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$248 USD million pledged to GEF climate fund for most vulnerable countries
New financing for Least Developed Countries Fund sends strong signal of commitment as Paris talks get underway
Eleven donors have pledged close to $250 USD million in new money for adaptation support to the most vulnerable countries on the planet giving a welcome boost to the start of the climate talks in Paris.
Canada, Denmark, Finland, France, Germany, Ireland, Italy, Sweden, Switzerland, United Kingdom, and the United States of America announced their contributions on 30 November 2015 to the Least Developed Countries Fund (LDCF), a climate fund hosted by the Global Environment Facility (GEF).
Welcoming the injection of new financing, GEF CEO and Chairperson, Naoko Ishii, said: “Given that we’re already locked into climate change trajectories for many years to come, increased investment in adaptation has to be at the core of the new climate agreement.”
“We know that many billions are required over the next few years to fill the gap in climate finance, but the money pledged today is vital to help some of the most vulnerable people on the planet cope with the immediate impacts of our rapidly warming world,” Ishii continued. “I commend all the donors for their support. This funding for adaptation is urgently needed to help sustain the hard-earned momentum for action on the ground that some of the most vulnerable countries have achieved in recent years.”
Demand from developing countries for financing from the LDCF remains strong. Droughts, violent storms, sea-level rise and other climate changes are already impacting the poorest and most vulnerable countries and communities.
In his speech at the COP on Monday, USA President Barack Obama said: “For some, particularly island nations [...], climate change is a threat to their very existence. That’s why today, in concert with other nations, America confirms our strong and ongoing commitment to the Least Developed Countries Fund. And tomorrow, we’ll pledge new contributions to risk insurance initiatives that help vulnerable populations rebuild stronger after climate related disasters. ”
At Monday’s announcement of the new financing, former President of Ireland and United Nations Secretary-General’s Special Envoy on Climate Change, Mary Robinson said: “I have seen for myself how people from across the developing world are leading the way to climate solutions. But the scale and international nature of climate change requires an unprecedented level of international solidarity and support. So today’s announcement should be seen in that context: they are not just about dollars and cents and accounting. They are about supporting millions of people across the world.”
The new financing will enable the GEF to respond to existing requests for support ranging from investments in new approaches to agriculture to national adaptation planning and building resilience against climate change variability and disasters.
Since 2001, the GEF – through the LDCF and the Special Climate Change Fund and the Strategic Priority on Adaptation program – has provided $1.3 USD billion in grant financing and mobilized $7 USD billion from other sources for 320 adaptation projects in 129 countries, including all Least Developed Countries and 33 Small Island Developing States. These projects are expected to directly reduce the vulnerability of 17 million people.
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UN chief launches initiative to build climate resilience of world’s most vulnerable countries
On the opening day of the United Nations climate change conference (COP21), dozens of announcements were made in Paris by Governments and leaders of the public and private sectors, all aiming to generate climate solutions and build a sustainable future.
A new initiative to build climate resilience in the world’s most vulnerable countries was launched by Secretary-General Ban Ki-moon and 13 agencies of the UN system.
“Three out of four humanitarian disasters are now climate-related,” Mr. Ban told delegates attending a High-level meeting on climate resilience at the Paris-Le Bourget site, COP21’s main venue.
“Economic losses have increased by more than half over the past decade. Ecosystems, and food and water supplies are under increasing pressure. The hardest hit are the poor and vulnerable – including small farmers, fishing communities and indigenous peoples,” warned the UN chief.
According to the UN, the new initiative – called ‘Anticipate, Absorb, Reshape’ – will strengthen the ability of countries to anticipate hazards, absorb shocks, and reshape development to reduce climate risks.
It is expected to help address the needs of the nearly 634 million people, or a tenth of the global population who live in at-risk coastal areas just a few meters above existing sea levels, as well as those living in areas at risk of droughts and floods. The world is now experiencing a strong El Niño event, which could place as many as 4.7 million people at risk from drought in the Pacific alone.
Over the next five years, the Initiative is set to mobilize financing and knowledge; create and operationalize partnerships at scale, help coordinate activities to help reach tangible results, catalyze research, and develop new tools.
The Secretary-General also joined the launch of the International Solar Alliance, set up by the Governments of India and France. In the presence of India’s Prime Minister Narendra Modi, the UN chief said the Alliance will “enable solar-rich developing countries to make the best use of an abundant, free natural resource.”
“The broad support for this international coalition is testament to the resonance of your vision of a solar-powered path to prosperity,” said Mr. Ban. “As the Prime Minister has said, we need ‘development without destruction.’ Solar energy offers major potential for reducing poverty and limiting greenhouse gas emissions.”
He added that he counts on developed countries to partner with the International Solar Alliance by providing technology support, capacity-building and financial resources.
Other news at the opening of COP21 included a pledge by 11 donor countries of close to $250 million dollars in new money for adaptation support to the Least Developed Countries Fund (LDCF), a climate fund hosted by the Global Environment Facility (GEF).
“I have seen for myself how people from across the developing world are leading the way to climate solutions,” said Mary Robinson, the UN Secretary-General’s Special Envoy on Climate Change.
“But the scale and international nature of climate change requires an unprecedented level of international solidarity and support. So today’s announcement should be seen in that context: they are not just about dollars and cents and accounting. They are about supporting millions of people across the world,” she added.
Meanwhile, a new Fossil Fuel Subsidy Reform Communiqué was presented to Christiana Figueres, the Executive Secretary of the UN Framework Convention on Climate Change (UNFCCC), by the New Zealand Prime Minister John Key.
The Communiqué calls on the international community to increase efforts to phase out perverse subsidies to fossil fuels by promoting policy transparency, ambitious reform and targeted support for the poorest.
In addition, the World Bank announced it has been working with four European countries – Germany, Norway, Sweden, and Switzerland – to set up a new $500 million initiative that will find new ways to create incentives aimed at large scale cuts in greenhouse gas emissions in developing countries to combat climate change.
The initiative, called the Transformative Carbon Asset Facility, will reportedly help developing countries implement their plans to cut emissions by working with them to create new classes of carbon assets associated with reduced greenhouse gas emission reductions, including those achieved through policy actions.
Twenty countries, all of them major economies, launched Mission Innovation, a landmark commitment to dramatically accelerate public and private global clean energy innovation, including doubling their current investments in the sector.
According to UNFCCC, these national commitments “are coupled with a major, independent private sector initiative spearheaded by Microsoft co-founder Bill Gates in which entrepreneurs, investors, and businesses will deploy billions more dollars to drive innovation from the laboratory to the marketplace.”
Finally, the opening of COP21 also included new partnerships forged between world leaders from major forest countries who today endorsed forests as a key climate solution.
A press release issued by UNFCCC indicated that they recommitted to providing strong, collective and urgent action to promote equitable rural economic development while slowing, halting and reversing deforestation and massively increasing forest restoration.
Additional initiatives and pledges are expected during the two-week conference, which is scheduled to end on 11 December.
Statement of the UN System Chief Executives Board for Coordination on Climate Change
Climate change represents one of humanity’s greatest challenges to the peaceful, prosperous and sustainable development of society. Each year, there is increasing evidence of its adverse impacts, particularly on the world’s poorest and most vulnerable populations and countries. Climate change affects women and men differently requiring gender-responsive climate action. No country is immune from the harmful effects of a changing climate, and no country acting alone can arrest it. Global cooperation is essential for meeting this challenge and transforming it into an opportunity for low-emissions, climate resilient growth that benefits all.
In September, United Nations Member States unanimously adopted the transformative 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals (SDGs). Putting the 2030 Agenda into practice provides the world with an unprecedented opportunity to build a better future for humanity that leaves no one behind.
Addressing climate change is fully consistent with, and necessary for, achieving the SDGs. In turn, the accelerated implementation of the SDGs will be an essential vehicle for reducing global greenhouse emissions, strengthening resilience and decreasing the negative effects of climate change.
In recognition of the need to better integrate and coordinate their work on sustainable development, peace and security, human rights and humanitarian engagement to achieve these objectives, the United Nations System Chief Executives:
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urge Parties to the UNFCCC to adopt a universal, ambitious, rights-based and gender-responsive agreement and accompanying decisions in Paris, which will put the world on an urgent pathway to limit global temperature rise to below 2°C this century;
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commit their entities to provide strong and coherent support to Member States for developing and implementing their Intended Nationally Determined Contributions (INDCs) in the context of their overall efforts to pursue sustainable development;
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continue to equally prioritize efforts to build the resilience of people, communities and countries to the adverse effects of climate change, especially the most vulnerable; and
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explore ways to increase access to financing for these efforts, including enhancing ways to leverage private finance with available public finance, in a sustainable manner and with safeguards to protect the public interest.
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Over $300bn since the financial crisis: Development Capital revealed as largest funders of infrastructure in Africa
A new report from Global law firm Baker & McKenzie in collaboration with the Economist Corporate Network, Spanning Africa’s Infrastructure Gap: How development capital is transforming Africa’s project build-out, reveals that development capital has been by far the predominant funder of African infrastructure since the financial crisis.
Closing the infrastructure gap requires many billions of US dollars, both to upgrade and maintain existing infrastructure as well as to fund new projects. In 2009 the World Bank estimated that over US$90bn annually was required in Sub-Saharan Africa alone.
This report estimates that actual development capital funding for African infrastructure totalled around US$328bn between 2009 and 2014 – roughly US$54bn a year. Add annual commercial lending estimated to be between $9bn and $12bn a year and suddenly that gap looks more realistic to close. Development Capital is a crucial enabler to make projects bankable by taking risks (primarily political risks) which the private sector would not be able to accept. Without them, private-sector contributions would be significantly less.
“Put bluntly, Africa cannot fulfil its economic potential without more and better infrastructure, particularly in the power, transport, and water and sanitation sectors,” said Gary Senior, chair of Baker & McKenzie in EMEA. “This needs funding one way or another for the ‘Africa Rising’ growth narrative to come to fruition. But what is surprising about these numbers is not so much the challenges as the apparent achievability of closing the funding gap over the next 10 years if Development Capital keeps flowing – we just need to find more ways to bring private and institutional capital into projects. That means making them bankable.”
The report contains detailed analysis of the $US93bn in commitments made by thirteen of the largest development capital institutions across 22 African countries between 2009 and 2014.
“DFIs play the long game. They are there through the economic cycle and are able to support projects in ways that the private sector cannot,” said Herman Warren, Director at the Economist Corporate Network and author of the report. The ‘through-the-cycle’ role DFIs play was relevant when oil and other commodities were trading at much higher levels and is even more important now given the current softer commodity cycle.”
Major capital providers
Over 67% of DFI-funding approvals analysed were provided by four institutions: The World Bank and related bodies, Development Bank of Southern Africa (DBSA), African Development Bank (AfDB), and Agence Française de Développement (AFD) and related entities.
Annually billions of dollars are directed into Africa-based infrastructure projects. DFIs are a primary source of this funding, but more than providing the financial capital alone, DFIs play a critical catalytic role, enabling power, water, transportation, urban development and other projects to materialise that otherwise would not see the light of day.
“It’s not just about money, it’s also about tenor and bankability,” said Michael Foundethakis, Baker & McKenzie’s head of Banking & Finance in EMEA. “DFIs are often key to due diligence pre-, during and post-construction phase, which increases a project’s chances of success. Furthermore, DFIs tend to have the experience and appetite to offer financing in jurisdictions and for longer term tenors than private sector banks may be willing to provide; as the risks for such commercial lenders are often too great relative to the returns.”
China: Soft Power – Hard Infrastructure
The role of Asia-based DFIs looms large. Although they did not provide official numbers for this report, China-based DFIs, in particular, are estimated to be the largest single source of funding, contributing over US$13.4bn in Africa in 2013 alone, according to the Infrastructure Consortium for Africa , and almost $60bn over the period covered.
Chinese support for Africa-based infrastructure has been weighted towards transportation sectors: rail, roads, airports and seaports. However, China-based DFIs are also funding mineral extraction and production platforms, such as commodity-processing and manufacturing facilities in African countries.
In an interview for the report, Zhao Changhui, chief country risk analyst from China Exim, says: “There is no doubt that cumulative Chinese investment in Africa will amount to at least US$1 trillion over the next decade.”
The report states that China Exim is believed to be the main source (at least 75%) of the billions of US dollars that will be directed to infrastructure in Africa on an annual basis from China-based organisations.
“What’s notable is the evolution of Chinese investment to a sophisticated approach after learning from early experiences,” said Wildu du Plessis, head of banking and finance at Baker & McKenzie South Africa. “We’re seeing complex projects being signed, finance and built, including multi-billion dollar rail projects in Nigeria and Zimbabwe as China’s ‘One Belt, One Road’ policy gains traction.”
Sectoral shifts
A key finding from the report is that infrastructure investments skew considerably away from the perhaps stereotypical categorisation of Africa, in the main, being a commodity play. For example, power and transportation projects were allocated around 67% of the funding approvals from the DFIs analyzed in detail.
The sectorial allocation of funding indicates that Africa is far from a commodity play. Over two-thirds of this US$93bn was directed to the power and transportation sectors.
Top recipients
South Africa, Egypt, Nigeria, Morocco, Kenya, Ethiopia and Ghana received more than 70% of funding from the DFIs analyzed in the report over the period.
Notably Nigeria increased its share of funding significantly in 2014 as commodity prices dropped dramatically, supporting the notion that DFIs fund through the cycle, while Ethiopia received a much higher amount of funding than larger countries, underlining its economic potential as well as need for infrastructure links to and from the landlocked country.
Filling the gap
The challenge of addressing the infrastructure gap in Africa is too big for any one group of stakeholders to address on its own. Billions of US dollars annually are required to pay for the physical infrastructure, but, beyond the build-related finance, funding and assistance are required to plan, manage and develop bankable projects. Many African countries face the conundrum of not being able to take on additional debt and a lack of the technical and other capacities to manage infrastructure-related projects successfully. In this context, the role DFIs have played of being there “through cycles”, and helping to create an enabling environment that supports infrastructure development, has been indispensable.
Not all DFIs operate on an altruistic basis. Some DFIs, the bilateral ones in particular, are guided primarily by a nationalist agenda in support of their own export base, which may or may not distribute the benefits of their funding initiatives equitably. However, without the contributions of DFIs, bridging the infrastructure divide would be all the more difficult.
“The key to filling the infrastructure funding gap is ensuring that public and private sector investors can work together. The greater reach, experience and risk appetite of DFIs can provide the platform for commercial banks, private equity and institutional investors to bring their own experience and capital to bear in supporting long-term bankable projects,” said Calvin Walker, Baker & McKenzie’s Global Head of Project Finance. “It’s not so much a question of needing DFIs and the private sector to combine to achieve scale of funding on particular projects; it’s more a question of having the public and private sector achieve an appropriate risk allocation across all types and sizes of projects, not just the largest ones.”
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Vienna Ministerial Conference focuses on “graduation path” out of LDC category
Operationalizing inclusive and sustainable industrial development in the Least Developed Countries (LDCs) as a path to graduation out of the LDC category was the focus of a Ministerial Conference that opened in Vienna on 26 November 2015.
The two-day event was organized by the United Nations Industrial Development Organization (UNIDO). It bought together more than 250 participants, including ministers from LDCs in charge of industry, representatives of relevant UN agencies, regional economic commissions, emerging countries’ institutions, donors and private sector entities.
Speaking at the opening, LI Yong, the Director General of UNIDO, said: “UNIDO has consistently accompanied the efforts of Least Developed Countries towards structural change and economic growth. The current UNIDO LDC Strategy 2012-2020 aims to fill the gap of inclusive and sustainable industrial development in LDCs. It contains UNIDO’s commitments, which are articulated around the eight key development priorities of the Istanbul Programme of Action. Emphasis is placed on equity at all levels through empowering the poor and marginalized and ensuring, among others, gender equality, inclusive and equitable economic growth and sustainable development.”
Participants noted that the 2030 Agenda and its Sustainable Development Goals, among which Goal 9 focuses on building resilient infrastructure, promoting inclusive and sustainable industrialization and fostering innovation, highlight the need to significantly raise industry’s share of employment and gross domestic product, in line with national circumstances, and double its share in least developed countries.
In recent years, LDCs as a group have recorded a relatively high rate of economic growth, and their export record is also impressive. The value of LDC merchandise exports more than doubled over the past decade or so, rising from USD 99 billion in 2003 to USD 211 billion in 2014. The share of LDCs in world exports almost doubled in 15 years, from 0.6 per cent in 2000 to 1.1 per cent in 2014, triggered largely by a small group of LDCs. In addition, there has been a steady increase in intra-regional trade amongst LDCs, although the degree varies by country and region. In some East Asian LDCs intra-regional trade accounts for more than 80 per cent of their total trade.
Another positive trend in LDCs is the growing middle class, which offers a large domestic consumer base that should be taken advantage of to propel further economic progress in these countries. In Africa alone, where most of the LDCs are located, the middle class currently stands at 300 million people and is poised to grow to 1.4 billion by 2050.
“However, amidst the strong growth, impressive export record and growing consumer base, poverty issues and the lack of inclusive development still loom large. In LDCs, export-led growth based on primary commodities has failed to lift millions from the poverty trap, and has led to growth without development. On the contrary, it is the productive sector-led growth that is critical for lifting people out of the poverty trap. As evidenced by the developed, emerging and newly industrializing economies of the world, manufacturing and related services, including trade capacity building, constitute the pillar of rapid socio-economic transformation,” said LI Yong.
Apart from infrastructure development, including renewable energy development, the LDCs need to give special attention to such critical elements knowledge, innovation and technological flows, inclusive and sustainable employment creation, environmental sustainability, and partnerships for economic transformation.
It was emphasized that UNIDO has the expertise and provides a range of technical services to foster technology transfers and give policy advice to promote innovation and institutional capacity building for industrial competitiveness.
Conference participants held a series of discussions in the context of the UN Agenda 2030 for Sustainable Development.
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ITU releases annual global ICT data and ICT Development Index country rankings
ITU’s flagship annual Measuring the Information Society Report, released on 30 November 2015, reveals that 3.2 billion people are now online, representing 43.4% of the global population, while mobile-cellular subscriptions have reached almost 7.1 billion worldwide, with over 95% of the global population now covered by a mobile-cellular signal.
The report also notes that all 167 economies included in the ITU’s ICT Development Index (IDI) improved their IDI values between 2010 and 2015 – meaning that levels of information and communication technology (ICT) access, use and skills continue to improve all around the world.
The Measuring the Information Society Report is widely recognized as the repository of the world’s most reliable and impartial global data and analysis on the state of global ICT development, and is extensively relied upon by governments, international organizations, development banks and private sector analysts worldwide.
“ICTs will be essential in meeting each and every one of the 17 newly-agreed Sustainable Development Goals (SDGs),” said ITU Secretary-General Houlin Zhao, “and this report plays an important role in the SDG process. Without measurement and reporting, we cannot track the progress being made, and this is why ITU gathers data and publishes this important report each year.”
“ITU’s work in gathering and publishing statistics allows us to monitor the real progress being made in ICT development worldwide,” said Brahima Sanou, Director of ITU’s Telecommunication Development Bureau, which produces the report each year. “Progress is encouraging in many areas but more needs to be done – especially in the world’s poorest and remotest regions, where ICTs can arguably make the biggest difference, and help bring people everywhere out of extreme poverty.”
Internet: more people online than ever before; but growth slows
By the end of this year, 46% of households globally will have Internet access at home, up from 44% last year and just 30% five years ago, in 2010. In the developed world, 81.3% of households now have home Internet access, compared to 34.1% in the developing world, and just 6.7% in the 48 UN-designated Least Developed Countries (LDCs).
Latest data show that growth in Internet use has slowed down, however, posting 6.9% global growth in 2015, after 7.4% growth in 2014. Nonetheless, the number of Internet users in developing countries has almost doubled in the past five years (2010-2015), with two thirds of all people online now living in the developing world.
Fastest growth continues to be seen in mobile broadband, with the number of mobile-broadband subscriptions worldwide having grown more than four-fold in five years, from 0.8 billion in 2010 to an estimated 3.5 billion in 2015. The number of fixed-broadband subscriptions has risen much more slowly, to an estimated 0.8 billion today.
Mobile-network coverage: reaching the last half billion
Over 95% of the global population is now covered by mobile-cellular services, meaning that there are still an estimated 350 million people worldwide who live in places which are still out of reach of a mobile network – a figure that has dropped from 450 million a year ago. But while 89% of the world’s urban population is now covered by a 3G network, only 29% of the world’s 3.4 billion people living in rural areas benefit from 3G coverage.
Predictions up to 2020
In 2014, the ITU membership adopted the Connect 2020 Agenda, which sets out a series of goals and targets for improvements in the growth and inclusiveness of ICTs, their sustainability, and the contribution of innovation and partnerships. The Measuring the Information Society report, for the first time, takes stock of where the world stands today in terms of these goals and targets, and makes estimates for their achievement by the year 2020.
The report notes that the proportion of households projected to have Internet access in 2020 will reach 56%, exceeding the Connect 2020 target of 55% worldwide. More needs to be done to increase the number of Internet users, however – the report predicts that only 53% of the global population will be online in 2020, significantly below the Connect 2020 target of 60%.
More action will also be needed to ensure that targets for growth and inclusiveness are not missed in developing countries, and in particular in LDCs. The Connect 2020 Agenda aims to ensure that at least 50% of households in developing countries and 15% of households in LDCs have access by 2020, but ITU estimates that only 45% of households in developing countries and 11% of LDC households will have Internet access by that date.
More affordable – but not universally affordable
The report notes that the price of mobile-cellular services continues to fall across the world. In LDCs, the mobile-cellular price basket continued to fall, coming down to 14% of gross national income per capita (GNI p.c.) by the end of 2014, compared to 29% in 2008.
The greatest decreases over the past year have been in mobile-broadband prices, which have made the service on average between 20% and 30% more affordable worldwide.
By early 2015, 111 economies (out of 160 with available data), including all of the world’s developed countries and 67 developing countries, had achieved the Broadband Commission for Digital Development’s target that the cost of broadband services should be no more than 5% of average monthly income. However, 22 developing countries still had broadband prices which corresponded to more than 20% of GNI p.c.
The report also notes that while tremendous progress has been in made in terms of mobile-broadband affordability, fixed-broadband prices increased between 2013 and 2014, after falling consistently for a number of years. In the LDCs in particular, fixed-broadband services remain unaffordable, and most of the countries ranked at the bottom of the fixed-broadband basket are LDCs. The 2014 average fixed-broadband basket corresponded to 98% of GNI p.c. in LDCs, up from 70% a year before, a sharp increase that will not improve the already very low uptake of fixed broadband in the world’s poorest countries.
ICT Development Index country rankings: widening gaps
In 2015, the Republic of Korea is ranked at the top of ITU’s ICT Development Index (IDI)[1], a composite measurement that ranks 167 countries according to their level of ICT access, use and skills. Republic of Korea is closely followed by Denmark and Iceland, in second and third place.
The IDI top 30 ranking includes countries from Europe and high-income nations from other regions including Australia, Bahrain, Barbados, Canada, Hong Kong (China), Japan, Macao (China), New Zealand, Singapore and the United States. Almost all countries surveyed improved their IDI ranking this year.
Over the past five years, there has been a widening of the gap in IDI values between countries ranked in the middle and those towards the bottom of the distribution. In the LDCs, the IDI grew less compared to other developing countries and LDCs are falling behind in particular in the IDI ‘use’ sub-index, which could impact on their ability to derive development gains from ICTs.
The report identifies a group of ‘most dynamic countries’, which have recorded above-average improvements in their IDI rank over the past five years. These include (in order of greatest change in IDI ranking): Costa Rica, Bahrain, Lebanon, Ghana, Thailand, United Arab Emirates, Saudi Arabia, Suriname, Kyrgyzstan, Belarus and Oman.
IDI – Regional Comparisons
Average IDI values vary considerably between different regions.
In Africa* only one country, Mauritius, has an IDI value above the global average of 5.03, while three others (Seychelles, South Africa and Cape Verde) exceed the average value for developing countries of 4.12.
Altogether, 29 out of 37 African countries rank in the bottom quarter of the 2015 IDI, including the 11 countries with the lowest rankings of all, illustrating the importance of addressing the digital divide between Africa and other regions.
The average rise in IDI values in Africa between 2010 and 2015 was 0.65, lower than that in other regions in nominal terms, but from a lower base and therefore higher in proportion to the benchmark set in 2010. The most significant improvement was achieved by Ghana, which increased its IDI value by 1.92 points and rose 21 places in the global rankings. Other substantial improvements in the rankings were achieved by Lesotho, Cape Verde and Mali.
In the Americas, the United States, Canada and Barbados lead the IDI rankings, with IDI values above 7.50, and global rankings in the top thirty economies. These three countries significantly outperform all other countries in the region, with IDI levels approaching one whole point above the next highest regional performer, Uruguay. Some 29 of the region’s countries fall within the top half of the global rankings.
Countries in the Americas region have experienced some of the most significant movements up and down in global IDI rankings between 2010 and 2015. The most dynamic improvement worldwide was achieved by Costa Rica, which rose 23 places in the global rankings, while other substantial improvements were achieved by Suriname, Brazil, Barbados and Colombia. However, a number of countries, particularly in Central America and the Caribbean, fell significantly, including Belize, Cuba, Grenada, Jamaica and St. Kitts and Nevis.
In the Arab States region, the top five countries in terms of ICT development – Bahrain, Qatar, the United Arab Emirates, Saudi Arabia and Kuwait – are oil-rich high-income economies that are members of the Gulf Cooperation Council (GCC). These countries all have IDI values over 6.50 and are among the top fifty countries in the global rankings. Three of them (Bahrain, the United Arab Emirates and Saudi Arabia) are among the ten countries which have seen the most dynamic improvements in IDI rankings and values since 2010, as are two other countries in the region (Lebanon and Oman).
There is a growing disparity, however, between these high-performing countries and those lower down the distribution. While GCC countries improved their IDI values by 1.78 points between 2010 and 2015, the average improvement for non-GCC countries was 0.89 points, the global average. The strong performance of GCC countries reflects the association between IDI and national income levels.
Asia-Pacific is the most diverse region in terms of ICT development, reflecting stark differences in levels of economic development. Six economies in the region – including the Republic of Korea, Hong Kong (China) and Japan – have IDI rankings in the top twenty of the global distribution. However, the region also includes ten of the Index’s least connected countries, including India, Pakistan, Bangladesh and Afghanistan.
Countries throughout the region, and particularly middle-income countries, have shown considerable improvements in their IDI values between 2010 and 2015, however. The most dynamic improvements in IDI rankings in the region were achieved by Thailand, Mongolia and Bhutan, which rose by 18, 13 and 9 places, respectively, in the global rankings during the period. The average growth in value for the region was 0.85 points, just below the global average.
The Commonwealth of Independent States (CIS) region shows the least variation of any region between its highest and lowest performing countries, reflecting the region’s relative economic homogeneity. All countries in the region have rankings in the top half of the overall distribution.
The average increase of 1.43 points in IDI values in the region since 2010 is considerably above the global average of 0.89. Belarus, the highest-ranking country in the region, improved its performance by 1.88 points and 14 places, while Kyrgyzstan, the region’s lowest-ranking country, also showed considerable improvement, rising by 1.60 points and 15 places.
In Europe, all countries, with the exception of Albania, exceed the global average IDI value of 5.03, and fall within the top half of countries in the IDI ranking, reflecting the region’s high levels of economic development. The region’s average IDI value rose between 2010 and 2015 from 6.48 to 7.35, an increase of 0.87 points. This is a highly positive performance given that all but one country in the region was already in the upper half of the distribution in 2010. The Europe region also has a relatively narrow range between its maximum and minimum IDI values, reflecting relative ICT sector and general economic homogeneity.
Positions at the top of the regional rankings are mostly held by countries in northern and western Europe, in particular by Nordic countries; while lower rankings are concentrated around the Mediterranean and in eastern Europe. Denmark is the region’s top performer, with an IDI value of 8.88, just ahead of Iceland, with an IDI value of 8.86, while the greatest improvement in IDI rankings between 2010 and 2015 was achieved by the United Kingdom, which rose from tenth to fourth position globally.
* ITU’s Africa region does not include the North African Arab States.
[1] ITU’s IDI is widely recognized by government, UN agencies and industry as the most accurate and impartial measure of overall national ICT development. It combines 11 indicators into a single measure that can be used as a benchmarking tool globally, regionally, and at national level, as well as helping track progress in ICT development over time. It measures ICT access, use and skills, and includes such indicators as mobile cellular subscriptions, households with a computer, Internet users, fixed and mobile broadband Internet subscriptions, and basic literacy rates.
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tralac’s Daily News selection: 30 November 2015
The selection: Monday, 30 November
Rail infrastructure in Africa: financing policy options (AfDB)
Except for South Africa and North Africa, railways are not making a dent on African economies. Market share is less than 20%. Railway transport expected to play a major role in complementing other transport modes of transport to support and sustain anticipated growth. With the anticipated growth, railways will be well positioned to contribute to low transportation costs, efficient use of energy, slowing down climate change, and job creation. How to accelerate the rail expansion? An in depth assessment of the railways in eight African countries has been undertaken. These eight countries are: Botswana, Cameroon, Kenya, Madagascar, Morocco, Senegal, Tanzania and Zambia. They represent a wide range of backgrounds and experiences. Most have had experience with concessions, with different results. But some (like Botswana and Morocco) have maintained a public sector approach. The most relevant conclusions from these visits are:
Transport Forum 2015 updates: Transport in Africa viewed through the lens of fragility, African cities need to push for green, inclusive transport
Kenya: Why the standard gauge railway is not cost-effective (Business Daily)
Mozambique invites bids for next phase of northern export harbour (Bloomberg)
AU in meetings to progress intra African trade (AU)
In this respect, from 23-27 November, the AU co-hosted three meetings aimed at enhancing trade among African countries: i.e. discussing progress in regional integration, specifically the moves towards establishing a Continental Free Trade Area: modalities for trade in services negotiations and review of the implementation of the plan of action for Boosting Intra African Trade (BIAT). Meeting in Cape Town were different departments of the African Union Commission, including the Directorate of Information and Communication, some member states, Regional Economic Communities and partners, under the joint coordination of the AUC’s Department of Trade and Industry and the Trade Law Centre, based in South Africa.
Transaction dollarisation in Tanzania (Bank of Tanzania)
The findings indicate that about 3.2% of the businesses in Mainland Tanzania and 4.5% in Zanzibar quote prices in US dollar, but most of these businesses were willing to accept payments in Tanzanian shilling. Only 0.1% of the businesses in the Mainland and none in Zanzibar indicated that they would prefer payments exclusively in US dollar. Many countries in the region and across the world are experiencing a similar situation. We urge the authorities to avoid the use of direct measures in their quest for limiting dollarization in the economy because international evidence suggests that enforcing de-dollarization can potentially be counter-productive. Instead, we recommend the use of gradual market-oriented measures aimed at enhancing the attractiveness of the domestic currency.
Zimbabwe: Unpacking depreciation of the Rand (The Zimbabwe Daily)
The same applies to diaspora remittances particularly from South Africa. The same illustration applies. For instance, if a Zimbabwean resident in South Africa was sending home say R13 000 in 2011, he/she would have sent an equivalent of $2 000. Today, the same R13 000 is now worth just below $897. From this analysis, we will certainly see our remittances especially from South Africa going down in real terms. This is a real concern for Zimbabwe in the face of the use of the multiple currencies with the US dollar being the “official currency”. [The author: Gift Mugano]
PSF, EALA exchange friendly fire over EAC laws (New Times)
The Chairman of the East African Business Council, Dennis Karera, challenged the regional legislative body to get tough on the subject of Non Tariff Barriers. “You clear four NTBs today, three are created next week, we need to get to work by walking the talk,” he said. Karera also called for stronger laws to protect the region’s nascent industries from cheaper imports from outside East Africa. “Cheap imports of garments from China have killed the region’s formerly booming textile industry, we need to get more protective and tougher regarding rules of origin,” Karera added. Karera also revealed that some partner states are using standards as a tool to fight competition within the region, this he said should be dealt with by EALA.
Regional assembly decries failure by leaders to assent to Bills (The East African)
Uganda: Government to borrow Shs672b to stabilise the Shilling (Daily Monitor)
Government wants to borrow $200m (Shs672bn) from the Eastern and Southern African Trade and Development Bank to “stabilise the exchange rate”. The money will be used to skirt around the need to go to Bank of Uganda for US dollars for some imports. Shs672bn is 2.8% of the 2015/16 Fiscal Year budget or 6.7% of Uganda’s current foreign exchange reserves.
Mozambique's metical drops 21% in a week on economy fears (Reuters)
ECOWAS businessmen seek court on trade disputes (Vanguard)
At a two day public-private sector dialogue on Nigeria/ECOWAS trade litigation group organized by the Association of Nigerian Traders in collaboration with the EU and German International Cooperation meeting, it was agreed that stakeholders should advocate the amendment of the ECOWAS Treaty to allow for supra-ntionality of the body as obtained in the UEMOA system. According to a communiqué issued after the meeting and signed by Ken UKAOHA, Esq, Secretariat President, National Association of Nigerian Traders, the body agreed that similarly, advocacy should be geared towards persuading member states to domesticate ECOWAS instruments in countries where domestication applies.
Setback at WTO as demand to continue talks on Doha set aside (Livemint)
India, along with an overwhelming majority of developing and poorest countries, received the biggest shock yet after a panel of facilitators at the World Trade Organization set aside their demand for reaffirming the commitment to continue negotiations on all outstanding issues of the Doha Development Agenda in the declaration to be adopted at the coming Nairobi ministerial meeting. On Friday, the panel of facilitators said its report “contains neither draft language on nor place holders for the most contentious issues identified by members, namely the reaffirmation of the DDA and instructions on the way forward, and no new issues”. Following the facilitators’ report, major industrialized countries - the US, EU, Japan, Australia and Canada, among others - insisted at a closed-door meeting on Saturday that if developing countries like China, India, Brazil, South Africa and Indonesia want reaffirmation of DDA negotiations, then they must accept “graduation” and forego special and differential and less-than-full-reciprocity flexibilities, according to people familiar with the development.
Nairobi Ministerial Declaration: consolidated draft by the facilitators (WTO)
Selected FOCAC trade-related updates, commentaries:
Africa and China: More FDI needed to boost exchange (UNECA)
China is Africa’s first trade partner but ranks behind the United States, European countries and India when it comes to Foreign Direct Investment in Africa, said ECA Executive Secretary Carlos Lopes Thursday 26 November in Marrakesh at the 2015 Sino-African Entrepreneurs Summit. According to Mr Lopes, less than 1% of the FDI China has invested across the world was put in Africa, and although the China-Africa partnership has had a good start it is still far from its potential: “To reach the next step, this partnership needs to rely on much more direct investment”, he added.
SA’s exports to China boosted (IOL)
“Both countries agreed that China would increase its sourcing of value added products from South Africa in order to improve the structure of trade between the two countries, which is mainly dominated by exports of raw materials from South Africa to China, and imports of value added products from China by South Africa,” said the dti. Strachan said South Africa was concerned about the skewed imports and exports pattern between the two countries that are in favour of the Chinese as over 85% of South Africa’s exports to China comprise raw materials. “This is a troubling characteristic of our trade given that a Comprehensive Strategic Partnership Agreement has been in implementation for 5 years and has not yet achieved one of its main objectives,” said Strachan. “It is also concerning in that South Africa and China refer to each other as the developing partners of the 21 century, yet continue to reinforce problematic trade behaviours of the past.”
Commentary by Dr Liu Xianfa, China's Ambassador to Kenya (CapitalFM)
In the first half of this year, 20% of Africa’s economic growth came from China. It is estimated that in the next five years, China will import US$ 10 trillion of goods and invest over US$ 500bn overseas, and outbound visits made by Chinese people will exceed 500 million. This will bring enormous business opportunities to the world, African countries included.
Africa to focus on China debt at Joburg summit as commodities slump (Reuters)
China clears way for Silk Road into Africa - and it takes the form of key summit with African leaders (M&G Africa)
China's relationship with Africa is way overblown (Global Post)
Learning from China is critical for Africa’s success (IOL)
The West and Central African trade profile: with a special review of the relationship with China and regional agricultural trade (tralac)
President Xi Jinping: Let the Sino-Zim flower bloom with new splendour (The Herald)
Ross Anthony, Yejoo Kim: Chinese industrialisation in Africa (IOL)
ACP Council of Ministers: outcomes
The ACP Council of Ministers concluded its 102nd session on 25th November 2015 with a renewed commitment to ensuring the success of the upcoming 8th Summit of ACP Heads of State and Government in 2016, which will be a pivotal point for the organisation, as it undergoes a review and reorientation process to position itself as a more effective global player. Along with the endorsing of the preparations for the 8th Summit, the ACP Council of Ministers passed 13 decisions, four resolutions and two declarations on other key matters, including the following: [Download: Ambassadorial Working Group report]
Magdy Martínez-Solimán: statement at UNIDO 2015 LDC Ministerial Conference (UNDP)
COMESA-UNAIDS in pact to promote local production of pharmaceuticals (COMESA)
The United Nations Programme on HIV/AIDS (UNAIDS) and COMESA Secretariat have formed a partnership that will enable the latter to develop a pharmaceutical production strategy. The strategy is intended to harmonize the production of medicines and related products in the region. The partnership entails among others, technical and financial assistance to COMESA in crafting and adopting the strategy. Currently, COMESA is working on a co-operation framework among member States in the manufacturing of essential drugs and an amendment of the Trade Related Intellectual Property Rights (TRIPS) Agreement on compulsory licensing for medicine. [Reminder: Pharmaceutical Manufacturing Plan for Africa, Building partnerships for sustainable capacity development on medicines regulation in Africa]
Financing health care in Africa: CABRI conference background papers
Ireland: Minister Coveney to lead trade mission to Africa (RTE)
Irish Minister for Agriculture Simon Coveney will lead a five-day trade mission to West Africa this week. The trip, which officials have described as the largest trade mission to the area in two decades, aims to improve economic links with Nigeria and Ghana in particular. Ahead of the trip, Minister Coveney said Ireland is "strategically placed" to be a key supplier to West Africa.
Nigeria: Cargo tracking note and the anxiety at the ports (ThisDay)
Kenya: Importers warn over high cost of goods under new inspection rule (Business Daily)
EALA urges fair climate deal at Paris conference (New Times)
SADC ministers agree to clamp down on social media (Zimbabwe Mail)
SADC senior legal meeting fails to form quorum (Mmegi)
EU to support Mozambique with US$779m until 2020 (Club of Mozambique)
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Council meeting boosts momentum on ACP Group future perspectives
The ACP Council of Ministers concluded its 102nd session on 25th November 2015 with a renewed commitment to ensuring the success of the upcoming 8th Summit of ACP Heads of State and Government in 2016, which will be a pivotal point for the organisation, as it undergoes a review and reorientation process to position itself as a more effective global player.
Council approved the offer from Papua New Guinea to host the 8th Summit in its capital city Port Moresby from 30 May – 1 June 2016 under the theme: “Reposition the ACP Group to respond to the challenges of Sustainable Development”. The Summit is expected to pronounce a clear direction on the future of the ACP Group as an organisation, in terms of how it delivers on the sustainable development goals of its Member States and populations, as well as the future partnership between the ACP countries and the European Union.
The Summit will also consider recommendations for organisational reforms, informed by the report of the ACP Eminent Persons Group chaired by former President of Nigeria Chief Olusegun Obasanjo, which is due in early 2016, and that of the Ambassadorial Working Group on Future Perspectives, which was approved by Council in December 2014.
Along with the endorsing of the preparations for the 8th Summit, the ACP Council of Ministers passed 13 decisions, four resolutions and two declarations on other key matters, including the following:
2016 Budget for ACP Secretariat
The ACP Council of Ministers passed a budget for the Secretariat for 2016, amounting to EUR 15,896,103, representing a nominal increase of 3.2% from the previous year. This is aimed at ensuring adequate support for the Secretary General and Secretariat to carry out its mandate, in spite of the economic constraints faced by the Member Countries. Under this budget, contributions from internal taxes will increase by 10.4%, contributions from the European Commission will increase by 0.8%, while Member State contributions will decrease in total by 8.5%.
Climate Change Declaration
The ACP Council of Ministers reaffirmed that the adverse impact of climate change threatens the very survival of the 79 ACP countries, and poses immediate and long term significant risks to their sustainable development efforts. In the lead up to the Paris Climate Change Conference (COP21), the ACP Council of Ministers declared that the new agreement to be adopted at the conference must be a legally binding agreement under the United Nations Framework Convention on Climate Change, while urging developed countries to take the lead in further reducing greenhouse gas emissions to support efforts to limit global warming to 1.5 degrees below pre-industrial levels by the end of the century. The Council emphasised the need to scale up climate finance, and highlighted other issues of concern in an ACP Issues Paper which was endorsed to support Member States in their negotiations at the COP21 conference.
ACP Agriculture Commodity Trade
A resolution passed by the ACP Council of Ministers welcomed the European Commission’s indication that no further tariff liberalisation will be granted to EU trade partners who are direct competitors of ACP countries on the banana market. It also welcomed the indication that the special safeguard clause set out in EU Market Access Regulation 1528/07 and in the Economic Partnership Agreements cannot be used to discriminate against imports of ACP sugar, but only as an indicator of possible market disturbance. At the same time they urged the European Commission to refrain from a direct intervention in sugar market supply arrangements, as well as an ongoing public debate which might encourage buyers to hold back unnecessarily.
Trade matters and ACP-EU Economic Partnership Agreements
The ACP Council of Ministers passed a resolution reiterating that the conclusion and implementation of Economic Partnership Agreements (EPA) between the ACP regions and the EU must be balanced, with a view to speeding up sustainable and inclusive development of ACP countries. The Council reaffirmed the need for additional EU resources, set up in special EPA Funds, while also increasing aid for trade financing. To date, the Caribbean region (CARIFORUM) is the only one currently implementing a full EPA with the EU, while the Southern African Development Community EPA Group, the East Africa Community, and West Africa have completed negotiations for full EPAs, to be signed and ratified by October 2016. At the same time, several other countries are already implementing interim EPAs at the bilateral level. The ACP Council thus called on the EU to speed up EPA negotiations with the remaining regions.
Council also endorsed the Declaration by the ACP Trade Ministers on the 10th WTO Ministerial Conference, to be held in Nairobi, Kenya from 15-18 December, which calls on WTO member countries to affirm their commitment to the Doha Development Agenda, in particular on the core areas in the negotiations that are important to developing countries.
Cuba-USA relations
The ACP Council of Ministers passed a declaration that expressed solidarity with the Government and people of Cuba in its struggle against the economic, commercial and financial embargo imposed by the United States of America against Cuba. The Council welcomed the decision by the United States Government to re-establish diplomatic relations with Cuba, while also calling on the international community to continue its support for the immediate and unconditional lifting of sanctions imposed on Cuba. The Council called for the unconditional repeal of unilateral and unjustified economic embargoes placed against other ACP countries, which harms the innocent, poor and vulnerable populations of these countries.
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Surge in climate change-related disasters poses growing threat to food security
In developing countries the agriculture sector bears much of the economic impact
Droughts, floods, storms and other disasters triggered by climate change have risen in frequency and severity over the last three decades, increasing the damage caused to the agricultural sectors of many developing countries and putting them at risk of growing food insecurity, FAO warned in a new report released on 26 November ahead of the United Nations Climate Change Conference (COP 21) in Paris.
Worldwide, between 2003 and 2013 – the period analyzed in the study – the average annual number of disasters caused by all types of natural hazards, including climate-related events, almost doubled since the 1980s. The total economic damage caused is estimated at $1.5 trillion.
Focusing specifically on the impact of climate-related disasters in developing countries, some 25 percent of the negative economic impacts were borne by the crop, livestock, fisheries and forestry sectors alone. In the case of drought, over 80 percent of the damage and losses affected the agriculture sector, especially livestock and crop production.
The FAO report is based on a review of 78 on the ground post-disaster needs-assessments conducted in developing countries coupled with statistical analyses of production losses, changes in trade flows and agriculture sector growth associated with 140 medium and large scale disasters – defined as those affecting at least 250,000 people.
The report clearly demonstrates that natural hazards – particularly extreme weather events – regularly impact heavily on agriculture and hamper the eradication of hunger, poverty and the achievement of sustainable development.
The situation is likely to worsen unless measures are taken to strengthen the resilience of the agriculture sector and increase investments to boost food security and productivity and also curb the harmful effects of climate change.
"This year alone, small-scale farmers, fisherfolk, pastoralists and foresters – from Myanmar to Guatemala and from Vanuatu to Malawi – have seen their livelihoods eroded or erased by cyclones, droughts, floods and earthquakes," said FAO Director-General José Graziano da Silva.
He noted how the international community recently committed itself to achieving the Sustainable Development Goals and the Sendai Framework for Disaster Risk Reduction 2015-2030 and is expected to reach a climate change agreement at the COP 21. Measuring progress made in meeting these global targets will require accurate, up-to-date information, including on the impact of disasters, Graziano da Silva stressed.
"National strategies for disaster risk reduction and climate change adaptation that support resilience must address the types of disasters with the greatest impact on the agriculture sector, the FAO Director-General said. He noted how sector-specific data on damage and losses are essential for effective policy and practice," and that the FAO study aims to contribute to national, regional and global efforts to develop comprehensive disaster data collection and monitoring systems.
Drought critical in sub-Saharan Africa, flooding and storms are a scourge in Asia
Drought has an especially detrimental impact – around 90 percent of production losses – on agriculture in sub-Saharan Africa where the sector on average contributes to a quarter of GDP, rising to a half when agribusiness is included. At a conservative estimate, total crop and livestock production losses after major droughts were equivalent to more than $30 billion between 1991 and 2013 in the region.
Drought often has a major cascading effect on national economies as shown in Kenya where between 2008 and 2011 it caused significant losses in the food processing industry, particularly grain milling and coffee and tea processing.
Many Asian countries are particularly vulnerable to the impact of floods and storms. For example, crop production losses caused by the 2010 floods in Pakistan directly affected cotton ginning, rice processing and flour and sugar milling, while cotton and rice imports surged. In this case, some 50 percent of the $10 billion in total damages and losses fell on the agriculture sector.
Different disasters require different responses
Understanding the impact of different types of disasters is crucial to ensure that the most appropriate policies and practices are implemented.
Floods cause more than half of the total damage and loss to crops which are also very vulnerable to storms and drought. Around 85 percent of the damage caused to livestock is due to drought, while fisheries are overwhelmingly affected by tsunamis and storms such as hurricanes and cyclones. Most of the negative economic impact to forestry is caused by storms and floods.
Beyond production losses, the study shows how disasters can cause unemployment and erode incomes especially for small scale family farmers, thus threatening rural livelihoods. For instance, the 2010 floods in Pakistan affected 4.5 million workers, two-thirds of whom were employed in agriculture and over 70 percent of farmers lost more than half of their expected income.
Directing more investments towards resilient and sustainable agriculture
Worldwide, the livelihoods of 2.5 billion people depend on agriculture, yet only 4.2 percent of total official development assistance was spent on agriculture between 2003 and 2012 – less than half the United Nations target of 10 percent. Investment in disaster risk reduction is extremely low: only around 0.4 percent of official development aid in 2010 and 2011.
FAO stresses that aid should better reflect the impact of disasters on the agriculture sector.
Investments into disaster response and recovery should also build resilience to future shocks through risk reduction and management measures, particularly in countries facing recurrent disasters and where agriculture is a critical source of livelihoods, food and nutrition security, as well as a key driver of the economy.
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“We cannot abandon hope,” the driver behind talks on a new climate regime
Starting this week, France will host a major international negotiation that aims to clinch a universal climate agreement set to come into force at the end of the decade, replacing current multilateral emissions-cutting arrangements. Delegates from over 200 nations carry a hefty weight of global expectations to streamline a complex 54-page bracketed draft document into a coherent climate regime, with the current mood recollective of the forceful words of the late sustainable development visionary Maurice Strong (1929-2015), a pioneer behind today’s intergovernmental environment processes.
The Twenty-first Conference of the Parties to the UN Framework Convention on Climate Change (UNFCCC COP21), as these talks are formally known, will be buoyed at the outset by the presence in Paris of more than 130 heads of state providing “political impetus” for the negotiations. Regular business will then continue in several formal negotiating tracks including the Ad Hoc Working Group on the Durban Platform for Enhanced Action (ADP) – the body charged with developing the new deal – and technical, ongoing work under other UNFCCC bodies.
According to a provisional agenda, work under the Subsidiary Body for Scientific and Technological Advice (SBSTA) and the Subsidiary Body for Implementation (SBI) should conclude by Friday 4 December, and the ADP should wrap up the following day with a revised version of the draft regime to present to the COP plenary. Heads of delegation will then resolve any outstanding issues before all negotiations close on Wednesday 9 December to allow time for the UN formalities of adopting a new agreement.
For seasoned climate talks watchers, the schedule is very tight, with many expecting difficult negotiations. Several stakeholders nevertheless remain optimistic an outcome will be reached, despite the spectre of a failed attempt to clinch a global climate deal in 2009 in Copenhagen, Denmark. Some observers question, however, whether the eventual pact will be effective, substantive, and workable.
The Paris effort will be closely followed by the wider international community not only given the existential threat posed by climate change, but also in light of the outcome’s potential systemic importance for many other policy areas from development to global economic governance. The global economy is hard-wired to fossil fuels, which make up 80 percent of the world’s energy mix, driving planetary warming greenhouse gas emissions. A shift towards a low carbon future will affect current ways of production and consumption. It will also substantively redefine the shape of trade and investment flows and the frameworks that serve as a key linchpin of the global economy.
Operationalising a new approach
In Durban, South Africa four years ago, UNFCCC parties agreed to forge by 2015 a new international deal to mitigate climate change with legal force applicable to all. The decision implied a break from the current Kyoto Protocol that mandates emissions cuts from so-called Annex I developed countries only as identified by the 1992 Convention.
Since then, countries have been grappling with the implications of this shift for international climate cooperation, as well as the new governance provisions it requires. In a move broadly welcomed by climate watchers, at press time over 180 nations responsible for around 96 percent of global emissions have outlined an “intended nationally determined contribution” (INDC), representing the individual self-defined domestic climate action plans that will serve as the building blocks of the new regime.
For some in the climate community the INDC approach represents a master stroke to usher in a new deal with expansive coverage – formerly unimaginable in UNFCCC corridors, given that the Kyoto Protocol covers just 14 percent of aggregate emissions and zero percent of emissions growth – and allows economies to focus climate obligations on areas where they are most willing to act.
Other stakeholders, however, have questioned the deal’s long-term effectiveness and say that a review process will be critical. A UNFCCC secretariat synthesis assessment of the INDCs – which mostly target the 2020-2030 period and in some areas are conditional on international support – finds that if implemented properly these measures will help slow emissions growth. They do not, however, do enough to keep the world below a two degrees Celsius warming from pre-industrial levels.
For many negotiating parties the new approach has also spawned tensions. For example, working out how to apply the principle of “common but differentiated responsibilities and respective capabilities” (CBDR-RC) – which acknowledges the different responsibility and capacity countries have for climate action – across the new regime has been slated as a key area to navigate in Paris, with implications for mitigation, review, climate finance, and technology transfer, among many other areas.
Draft text
The draft document outlined by parties for the ADP talks in Paris – the result of over 18 months of refining – contains both a draft agreement and implementing decisions, including scaling up action before the end of the decade. The draft document covers all manner of potential details relevant to the functioning of the new regime, including its purpose, long-term goal, management of individual climate mitigation efforts, adaptation and loss and damage, climate finance, climate technologies, and other supportive arrangements.
However, numerous proposals and options are suggested for each area, pointing to some key divisions parties must bridge in Paris. For example, on the ever-difficult issue of financing to enable both emissions mitigation as well as adaptation to climate change some parties support language that would see all nations in a position to do so mobilise funds, but others expect commitments from just developed nations. While developed countries have pledged to scale up climate finance to US$100 billion a year by 2020, the G77 and China have warned that an effective climate deal hinges on increased finance arrangements beyond the end of the decade.
Several proposals are included for reviewing and monitoring the INDCs, along with provisions on transparency, global stocktaking, and facilitating implementation and compliance. Some parties also support adopting various long-term goals such as a peaking of emissions, or an overall decarbonisation of the economy by the end of the century. Consensus around many of these areas is, however, not a done deal heading into the talks.
An informal ministerial held in Paris from 8-10 November garnered wide-ranging support – according to an “aide-mémoire” prepared by the French COP21 presidency – for a “single system, with flexibilities depending on capabilities,” referring to the new regime. Developed countries will likely continue leading on mitigation, through absolute economy-wide targets via the INDCs, although all nations should regularly present mitigation commitments with no backtracking over time.
Among other things, ministers converged on the need to regularly review mitigation efforts in five-yearly cycles, in a way that is facilitative and non-punitive. Ministers also confirmed that the Paris deal should provide economic signals to shift investment flows at large, whether through green bonds, fiscal incentives, or carbon pricing. The extent to which this informal political progress will shape details emerging from the technical negotiations, however, remains to be seen.
Questions around the final deal’s legal nature were voiced ahead of Paris, as US Secretary of State John Kerry insisted that the outcome will not be a “treaty,” while others argued that this is required by the Durban mandate. According to The Financial Times, France has now bowed to the US on the broad outcome, but has signalled that some of the clauses will be legally binding.
Trade issues to look out for
Under one option in the draft agreement’s finance section, parties would abide by principles of fiscal sovereignty and avoid disguised distortions to trade in mobilising climate funds. The mitigation section in the draft agreement also suggests that countries would not resort to any “unilateral measures” against goods and services from developing countries on the grounds of climate change. The same section alludes to the importance of giving full consideration to the specific needs and concerns of developing countries resulting from the implementation of “response measures,” in other words, mitigation actions.
Some parties support establishing an instrument to enhance action in this area, elaborated in the draft decision under an option for a cooperative mechanism on response measures, set up at some future date and building on existing work. The mechanism would recommend specific tools, actions, and programmes to address response measures' impacts and implementation gaps in order to minimise adverse effects on developing countries. The approach has drawn strong resistance by others. The decision paragraph adds that any measures should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction to international trade.
Specific questions surrounding work on minimising adverse economic, social, and environmental impacts from the implementation of response measures and addressing the needs of developing countries have proved complex in the UNFCCC context over the years. The topic is not linked exclusively to trade, although parties have pledged to promote an open international economic system supportive of sustainable growth all the while responding to climate change.
Under the SBI and SBSTA tracks, parties have repeatedly clashed over how to take forward the work of a forum on response measures whose two-year mandate expired in 2013, but recently agreed in June to forward a bracketed draft decision on a forum and work programme for consideration in Paris. How this relates to the discussions under the ADP needs to be clarified.
Multilateral arrangements on carbon markets are among the other areas relevant to trade policy and are also subject to political ping-pong between the ADP and technical tracks. Long-running talks under SBSTA on a framework for various approaches (FVA) – a way of coordinating market and non-market based mitigation actions that relate to commitments under the UNFCCC – a new market based mechanism (NMM), complemented by non-market based approaches (NMA) saw some exchange in June on accounting frameworks, among other areas, but failed to secure draft conclusions.
In theory, these talks could set common rules for climate mitigation efforts with international scope, such as international emissions trading. However, parties continue to disagree on the mandate for the talks, the relationship between this SBSTA work and proposals on markets that have been suggested for the Paris deal, and ideological resistance by some to the use of market-based mechanisms for climate action.
In the Paris draft agreement and decisions, some parties have submitted options relating to international emissions trading, including avoiding double counting, ensuring that any abatement outcomes are “real, permanent, additional, and verified,” and as part of a “mechanism to support sustainable development” in various incarnations. The agreement’s preamble, meanwhile, could acknowledge that carbon pricing is an important approach for cost-effective emissions cuts. Mark Carney, Governor of the Bank of England and Chairman of the G20's Financial Stability Board, has suggested such language in the Paris deal might prompt governments to provide further guidance to markets on possible carbon pricing efforts.
After being dropped from earlier versions of the document, the draft agreement’s mitigation section now includes a reference to reducing emissions from international aviation and shipping, through the respective UN agencies responsible for these sectors.
Boosting the global deployment of climate technologies for mitigation and adaptation will also be a critical part of addressing the climate challenge. The draft agreement contains an article, supported by corresponding decision elements, on technology development and transfer including a possible UNFCCC global goal in this area, enhanced communication on implementing commitments, a new technology framework, and strengthening the existing Technology Mechanism.
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SA’s exports to China boosted
South Africa’s exports to China received a boost with the signing of more than 20 co-operation agreements and contracts to the value of $918 million, the Department of Trade and Industry (dti) said on Monday.
These agreements and contracts were signed during the China Inward Buying Mission event that took place in Sandton, Johannesburg, ahead of the Forum on China-Africa Co-operation (Focac).
“More than 16 South African companies signed these purchase and investment agreements with the Chinese companies,” the dti said in a statement.
The Inward Buying Mission forms part of the implementation of the Comprehensive Strategic Partnership Agreement (CSPA) signed between South Africa and China.
“Both countries agreed that China would increase its sourcing of value added products from South Africa in order to improve the structure of trade between the two countries, which is mainly dominated by exports of raw materials from South Africa to China, and imports of value added products from China by South Africa,” said the dti.
Speaking at the event, dti Deputy Director-General Garth Strachan said the Inward Buying Mission served as a symbol of incremental progression as the governments of the two countries had been planning to hold an event of this nature for some time.
“Within this (CSPA) agreement, China has also committed to (1) encourage its enterprises to increase investment in South Africa’s manufacturing industry and promoting the creation of value-adding activities; (2) explore co-operation opportunities in infrastructure projects such as roads, railways, ports, power generation, and airports,” said Strachan.
“Most importantly, China has agreed to (3) increase its source of value added products from South Africa. Let me emphasise that this inward buying mission is part of the implementation of the third pillar of the CSPA.”
Strachan said South Africa was concerned about the skewed imports and exports pattern between the two countries that are in favour of the Chinese as over 85 percent of South Africa’s exports to China comprise raw materials.
“This is a troubling characteristic of our trade given that a Comprehensive Strategic Partnership Agreement (CSPA) has been in implementation for 5 years and has not yet achieved one of its main objectives,” said Strachan.
“It is also concerning in that South Africa and China refer to each other as the developing partners of the 21 century, yet continue to reinforce problematic trade behaviours of the past.”
Strachan said that South Africa would like to see a reduction in the dominance of raw materials in its export basket to China.
“We call on the Chinese government and Chinese private sector to collaborate and send more value added orientated inward buying missions to South Africa,” said Strachan.
“We believe that this action will fast-track the industrialisation of our economy and contribute to successful long-term industrialisation and developmental plans.”
Strachan also said that in any healthy economy, the manufacturing sector was a key driver towards accelerating growth.
The South African government has key policies to further develop and support the manufacturing sector in order to ensure its sustainability.
Strachan said the government plans to expand the current supply measures to attract downstream value adding manufactures.
“In this regard, we have developed plans to increase the level of beneficiation in the following areas: iron ore and steel; platinum group metals; polymers; titanium; upstream mining inputs and the energy value chain,” said the deputy director general.
“This development will require major foreign direct investment in the identified priority areas. We welcome China’s participation in the development of these priority sectors which we have identified for beneficiation as well as investment in all the other areas of manufacturing.”
Strachan said the signing of the co-operation agreements and contracts was in line with Focac, which will be held in Johannesburg later this week. It is the first time Focac is being held on the African continent.
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China clears way for Silk Road into Africa
The Forum on China-African Cooperation summit will look to charm leaders on the continent, seen by Beijing as a step towards global dominance.
In September, presidents Omar al Bashir and Jacob Zuma held a warm meeting on the sidelines of a major Chinese military celebration, three months after the Sudanese leader flew out of South Africa in the face of an ICC arrest warrant, having managed to steal the attention from the AU summit that he was attending.
Bashir was an old friend, China said in the face of criticism, while Zuma’s side put out that they expected even better bilateral relations between Sudan and South Africa.
Then a few days ago news broke that China and South Africa had asked Bashir to stay away from a key summit in Johannesburg next week, both countries evidently quite keen on ensuring there was no repeat of the sideshow of his presence to draw away the international spotlight from the meeting.
For China, the thinking is clear: Beijing intends to use the Forum on China-Africa Cooperation (FOCAC) to both re-state its engagement with Africa following what has been a tumultuous year for its economy, and also to clear the bushes for its much-heralded “Silk Road” strategy, China’s new foreign policy that is expected to position it as a comprehensive global power.
This year’s triennial meeting between China and Africa was always going to be closely watched. Taking place for the first time in sub-Saharan Africa, it has also been upgraded to a summit, with at least 40 heads of states and government expected to attend.
It takes place when China’s economic slowdown has sent African nations into mild panic, as the Asian nation slowed down on its imports of African resources. The bulk of these make up the mainstay of many regional economies, raising questions about the long-term direction of a bilateral relationship that while unequal is still seen as symbiotic.
States from Zambia and Angola to Nigeria and the Democratic Republic of Congo and even host South Africa are battling with the resulting market turmoil stoked by uncertainty over China’s continual unbridled growth, the jury being still out over whether it is a deliberate rebalancing or market enforced.
China’s key geopolitical rival the US was sufficiently concerned to stay its hand on raising its much-watched interest rate, citing the volatility, giving some much-needed but short-lived reprieve to many African countries that have been doubling back on previously optimistic growth projections. Recent downward revisions by international lenders such as the International Monetary Fund have only added to the sense of decline, with the sub-Saharan economy now expected to grow at the slowest pace since the global financial crisis years.
Recently, official figures showed Chinese Foreign Direct Investment into Africa fell more than 40% year-on-year in the first half of this year, while imports from Africa tumbled nearly 43% over the same period, underlining the depth of China’s weakened demand for the continent’s energy and resources.
Even Chinese analysts contend that the relationship is at a crossroads.
China’s flagship meeting with Africa has been previously watched for the magnitude of the billions of dollars that are usually announced in loans and aid, but due to the changing economic terrain, there will be far more scrutiny on the tenor of the final agreements. With this in mind, Beijing has been careful not feed the growing feeling that it is not on the continent for the long-haul.
The approach has been three-pronged.
First, the language has been unusually exuberant even by usual pre-summit standards. “The historic grand gathering will further strengthen solidarity and cooperation between China and Africa, upgrade China-Africa relationship and have positive impact on balanced, inclusive and sustainable development,” Ji Peiding, a member of the Chinese Foreign Ministry’s Foreign Policy Advisory Group, said in a stock-taking meeting with African scholars and politicians in Nairobi early this month.
Speaking on November 25 in Beijing, Chinese vice foreign minister Zhang Ming said the summit, themed ‘China Africa move Forward Hand in Hand for Win-win Cooperation and Common Development’, would “have the most significant influence in Sino-African relations”.
Foreign minister Wang Yi was even more effusive. ”The summit will send a strong signal to the international community about the importance, respect and support China gives to Africa. We hope that will strengthen the confidence of the international community and bring more input to Africa,” he said in Johannesburg this week.
Second, there are also promises of even more goodies and trinkets, with a clutch of new initiatives set to be announced according to Chinese officials, but it is a message that has been tempered to take on board African concerns of a handouts culture.
“This is not a donor conference and there will be no hand-outs. This is a meeting of equal partners who will be mapping a way forward to the relationship (between Africa and China),” South African diplomat Ghulam Asmal told journalists accredited to the summit last week.
Africa instead wants to learn from the Chinese model, Asmal said. “Our discussion will centre on socio-economic upliftment (sic) of the African people. We want to know how China within a short space of time managed to reduce poverty and developed to be an industrial giant. We want to convince China as a partner to help us develop our industrial capacity.”
Trade between the two sides is estimated to have reached $220 billion last year, according to a statement from China’s ambassador to Nigeria Gu Xiaojie, while China has since 2012 provided more than $20 billion in loans to African countries.
Since 2000 when the inaugural FOCAC launched, Beijing says close to 4,000 kilometres of railways and 4,300 km of roads had been added in Africa using Chinese financing, in addition to more than 200 schools and 7,000 Chinese government scholarships annually. Some 2,500 Chinese companies were also operating on the continent at the end of last year.
China has for the last six years been the continent’s largest trading partner, but western companies continue to stump up significantly more than the Asian giant in terms of FDI.
The flow of trade is also lopsided: while the share of China-Africa trade in Africa’s total foreign trade has grown from about 4% in 2000 to 20.5% currently, Beijing’s investment in Africa is less than 5% of its overall total outside, giving rise to high-profile views that China’s role on the continent has been overplayed.
Thirdly, there has been a sharp focus on making the partnership sustainable.
“We envisage that a new level of beneficial development will be announced and the summit will give impetus to Africa’s developmental agenda,” Asmal said of the continent’s wish list.
Wang said that China will help the continent build up its industries, attain elusive food security and strengthen its public health systems in the wake of the devastation wreaked by the Ebola fever.
China would focus on the continent’s long-term growth and was willing to work with other partners on this he said, before differentiating his country’s approach.
“China will not follow the beaten track of past major powers and will not sacrifice Africa’s environment and long-term interests,” he said of a meeting that will also for the first time discuss poaching concerns.
But for all the diplomatic niceties over a partnership, China’s changing circumstances cannot be wished away. There is a growing view that Africa outsourced its growth to Beijing, and has been left holding the can after the Asian country signalled its shift to a ”new normal”.
Be that as it may, Africa’s stage of development is such that it cannot afford to be picky of who its friends are. It needs all the help it can to industrialise and add millions of jobs – with China saying it was open to the relocation of its increasingly higher-cost factory jobs to the continent.
The continent is also yet to attain its ‘green revolution’ in critical agriculture – the level where there are major small-holder productivity advances in production of staples, such as those attained in Asia starting in the 1950s, despite the renewed focus on agriculture by policy makers and the call for digital technologies to help bridge the gap.
In other words, until Africa is able to stride confidently in a fast globalising world, every hand, China’s included, will be a support rail. It also has the advantage that its path towards industrialisation is one that is much admired on the continent, and despite some bumps on the roads, the country continues to command a wide audience on the continent.
But Africa will also do well to be aware that it is only a strategic cog in China’s ambition to be a major geopolitical player. It’s ‘One Belt, One Road’ (OBOR) strategy, which refers to the land-based Silk Road Economic Belt and the 21st Century Maritime Silk Road that Beijing has crafted as its vehicle to global dominance, sees the continent as fitting neatly into it, on the back of billions of dollars worth of investment in much-needed infrastructure.
Announced in 2013, it is easily the overriding project for China’s president Xin Jinping, and while it has been avidly sold in Eurasia despite being a meta-concept, only now is it starting to become apparent how the Maritime arm of the strategy that branches in Africa’s direction will shape up.
Early signs are that the use of sea-lanes and the investment of billions into deepwater ports along the eastern Indian Ocean seaboard will create paths for Chinese goods and firms, growing its export markets.
The Berlin-based think-tank Mercator Institute for China Studies (Merics), which tracks the route keenly, says that China is pursuing three main goals of diversifying its economy, deepening political stability and the establishment of a multi-polar global order.
“From an economic perspective, China strives that the development of new trade routes, markets and energy sources will result in growth impulses and at the same time reduce dependencies.
“As China finances most infrastructure projects Beijing is also able to increase its political influence. Many countries along the Silk Roads depend on Chinese infrastructure investments.”
The Silk Road Economic Belt has been targeted at eastern European countries and Asian countries in the path, as China also seeks to forge an economic and political path towards the West. Forecasts were that a staggering $900 billion would be spent on projects in Eurasia, and China’s current economic slowdown has only the effect of slowing down the pace, not the goal.
The establishment of the Asian Infrastructure Investment Bank, AIIB, and the Silk Road Fund are among the sources expected to meet the financing needs – the former having been opposed by the US in a sign of concerns over the plan’s reach.
The economy is the one area China has a huge competitive advantage in Africa – and globally – but this week Beijing confirmed it is in negotiations with Djibouti to build a logistics hub for military operations in the strategically vital African country.
The US Africa Command has referred to it as China’s first “military location” on the continent, a term Beijing has been careful not to use given the potential to jar with the non-interference message, but on analysing the proposed sea-lanes, few doubt the hub will play a crucial role in ensuring the “free flow” of international trade that is so crucial to China’s next phase of growth following its internal transition.
The Djibouti deal has all the signs of the OBOR clicking into gear on the continent, with next week’s Johannesburg summit playing the wider role of “softening up” the gathered African leaders – to whom the strategy will be marketed as an inclusive process towards a “common destiny”.
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Setback at WTO as demand to continue talks on Doha set aside
Panel sets aside demand to reaffirm commitment to continue Doha talks in declaration to be adopted at Nairobi meet
India, along with an overwhelming majority of developing and poorest countries, received the biggest shock yet after a panel of facilitators at the World Trade Organization (WTO) set aside their demand for reaffirming the commitment to continue negotiations on all outstanding issues of the Doha Development Agenda (DDA) in the declaration to be adopted at the coming Nairobi ministerial meeting.
On Friday, the panel of facilitators said its report “contains neither draft language on nor place holders for the most contentious issues identified by members, namely the reaffirmation of the DDA and instructions on the way forward, and no new issues”.
Following the facilitators’ report, major industrialized countries – the US, EU, Japan, Australia and Canada, among others – insisted at a closed-door meeting on Saturday that if developing countries like China, India, Brazil, South Africa and Indonesia want reaffirmation of DDA negotiations, then they must accept “graduation” and forego special and differential and less-than-full-reciprocity flexibilities, according to people familiar with the development.
Effectively, the major industrialized countries turned the facilitators’ report into a trade-off between the continuation of DDA negotiations on the one side, and radical changes in the WTO’s architecture to bring graduation so to ensure that India, China, South Africa, Brazil and Indonesia undertake the same level of commitments as the developed countries for completing the Doha negotiations, according to people familiar with the development.
The countries which took part in the meeting included the US, China, India, Brazil, Japan, Australia, Canada, Norway, New Zealand, Switzerland, South Africa, Mexico, Colombia and Kenya, apart from the EU.
Ahead of the facilitators’ report, over 100 developing and least-developed countries demanded the “reaffirmation” of DDA negotiations. India, China, Indonesia, South Africa, Ecuador and Venezuela, along with the Africa Group, the Arab Group, the small and vulnerable economies, the Africa, Caribbean, and Pacific (ACP) group, the recently-acceded members, and the least-developed countries, have all demanded that the Nairobi Ministerial Declaration (NMD) must direct members to complete the DDA negotiations based on the existing mandates.
“We take note of the progress that has been made towards carrying out the Doha Work Programme, including the decisions we have taken during this (Nairobi) Ministerial Conference. These decisions are important stepping stones towards the completion of the Doha Round. We reaffirm the declarations and decisions we adopted at Doha, and all the subsequent declarations and decisions, notably the decision adopted by the general council on 1 August 2004; the Hong Kong Declaration of 2005 and the Bali Ministerial Declaration of 2013,” India, China, Ecuador, Indonesia, South Africa and Venezuela said in their proposal.
In his address to African leaders on 19 October in New Delhi, Prime Minister Narendra Modi said “the Doha Development Agenda of 2001 is not closed without achieving these fundamental principles (at the Nairobi ministerial meeting).”
But, disregarding the demands raised by the large majority of developing and poorest countries, the three facilitators – Gabriel Duque (Colombia), Stephen Karau (Kenya), and Herald Neple (Norway) – merely included the language as suggested by a handful of powerful countries such as the US EU, Japan, and other members, according to trade envoys familiar with the report.
The five-page draft report, reviewed by Mint, has portrayed the DDA negotiations in a negative manner to bolster the case made by the US and the EU.
For example, the facilitators said the members made “some” progress in the DDA negotiations despite concluding the $1 trillion trade facilitation agreement, which is part of the DDA, said an African trade envoy, who asked not to be quoted.
In the crucial Part III of the report, which deals with the post-Nairobi work programme, the facilitators turned a blind eye to the demand from the overwhelming majority of countries that “explicitly” called for reaffirmation of continuation of DDA negotiations based on the existing Doha mandates.
Echoing the oral statements issued by the US, the EU and Japan, the facilitators merely said: “We regret that it has not been possible to reach agreement on all areas of the (DDA) negotiations, including agriculture, NAMA (manufacturing), services, rules, including fisheries subsidies, and TRIPS (trade related intellectual property). In particular, we note the importance of agriculture to many WTO members, including LDCs (least developed countries). We will, therefore, address all aspects of agriculture reform as a matter of priority.”
“By drafting a declaration which basically points towards closing the Doha negotiations, as demanded by the handful of countries, the facilitators turned their back to all the issues raised by a majority of countries in their written submissions,” a second trade envoy said.
Before the facilitators’ report is discussed by members in a bottom-up negotiating framework on Wednesday, industrialized countries are trying to adopt a top-down approach to finalize the Nairobi ministerial declaration, the second envoy said.
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Rail Infrastructure in Africa: Financing Policy Options
The transport sector can accelerate and intensify trade in Africa. Rail transport in particular, as a result of its energy efficiency, reduced greenhouse gas emissions and lower cost per ton kilometre, is expected to play an increasingly important role in the conveyance of freight over long distances. In comparison to other means of transportation, railways are particularly useful in mass transit systems for both inter-city and urban settings.
This report proposes a broad overview of policy options to be considered in financing rail infrastructure investment and maintenance. The recommendations presented in the report are by no means exhaustive. They are expected, however, to serve as a starting point for more innovative business models in Africa's rail transport sector.
The current situation
Most African railways have suffered a strong decline during the last decades
Railways transport is a mature industry in the developed world, which is experiencing a remarkable comeback after a period of decline. The rediscovered allure of railways is underpinned by its capacity to move huge volumes of freight or passengers in an energy-efficient and environmentally friendly way. Nevertheless, in many countries railways are still struggling to transform themselves from subsidydependant legacy companies to more efficient commercial undertakings.
With a few exceptions (mainly in the RSA and Northern Africa), African railways clearly lag behind those of most other regions in the world. Rail transport has faced the same constraints and challenges as elsewhere. But, poor economic, technological and institutional conditions have further aggraveted the situation in Africa. The result is outdated infrastructure, sometimes approaching a point of no return. The operations are clearly below international standards.
Concessions introduced in the 90s, under the impulse of the World Bank and other international donors, have halted the declining trend that threatened to dismantle many rail lines. But, the entire initiative has produced mixed results: in some cases it was a blatant failure and in quite a few others, if any, it was an outright success.
The fundamentals of rail economics and operations
Some of the fundamentals of railways that need to be borne in mind, are:
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Freight transport is typically competitive over mid to long distances but it usually loses its attractiveness in shorter journeys.
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Rail requires high volumes to be feasible, and it is a business of high volumes with low margins.
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Road and railway transport are both competitive and complementary. They compete over long distance but road transport is required for the “last mile.”
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Railway infrastructure is rigid, expensive and requires an operating and maintaining.
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The performance of the operator is highly dependent on the conditions of the infrastructure and rolling stock
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Rail freight and rail passenger transportation are very different businesses
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Most rail projects around the world require high levels of subsidy for the construction and/or operations to be sustainable. This subsidy should reflect the economic, social and environmental benefits of railways compared with other transport modes.
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Including appropriate stakeholders in the concessionaire’s shareholding improves project performance in the case of PPPs
There is no single “fit for all” business model for railways. A large number of railway business models can be found worldwide with various levels of integration/separation of infrastructure and operations, and with more or less private participation. Significantly, the bigger and apparently more efficient railways in Africa (e.g. RSA or Morocco) are public sector undertakings, which is not the mainstream pattern in the Americas or in Europe.
The need for a new approach
The analysis of selected African railways confirms the need for a new approach
An in depth assessment of the railways in eight African countries has been undertaken. These eight countries are: Botswana, Cameroon, Kenya, Madagascar, Morocco, Senegal, Tanzania and Zambia. They represent a wide range of backgrounds and experiences. Most have had experience with concessions, with different results. But some (like Botswana and Morocco) have maintained a public sector approach.
The most relevant conclusions from these visits are:
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In most countries, the introduction of concessions has proved rather unsettling to the point that two of them been terminated after a very short time. Where concessions are still operational, the terms have had to be modified, resulting in major changes to their financial base.
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Most concessions underestimated the amount of investment required and the sums committed have had a limited impact on improving railway performance. Financial packages associated with these concessions have proved to be insufficient.
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Railways contract holders, most of them freight driven, have been overburdened with obligations that do not sit comfortably with their core business. They had to take over a substantial share of state railways legacy and passengers' service obligations, and this has been a major issue for their operations.
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Most concessions require operators to engage to a greater or lesser degree in infrastructure renewal or maintenance. This means that most African concessions are a hybrid that requires operators to be involved to a certain level in infrastructure and maintenance works.
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The coexistence of passenger services, with mostly freight-driven operators, has been uncomfortable to the point that in some cases, it has been the cause of litigation. Major concession amendments has been introduced, and effected even before the service was eventually terminated. In these cases, service termination is deemed more appropriate than service cessation.
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The competitive environment between railway and road transport modes has not been adequately addressed in most cases. Neither at the planning stage not at the implementation and enforcement stages were competitive modes of transportation appropriately considered. In too many cases, the compétitive or complementary aspects of road versus rail transportions have not properly been examined.
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Most countries have reached the conclusion that railway management and financing have to be reviewed. But these countries are still struggling to define the adequate financial models, most notably how infrastructure maintenance should be managed and funded.
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Most of the visited countries have several new major railway projects, targeting both freight (mostly mining) and passenger market segments. A variety of schemes at regional level have been designed as well. There is a general acceptance that PPPs can have a role to play in the funding of such projects. However, it seems of paramount importance that rail infrastructure, rolling stock and operations should be split both contractually and financially.
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Finally, some countries seem to have opted for a public approach to their railways sector with no intention to privatize them in the short to mediumterms. Thèse countries are: Morocco, Botswana and Zambia. Zambia, the last of these countries, came to make that decision after a disppointing experience with concessioning. The countries, which opted for the public sector approach, are also countries with the greatest technical capacities and the most attractive business environments in our sample. This is an indication that well-funded and properly managed public railways may be a suitable option in some cases, provided that appropriate institutional framework and commercial structures are in place.
The challenge
There seems to be two conflicting views:
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One opinion is based on the perception that rail transport as a losing game. The number of operations funded by International Financial Institution’s (IFIs) in Africa, in recent years, shows relatively little investment in railways as compared to other infrastructure such as roads or energy.
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Conversely, the other opinion sees railways as an indispensable tool to foster development and take full advantage of the continent’s natural wealth. Many African countries, as well as regional groupings, are currently designiing new railway schemes. And several foreign players have become very active in promoting, lobbying government and even investing in railways. High expectations for the sector, as well as a certain amount of media hype, can now be found in the offices of many African decision-makers.
These contradictory views should not provide any excuse for either inaction or irresponsible investment decisions. On the contrary, what is required is a clear understanding of the fundamentals of the rail business, its financing and the making of sound and unbiased assessments, especially at the stage of project identification and preparation. Unfortunately, in many countries, this process is hindered by a shortage of skills and familiarity with modern railways.
The solution
There are opportunities for railway development in Africa as a consequence of the following drivers:
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Growing urbanisation and industrialization will pose new transportation challenges that railways are well suited to handle.
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Africa will produce large volumes of goods such as bulk minerals and commodities that are natural markets for railways.
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The huge continental mass of Africa and the existence of many landlocked countries will encourage the development of high-capacity and efficient transport corridors.
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Higher sensitivity towards environmental and safety issues will result in railways getting more public attention and social support
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The reduction of the extremely high external costs (noise, pollution, congestion, accidents etc.) associated with the constant increase in the use and ownership of private vehicles.
Focus projects on what railways do best
Railways are not the sole solution to all transportation challenges. Projects should be concentrated in segments where railways can effectively bring higher efficiency and lower costs than other modes: moving high volumes of persons or goods over a given distance. Accordingly the areas deemed to be most appropriate for railway projects in Africa are:
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Major African Metropolitan Areas > Urban and suburban passenger railways.
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Densely populated areas and corridors > High volumes for freight or passengers possible.
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Corridors from ports to inland markets > Freight trains moving containerised or bulk materials from/to ports over long distances.
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Major mining basins > Freight trains moving minerals and other raw materials to export ports.
Railway policy makers may have to bear in mind that new railway projects in Africa will only be sustainable provided that they are compatible with their natural markets. Projects should be driven by the “need” within the Transport Sector with a clear set of objectives. Robust and detailed feasibility assessments such as cost-benefit analysis (CBA), economic impact analysis or social return on investment analysis need to be part of the evaluation process.
The way forward
Learn from the experience of other countries
Faced with similar challenges in terms of the financing and development of railways, experiences in other developing and emerging countries are particularly valuable:
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Countries that pioneered railways concessions, such as Argentina, provide mixed results. While freight transport has grown and proven to be profitable, longdistance passenger services have been discontinued, as the subsidies required were unsustainable. However, urban and suburban trains remain crucial to Buenos Aires mobility.
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The quality of the institutional environment is critical to ensuring that users benefit from private sector participation. In poor institutional environments, private operators may be more interested in courting regulators and politicians (i.e. the source of subsidies), than in really engaging in the improvement of safety and service standards to users, since fares are a minor part of the operator’s revenues.
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Big, and bureaucratic, public railways may create highly professionalized spin-offs to provide flexible, credible and creditworthy instruments to deal with the private sector under a wide range of PPP deals. This is the case of IRFC and RVN in India. This type of approach merits the support from IFI’s.
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Public railways such as Transnet and PRASA in the RSA may provide acceptable to good service delivery and sound financial performance, under adequate institutional arrangements, and has experience with big PPP deals such as the Gautrain.
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Although it is a politically sensitive issue, the use of a share of fuel taxes to fund railway infrastructure is possible in emerging countries, as Poland’s experience shows. This fund can eventually underwrite the issue of bonds to finance railway projects.
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Unless there is a clear political will to push forward with liberalization and integration of national networks, it can be difficult to get agreement to a legal framework that neatly separates infrastructure, operation and regulation.
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Partnerships between railways and logistics/transport operators have been successfully achieved in some of the leading railways in Europe and some examples already exist in Africa. The strong synergies obtained seem to favour this approach.
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The decision to change gauge within a country has many implications. It can hinder, almost irreversibly, the development of rail traffic as has happened in some EU countries without standard gauge. Any new project, that involves the introduction of a different gauge from the one existing on the network, needs to be carefully assessed before any decision is made. The assessment needs to take into account the requirements of stakeholders in the logistics chains and all the operational and day-to-day impacts.
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WTO members consider draft Nairobi Ministerial Declaration
The three facilitators appointed by Director-General Roberto Azevêdo to support members to develop a Ministerial Declaration for the WTO’s 10th Ministerial Conference presented their draft Declaration text at a meeting of all members on Friday, 27 November.
The facilitators (Ambassador Gabriel Duque of Colombia, Ambassador Harald Neple of Norway and Ambassador Stephen Karau of Kenya) prepared this text at the request of members, after an intensive period of consultations on the shape, structure and content of a potential Ministerial Declaration. The facilitators used textual proposals made by members to develop their draft. At the request of members, they also excluded the most contentious issues from their draft, leaving them to be addressed via a separate process.
The Director-General asked members to take time to consider the document over the coming days before discussing it in detail at a meeting of all members on Wednesday 2 December. He stressed that the document was a draft for consideration. He said:
“This text represents the facilitators’ best efforts. It is a good faith attempt to provide something that members can work with, and which – we hope – will allow for convergence on the majority of the Ministerial Declaration. As promised, this text touches specifically on the less contentious issues. And, again, as promised, the facilitators have treated members' textual proposals with the highest priority throughout.
“Of course, we also need to tackle the most contentious issues – such as the reaffirmation of the Doha Development Agenda and instructions on the way forward, and openness to talking about new issues. I will set up a different process to deal with those tough, contentious issues, and we will be starting this process after the General Council is finished next week.”
The Director-General also stressed the need to keep making progress in negotiations towards agreeing substantive outcomes for the Ministerial Conference. The Conference will take place in Nairobi on 15-18 December.
DRAFT by Facilitators
Nairobi Ministerial Declaration
PART I
Preamble
1. We, the Ministers, have met in Nairobi, Kenya, from 15 to 18 December 2015 at our Tenth Session. As we conclude our Session, we would like to express our deep appreciation to the Government and people of Kenya for the exceptional organization and the warm hospitality we have received in Nairobi.
2. We note that our Tenth Session takes place as we mark the twentieth anniversary since the establishment of the WTO. On this occasion, we underline the crucial importance of the multilateral rules-based trading system and reaffirm the principles and objectives set out in the Marrakesh Agreement Establishing the World Trade Organization.
3. We reaffirm the pre-eminence of the WTO as the global forum for trade governance. We pay tribute to the major contribution that the rules-based multilateral trading system has made to the strength and stability of the global economy.
4. We note with concern the slow and uneven recovery from the severe economic and financial crisis of 2008, resulting in lower global economic growth, raising inequalities, unemployment and significantly slower expansion of international trade in recent years. We acknowledge that international trade can play a role towards achieving sustainable, robust and balanced growth for all.
5. We pledge to make the multilateral trading system responsive to existing challenges so as to provide a strong impetus to inclusive prosperity, welfare and development, especially in view of the needs of our weaker and vulnerable Members, in particular least developed countries (LDCs).
6. We reaffirm the centrality of development in the WTO’s work and commit to continuing to make positive efforts designed to ensure that developing country Members, and especially the least-developed country Members, secure a share in the growth of world trade commensurate with the needs of their economic development.
7. We strongly reaffirm our commitment to the objective of sustainable development, as stated in the Preamble to the Marrakesh Agreement. In this regard, we recognize the role the WTO can play in contributing towards achievement of the 2030 Sustainable Development Goals.
8. We underscore the importance of coherence in global economic policy-making. We welcome initiatives for cooperation with other international organizations, and encourage the further strengthening of such collaboration in pursuit of common objectives such as promoting sustainable development through trade.
WTO’s twentieth anniversary – achievements and challenges
9. On the occasion of the WTO’s twentieth anniversary, we acknowledge important achievements under the functions of the Organization described in Article III of the Marrakesh Agreement.
10. We reaffirm the importance of work in regular bodies in furthering the objectives of the WTO Agreements and in facilitating meaningful exchange of information and sharing of experiences regarding the effective implementation and operation of their provisions. We note that the WTO’s trade monitoring work, including trade policy reviews, has contributed consistently to the functioning of the multilateral trading system, by achieving greater transparency in, and understanding of, the trade policies and practices of Members.
11. We reiterate that the WTO shall remain the main forum to negotiate multilateral trade rules. At our Fourth Session, we launched for the first time in the history of the GATT and the WTO, a Development Round – the Doha Development Agenda. We have made some progress in the negotiations. We recall the adoption of the Protocol Amending the TRIPS Agreement and welcome the adoption of the Agreement on Trade Facilitation (TFA) as the first multilateral agreement since the establishment of the WTO. We commend those Members that have already ratified the respective Protocols and look forward to further ratifications. We note with regret that much less progress has been made in central elements of the WTO’s negotiating agenda, in particular in agriculture.
12. As we recognize the centrality and primacy of the multilateral trading system, we take note that the plurilateral agreements concluded under the auspices of the WTO have deepened the framework of rules.
13. We note that the Dispute Settlement Understanding (DSU) continues to offer a means for the settlement of disputes among Members that is unique in international agreements. The system has dealt with a large and growing number of disputes, demonstrating Members’ continuing confidence in it. We recognize that the increasing number and growing complexity of disputes present challenges to the system. We therefore commit to further strengthen it, including through effective implementation of the rulings and recommendations of the Dispute Settlement Body (DSB).
14. We acknowledge that international trade continues to play a major role in the promotion of economic development and the alleviation of poverty. We recognize the need for all our peoples to benefit from the increased opportunities and welfare gains that the multilateral trading system generates. The majority of WTO Members are developing countries. We seek to place their needs and interests at the centre of the work in the WTO.
15. We recall the commitments made by Ministers at all of our previous sessions, as well as by the international community at the Fourth UN Conference on Least-Developed Countries in Istanbul, to assist LDCs secure beneficial and meaningful integration into the multilateral trading system and the global economy. We recognize that LDCs remain vulnerable and continue to face structural difficulties in the global economy. We underscore the continued importance of initiatives aimed at fully and meaningfully integrating LDCs into the multilateral trading system in a more effective manner.
16. We recognize the contribution of the Enhanced Integrated Framework (EIF) in mainstreaming trade in development policies of LDCs and building their trade capacity. This significant role in helping LDCs achieve their development objectives is duly recognized by the 2030 Agenda for Sustainable Development. We are determined to further intensify our efforts in securing the necessary level of financial contributions to the program with the view to enabling the delivery of predicable trade-related support to LDCs, based on the programme needs as set out in the EIF Phase Two Programme Framework.
17. We recognize the importance of the Aid for Trade initiative in supporting developing country Members to build supply-side capacity and trade-related infrastructure and we shall accord priority to the LDCs’ needs. We take note of the outcomes of the WTO global reviews on Aid for Trade, in particular the Fifth Global Review, and recognize the continuing need for this initiative.
18. We note the substantial progress in WTO’s technical assistance and capacity building, which focuses on the needs and priorities of beneficiary Members. We recognize that dedicated facilities such as the Standards and Trade Development Facility and the Trade Facilitation Agreement Facility can make an important contribution towards assisting developing country Members and LDCs to implement relevant WTO agreements. We also reiterate the importance of targeted and sustainable financial, technical, and capacity building assistance programmes to support the developing countries, in particular LDCs, to implement their agreements, to adjust to the reform process, and to benefit from opportunities presented.
19. We celebrate the enlargement of the Organization by accessions in accordance with Article XII of the Marrakesh Agreement. We note that the accessions of the Republic of Yemen, the Republic of Seychelles and the Republic of Kazakhstan to the WTO have been completed since our
last Session. In particular, we note with satisfaction that this Conference has completed the accession procedures for two least-developed countries, the Republic of Liberia and the Islamic Republic of Afghanistan. We recognize the contribution of accessions to the strengthening of the multilateral trading system. We highlight the need to provide technical assistance to acceding countries, including in the post-accession phase.
20. We take note of the reports from the General Council and its subsidiary bodies. We welcome the progress arising from these reports, and the Decisions stemming from them, in strengthening the effectiveness of the WTO as an organisation and the multilateral trading system as a whole.
PART II
21. We welcome the following decisions we have adopted at this Session:
- [TRIPS Non-violation and Situation Complaints – Draft Ministerial Decision]
- [Work Programme on Electronic Commerce – Draft Ministerial Decision]
- [Work Programme on Small Economies – Draft Ministerial Decision]
- [Any additional decision to be inserted]
22. We further welcome the adoption by the TRIPS Council of the Decision on the Extension of the Transition Period under Article 66.1 of the TRIPS Agreement for Least-developed Country Members for certain obligations with respect to pharmaceutical products.
PART III
23. We welcome the advances made in the Doha Development Agenda. We regret that it has not been possible to reach agreement on all areas of the negotiations, including Agriculture, NAMA, Services, Rules, including fisheries subsidies, and TRIPS. In particular, we note the importance of agriculture to many WTO Members, including LDCs. We will therefore address all aspects of agriculture reform as a matter of priority.
24. In reaffirming the centrality of development, we agree that the principles of Special and Differential Treatment and Less Than Full Reciprocity for developing and least-developed country Members shall remain integral parts of the WTO’s future work.
25. We strongly commit to addressing the marginalization of LDCs in international trade and to improving their effective participation in the multilateral trading system. Towards that end, we shall ensure that all issues of specific interest to LDCs shall be pursued on a priority basis.
26. We reaffirm our commitment to continue to address, in a substantive and meaningful manner, the needs of small, vulnerable economies (SVEs) and to adopt specific measures that would facilitate their fuller integration into the multilateral trading system, without creating a sub-category of WTO Members. We therefore call for the priorities of SVEs to be duly addressed in all areas of the negotiations and regular work.
27. We recognize the extensive commitments undertaken by Members that acceded under Article XII. We further recognize the need to narrow the gap in Members’ commitments.
28. We reaffirm the need to ensure that Regional Trade Agreements (RTAs) remain complementary to, not a substitute for, the multilateral trading system. We agree to enhance the role of the Committee on Regional Trade Agreements so as to map the systemic implications of RTAs and their coherence with WTO rules. We deem it necessary to conduct a study on the systemic implications of RTAs, modalities of which will be decided by the General Council.
Related News
EU launches GCCA+ to tackle climate change in developing countries
The European Union (EU) launched the GCCA+, its largest initiative to combat climate change in the world’s poorest and most vulnerable places, notably the group of Least Developed Countries and Small Island Developing States.
The Global Climate Change Alliance Plus, a flagship initiative and successor of the GCCA, will allocate around €350 million over a seven-year period (2014-2020) – in addition to private and national public investments.
The official launch, held in Brussels on 29 October, comes at a historic moment. In December leaders from around the world will gather in Paris for the 21st Session of the Conference of the Parties (COP 21) to the United Nations Framework Convention on Climate Change, to agree a treaty tackling the 21st century’s most pressing issue.
“Climate change can bring about an unprecedented reversal in the progress towards poverty eradication and undermine efforts towards sustainable and inclusive development,” said Neven Mimica, Commissioner for International Cooperation and Development.
“It is a high priority for the European Union to help the most vulnerable countries win this fight while making the transition to a greener and more sustainable economy,” the Commissioner told the audience gathered in downtown Brussels.
The main aim of the GCCA+ is to tackle climate change, especially in Small Island Developing States and Least Developed Countries, where changing weather patterns, extreme weather events, and rising sea levels have already become a reality.
“Our country is very vulnerable to climate change,” Pema Tenzin, a coordinator of the GCCA Bhutan programme told the audience.
“Farmers are the ones who are facing the impacts the most. We hope we can take what we have achieved so far (with the GCCA) and scale it up across the country.”
“Doing more, doing better”
The launch gave an opportunity for governments, institutions, private-sector representatives and many others to learn about the programme, as well as its funding opportunities.
“We want to do more and we want to do it better,” the Commissioner said, referring to the initiative’s plan to enhance collaboration with EU Member States and various other partners. In its new phase, the initiative also wants to reach new audiences such as the private sector.
Doing “better” also means enhanced collaboration and participation with the civil society and non-governmental organisations.
The panel entitled 'Doing more, doing better’ gave an opportunity to discuss exactly that. Bringing together representatives from various groups, including Giannina Cadena from Fairtrade International and Nicole Brown from the Carribbean Natural Resources Institute (CANARI), the debate focused on the future and how to further bridge local actions with global policy initiatives.
The GCCA+ today is considerably larger than its predecessor, the GCCA, which began in 2007 with support for programmes in just four countries plus the European Union.
European efforts to tackle climate change have also grown considerably since then. The GCCA+ is supporting 51 programmes in 38 vulnerable countries by engaging in policy discussions and by providing financial and technical support.
“This is a great initiative which shows that the EU is scaling-up climate finance to help the most vulnerable countries take action against climate change,” Climate Action and Energy Commissioner Miguel Arias Cañete said in a press statement.
“And it also sends a clear signal ahead of Paris: the EU stands by its commitments and is ready to continue to do its part.”
Concrete action for the planet
The initiative is directly involved in the implementation of the international development agenda, shaped by the Addis Ababa Action Agenda, the Sustainable Development Goal 13 that calls for urgent action to combat climate change and to the upcoming COP 21.
“It is essential that Europe as a whole is united in its commitment to fund the fight against climate change,” said Gautier Mignot, Deputy Director General for Global Affairs, French Ministry for Foreign Affairs and International Development.
“And that is why I am delighted to participate in this launch event, which allows us to recall what the European Union has achieved since 2007 as part of the GCCA and all that it will do in the framework of the GCCA+.”
The event also served as a preparatory meeting for the Paris summit and participants all stressed that the GCCA+ will play a key role in shaping the post-Paris climate change landscape in developing countries.
“We know there will be a deal in Paris,” said Simon Maxwell, the Executive Chair of the Climate and Development Knowledge Network. “The question today is what do we do right after Paris... How can we build on the success of the GCCA in the future?”
The GCCA+ launch event and the constructive panel discussion provided an opportunity to exchange ideas for the future and concrete actions to improve the planet.
And every little bit helps. For example, the Directorate-General for International Cooperation and Development (DG DEVCO) of the European Commission, which organised the launch event on behalf of the EU, made a considerable effort to significantly reduce the environmental impact of the event itself.
Participants were served a vegetarian lunch, which saved the equivalent emissions – compared to a buffet made up of 40% meat – of a 600-km trip in a mid-sized petrol car, and corporate gifts were made of eco-friendly materials.
The travel carbon footprint of participants has also been offset – the equivalent of 18.17 tonnes of CO2. This has been done by funding projects focusing on the reduction of global climate change.
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AU in meetings to progress intra African trade
The African Union is spearheading efforts to boost intra African trade as a means to achieve the Agenda 2063 goal of a united, prosperous and peaceful Africa by 2063.
In this respect, from 23 to 27 November, the African Union co-hosted three meetings aimed at enhancing trade among African countries: i.e. discussing progress in regional integration, specifically the moves towards establishing a Continental Free Trade Area (CFTA): modalities for trade in services negotiations and review of the implementation of the plan of action for Boosting Intra African Trade (BIAT).
Meeting in Cape Town were different departments of the African Union Commission, including the Directorate of Information and Communication, some member states, Regional Economic Communities and partners, under the joint coordination of the AUC’s Department of Trade and Industry and the Trade Law Center (Tralac), based in South Africa.
With regards to the CFTA, the meeting benefitted from experiences of the Tripartite Free Trade Area that was launched by the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC) in June 2015.
The objective of the modalities workshop was to review the various services liberalization options and modalities for negotiations and make recommendations of possible options and modalities to be adopted for the CFTA services negotiations.
In its efforts to boost intra African trade, the Union adopted the BIAT Action Plan to deepen African market integration and significantly increase the volume of trade that African countries undertake among themselves. The action plan has the following pillars trade policy, trade facilitation, infrastructure, finance, information, factor market integration and productive capacity. The road map also envisages that the CFTA will be established by 2017, building upon and consolidating the regional free trade agreements of Regional Economic Communities (RECs).
The meeting took stock of the implementation of the BIAT Action Plan at RECs and member states’ level; exchanged information and experiences with regards to the implementation of the Action Plan or related initiatives; and discussed the design of a monitoring and evaluation framework.
“Beneficiaries of intra African trade, i.e. the African people, need to see results sooner rather than later, so we are discussing how we can move forward step by step to realize the opportunities that will arise from greater intra African trade,” said AUC Director for Trade and Industry Mrs Treasure Maphanga.
Such benefits are expected to accrue from economies of scale to supply international markets, as Africa leverages its combined capacities and population of almost one billion people.
The importance of boosting intra African trade is of great significance to achieving a prosperous Africa. Levels of trade in Africa are currently very low compared to other regions. It was estimated at 11 to 12 percent in 2010, growing to a still lowly 13 percent by 2015. Through implementation of the BIAT plan of action, this is expected to almost double to 22 percent before 2022.
The conclusions from the meeting will be submitted to the STC on Trade, Industry and Mineral Resources in 2016.
Implementation of the BIAT action plan is being done in coordination with other key actors including RECs, the UN Economic Commission for Africa, and the African Development Bank.
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Agriculture and structural transformation in Africa
Close to 70% of Africans depend on agriculture for their incomes, yet the sector represents only a third of the continent’s gross domestic product (GDP). Efforts to improve farmer productivity and raise incomes can, therefore, drive demand in other important economic sectors. This would increase economic growth while providing the opportunity to simultaneously pull millions of people out of the vicious circle of poverty.
Despite the importance of the agricultural sector in the continent, it is not getting the requisite attention from policy makers and private sector actors. This is manifested by the non-inclusive growth in most African countries leading to poverty in the rural areas where a majority of the population lives. Numerous African countries could realize more potential from their agricultural sectors, yet in recent decades countries have given vastly different levels of prioritization to investments and policy reforms.
“The agricultural sector is important to us because it is a key ingredient for inclusion in development of sub-Saharan Africa. And it is significant to note that agricultural productivity gains offer a powerful lever for raising productivity of African workers, generating youth employment and women empowerment; alleviating rural poverty and driving structural transformation in Africa. Thus, structural transformation in this sector, that would lead to improvement of productivity in smallholder farms, as well as, creating opportunities elsewhere in the economy, whether in agriculture or non-agriculture is a welcome business,” says Prof. Lemma W. Senbet, AERC Executive Director.
It is in this context, Agriculture and Structural Transformation in Africa is the theme for the 43rd plenary session of the African Economic Research Consortium’s (AERC) Biannual Research Workshop, which opens at 9:00 am on Sunday, November 29, 2015 at the Hilton Hotel in Addis Ababa, Ethiopia. Opening remarks will be by Prof. Lemma W. Senbet, AERC Executive Director, Anthony Maruping, Commissioner, Economic Affairs, African Union and Dr. Carlos Lopes, Executive Secretary, Economic Commission for Africa (UNECA). The session will feature three presentations by thought leaders on the subject.
Professor Christopher Barrett, Cornell University, USA and his co-authors will start off the proceedings with a look at ‘The Structural Transformation of Rural Africa: On the Current State of African Food Systems and Rural Non-Farm Economics’. The next paper will be on ‘An African Green Revolution: Past Failures and Future Prospects’ by Prof. Keijiro Otsuka, The National Graduate Institute for Policy Studies (GRIPS), Japan. The third and final paper, ‘Pathways Less Explored – The Nature and Significance of Aspirations in Agricultural Transformation’ will be by Dr. Alemayehu S. Taffesse, International Food Policy Research Institute (IFPRI), Ethiopia.
Discussions on these papers will be led by Prof. Yaw Nyarko, New York University, USA, Dr. Adam Elhiraika, United Nations Economic Commission for Africa (UNECA) and Prof. Rodney Smith, University of Minnesota, USA. Thereafter, active discussions by the participants made up of senior African policy makers, distinguished economists from all over the world, development partners and researchers from Africa and beyond will take place.
A public/private sector policy panel discussion is also scheduled later to wind up the activities for the day. This session will be chaired by Dr. Admessu Tadesse, President of PTA Bank. The round table panelists include Prof. Mthuli Ncube, Oxford University and former Chief Economist of AfDB, Gabriel Negatu, AfDB, Linda Kwamboka, Mfarm Limited, Kenya, Dr. Eleni Gabre-Madhin, CEO, Ethiopia Commodity Exchange, and Prof. Yaw Nyarko, New York University. The objective of the public/private sector panel discussion is to contribute to finding solutions to the agricultural challenges in Africa, by focusing on the practical opportunities and challenges. This way, the panel discussion complements the preceding plenary presentations.
Concurrent sessions of the workshop start on Monday, November 30, 2015. They will feature 85 presentations of research proposals, work in progress, final reports and PhD theses proposals. These will cover a wide range of topics that fit into the focal areas of AERC’s thematic research programme: poverty, labour markets and income distribution; macroeconomic policy and growth; finance and resource mobilization; production, trade and economic integration; agriculture, climate change and natural resource management.
Moreover, following the tradition, special sessions will be conducted on various topics by AERC partners namely UNECA, AUC and AfDB:
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“Economic Report on Africa 2015: Industrializing through Trade” will be presented by Dr. Adam Elhiraika, Director, Macroeconomic Policy Division, United Nations Economic Commission for Africa (UNECA) on November 30, 2015.
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“African Agenda 2063 and African Union (AU) Commission’s Response to the Data Revolution” will be presented on December 1, 2015.
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African Development Report 2015, will be presented by AfDB on December 2, 2015.
High-level conference
The AERC, in partnership with Cornell University, AfDB, Partnership for Economic Policy (PEP), and the World Bank, will host a high-level conference on the Structural Transformation of African Agriculture and Rural Spaces (STAARS), on December 4-5, 2015.
The AERC will also play host to one back-to-back workshop during this period at the same venue:
- The AERC/GDNet Policy Communications Workshop will be held on December 4-6, 2015. About 20 participants are expected to take part. The objective of this workshop is to build capacity and skills in communicating research to maximize their uptake and impact as well as increase understanding of research to policy process and the role of policy briefs in this process. The researchers will also be trained on how to produce a Policy Brief for each research project to be finalized after the workshop.
Each of the AERC’s biannual research workshops attracts about 200 researchers, academics, policy makers and other economists who participate in the Research Programme. The workshops provide a forum in which the participants can meet each other within a worldwide network of professionals, and deal with issues relevant to Africa’s economic development. They also provide an opportunity for monitoring the progress and quality of the various research projects sponsored by AERC, thereby fulfilling one of its major mandates – to strengthen local capacity for conducting independent, rigorous inquiry into problems facing the management of economies in sub-Saharan Africa.
About AERC
The AERC, established in 1988, is a premier capacity building institution in the advancement of research and training to inform economic policies in sub-Saharan Africa. It is one of the most active Research and Capacity Building Institutions (RCBIs) in the world, with a focus on Africa. AERC’s mission rests on two premises: First, that development is more likely to occur where there is sustained sound management of the economy. Second, that such management is more likely to happen where there is an active, well-informed cadre of locally-based professional economists to conduct policy-relevant research. AERC builds that cadre through a programme that has three primary components: research, training and policy outreach. The organization has now emerged as a premier capacity building network institution integrating high quality economic policy research, postgraduate training and policy outreach within a vast network of researchers, universities and policy makers across Africa and beyond. AERC has increasingly received global acclaim for its quality products and services, and is ranked highly among global development think tanks.
Related News
tralac’s Daily News selection: 27 November 2015
The selection: Friday, 27 November
Today: MTC holds Beira and Zambezia Development Corridors Investment Conference
Looking ahead to Monday: South Africa's October trade statistics will be released, The 13th African Regional Meeting starts in Addis: updated agenda from the ILO
Featured commentaries:
Gerhard Erasmus: 'New generation disputes in African regional integration: what are the reasons and the implications?' (tralac)
This state of affairs is changing; at least in some of the RECs. Regional Courts and Tribunals have allowed standing for private parties; while recent case law shows a tendency to expand the scope of the relevant jurisdictional principles. New types of disputes involving investors and businesses from other African countries are also being heard by domestic courts. This Trade Brief discusses some of the recent cases and discusses the reasons and the implications of these developments for African regional integration endeavours.
Mzukisi Qobo: 'Depending on China is no way to grow Africa' (Business Day)
African leaders need to look beyond China for the continent’s long-term development. Next week, SA will be co-hosting the Sixth Forum on China-Africa Co-operation. While China’s relationship with Africa has broadly been beneficial, there are worrying movements in this tango.
Ricardo Hausmann: 'The import of exports' (Project Syndicate)
Should a country’s development strategy pay special attention to exports? After all, exports have nothing to do with satisfying their people’s basic needs, such as education, health care, housing, power, water, telecoms, security, the rule of law, and recreation. So why give precedence to satisfying the needs of distant foreign consumers?
Featured report: The Commonwealth in the unfolding global trade landscape - prospects, priorities, perspectives (Commonwealth Secretariat)
“Our flagship report offers new and valuable perspectives on Commonwealth trade in a global context. We have demonstrated that a Commonwealth connection makes a difference from a trade perspective and we have also suggested policy measures that can help members exploit the huge potential to expand their trade,” said Kamalesh Sharma, Commonwealth Secretary-General. Trade within the Commonwealth is already substantial and is predicted to surpass $1trn by 2020. When bilateral partners are both Commonwealth members, they tend to trade 20% more, save around 19% in costs and generate 10% more foreign direct investment inflows. Evidence also suggests that hundreds of billions of dollars of intra-Commonwealth trade has yet to be exploited, particularly through trade with developing countries. [Downloads]
Mainstreaming trade in Africa: lessons from Asia and the way forward (UNCTAD)
This paper examines the experiences of three Asian countries (China, the Republic of Korea and Singapore) that have successfully used trade to engender development and draws lessons from these experiences for Africa. The paper also argues that despite the growing interest in mainstreaming trade, no criteria have been set or defined on how to measure success. To fill up this lacuna, the paper proposes measurable criteria on how to determine whether or not African countries have successfully mainstreamed trade into their national development strategies. [The author: Patrick N. Osakwe]
WTO updates:
Pakistan unanimously elected to chair key WTO body on trade and environment (The News)
Cecilia Malmström: 'We must have a trade deal' (Politico)
India may not secure food security deal at WTO Nairobi meet (LiveMint)
India toughens stand at WTO after safeguards proposal blocked (LiveMint)
The world’s poorest countries can still make patent-protected drugs - till 2033 (Quartz)
AfDB Transport Forum: report of first day's proceedings (AfDB)
The panelists pinpointed that despite the opening up of African skies, the continent does not see many companies or competition, as taxes, fares and fuel costs are high in Africa. Capacity building for actors and operators in the transport sectors was also stressed as a key element for sustainable development and integration. Government officials and airline operators underlined opportunities for developing transport in Africa and potential benefits from the regional integration, but underscored the need for strengthened cooperation and vigorous actions. For African air transport to be competitive, they said, there is a need for adequately investing in transport infrastructure, cancelling the monopoly of airport service providers, reducing fuel prices and taxes, as well as fares and charges.
Chinese firm acquires Swissport (Tanzania Daily News)
Tanzania's Fair Competition Commission, is investigating reports on the acquisition of Swissport by China’s HNA Group and claims that the merger will not have material effect on the market. The FCC has given 14 days any parties that have objections with the merger to notify the commission, which strives for fair competition in the country.
Zambia: Lungu cuts spending on roads as low copper prices weigh (Bloomberg)
Zambian President Edgar Lungu unveiled a raft of spending cuts ranging from reduced fuel subsidies to delayed road building as an economic crisis in the southern African nation intensifies. The government will have spent $300 million on subsidizing fuel for consumers by the end of the year, which is “clearly not sustainable,” Lungu, told reporters Thursday in Lusaka. A further $40 million will have been paid to import power and ease a severe shortage between September and the end of the year, underscoring the need for the energy regulator to increase prices, he said. Lungu ordered officials not to start any new road projects, to defer construction contracts where possible and to focus instead on completing those already under way. He’s also delaying the establishment of a national airline, which was set to take place next year.
EAC/EALA updates:
Time to make One Stop Border Posts a reality
EALA members undertook an On-Spot Assessment on the One Stop Border Posts in EAC Partner States in the months of April and September 2015. Phase one of the assessment covered OSBPs of Mutukula (Uganda/Tanzania), Mirama Hill/Kagitumba (Uganda/Rwanda) and Rusumo (Rwanda/Tanzania) on 8th to 11th April 2015. The second phase covered Lungalunga/HoroHoro (Kenya/Tanzania), Taveta/Holili (Kenya/Tanzania) and Namanga (Tanzania/Kenya) from 30th September to 3rd October 2015. Generally on all borders, there is limited knowledge on borders with regards to OSBPs, lack of operating manuals and inadequate water supply. In its findings, the report underscores training and sensitisation programs and the need for teamwork.
EALA wants effective tracking of its resolutions
At the same time, the Assembly is to urgently mobilize resources to develop an online monitoring module under the EAC Monitoring System currently operational at the EAC Secretariat that will serve as a database for monitoring. The recommendations are contained in a report of the Committee on Legal, Rules and Privileges on tracking the implementation of Resolutions and Questions of the Assembly.
Promoting innovation and trade in East Africa's horticulture sector (New Times)
The conference under the theme, “Promoting innovation and trade in horticulture” brought together over 500 horticulture industry stakeholders from seven countries, including The Netherland, Kenya, Tanzania, Uganda, Burundi, Zambia and the DR Congo. It was organised by the National Agricultural Export Development Board, the Private Sector Federation, the Rwanda Horticulture Interprofessional Organisation and AgriPro Focus Rwanda. Rwanda’s horticulture sector is expected to fetch about $9m this year, up from $3m in 2010.
EALA to look into alleged mistreatment of Sezibera in Burundi (New Times)
COMESA updates:
William Mwanza: Steady progress of community law in COMESA: Malawi Mobile Ltd v Government of Malawi and MACRA (tralac)
Court of Justice ruling on the matter between Malawi Mobile Limited and Government of Malawi
COMESA/AUC discussion on the Road Map to eliminate HIV, TB and Malaria in Africa
SADC updates:
Namibian PM calls for regional approach to diamond processing (NAM News)
Namibian Prime Minister Saara Kuugongelwa-Amadhila has called on mining industry role players in the Southern African Development Community bloc to adopt a regional co-operative approach towards diamond processing instead of competing against one another. She made the call during a gala dinner held here Tuesday for industry players from across the SADC sub-region who had gathered for a two-day diamond industry conference, held under the theme "Challenges Facing Diamond Beneficiation in Southern Africa". "Last year, the SADC region produced 56% of global diamond output by US dollar value and 51% by volume. This is clearly a strong and dominant market position that we need to optimise by bargaining for better beneficiating deals in the region. We look forward to innovative proposals on how diamond beneficiation can be promoted in our region," she stressed.
Zimbabwe says diamond industry must tackle synthetic diamonds (The Namibian)
Regional parliament eludes SADC-PF
SADC calls for a code of ethics for media in the region
Zimbabwe's budget issues: The 2016 National Budget Statement, Govt misses ZimAsset targets (Zimbabwe Independent), Jet-setting govt sees expenditure rise 25%, deficit widens – think tank (Zimbabwe Independent)
Jim Brumby: 'A tool at the right time for tax reform' (World Bank Blogs)
Berlin Msiska, commissioner general of the Zambia Revenue Authority, said TADAT showed his administration had a strong governance structure. It validated previous reforms, and identified successful practices. The tool also showed some weaknesses, including in areas that had not received much attention, such as bottlenecks caused by the use of third-party information. He said it “should be embraced like a health check,” and planned to sign up for a re-assessment early next year.
Namibia studies SA's black industrialist policy (The Namibian)
Namibian diamond factories decimated in downturn, mining minister says (Rapaport)
Mozambique announces total ban on timber exports, starting immediately (Club of Mozambique)
Africa Tourism Monitor (AfDB)
Promoting North African women’s employment through SMEs (AfDB)
tralac’s Daily News archive
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This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to over 300 recipients across Africa and internationally, serving in the AU, RECS, national government trade departments and research and development agencies. Your feedback is most welcome. Any suggestions that our recipients might have of items for inclusion are most welcome. Richard Humphries (Email: This email address is being protected from spambots. You need JavaScript enabled to view it.; Twitter: @richardhumphri1)
Related News
Mainstreaming trade in Africa: Lessons from Asia and the way forward
Africa is a heterogeneous, vast and vibrant continent. It is home to 54 countries, has about 15 percent of global population, is endowed with enormous natural resources, and has experienced relatively strong economic growth over the past decade. Yet, most countries on the continent continue to grapple with the challenge of how to achieve sustained poverty reduction and build inclusive societies.
Trade has the potential to contribute to addressing this challenge. It has played this role effectively in developed countries and also in several countries in Asia and Latin America. It could also play this role in Africa if appropriate measures are taken to unlock and harness its potential for growth and development. Despite the progress that has been made by African governments in economic policy formulation and management over the past decade, trade priorities have not been fully and effectively integrated into national development strategies of many countries on the continent and this has had serious consequences for their ability to effectively integrate into the global trading system and increase their share of the benefits of global trade.
Mainstreaming trade is important for Africa because the benefits of trade are not automatic. They accrue to countries that have taken proactive steps to exploit opportunities created in the global trading system. In this context, there is the need for African countries to elaborate their trade priorities and fully integrate them into overall development strategies to ensure better development outcomes from trade than was the case in the past.
While there is no generally accepted definition for mainstreaming trade, it is well-known that one of its main objectives is to have a trade strategy or framework that is consistent with overall national development goals. But effective trade mainstreaming is not only about policy coherence. It requires including trade policies, programmes and projects not only in national plans but, more importantly, also in national budgets. Furthermore, it entails building human and institutional capacities for trade, improving infrastructure, developing productive capacities for trade and transforming economies, recognizing and dealing with the adjustment costs of trade reforms, strengthening coordination across government ministries and departments, building effective partnerships between governments and local stakeholders, and ensuring effective implementation of policies by governments.
This is clearly a challenging exercise, but it has been successfully done in both developed and emerging economies in different continents. In particular, several countries in Asia have effectively integrated trade in their national development strategies with very positive results. In this context, as African countries grapple with the challenges of trade mainstreaming there are useful lessons they can learn from the experiences of Asian countries.
For ease of exposition, the discussion and analysis in this paper will be based on the experiences of three Asian countries (China, the Republic of Korea and Singapore) that have made significant progress in integrating into the global trading system and in transforming their export and production structures over the past few decades.
Each of the three Asian countries has unique features that make it an interesting case for drawing lessons for Africa. For example, Singapore is the second most trade dependent economy in the world and in the 1960s was a small vulnerable country with low levels of per capita income as most African countries today. Yet, it has been able to successfully integrate into the global trading system and make the transition from a developing to a developed economy.
The Republic of Korea is particularly interesting because over the past four decades its status shifted from aid recipient to an aid donor indicating that development can take place even in aid recipient countries. With regard to China, it is interesting because despite its status as a developing country it is now one of the three big economies in the world and has made significant progress in trade and poverty reduction despite following an unorthodox development path.
The aim of the Trade and Poverty Paper Series is to disseminate the findings of research work on the inter-linkages between trade and poverty and to identify policy options at the national and international levels on the use of trade as a more effective tool for poverty eradication. The opinions expressed in papers under the series are those of the authors and are not to be taken as the official views of the UNCTAD Secretariat or its member states.
The previous paper in the series, ‘Integrating trade into national development strategies and plans: The experience of African LDCs’, is available here.
Related News
Time to make One Stop Border Posts a reality
Traders enjoying facilities, but Partner States challenged to operationalise regional law once in effect
Citizens of the region are set to benefit a great deal through facilities offered by the One Stop Border Posts (OSBPs) in the EAC Partner States. Already where the facilities are running bilaterally, there is facilitation of free movement of persons and the enhancement of trade between the Partner States, an EALA report adopted by the House states.
In the regard, regional legislators are calling for the fast-tracking of all remaining works of the OSBPs to allow its implementation for further integration.
At the same time, it is key for the assent of the OSBP Bill, 2013, in the Partner States to be finalised to give it legal effect in the entire region. It has been stated that Partner States are implementing the OSBP Initiatives bilaterally as they await for completion of the Assent process. At the moment, the Bill which was introduced by the Council of Ministers is in Rwanda for the final assent signature. Already, the Republics of Burundi, Kenya, Tanzania and Uganda have assented to the Bill.
The recommendations are contained in a report of the Communication Trade and Investments (CTI) on the OSBPs in EAC Partner States debated and passed by the House. The report was presented to the House by Hon. Nancy Abisai on behalf of the Committees Chair, Hon. Mukasa Mbidde.
EALA Members undertook an On-Spot Assessment on the One Stop Border Posts in EAC Partner States in the months of April and September 2015. Phase one of the assessment covered OSBPs of Mutukula (Uganda/Tanzania), Mirama Hill/Kagitumba (Uganda/Rwanda) and Rusumo (Rwanda/Tanzania) on 8th to 11th April 2015. The second phase covered Lungalunga/HoroHoro (Kenya/Tanzania), Taveta/Holili (Kenya/Tanzania) and Namanga (Tanzania/Kenya) from 30th September to 3rd October 2015.
The objectives of the One–Spot assessment was to find out the status of implementation of the OSBP initiative project and its effect on the movement of people and the EAC business environment. It also set to interact with stakeholders and identify opportunities and challenges affecting the implementation of effective OSBPs and to come up with relevant recommendations.
Stakeholders who participated in the On-Spot Assessments included Revenue Authorities, Immigration, Bureau of Standards, Police, Clearing and Forwarding Agents, and Traders. Others were Transporters, Local Authorities and Development Partners as well as officials from the EAC Secretariat.
One Stop Border Posts lessen days and facilitate inter-regional and international transport and road transit. According to analysts, when exiting one country and entering another, OSBPs combine two stops into one.
During the meetings, Members were informed that the construction of OSBPs were delayed at the Mutukula (Tanzania side) due to late handover of the site, power outages and floods among others. Mutukula on the Uganda side also had delays occasioned by re-designing challenges, delays in relocation of police posts occupying the area and delay in release of funds among others.
The OSBP on Mirama Hills, which was financed by TradeMark East Africa to the tune of USD 7.8 Million was however completed in time as was the facility at Kagitumba, Rwanda/Uganda border.
Construction at Rusumo border is expected to be concluded in time in December 2015. In Namanga, the Report indicates that construction on the Tanzania side has been completed even though not formally handed over due to a number of outstanding issues. On the Kenya side, a number of challenges continue to hamper the completion including erratic power supply, lack of drive through scanners for goods carrying vehicles and funding shortages.
Generally on all borders, there is limited knowledge on borders with regards to OSBPs, lack of operating manuals and inadequate water supply. In its findings, the report underscores training and sensitisation programs and the need for teamwork.
At debate, Hon. Shyrose Bhanji lamented that implementation of the decisions of the House were overlooked. “I had hoped to hear there is 100% implementation of the OSBPs. The reasons given for the delay are not good. Where is the problem, Hon Speaker,” she posed. “The process of getting the Bill has been costly. It is important that it is effected”, she said.
Hon. Straton Ndikuryayo said the Bill was key in ensuring trade facilitation. Hon. Bernard Mulengani said various basic amenities including school, water and housing were lacking and this may have impact on enhancing OSBPs. He further said Partner States were managing OSBPs on bilateral agreements and there was need to address the matter.
Hon. Hafsa Mossi rooted for awareness creation and requested Investment authorities should avail information on investment opportunities at the border. She further called for the harmonisation of the time zones between the Partner States. At the moment, Rwanda and Burundi are one hour in the time zone behind Kenya, Uganda and the United Republic of Tanzania.
The Secretary-General of the EAC, Amb. Dr Richard Sezibera mentioned that the EAC Summit of EAC Heads of State was keen to assent to the Bills more efficiently. “In the recent past, they have assented to Bills including the EAC HIV and AIDS Management Act, 2012, EAC Conflict Management Act, 2012, EAC Elections Act, 2012 and the EAC Community Emblems (Amendment) Act, 2008. Others are the Customs Management Amendment Act, 2012 and the EAC Supplementary Act, 2012,” he remarked.
The Secretary-General reiterated that the EAC OSBP Bill and the Vehicle Load Bill were currently in Rwanda on the last stop and that the process of assent was on.
Hon. Sara Bonaya noted that the issue of ownership of land was necessary as was the standard of optimal parcels of land for future expansion. Others who supported the report were Hon. Taslima Twaha, Hon. Dr James Ndahiro, Hon. Pierre Celestin Rwigema and Hon. Dr Kessy Nderakindo.