930s focused on ‘Relief, Recovery and Reform’. For Africa’s New Deal on Energy, in the spotlight at the World Economic Forum in Davos this week, the focus is on Power, Potential and Partnership.
‘Power’ – because the New Deal aims to light up and power Africa by 2025. Energy is the lifeblood of any society. It is the passport to economic transformation, and it is one of the foundations for any society in the provision of education and health.
And yet as we begin 2016 over 645 million Africans – some two-thirds of the people on the continent – have no access to energy.
Africans are tired of being in the dark: children suffer, because 90 per cent of the continent’s primary schools have no electricity. Women suffer: 600,000 people, largely women, die each year from cooking with unclean energy like wood or baked earth.
Hospitals and their patients suffer when equipment simply doesn’t work. Small and even large businesses suffer – Africa loses an estimated 4 per cent of its annual GDP for the lack of energy.
The unavailability of energy in Africa is unacceptable, and so is its cost. A woman living in a village in northern Nigeria spends around 60 to 80 times per unit more for her energy than a resident of New York City or London.
‘Potential’ – because Africa is aching to release its full economic potential, and to turn strong but uneven economic growth into deep-rooted and universally shared economic transformation.
Energy is the secret to that. With a strong and secure energy supply we can unleash the skills of a young and dynamic population. We can continue the process of turning agriculture into agro-industry, and partial diversification into full-scale industrialisation. The raw materials that will provide our energy await us – unused or as yet untapped.
As well as 300 gigawatts of coal potential and 400 gigawatts of gas, the continent is waiting to get its hands on 10 terawatts of solar energy potential, 350 gigawatts of hydroelectric, 110 gigawatts of wind, and a further 15 gigawatts of geothermal.
‘Partnership’ – because no country, no organisation, no initiative can do it alone. The Africa Progress Panel has already done the research to show that Africa can power itself – if it and others work together.
There are already key players in the field, like the Africa Renewable Energy Initiative supported by the G7, the UN’s Sustainable Energy for All Initiative, and the US Power Africa Program.
The private sector is a source of leadership as well as funding, for instance through the Africa Energy Leaders Group. The task is to point them all in the same direction. So the New Deal is an African-led initiative to mobilise political will and financial support to solve Africa’s energy challenges.
What will it do?
It has four – huge – targets; To increase on-grid generation by adding 160 Ggigawatts of new capacity by 2025, nearly doubling what we have today. To increase on-grid transmission and grid connections that will create 130 million new connections by 2025, 160 per cent more than today.
To increase off-grid generation to add 75 million connections by 2025, nearly 20 times what we have today. To increase access to clean cooking energy for around 130 million households.
First and foremost, it will raise money, from Africa and beyond, and from the public and the private sectors. We need a total of $60-90 billion a year, compared with the $22 billion invested in the sector in 2014.
This money will come from a variety of sources. First, we will work with other multi-lateral and bilateral financial institutions to see if we can get investment into the power sector to triple on an annual basis.
Second, governments themselves need to play a role.
If Africa were to increase its annual spending on energy from 0.4 per cent of GDP to 3.4 per cent, this would solve the problem completely. This could also be done by putting an end to subsidies for products such as kerosene and diesel. Finally, the private sector is very willing to play a significant role.
This will require changes in regulation to make the sector more attractive for private capital, but we have seen many examples of significant capital flow where regulations are appropriately structured.
The New Deal is also practical: it will set up the right energy policy environment: laws, regulation, governance; it will build the capacity of national energy utility companies; it will dramatically increase the number of bankable energy projects and the funding pool to deliver them; it will roll out waves of country-wide energy ‘turnarounds’.
It will be energy resource neutral, using renewables and non-renewables alike, and technology neutral.
The African Development Bank will manage the New Deal, as well as investing US$12 billion in energy funding over the next five years, attracting up to four times as much from other financiers in the process.
‘I pledge you, I pledge myself to a New Deal for the American people’, said FDR in July 1932. The pledges – financial and political – are being made again on a different continent, over 80 years later.
Meeting Africa’s energy challenge is both a moral and an economic imperative. ‘A flick of a switch’ can’t be delivered in an instant, but a flick of a switch is what it will take.
Akinwumi Adesina is President of the African Development Bank Group.
The New Deal on Energy for Africa: A transformative partnership to light up and power Africa by 2025
The New Deal on Energy for Africa is a partnership-driven effort with the aspirational goal of achieving universal access to energy in Africa by 2025. To drive and achieve this goal, the African Development Bank is working with governments, the private sector, and bilateral and multilateral energy sector initiatives to develop a Transformative Partnership on Energy for Africa – a platform for public-private partnerships for innovative financing in Africa’s energy sector.
The New Deal on Energy for Africa helps to unify all of the other efforts that are currently driving towards achieving the goals of universal access in Africa. It focuses on five key principles: raising aspirations to solve Africa's energy challenges; establishing a Transformative Partnership on Energy for Africa; mobilizing domestic and international capital for innovative financing in Africa’s energy sector; supporting African governments in strengthening energy policy, regulation and sector governance; and increasing the African Development Bank's investments in energy and climate financing.
What does the New Deal aim to achieve?
To reach the goal, Africa must achieve four targets:
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increase on-grid generation to add 160 GW of new capacity by 2025
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increase on-grid transmission and grid connections that will create 130 million new connections by 2025, 160 per cent more than today
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increase off-grid generation to add 75 million connections by 2025, 20 times what we have today
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increase access to clean cooking energy for around 130 million households.
Why the New Deal?
Over 645 million Africans have no access to electricity. Power consumption per capita in Sub-Saharan Africa is the lowest of all continents, currently estimated at 181 kWh per annum, compared to 6,500 kWh in Europe and 13,000 kWh in the United States.
Energy‐sector bottlenecks and power shortages are estimated to cost Africa some 2-4 per cent of GDP annually, undermining economic growth, employment creation and investment. Companies in Tanzania and Ghana are losing 15 per cent of the value of sales as a result of power outages. South Africa’s economic growth has been hobbled in recent years by severe electricity generation capacity constraints and frequent ‘load‐shedding’.
Africa’s poorest people are paying among the world’s highest prices for energy. A woman living in a village in northern Nigeria spends around 60 to 80 times per unit more for her energy than a resident of New York City or London (Africa Progress Panel).
While a number of programmes and projects exist (and more are emerging), the lack of sufficient innovative and appropriate financing, of bankable projects, of appropriate policy and regulatory environments, of pricing incentives and of coordination severely limits the scale and speed at which energy is provided to the continent.
At the same time, Africa is rich in energy resources. The continent has well over 10 TW of solar potential, 350 GW of hydroelectric potential, 110 GW of wind potential and an additional 15 GW of geothermal potential. This does not even include coal and gas, which can still provide some of its cheapest electricity. Africa cannot power its homes and businesses unless it unlocks this huge renewable energy potential, and combines it with conventional energy to light up and power the continent. Energy is the engine that powers economies.
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Azevêdo: Build on historic success of Nairobi to tackle urgent challenges facing the WTO
In his speech at the University of the West Indies in Jamaica on 18 January, WTO Director-General Roberto Azevêdo said WTO members should build on the historic success of the recent Ministerial Conference in Nairobi to tackle the urgent challenges facing the WTO in 2016, including the future direction of global trade negotiations. This is what he said:
It’s a real pleasure to be here at the University of the West Indies – and to be here in Kingston in this fantastic setting.
We meet at the start of a year which is full of promise.
In 2015 the international community took some huge strides forward on a number of vital issues.
There was the agreement on the UN’s new sustainable development goals.
There was the remarkable breakthrough in Paris in the fight against climate change.
And, late in December, at the WTO ministerial conference in Nairobi, members agreed a set of very significant results. In fact they delivered some of the biggest reforms in global trade policy for 20 years.
We must seek to capitalise on this progress in 2016.
I’ll come back to this point in a moment – but first I want to pay tribute to Jamaica’s leadership.
You have always played a very prominent role at the WTO. Jamaica joined the WTO’s predecessor – the GATT – the year after full independence was declared. So you didn’t waste any time!
Today at the WTO, Jamaica is known for making its voice heard – representing your specific interests and those of small and vulnerable economies more broadly.
And, while Jamaica is a relatively small nation, that has never been a reason to speak quietly – quite the opposite.
For smaller nations, the costs of maintaining a mission in Geneva are significant – and therefore it is even more essential for those nations that we are making progress and delivering results which make a difference in people’s lives. We have a responsibility to do so. Your Ambassador in Geneva, Wayne McCook, argues this point very clearly.
Indeed, Ambassador McCook, also as chairman of the Negotiating Group on Rules, played an important role in the preparatory work for the Nairobi ministerial conference – and Jamaica was crucial in the success of the meeting itself.
Minister Arnold Nicholson was one of a very small group of ministers who were selected to chair negotiations. And I pay tribute to the excellent – and tireless – work that he did there.
It is a great strength of the WTO that all members have a seat at the table – and all voices are heard. Developing countries play a growing role in decision-making and in setting the agenda. And Jamaica is always a prominent voice in the debate.
Trade is a clear priority here. For island states like Jamaica, trade is an essential means to secure growth and development.
During my visit I will be hearing about some of the steps you are taking to ensure that trade plays its full role – including through reforms to improve the flow of goods.
In fact, during my visit I will be receiving Jamaica’s formal ratification of the WTO’s Trade Facilitation Agreement. This is very welcome. This Agreement helps cut trade costs – and therefore improves your ability to trade.
Measures like this to improve the business climate will be very important. I was pleased to note that you have jumped 27 places in the 2015 World Bank’s "Doing Business" rankings, standing at 58 out of 189 economies worldwide.
This is very positive and quite impressive. However, of course, there is still work to be done. The work to promote growth and development continues.
I think that trade will be more important than ever in this effort. This is highlighted by the reforms to trade rules that the WTO has delivered in recent times.
The WTO is delivering
Let me explain in a bit more detail what was delivered in Nairobi.
The Nairobi Package contained a number of important decisions – including a decision on export competition. This is truly historic. It is the most important reform in international trade rules on agriculture since the creation of the WTO.
The elimination of agricultural export subsidies is particularly significant in improving the global trading environment.
WTO members – especially developing countries – have consistently demanded action on this issue due to the enormous trade-distorting potential of these subsidies. In fact, this task has been outstanding since export subsidies were banned for industrial goods more than 50 years ago. So this decision corrected an historic imbalance.
Countries have often resorted to export subsidies during economic crises – and recent history shows that once one country did so, others quickly followed suit. Because of the Nairobi Package, no-one will be tempted to resort to such action in the future.
This decision will help to level the playing field in agriculture markets, to the benefit of farmers and exporters in developing and least-developed countries.
This decision will also help to limit similar distorting effects associated with export credits and state trading enterprises.
And it will provide a better framework for international food aid – maintaining this essential lifeline, while ensuring that it doesn’t displace domestic producers.
Members also took action on other developing-country issues, committing to find a permanent solution on public stockholding for food security purposes, and to develop a Special Safeguard Mechanism.
And members agreed a package of specific decisions for least developed countries, to support their integration into the global economy. This contained measures to enhance preferential rules of origin for these countries and preferential treatment for their services providers.
And it contained a number of steps on cotton – helping low-income cotton producers to access new markets.
Finally, a large group of members agreed on the expansion of the Information Technology Agreement. Again, this was an historic breakthrough. It will eliminate tariffs on 10% of global trade – that’s $1.3 trillion worth of trade, making it the WTO’s first major tariff cutting deal since 1996.
Altogether, these decisions will provide a real boost to growth and development around the world.
This success is all the more significant because it comes so soon after our successful conference in Bali that delivered a number of important outcomes, including the Trade Facilitation Agreement.
Let me underline again the significance of that Agreement.
It will bring a higher level of predictability and transparency to customs processes around the world, making it easier for businesses – especially smaller enterprises – to join global value chains.
It could reduce trade costs by an average of 14.5% - with the greatest savings being felt in developing countries.
By cutting these high trade costs, the Agreement has the potential to increase global merchandise exports by up to 1 trillion dollars per annum, and to create 20 million jobs around the world.
That’s potentially a bigger impact than the elimination of all remaining tariffs.
Post-Nairobi – Looking forward
For many years global trade negotiations yielded few results.
But, as you can see, we are changing all that. The WTO has delivered a huge amount over the last few years. We are getting into the habits of success.
By doing so, we are bringing the negotiating work of the WTO into line with the other parts of the organization which already function very effectively.
98% of global commerce now takes place under the WTO rulebook.
The WTO’s 162 members monitor each other’s practices and regulations against those rules in order to improve transparency and avoid protectionism. And when conflicts arise, we have built one of the most effective dispute settlement systems in the world to resolve them.
The system has dealt with over 500 cases in just 20 years.
We need to continue bringing this kind of discipline to reforming global trade rules.
The negotiating successes of recent years have been achieved despite some persistent and fundamental divisions between members – not because those divisions have been solved.
The prolonged deadlock in advancing negotiations on the WTO’s core negotiating agenda, the so-called ’Doha Development Agenda’, has been a source of frustration for many.
This is one reason that countries have been putting their energy into other trade initiatives, such as bilateral and regional trade deals. We have to face up to this.
For the last two years, we have been trying to reinvigorate the Doha agenda, exploring various ways of overcoming the existing difficulties. We tested different alternatives over several months of good engagement, but the conversations revealed significant differences, which are unlikely to be solved in the short term.
In Nairobi ministers formally acknowledged their differences about our future work. This was a very significant moment.
But, despite those differences, there is some convergence. For example, there is a clear openness to advance negotiations on the remaining Doha issues, and to keep development at the centre of our work.
These issues include domestic support and market access for agricultural goods, market access for industrial goods, services, fisheries subsidies, and a number of other areas.
So clearly these are important issues, which members want to address through negotiations. The question, given the differences I have mentioned, is how?
At the same time, some members want to explore the possibility of discussing and eventually negotiating on other issues.
Certainly, all members believe that the WTO can do more – and that we can do it at a faster pace.
So ministers instructed their representatives in Geneva to find ways to advance negotiations.
And in having this conversation, I think we should learn the lessons of our recent successes.
The multilateral approach, as we have already seen, is clearly viable, but there are different ways of negotiating at the WTO.
We have seen success recently by working in different configurations. Groups of members have been working to tackle specific issues of importance to them – such as the negotiations on trade in IT products, which saw success in Nairobi. There are other such initiatives underway as well, on environmental goods, for example.
Whatever the approach, flexibility in the way new commitments are taken on has proved to be a crucial ingredient for success.
The Trade Facilitation Agreement – a fully multilateral undertaking – was successful for exactly this reason: because it is flexible. It allows members to participate in a way which is commensurate with their capacity to do so.
It allows members to decide individually how quickly they take on commitments and, more than that, whether they need practical support to implement them.
Jamaica will benefit from this support.
Flexibility is also the hallmark of plurilateral deals, such as the Information Technology Agreement, where members who are ready take on new commitments, and others join later if they wish.
We may need to see more of these kinds of flexible approaches if we want to reach consensus in an Organization that has members at different stages of development, and which face distinct economic circumstances.
I am confident that we will learn from these successes and build on the commonalities between members – because the alternative is not an option.
The price of inaction on negotiations would be high.
We would be harming the prospects of all those who rely on trade today – and it would disadvantage all those who would benefit from a reformed, modernized global trading system in the future, particularly in poorer countries.
The smaller and the poorer the country, the more likely it is to need trade as a means to attract investments and to boost economic and social development. We simply cannot lose sight of this reality.
Conclusion
So the challenge before us is very significant.
It is not limited only to the question of what happens to the Doha issues, it is about the negotiating function of the WTO. It is about what members want for the future of the Organization as a standard and rule-setting body.
It has wide systemic implications for trade multilateralism, and for multilateralism at large.
And the challenge is urgent.
The world won’t wait for the WTO. Other trade deals will keep advancing. The WTO cannot stop delivering.
The wider the gap between regional and multilateral disciplines, the worse the trade environment becomes for everyone, particularly businesses, small countries and all those not involved in major regional negotiations.
But the outlook is not bleak. I said at the outset that 2016 was full of promise. I truly believe that – because, while we face real challenges, there are also real opportunities before us.
The conversation that is already getting underway in Geneva will determine the future direction of global trade negotiations – and the future direction of the WTO.
It is an opportunity to find solutions that have long eluded us.
It is an opportunity to ensure that trade delivers more – and that it supports growth and development for all.
So I trust members will rise to this challenge – and seize this opportunity. I have no doubt that Jamaica will play an active and central role in that debate.
Thank you.
Weak pickup in global growth, with risks pivoting to emerging markets
The pickup in global growth is weak and uneven across economies, with risks now tilted toward the emerging markets, says the IMF’s latest World Economic Outlook (WEO) Update.
Advanced economies will see a modest recovery, while emerging market and developing economies face the new reality of slower growth.
The WEO Update now projects global growth at 3.4 percent this year and 3.6 percent in 2017 (see Table), slightly lower than the forecast issued in October 2015.
“This coming year is going to be a year of great challenges and policymakers should be thinking about short-term resilience and the ways they can bolster it, but also about the longer-term growth prospects,” said Maurice Obstfeld, IMF Economic Counsellor and Director of Research.
“Those long-term actions,” he continued, “will actually have positive effects in the short run by increasing confidence and increasing people’s faith in the future.”
Marginal improvements in advanced economies
Growth in advanced economies is projected to rise to 2.1 percent and to hold steady in 2017, a slightly weaker pickup than that forecast in October.
Overall activity remains robust in the United States, supported by still-easy financial conditions and strengthening housing and labor markets. But there are also challenges stemming from the strength of the dollar, which is causing the U.S. manufacturing sector to shrink marginally.
In the euro area, stronger private consumption supported by lower oil prices and easy financial conditions is outweighing a weakening of net exports.
Growth in Japan is also expected to firm up in 2016, on the back of fiscal support, lower oil prices, accommodative financial conditions, and rising incomes.
Emerging markets face growth slowdown
Emerging market and developing economies are now confronting a new reality of lower growth, with cyclical and structural forces undermining the traditional growth paradigm, as IMF chief Christine Lagarde pointed out in a recent speech.
Growth forecasts for most emerging market and developing economies reveal a slower pickup than previously predicted. Growth is projected to increase from 4 percent in 2015 – the lowest rate since the 2008-09 financial crisis – to 4.3 and 4.7 percent in 2016 and 2017, respectively.
But these overall numbers fail to do full justice to the diversity of situations across countries.
India and parts of emerging Asia are bright spots, projected to grow at a robust pace, whereas Latin America and the Caribbean will again see a contraction in 2016, reflecting the recession in Brazil and economic stress elsewhere in the region, even as most other countries in the region will continue to grow. Emerging Europe is expected to grow at a steady pace, albeit with some slowing in 2016, given that Russia could remain in recession in 2016. Most countries in sub-Saharan Africa will see a gradual pickup in growth, but only to rates that remain lower than those achieved during the past decade.
Risks tilted to downside
Looking beyond the short-run forecasts, there are important risks to the outlook, which are particularly prominent for emerging market and developing economies and could stall global recovery.
These risks relate mostly to the ongoing adjustments of the global economy, namely China’s rebalancing, lower commodity prices, and the prospects for the progressive increase in interest rates in the United States. They include the following possibilities:
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A sharper-than-expected slowdown in China, which could bring more international spillovers through trade, commodity prices, and waning confidence.
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A further appreciation of the dollar and tighter global financing conditions which could raise vulnerabilities in emerging markets, possibly creating adverse effects on corporate balance sheets and raising funding challenges for those with high dollar exposures.
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A sudden bout of global risk aversion, regardless of the trigger, could lead to sharp further depreciations and possible financial strains in vulnerable emerging market economies.
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An escalation of ongoing geopolitical tensions in a number of regions, which could affect confidence and disrupt global trade, financial flows, and tourism. New economic or political shocks in countries currently in economic distress which could also derail the projected pickup in activity.
Commodity markets pose two-sided risks. On the downside, further declines in commodity prices would worsen the outlook for already-fragile commodity producers, and widening yields on energy sector debt threaten a broader tightening of credit conditions.
On the upside, the recent decline in oil prices may provide a stronger boost to demand in oil importers, including through consumers’ possible perception that prices will remain lower for longer.
“All in all, there is a lot of uncertainty out there, and I think that contributes to the volatility,” said Obstfeld. “We may be in for a bumpy ride this year, especially in the emerging and developing world,” he said.
Raising growth still a priority
In this global environment, with the risk of low growth persisting for a long time, the WEO Update underlines the urgent need for policymakers to raise actual and potential growth through a mix of demand support and structural reforms.
Structural reforms, in particular, remain critical. Priorities vary, but many advanced economies would benefit from reforms to strengthen labor force participation (Japan, euro area) and overall employment levels (given aging populations), as well as measures to tackle private debt overhangs.
Policymakers in emerging markets and developing economies need to redirect activity to new sources of growth. Lifting growth will also ensure continued convergence toward advanced economy income levels.
These economies also need to press on with structural reforms to remove infrastructure bottlenecks, facilitate a dynamic and innovation-friendly business environment, and bolster human capital through reforms to education, labor, and product markets.
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Five million jobs by 2020: The real challenge of the Fourth Industrial Revolution
The Fourth Industrial Revolution, which includes developments in previously disjointed fields such as artificial intelligence and machine-learning, robotics, nanotechnology, 3-D printing, and genetics and biotechnology, will cause widespread disruption not only to business models but also to labour markets over the next five years, with enormous change predicted in the skill sets needed to thrive in the new landscape. This is the finding of a new report, The Future of Jobs, published on 18 January 2016 by the World Economic Forum.
The report is based on a survey of chief human resources officers and top strategy executives from companies across nine broad industry categories and covering 15 of the world's largest economies. These are; Australia, Brazil, China, France, Germany, India, Italy, Japan, Mexico, South Africa, Turkey, the UnitedKingdom and the United States, plus the ASEAN and GCC groups. Together, these economies account for 65% of the global workforce. A major goal of the report is to analyse the impact of key drivers of change and provide specific information on the relative magnitude of these expected changes by industry and geography, and the expected time horizon for their impact to be felt on job functions, employment levels and skills.
In terms of overall impact, the report indicates that the nature of change over the next five years is such that as many as 7.1 million jobs could be lost through redundancy, automation or disintermediation, with the greatest losses in white-collar office and administrative roles. This loss is predicted to be partially offset by the creation of 2.1 million new jobs, mainly in more specialized “job families”, such as Computer and Mathematical or Architecture and Engineering.
These predictions are likely to be relatively conservative and leave no room for complacency. Yet the impact of disruption will vary considerably across industry and gender as well as job type. For example, Healthcare is expected to experience the greatest negative impact in terms of jobs in the next five years, followed jointly by Energy and Financial Services and Investors. The industry that stands to create the most jobs, perhaps less surprisingly, is Information and Communication Technology, followed by Professional Services and Media, Entertainment and Information professionals.
“Without urgent and targeted action today to manage the near-term transition and build a workforce with futureproof skills, governments will have to cope with ever-growing unemployment and inequality, and businesses with a shrinking consumer base,” said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum
There is also a gender implication to the future of jobs. Based on the absolute job gains and losses mentioned above, the burden of job losses seems to fall equally on women (48%) and men (52%). However, given that men represent a larger share of the overall job market than women, this even spread translates into a widening of the employment gender gap, with women losing five jobs for every job gained compared with men losing three jobs for every job gained. This is also partly explained by low participation by women in the “job families” that are expected to grow, such as Computers and Mathematics, thus adding to the urgency with which leaders must address the chronic problem of getting more women into STEM (science, technology, engineering, mathematics) professions.
When it comes to respondents’ outlook on how best to deal with these sweeping changes, the news is more encouraging. The most popular workforce strategy across every industry is investing in reskilling current employees. Other practices, such as supporting mobility and job rotation, attracting female and foreign talent and offering apprenticeships, also scored high. Hiring more short-term or virtual workers are much less popular responses. Indeed, the survey suggests that those companies that are treating future workforce planning as a priority are almost 50% more likely to invest in reskilling than those that do not. The report also indicates that those companies that report satisfaction in their future workforce strategy are more than twice as likely to be targeting female talent, and significantly less likely to be planning on hiring more short-term workers.
Drivers of Change
The most significant driver of change – across all industries – is the changing nature of work itself. As new technologies make “anytime, anywhere” work possible, companies are breaking up tasks in new ways, leading to a fragmentation of jobs across many industries. These effects are further compounded by the rise of mobile internet and cloud technology, enabling the rapid spread of internet-based service models. However, while the new “gig economy” may be one of the most visible and current manifestations of disruptions to the labour market, there is more change – both positive and negative – expected in specific industries, leading to new management and regulatory challenges.
Further unpacking the bundle of technological drivers of change in the Fourth Industrial Revolution yields a rather more optimistic picture on the job creation potential of technologies such as big data analytics, mobile internet, the internet of things and robotics. However, by far the biggest expected drivers of employment creation are demographic and socio-economic in nature; in particular, the opportunities offered by young demographics and rising middle classes in emerging markets and the rising economic power and aspirations of women. Conversely, the survey respondents predict that increasing geopolitical volatility risks are the biggest threat – by far – to employment and job creation globally.
Regional Analysis
At country level, expectations of the nature of upcoming disruptions are shaped by the demographic, economic and technological development of the country in question. Overall, changing and flexible work is seen as the most significant driver of change in advanced economies, whereas the rising middle class takes this role in emerging markets. New energy supplies and technologies are expected to play the largest role in the Gulf Cooperation Council (GCC) countries, while climate change adaptation is seen as a particularly major driver in Germany. A number of developing countries expect particularly large impact from the mobile internet given that the technology has the potential to bring millions of formerly unconnected workers and consumers into the formal economy for the first time.
Skills instability – the rapid change in the skills requirements of all existing jobs – will also impact countries differently. While ASEAN, GCC and Japan will have only 25% instability in the top skills mix overall, in Turkey, China, India and Italy over 40% of the top skills required across all jobs will change in the next five years. In the United Kingdom, 28% of the top skills mix is expected to change by 2020 while in the United States this number is expected to be 29%. In France (28%) and Germany (39%) the situation is even more challenging.
Employment outlook is net positive in only five of the 15 countries covered, but even in those countries there is significant job churn – with some functions becoming redundant as new ones emerge. Using the forecasts from chief human resource officers and current employment data, the highest ratios of jobs created per job lost is expected to be in ASEAN (3.72 jobs gained per job lost), Mexico (3.06), United Kingdom (2.91), United States (1.37) and Turkey (1.14). In all other countries covered by the Future of Jobs report, there is an expected net loss in jobs.
Industry and Occupation Analysis
Drivers of change will also have a very disparate impact within specific industries. For example, new energy supplies and technologies will have a particular impact on Energy, Basic and Infrastructure, and Mobility. Processing power and big data will have an especially strong impact on Information and Communication Technology, Financial Services and Professional Services. The rising middle class in emerging markets will have the largest effect on Consumer, Financial Services and Mobility. Consumer ethics and privacy issues will have a significant impact on the Consumer, Financial Services and Information and Communication Technology sectors. The business model changes created by these drivers will, in turn, have specific and different consequences for employment and skills needs in each industry. While there is a modestly positive outlook for employment across most sectors over the 2015-2020 period, underneath this aggregate outlook there is significant relative growth in some job families and significant relative decline in others.
Skills instability is expected to impact all industries but is particularly pronounced in Financial Services where 43% of the top skills needed in all job families across the industry are expected to change by 2020. The next most affected industries are Basics and Infrastructure (42%) and Mobility (39%). The least affected by 2020 are Media, Entertainment and Information (27%) – unsurprisingly, as the industry is already in the midst of a major skills displacement – and Consumer industry (30%).
The survey respondents expect strong employment growth across the Architecture and Engineering and Computer and Mathematical job families, a moderate decline in Manufacturing and Production roles and a significant decline in office and administrative roles. Other sizeable job families, such as Business and Financial Operations, Sales and Related and Construction and Extraction have a largely flat global employment outlook over the 2015-2020 period. However, across all job families, chief human resource officers expect major challenges in recruiting.
Our research also explicitly asked respondents about new and emerging job categories and functions that they expect to become critically important to their industry by the year 2020, and where within their global operations they would expect to locate such roles. Two job types stand out due to the frequency and consistency with which they were mentioned across practically all industries and geographies. The first are data analysts, which companies expect will help them make sense of the torrent of data generated by the technological disruptions referenced above. The second are specialized sales representatives, as practically every industry will need to become skilled in commercializing and explaining their offerings to clients. Other new specialties frequently mentioned include new types of human resources and organizational development specialists, engineering specialties such as materials, biochemicals, nanotech and robotics, regulatory and government relations specialists, geospatial information systems experts, and commercial and industrial designers.
The Case for Cooperation
While forecasts vary by industry and region, momentous change is under way and, ultimately, it is our actions today that will determine whether that change mainly results in massive displacement of workers or the emergence of new opportunities.
One of the major barriers to change identified by chief human resource officers is the lack of specificity on the types of disruptive change under way. Our dataset aims to bring specificity to the debate and to the options for action by providing the perspective of chief human resources officers of leading employers who are among those at the frontline of the emerging trends and are key actors in implementing future workforce strategies. “Our analysis reveals that upcoming disruptions to the employment landscape will be about much more than simply automation. It is essential that we act collectively now to prepare ourselves for the changes that we know the Fourth Industrial Revolution will bring,” said Saadia Zahidi, Head of the Global Challenge on Employment, Skills and Human Capital at the World Economic Forum.
In part, this will entail business taking more responsibility for upskilling, reskilling and collaborating rather than competing on talent. In addition, it is imperative that governments put in place rapid and fundamental change in education systems to prepare for the new labour market. The World Economic Forum’s Global Challenge Initiative on Employment, Skills and Human Capital (see below) brings together businesses and governments to collaborate on making these solutions a reality.
Methodology
The Future of Jobs Survey that formed the basis of the report covers over 350 of the largest companies in the world, including over 150 of the Fortune Global 500. In addition to the individual company responses. we had over 1,300 detailed occupation-level data points on mass employment, specialist and newly emerging occupations based in specific geographic locations across these companies’ global operations. The survey respondents primarily included chief human resource officers, chief strategy officers and other senior talent and strategy executives. The target pool of respondents comprised, as the primary selection criterion, the 100 largest global employers in each of our target industry sectors. In addition to the aggregate analysis, the report contains 15 country or regional profiles and nine industry profiles providing detailed information for each on the current situation and the 2020 outlook.
Global Challenge on Employment, Skills and Human Capital
The World Economic Forum’s Global Challenge Initiative on Employment, Skills and Human Capital produces analytical tools such as the Human Capital Report, the Disrupting Unemployment compendium and the Future of Jobs report to allow companies and countries to benchmark their current performance, assess their prospects and learn from best practices. In addition, the Challenge Initiative serves as a platform for public-private partnerships to address skills gaps and prepare for the future of jobs in selected regions and countries. It cooperates with industries to analyse employment and skills needs and implement solutions, working closely with global multistakeholder communities of leaders and experts dedicated to boosting employment, closing skills gaps and improving education.
Partners of the Global Challenge on Employment, Skills and Human Capital are: Adecco Group, African Rainbow Minerals, Alghanim Industries, AlixPartners, The Bahrain Economic Development Board, Chobani, The Coca-Cola Company, Edelman, GEMS Education, Infosys, LinkedIn, ManpowerGroup, Mercer, Microsoft Corporation, Pearson, The Rockefeller Foundation, SAP, Saudi Aramco, Siemens, Tata Consultancy Services, Tupperware Brands Corporation, Uber, Workday, WPP and Zain.
Over 2,500 leaders from business, government, international organizations, civil society, academia, media and the arts will participate in the 46th World Economic Forum Annual Meeting in Davos-Klosters, Switzerland, on 20-23 January. Under the theme, Mastering the Fourth Industrial Revolution, the programme comprises over 250 sessions, of which over 100 will be webcast live.
Taking a formative role in shaping the discussion at the Annual Meeting 2016 as the Co-Chairs are: Mary Barra, Chairman and Chief Executive Officer, General Motors, USA; Sharan Burrow, General Secretary, International Trade Union Confederation (ITUC), Brussels; Satya Nadella, Chief Executive Officer, Microsoft Corporation, USA; Hiroaki Nakanishi, Chairman and Chief Executive Officer, Hitachi, Japan; Tidjane Thiam, Chief Executive Officer, Credit Suisse, Switzerland; and Amira Yahyaoui, Founder and Chair, Al Bawsala, Tunisia.
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Global unemployment projected to rise in both 2016 and 2017
Despite falling unemployment levels in some developed economies, new analysis shows the global job crisis is not likely to end, especially in emerging economies.
Continuing high rates of unemployment worldwide and chronic vulnerable employment in many emerging and developing economies are still deeply affecting the world of work, warns a new ILO report.
The final figure for unemployment in 2015 is estimated to stand at 197.1 million and in 2016 is forecast to rise by about 2.3 million to reach 199.4 million. An additional 1.1 million jobless will likely be added to the global tally in 2017, according to the ILO’s World Employment and Social Outlook – Trends 2016 (WESO).
“The significant slowdown in emerging economies coupled with a sharp decline in commodity prices is having a dramatic effect on the world of work,” says ILO Director-General Guy Ryder.
“Many working women and men are having to accept low paid jobs, both in emerging and developing economies and also, increasingly in developed countries. And despite a drop in the number of unemployed in some EU countries and the US, too many people are still jobless. We need to take urgent action to boost the number of decent work opportunities or we risk intensified social tensions,” he adds.
In 2015, total global unemployment stood at 197.1 million – 27 million higher than the pre-crisis level of 2007.
Emerging economies worst hit
The unemployment rate for developed economies decreased from 7.1 per cent in 2014 to 6.7 per cent in 2015. In most cases, however, these improvements were not sufficient to eliminate the jobs gap that emerged as a result of the global financial crisis.
Moreover, the employment outlook has now weakened in emerging and developing economies, notably in Brazil, China and oil-producing countries.
“The unstable economic environment associated with volatile capital flows, still dysfunctional financial markets and the shortage of global demand continue to affect enterprises and deter investment and job creation,” explains Raymond Torres, Director of the ILO Research Department.
“In addition, policy-makers need to focus more on strengthening employment policies and tackling excessive inequalities. There is much evidence that well-designed labour market and social policies are essential for boosting economic growth and addressing the jobs crisis and almost eight years after the start of the global crisis, a strengthening of that policy approach is urgently needed,” adds Torres.
The authors of the WESO also document the fact that job quality remains a major challenge. While there has been a decrease in poverty rates, the rate of decline in the number of working poor in developing economies has slowed and vulnerable employment still accounts for over 46 per cent of total employment globally, affecting nearly 1.5 billion people.
Vulnerable employment is particularly high in emerging and developing economies, hitting between half and three-quarters of the employed population in those groups of countries, respectively, with peaks in Southern Asia (74 per cent) and sub-Saharan Africa (70 per cent).
Tackling informal employment
Meanwhile, the report shows that informal employment – as a percentage of non-agricultural employment – exceeds 50 per cent in half of the developing and emerging countries with comparable data. In one-third of these countries, it affects over 65 per cent of workers.
“The lack of decent jobs leads people to turn to informal employment, which is typically characterized by low productivity, low pay and no social protection. This needs to change. Responding urgently and vigorously to the scale of the global jobs challenge is key to successful implementation of the United Nations’ newly adopted 2030 Agenda for Sustainable Development,” concludes Ryder.
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Ban names ‘eminent advocates’ to propel achievement of new Sustainable Development Goals
A queen, a crown princess, a president, a prime minister, a Chinese e-commerce pioneer, and a player often ranked as the world’s best footballer are among eminent Advocates appointed by Secretary-General Ban Ki-moon on Tuesday to help achieve the United Nations 2030 Agenda for Sustainable Development, which seeks to eliminate poverty, hunger and a raft of social ills, all within 15 years.
The eminent Sustainable Development Goals (SDGs) Advocates “will build on their unique standing and leadership to promote the SDGs as part of an ambitious and transformative global development agenda,” a UN spokesperson said.
“They are to support the Secretary-General in his efforts to generate momentum and commitment to achieve the SDGs by 2030,” the spokesperson added in a note to correspondents, which also listed the panellists.
The co-chairs are Ghanaian President John Dramani Mahama and Norwegian Prime Minister Erna Solberg. Members include Queen Mathilde of Belgium; Crown Princess Victoria of Sweden; Jack Ma, Founder and Executive Chairman of the Chinese Alibaba Group of Internet-based businesses; and Leo Messi, the world renowned Argentine-born footballer, who is already a UN Children’s Fund Goodwill Ambassador.
The 2030 Agenda, adopted unanimously by 193 Heads of State and other top leaders at a summit at UN Headquarters in New York in September, calls on all countries to achieve 17 SDGs, addressing the needs of people in both developed and developing countries.
They build on the earlier eight Millennium Development Goals (MDGs), which specifically sought by 2015: to eradicate extreme poverty and hunger; achieve universal primary education; promote gender equality and empower women; reduce child mortality; improve maternal health; combat HIV/AIDS, malaria and other diseases; ensure environmental sustainability; and develop a global partnership for development.
But progress on these was uneven across regions and countries, leaving millions of people behind, especially the poorest and those disadvantaged due to sex, age, disability, ethnicity or geographic location. This is where the SDGs come in.
They stress everything from zero poverty, zero hunger, good health, quality education, gender equality, clean water and sanitation, and affordable clean energy, to decent work and economic growth, innovation, reduced inequalities, sustainable cities, responsible consumption, climate action, unpolluted oceans and land, and partnerships to achieve the goals.
“The SDG Advocates will promote the universal character of the SDGs, including their commitment to leave no one behind; to promote the engagement of new stakeholders in the implementation and financing of the SDGs; to encourage partnerships with governments, civil society and the private sector to share knowledge and resources; and to raise awareness for the integrated nature of the SDGs,” the spokesperson said.
The other Advocates are: Sheikha Moza bint Nasser, Co-Founder of the Qatar Foundation; screenwriter, producer and film director Richard Curtis; Dho Young-Shim, Chairperson of the UN World Tourism Organization’s Sustainable Tourism Foundation; Leymah Gbowee, Director of the Gbowee Peace; Graça Machel, President of the Foundation for Community Development; Alaa Murabit; Founder of The Voice of Libyan Women; Paul Polman, Chief Executive Officer of Unilever; Jeffrey Sachs, Director of the Earth Institute at Colombia University; Shakira Mebarak, Founder of the Pies Descalzos Foundation; actor Forest Whitaker, Founder of the Whitaker Peace & Development Initiative; and Noble Peace Prize laureate Muhammad Yunus, Founder of the Grameen Bank.